Senate Panel Report Deplores Riggs Dealings By TIMOTHY L. O'BRIEN July 15, 2004 A Senate report scheduled to be released today draws a scathing portrait of money-laundering controls at the Riggs National Corporation, taking the banking company's management to task for failing to monitor suspect financial dealings involving Gen. Augusto Pinochet, the former Chilean dictator, and senior officials of Equatorial Guinea, a West African country in the midst of an oil boom. The report, prepared by the Senate subcommittee on investigations, offers an unusually detailed account of banking dealings since the mid-1990's that included suitcases stuffed with shrink-wrapped cash being walked through Riggs Bank's front door in Washington; offshore accounts set up to avoid regulatory scrutiny; millions of dollars wired worldwide with few questions asked about the money's origin; and questionable transactions involving three major oil companies. The report said there had been an overly cozy relationship between Riggs and its federal regulators, and asserted that the bank's management was enamored of courting questionable clients and openly resistant to regulatory entreaties to close those clients' accounts. Senator Carl Levin, Democrat of Michigan, a member of the subcommittee, described the report as a "sordid story about a bank with a distinguished name that was blatantly disregarding its anti-money-laundering obligations." Mr. Levin said the bank's practices continued even after stricter anti-money laundering laws were passed in the wake of the September 2001 terrorist attacks. Federal law enforcement officials are examining if Saudi and Equatorial Guinean accounts at Riggs were used for money laundering or for financing terrorist activities in at least the last two years. In May, the comptroller of the currency, a federal bank regulator, fined Riggs $25 million for a series of compliance problems involving those accounts, the largest such fine ever imposed on an American bank. Today's Senate report criticizes the comptroller's office for being indulgent of repeated regulatory lapses at Riggs, noting that a senior examiner with the agency later went to work for the bank. No criminal charges have been filed against Riggs, but a former executive, Simon P. Kareri, is the subject of a federal grand jury hearing on the possibility of criminal fraud. Mr. Kareri's lawyer did not return a phone call seeking comment. The Saudi Arabian Embassy has repeatedly denied any wrongdoing related to its Riggs accounts, and the report said the Senate investigations subcommittee did not examine those accounts because the Senate Governmental Affairs Committee is conducting a separate review. The embassy of Equatorial Guinea declined to comment yesterday. Riggs, in a statement, acknowledged regulatory problems and said it took banking regulations seriously. The report also offered a stinging portrayal of Riggs's biggest shareholder and former chief executive, Joe L. Allbritton, who did not respond to an interview request yesterday. According to interviews with Riggs executives conducted by the subcommittee, Mr. Allbritton was directly involved in courting Mr. Pinochet's business and was kept well apprised of General Pinochet's dealings at the bank - at a time in the mid-1990's when the Chilean was under house arrest in Britain on charges of human rights abuses and his assets were supposed to be frozen by an international court order. The report says that from 1994 until 2002, Riggs opened at least six multimillion-dollar accounts and issued several certificates of deposit for General Pinochet. Members of the bank, possibly including Mr. Allbritton, traveled to Chile to meet with General Pinochet and, the report said, "Riggs account managers took actions consistent with helping him evade legal proceedings seeking to discover and attach his bank accounts." Authors of the report wrote that some Riggs employees they interviewed could recall Mr. Allbritton's meeting with General Pinochet, while others could not. The report also says that Riggs helped him "set up offshore shell corporations and open accounts in the names of those corporations to disguise his control of the accounts; altered the names of his personal accounts to disguise their ownership; transferred $1.6 million from London to the United States while Mr. Pinochet was in detention and the subject of a court order to attach his bank accounts; conducted transactions through Riggs's own accounts to hide Mr. Pinochet's involvement in some cash transactions; and delivered over $1.9 million in cashiers checks to Mr. Pinochet in Chile to enable him to obtain substantial cash payments from banks in that country." According to the report, it was not until 2001 that Steven B. Pfeiffer, a Washington lawyer who is a member of Riggs's board, prepared a memorandum for senior bank executives about General Pinochet's legal troubles and court orders to freeze his assets. Mr. Pfeiffer told the report's authors that he was unaware of General Pinochet's Riggs accounts before being asked to prepare the memo and raised no concerns about the accounts because he believed the bank had vetted them for problems. Mr. Pfeiffer did not return a phone call yesterday seeking comment. Senator Levin said yesterday Mr. Pinochet's tenure in Chile and flight from justice were highly publicized. "Pinochet's history was well known to the world," he said. "It should have been well known to Riggs." The report says that when the comptroller began examining General Pinochet's accounts in 2002, a Riggs officer told an examiner that General Pinochet "has a relationship" with Mr. Allbritton. The comptroller's office forced the bank to close the Pinochet accounts in 2002, though the report said the Riggs board "reacted with resentment" over how regulators handled the matter. General Pinochet was not the only dictator Riggs courted. From 1995 to this year, according to the report, Riggs handled 60 accounts and certificates of deposit for the government of Equatorial Guinea, an oil-producing nation known for human rights abuses and ruled since 1979 by Teodoro Obiang Nguema Mbasogo. The report says that by 2003, those accounts had deposits over the years of $400 million to $700 million. The accounts involved a dizzying array of transactions, some personal, some governmental and many involving financial dealings with three oil giants - Exxon Mobil, Amerada Hess and Marathon Oil - that do