Corralling Mobsters, if Not Many Big Banks
By GRETCHEN MORGENSON
EVERYONE knows about the mobsters and terrorists that Mary Jo White
successfully put behind bars during her nine years as United States
attorney for the Southern District of New York. Less well-known is Ms.
White’s record bringing cases against large financial institutions
during her stint as the top criminal prosecutor in New York.
Ms. White, who has been nominated to become the chairwoman of the Securities and Exchange Commission,
ran the Justice Department’s unit in the Southern District, which
includes Manhattan, from 1993 until January 2002. She is expected to
appear at a confirmation hearing before the Senate Banking Committee on
Tuesday.
Ms. White’s recent work as a partner at Debevoise & Plimpton,
where she represented JPMorgan Chase, Morgan Stanley and other
companies, has come under scrutiny. Her record as a federal prosecutor
of financial crime has received less attention.
Given that regulating financial firms will become her purview if she
heads the S.E.C., assessing her pursuit of financial fraud as a
prosecutor may provide clues to how she would run the agency.
Let’s just say her prosecutorial stint did not include a lot of cases
against large United States financial institutions.
Last week, I asked Ms. White which large financial institution cases she
was most proud of prosecuting. She declined to be interviewed but,
through a colleague, provided a list.
First on that list was a 1996 case against Daiwa Bank,
a Japanese institution that lost its license to do business in the
United States after Ms. White’s office indicted it for fraud. Daiwa
pleaded guilty and paid a fine of $340 million, then a record for a
financial institution.
Another case she cited was the 2001 fraud case against Republic Securities,
a unit of Republic Bank, which generated $600 million in restitution
for clients whose accounts had been valued improperly by bank employees.
It, too, pleaded guilty.
A third highlight on Ms. White’s list was a 1999 prosecution of Bankers Trust
for misappropriating $19 million from dormant customer accounts. The
bank pleaded guilty and paid more than $60 million in fines.
Those are considerable victories. Four other cases she cited through her colleague involved Ponzi schemes and fraud by small investment advisory firms, not household-name Wall Street or financial firms.
A review of her years in the Southern District also turned up several
intriguing cases that Ms. White and her colleagues did not pursue or
turned away. All three of these matters involved large and prestigious
financial companies headquartered in the United States.
A big question mark, federal investigators say, still hangs over the decision by Ms. White’s office not to prosecute Citibank in the mid- to late 1990s for a possible role in questionable money transfers that benefited Raúl Salinas de Gortari, the brother of the former president of Mexico. Between 1992 and 1994, Mr. Salinas, a consultant to a Mexican antipoverty agency whose annual salary never exceeded $190,000, somehow moved almost $100 million from Citibank accounts in Mexico and New York to Citibank accounts in London and Switzerland.
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