Riggs Banks investigators have found evidence of possible criminal activities by some former employees who managed the accounts of former Chilean dictator Augusto Pinochet and have referred their findings to federal prosecutors, according to several sources familiar with the matter.
The referrals emerged from an internal investigation of possible money laundering in Riggs's dealings with Pinochet and Chile going back to the mid-1980s, said the sources, who are familiar with the probe and spoke only on condition of anonymity because the investigation is still in its early stages.
Investigators retracing transactions in Pinochet's Riggs accounts also have found evidence that some of his associates and family members moved large sums of money through at least four other U.S. banks, including Citibank and Bank of America, the sources said.
The Justice Department and the U.S. attorney for the District of Columbia are investigating possible money laundering at Riggs involving Pinochet and officials of the government of Equatorial Guinea. Riggs had made a previous referral to the Justice Department related to Simon P. Kareri, who was Equatorial Guinea's account manager at Riggs and is the subject of a grand jury investigation in the District.
Riggs spokesman Mark N. Hendrix declined to comment yesterday. The company last month said it was the subject of various investigations and has previously said it was cooperating with those investigations. Riggs has hired criminal-defense lawyer Reid H. Weingarten to represent the bank and its holding company in connection with the Justice Department inquiry, the sources said.
Weingarten did not return phone calls yesterday.
The sources declined to describe the specific actions that bank officials believe may have violated the law or to say how many former employees were involved.
An investigation by the Senate permanent subcommittee on investigations released in July found that for at least eight years, Riggs helped Pinochet hide accounts with balances of between $4 million and $8 million from outside scrutiny, even helping the general hide the funds from international prosecutors seeking restitution for political killings. Specifically, the report detailed how Riggs account managers helped him set up offshore shell companies to hide his interest in the money deposited in Riggs, altered names on accounts so outsiders would not recognize the Pinochet name and concealed Pinochet's accounts from bank examiners. The Senate report said two former Riggs employees were primarily responsible for managing Pinochet's accounts.
In May, Riggs was fined $25 million by bank regulators for failing to comply with anti-money-laundering laws in its dealings with the Saudi Arabian embassy and the oil-rich African country of Equatorial Guinea.
The revelations about Pinochet have sparked new efforts in Chile to bring the 88-year-old former dictator to trial for his role in political assassinations during his rule. The large sums of money in the Riggs accounts have also sparked a public corruption investigation in Chile. A representative of the Pinochet family has told media in that country that the money in Riggs was "donations" from wealthy supporters.
The Pinochet transactions that moved through other banks have been traced to Pinochet's son Marco, his daughter Lucia, several former military commanders in Chile's powerful armed forces and other associates of Pinochet, according to the sources familiar with the Riggs internal probe. They said the transactions involved substantial sums, sometimes more than a million dollars at a time.
The sources said Riggs investigators have been unable to obtain proper documentation from the other banks about the source and destination of funds in those accounts. Regulations requiring documentation of "politically exposed" bank customers have been in force since 1986 for most banks, and the 2001 Patriot Act made them law.
Spokesmen for Bank of America and Citibank declined to comment.
The Office of the Comptroller of the Currency is responsible for assuring that national banks comply with "know your customer" regulations, designed to protect against money laundering. Kevin Mukri, a spokesman for comptroller's office, declined to comment on the Riggs investigation. Monty Wilkinson, a spokesman for the U.S. attorney in the District, also declined to comment.
The ongoing probe of Riggs could present problems for its pending merger with PNC Financial Services Group Inc. If the bank is prosecuted, or if it is subject to criminal fines, it could delay, materially change the terms of or even scotch the merger. The merger transaction included a provision allowing PNC to back out if any major adverse regulatory event occurs before closing. The merger is not expected to take place until the first three months of next year, at the earliest.
A PNC spokesman did not return calls seeking comment.