business in Equatorial Guinea. The report said that Riggs serviced the accounts "with little or no attention to the bank's anti-money laundering obligations, turned a blind eye to evidence suggesting the bank was handling the proceeds of foreign corruption, and allowed numerous suspicious transactions to take place without notifying law enforcement." It said that the comptroller was insufficiently concerned about the accounts as recently as late last year and that at a Riggs board meeting on Dec. 17, 2003, Mr. Allbritton told federal bank examiners that "the bank had no intention of closing the E.G. accounts." The accounts were closed early this year. The comptroller's office has previously acknowledged problems in its oversight of Riggs and is conducting a review of its procedures. An Exxon Mobil spokeswoman declined to comment yesterday, saying the company was still reviewing a copy of the report. Executives of Marathon Oil and Amerada Hess were not available for comment. All three companies will be represented at a hearing today of the Senate investigations subcommittee that will further explore Riggs's problems. A money-laundering expert said yesterday that more than regulatory issues were at stake. "These two cases involving Obiang and Pinochet cry out for criminal prosecution," said Charles Intriago, publisher of the newsletter Money Laundering Alert. "It's not just regulatory violations; it's violations of the criminal laws of the United States. Where are the prosecutors?" Copyright 2004 The New York Times Company ------------------------------------------------------ Senators Outraged by Riggs Bank Officials By MARCY GORDON Jul 15, 1:14 PM (ET) WASHINGTON (AP) - Senators investigating Riggs Bank's operations said Thursday they were outraged by senior bank officials' failure to act while managers helped former Chilean dictator Augusto Pinochet conceal his wealth, move funds and evade efforts under court order to seize his assets. At a Senate hearing, testimony under oath by a Riggs executive concerning Pinochet's accounts conflicted with sworn written statements by federal regulators whom he formerly supervised. Sen. Carl Levin, D-Mich., said he wants the Justice Department to investigate the discrepancy. There is "a very direct conflict on a very critical point," Levin told R. Ashley Lee, executive vice president and chief risk officer at Riggs. Lee had been the lead examiner for Riggs at a Treasury Department agency from 1998 until he retired in October 2002 and went to work for the bank two weeks later. A former Riggs senior vice president who had managed the Equatorial Guinea accounts, Simon Kareri, invoked his Fifth Amendment privilege against self-incrimination at the hearing and refused to answer questions on the bank's handling of accounts held by officials of Equatorial Guinea. A new report by the Senate Governmental Affairs investigative subcommittee says that Lee instructed agency staff who had looked into the Pinochet accounts not to put their examination memos or supporting paperwork into the agency's electronic files. He denied having done so at the hearing, saying "I made no (such) instructions to anybody." Managers at the old-line Washington bank, working with Pinochet from 1994 to 2002, set up phony offshore companies and hid the existence of his accounts from U.S. examiners, according to the report based on a yearlong investigation by the panel's Republican and Democratic staffs. "I sit here in amazement ... to see how casually they dismissed the rules" to prevent money laundering, said Sen. Frank Lautenberg, D-N.J. The government recently fined Riggs a record $25 million for allegedly violating laws to prevent money laundering for the way it handled Saudi Embassy accounts and those held by officials of Equatorial Guinea. The Senate investigators discovered large payments by oil companies, including major U.S. companies, to Equatorial Guinea officials and their relatives and to businesses they controlled. That raised concerns about corruption, the Senate investigators said. The State Department has cited the West African country for human rights abuses, corruption, and diversion of oil revenues to government officials. In one case, a Riggs account manager brought a suitcase weighing 60 pounds full of dollar bills into the bank to make a deposit into an account of Equatorial Guinea's president, the investigators said. "If that kind of cash deposit doesn't make a bank sit up and ask questions, I'm not sure anything will," Levin said. The report also details a pattern of lapsed oversight by regulators and questionable actions by Riggs managers in the handling of the Pinochet accounts. The bank, in a statement, said, "It is clear that Riggs did not accomplish all that it needed to." Riggs, a Washington-based institution since the mid-19th century, has a near-exclusive franchise on business with the capital's diplomatic community. It was accused by federal regulators earlier this year of failing to report suspicious transactions in accounts controlled by diplomats from Saudi Arabia and officials of Equatorial Guinea. The bank neither admitted nor denied wrongdoing when it agreed to pay the civil fine in May in a settlement with the Office of the Comptroller of the Currency, a Treasury Department division. According to the report, Riggs employees dealing with the Pinochet accounts during 1994-2002, while international prosecutors were seeking an accounting and freeze of his assets: _Helped Pinochet set up phony offshore companies. _Opened accounts in their names and otherwise altered names on the accounts to conceal his control of them. _Transferred $1.6 million of his funds from London to the United States. Pinochet, who was president of Chile from 1973 until 1990, was under house arrest in Britain during part of the period in question. Chile's Supreme Court in 2002 declared him unfit to stand trial on grounds of health problems and his mental condition. _Conducted transactions through Riggs' own accounts to hide Pinochet's involvement in some cash transactions. _Hid the existence of his accounts from comptroller's office examiners for two years and initially resisted the regulators' requests for information. --- On the Net: Office of the Comptroller of the Currency: http://www.occ.treas.gov Riggs Bank: http://www.riggsbank.com ------------------------------------------------------ Reuters Washington Post LA Times BBC, CNN, USA Today, Financial Times