Benjamin Lawsky – Eliot Ness or New York commercial agent?

SCB charges: DSK-style grab at Dollar trading?

Standard Chartered heads for takeover territory

Leaks & rivalry between State and Fed authorities

What Labour MP John Mann calls “a concerted effort to win the commercial battle to have trading from London shifted to New York” is beginning look only partly correct. Over the last 24 hours, Slog sources and reports in several MSM titles suggest that geopolitical deals, domestic political victimisation, Wall St games, and  internecine US governmental rivalries are also involved.

In and around the corridors of Standard Chartered Bank’s senior management floor, people are in something of a daze. There is, I’m told, a genuine befuddlement as to why SCB has suddenly had such serious charges launched against it…and why the near-legendary CEO Peter Sands has been seemingly caught on the hop by them.

Standard Chartered does not in any way fit the profile of the Wicked Investment Bank: although most  of its British contemporaries have been bailed out, Sands has guided this august institution to huge profits in the worst of all times. But as the senior management stresses, Standard Chartered does not have an investment bank. No derivative paper trails, silly sovereign debtors, or dodgy tax haven products for them, we are told: astute investment flair and loyal, grateful clients are the basis of their undoubted success. Hmm.

“I simply can’t believe it,” said one such client yesterday, “in no way do these severe accusations reflect the bank I’ve known for over twenty years.”

It wasn’t just that New York state Monday evening threatened to revoke SCB’s licence – and charge the bank with a cool $250 billion worth of secret transactions with Iran. It was the concerted way in which NYS wound up the media into a frenzy of bile. Standard Chartered had, said the prosecutor’s office, been “operating as a rogue institution”, conducting in excess of 60,000 illegal deals with the Ayatollahs in Tehran, some of which – it charged – had “exposed the United States to extreme danger from terrorists”.

In a 27-page order, the Superintendent of Financial Services Benjamin Lawsky of DFS said that “grounds exist for revocation of Standard Chartered Bank’s licence to operate in the State of New York and that interim measures must be taken to protect the public interest.” In turn, the order accused Standard Chartered of being ‘motivated by greed.’

And ‘thinking’ opinion in New York was quick to jump on the wagon:

“It’s not going to be helpful that the management team was basking in the glory saying that they weren’t hit by compliance scandals,” said Gary Greenwood at Shore Capital. “It doesn’t look good as they probably ought to have known this was going on.”

The real rogue here is Lawsky and his office. Effectively, Standard Chartered is being perped…and the commentariat already has Sands down as guilty.

Having studied the DSK case from the outset, I’m getting a very strong feeling of deja vu on this one.

Here are some facts worth noting:

1. Standard Chartered’s U.S. dollar clearing business is the seventh largest in the world.

2. Lawsky’s filing is compelling, but he jumped the gun – why? The Treasury Department’s Office of Terrorism and Financial Intelligence is normally ruthless in such cases. These are very, very powerful guys. For them not to have pursued it anywhere as aggressively as a vastly less well wartered provincial regulator – particularly when Iran is now the designated Enemy Satan – is, shall we say, somewhat malodorous.

3. Standard Chartered shares have fallen by a quarter since news of the New York action on Monday. If that continues, they are soon going to be a takeover target. (see Pt 1 above)

4. Although I began this investigation Monday evening BST, this morning Reuters reports that ‘Treasury’s Office of Foreign Assets Controls (OFAC) has been blind-sided and angered’ by Lawsky’s action. Yesterday (Tuesday), a solid source in New York throughout the DSK case told me that there were “huge doubts about this case in my circle. I doubt very much if Standard Chartered is completely pure in all this, but there are all kinds of politics behind it – foreign and domestic, by the way”.

5. SCB notes that ‘In January 2010, the Group voluntarily approached all relevant US agencies, including the DFS, and informed them that we had initiated a review of historical US dollar transactions and their compliance with US sanctions…The Group waived its attorney-client and work product privileges to ensure that all the US agencies would receive all relevant information.’ This I know to be an entirely accurate assertion. In fact, I am told that OFAC had the same information flow as New York State, but did diddly-squat about it for two years or so. Why?

6. A trend is appearing over time in these suddenly emerging cases (almost all of which involve British owned or HQ’d banks) that suggests the Federal authorities were telling the media that banks were cooperating when they weren’t. It isn’t rocket science from there to assume that the deals, fines and plea bargains mélange was in operation: there must have been a lot of “OK guys, we know – and you know that we know – so, we can hit you hard, and save alot of money and be much more pleasant on the pain issues…or we can hit you so hard that your heart will stop. Whaddya think?”

A City source this morning: “I think they [SCB] were caught napping because the Feds had told them it was cool and then up pops some bloke in New York and they weren’t expecting it”. Also confirmed by this in the Reuters article: ‘Standard Chartered, which sought the advice of one of New York’s top law firms, had hoped that coming clean and turning over internal records to federal regulators would yield a settlement, sources said.’

Fair enough. But what was Lawsky’s motive for doing that?

7. A West Coast US banking source insists that there was a leak from Federal to New York State authorities: “No question in our minds about that. Some spoiling tactics are in play here, and somebody well-briefed in the Government wanted the truth out in the open.” Why – bruised ethics? Or geopolitical pour encourager les autres? Possibly connected: the Reuters piece quotes ‘a Federal Reserve spokesman’ as saying his employer ‘had been working closely with various prosecutorial offices on matters involving Iran and other sanctioned entities, but could not comment on ongoing investigations.’

8. It seems clear that some form of domestic internecine war is going on about this in the US: one New York contact says that there is “the odd Eliott Ness nut prepared to reveal sleaze at the federal level”. For me, this is given added weight by the venom, and the detailed examples of malfeasance, offered this time compared to, for example, the Barclays case. Standard Chartered, for example, puts the all-up total of Iran-related anti-sanction grubby stuff at less than $14 million. Lawsky says bollocks, it was $250 billion. That’s not exactly a consensus of estimates.

So there we have it: plenty of speculation and a reasonable amount of logic behind it. Labour MP and anti-bank activist John Mann says, “I think it’s a concerted effort that’s been organized at the top of the U.S. government. This is Washington trying to win a commercial battle to have trading from London shifted to New York.”

He could be right: but it still doesn’t explain Lawsky’s pre-emptive strike. However, I’ve been saying for months that the US financial and political elites are looking for culprits and alibis for the Tsunami of crap soon to descend on all of us. There is now overwhelming evidence of attempts from Obama downwards to finger EU sloth and British malpractice as the ‘root cause’ of America’s ‘torpedoed recovery’. It’s bollocks, but it will play well in November. Reuters again:

‘A British executive at an institution which ranks among Standard Chartered’s top 25 shareholders also saw a politically motivated move by U.S. officials irked by the major role London plays in the global financial industry, attracting big investments from major U.S. banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley.

“Are we starting to see an anti-London bias in U.S. regulatory activities?” the executive asked. “Oh yes.” “Is there any subtle form of banking sector protectionism going on?” “Yes.”‘

This is yet another one to watch. Stay tuned.