Today's news reports that JP Morgan Chase -- a very big and powerful U.S. bank -- has agreed to a deferred prosecution agreement and penalties of $1.7 billion with more to come from a civil case by regulators. Ben Protess and Jessica Silver-Greenberg, JPMorgan Settles With Federal Authorities in Madoff Case (NYT DealBook 1/7/14), here.
The circumstances are not the same, of course, because the conduct which led to this agreement involved U.S. players, including JP Morgan Chase, and the conduct or nonconduct occurred in the U.S. But it does establish some key points:
1. The mighty banks in the U.S. are at risk. The DealBook article also notes
In November, JPMorgan paid a record $13 billion to the Justice Department and other authorities over its sale of questionable mortgage securities in the lead-up to the financial crisis.2. JP Morgan takes the hit in these cases because, at a minimum, it did not smell the rat that was waived before its nose.
In addition, in the fraudulent tax shelter boom times in the late, for some reason it was the foreign banks who were the prominent enablers of the fraudulent / bullshit shelters. Some of those foreign banks were similarly prosecuted. See Another Chapter Closes in the Tax Shelter Wars - Deutsche Bank Admits Crimes and Takes $553,633,153 Hit (Federal Tax Crimes Blog 11/22/10), here, and HVB Cops Plea in KPMG Tax Shelter Fraud (Tax Prof Blog 2/15/06), here. See also Dutch Bank Funded U.S. Tax Shelters: Rabobank Supplied Cash for Structures Under Investigation (WSJ 5/2/13), here. (I think the supplied cash is a bit of an overstatement; usually they supplied bookkeeping entries only.)
Why is it that foreign banks -- not just Swiss banks -- imagine that they are entitled to enable U.S. tax evasion with impunity? Why do they complain when they are called on the carpet for doing so?
I think it is for the same reason that JP Morgan has seen its brand tarnished for the same reason. Why ask questions when you are making money. See What Motivates the White Collar Criminal? (Federal Tax Crimes Blog 1/7/14), here.