Time for bank leaders to pay the ultimate price

By Brooke Patterson

 

“Tax evasion was the biggest mistake of my life” said Uli Hoeness, one-time  president and business chairman of Bayern Munich, the club he made into one of the world’s most-successful football dynasties.

Earlier this year the contrite German boss said he would accept a three-and-a-half-year prisonBAYERN term for evading €27m in taxes and would step down from his high level role.

“After discussions with my family, I have decided to accept the ruling of the Munich court on my tax affairs. This befits my understanding of decency, dignity and personal responsibility,” he wrote in a statement published on the club’s website.

Having accepted the inevitable, Mr Hoeness, is now said to be residing somewhere in a German prison, hopefully further reflecting on his evasions. It would be reassuring to know he was also in bad company with a whole bunch of fallen ex bankers. No such luck.

When it comes to bad or unethical behaviour bankers lead charmed lives. Almost regardless of the scale of criminal behaviour they seldom, if ever end up sharing a cell with the likes of Mr Hoeness.

Time and time again banks break rules or swerve sanctions. And the punishment for carrying out such violations? Seldom more than a mere slap on the wrist.

The puzzling BNP Paribas case is just one more example of bankers looking contrite but never BNPeven coming close to smelling the inside of a prison cell.

On the 31st of June BNP’s fait was sealed. The price for transmitting $30bn worth of payments to Sudan, Iran and other countries in breach of US sanctions was a record-breaking $8.9bn.

A leader in global banking and financial services BNP Paribas lives by the slogan “the bank for a changing world”. Many feel it should actually read: “The bank that’s too big to jail”

The bank’s own lawyers kept ringing alarm bells as nearly $8.8 billion was moved illegally through the US financial system between 2004 and 2012. Despite the warnings, the French bank regularly processed transactions for Sudan, Cuba and Iran. Naturally it failed to acknowledge it was doing anything wrong—until forced to own up to undeniably unlawful behaviour.

The bankers entered a guilty plea and agreed to take punishment. Once again the hidden dialogue was really: “We’re guilty as hell and you can fine us a bundle so long as you don’t make us see the inside of a prison.”

Too Harsh Or Not Harsh Enough?

For most of us $9billion is an unthinkable amount of money. To bankers like BNP this is apparently small change.

After the fine and and losing 13 key employees will anything alter at BNP Paribus?  One would like to think so, but don’t hold your breath. Despite howls from the French Foreign minister, Laurent Fabius the fine was an “unfair and unilateral decision” the punishment by the US Department of Justice, was more token than terminal.

Showing just how ineffectual the fine is to BNP Paribas it had the unmitigated cheek to publicly say the sanctions will have “no impact on its operational or business capabilities”. In which case perhaps the amount should be doubled.

To say that BNP Paribas has come off lightly is maybe unfair. The present fine is large, but it’s a mere passing irritation compared to the bank’s monster annual turnover.

Once again, no one has been held accountable within the law. Those 13 employees who departed recently probably did so with relief. At least there was no prospect of them wearing prison uniform.

With zero threat of individual criminal prosecution other institutional leaders will hardly be deterred from acting in such a manner.

Too big to jail?

According to Jaret Seiberg, a Policy Analyst with Guggenheim Partners, “no bank is too big to jail” but this seems more reassuring rhetoric than reality.

Punish the people not the institution is a carefull piece of PR since the history is one of bank executives avoiding serious punishment Just a matter of months ago, Swiss banking giant, Credit Suisse, pleaded guilty to tax evasion, after seemingly helping millions of Americans evade taxes.

Despite becoming “the first bank in more than a decade to admit to a crime in the US” the fine was a slight $2.5bn—a tiny fraction of its truth worth. And of course no banker got anywhere near a prison cell. How do they do it?

At the time of the verdict, Attorney General Eric Holder claimed that the case demonstrated “no financial institution no matter its size or global reach is above the law”. If only this was generally true.

One of the few exceptions was the Icelandic bank Kaupthing where former bosses faced between three and five years in prison.

Banks and financial institutions are at the core of our society. Yet they also seem to float above the law, showing no respect for the rules that are in place. Once the headline making penalties are paid the issue is quietly laid to rest.

But as for holding individuals of these big institutions accountable for their actions -this is one issue that is far from being settled.

 

 

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