Posted On Friday, June 2, 2017
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Last week, the U.S. Department of Justice announced a non-prosecution agreement (“NPA”) between Banamex USA, a California bank with significant operations in Mexico, related to alleged U.S. Bank Secrecy Act (“BSA”) violations. The government’s investigation, which took place over the past several years, revealed that Banamex USA willfully failed to employ sufficient controls to prevent money laundering and willfully failed to file Suspicious Activity Reports related to questionable banking transactions. The United States claimed Banamex USA processed over 30 million payments to Mexico worth more than $8.8 billion. Despite this volume, Banamex USA conducted less than 10 investigations into questionable transactions although its monitoring system issuing over 18,000 alerts from 2010 to 2012. In the NPA and the associated factual stipulations, Banamex agreed to the violations as well as to the forfeiture of $97 million and other remedial measures.
The NPA follows several years of legal concerns regarding Banamex USA. Last week’s DOJ press release also referenced the FDIC’s June 2015 assessment of a $140 million penalty for Banamex USA’s failure to implement an effective BSA/AML compliance program. The combined penalties from the FDA assessment and the recent DOJ forfeiture is roughly $237.44 million.
Also, as covered by White-Collared in March 2014 (here), $585 million in fraudulent accounts receivable loans made by Banco Nacional de Mexico, Banamex USA’s affiliate in Mexico, led their corporate parent, Citigroup, Inc., to downwardly adjust its 2014 financial results. Of the $585 million received by the borrower, Oceanografia S.A. de C.V., only $185 million was backed by actual accounts receivables. The 2014 announcement coincided with Citigroup’s annual filing which – in an ironic turn of events – disclosed that Banamex received subpoenas from the FDIC and DOJ regarding compliance with the U.S. Bank Secrecy Act and other AML requirements.
The link to the DOJ press release and the NPA can be found here and here, respectively.
Posted On Thursday, June 1, 2017
Score one for the defendants – at least those who die while their criminal appeals are pending. In United States v. Libous, the U.S. Court of Appeals for the Second Circuit vacated the conviction of the late New York State Senator, Thomas Libous, and ordered a $50,000 criminal fine that he paid to be reimbursed to his estate.
On July 22, 2015, Libous, the Deputy Majority Leader in the New York State Senate, was convicted of making false statements to the FBI during a public corruption investigation about his efforts to secure his son a job at a law firm. He avoided prison time, in part because he had been diagnosed with advanced-stage prostate cancer, and was sentenced to six months’ house arrest and two years’ probation. He was also ordered to pay a fine of $50,000 and a $100 special assessment. In May 2016, after noticing his appeal but before filing an appellate brief in the Second Circuit, Libous passed away. The executrix of Libous’s estate moved to withdraw the appeal, to vacate the underlying judgment of conviction, and for remand to the district court for dismissal of the indictment and entry of an order that the fine and special assessment be remitted to the estate.
Acknowledging the applicability of abatement ab ignitio – a common law doctrine which states that a conviction abates when a defendant dies pending an appeal as of right – the government agreed that Libous should be relieved of the conviction. However, it argued that Libous’s estate was not entitled to the fine or special assessment that Libous paid.
The three-judge panel unanimously ruled in favor of the estate, holding that, as Libous “stands as if he had never been convicted . . . [h]e is no longer a wrongdoer.” The government could not retain a fine extracted for an offense that Libous, given his death while his appeal was pending, was presumed not to have committed.
The panel found support for its ruling in the U.S. Supreme Court’s recent decision in Nelson v. Colorado, 137 S. Ct. 1249 (2017). There, the Court held that the Fourteenth Amendment’s due process clause required the refund of fees, costs, and restitution whenever a reviewing court invalidates a conviction and no retrial will occur. In so holding, the panel rejected the government’s concern that abating the fine, which was levied on Libous while he was alive, would delegitimize the punishment. Per the panel, it was not determining that Libous was wrongly punished, but rather that there was no longer a valid conviction to support the fine.
United States v. Libous stands in contrast to United States v. Schumann, 861 F.2d 1234 (11th Cir. 1988) and United States v. Zizzo, 120 F.3d 1338 (7th Cir. 1997), both of which held that abatement ab ignitio did not apply to fines paid by defendants before their deaths. The Second Circuit panel found those cases unpersuasive because they did not account for the due process underpinnings of the doctrine, and it questioned their vitality in light of the Supreme Court’s decision in Nelson.
