Dickering Over The Price
She: What kind of woman do you think I am?
He: We’ve already established that. Now we’re just dickering over the price.
The old joke, attributed to George Bernard Shaw, Winston Churchill and others, has been given new life. The amount has now been conclusively established: $1.92 billion. Via the New York Times:
Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system. They also have not charged any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.
The reason is that HSBC is too big to fail. If indicted or convicted of money laundering for drug cartels and terrorists, as alleged, London based HongKong Shanghai Banking Corporation could have toppled the banking system, with devastating consequences. It would have been a disaster for the economy, both ours and the worlds. Too big to fail.
So the government decided, in an exercise of discretion, to take whatever spare change they had in their pocket and call it even.
The New York Times editorial, while recognizing the impact such a prosecution would have on the global economy, argues that this decision has eliminated any deterrent effect laws have on "too big to fail" multinationals, and converted them into another cost of doing business. True.
But HSBC can take care of itself. What about you? What about your business? What about the bank down the street? Need I say it? Not too big to fail. Your family, your employees, your customers? They will suffer, but the economy will survive. And really, isn't that what criminal law is all about?
The cynical will mention "equal protection," that phrase in the Constitution that says the government can't treat you any differently than anyone else, even if the other guy is too big to fail. It's often chiseled into the lintel over courthouse doorways. But as we now know, that's only for us little guys.
Prosecutors will scoff at you if you mention the HSBC settlement. You're no HSBC, they will say. And indeed, you're not. Judges will impose sentence with a straight face, perhaps expressing righteous indignation at the things you've done and the harm you've caused, as they mumble triple digit numbers that are crucial to the preservation of society. You must be imprisoned so others will know that you cannot do such evil things and get away with it.
The criminal justice system, like every system relied upon by government to keep its vision of the wheels of society greased, has both a pragmatic as well as principled component. The problem is that it's principled only when the government is willing to pay the price. Whether that means releasing prisoners when the cost of keeping them incarcerated exceeds what they are willing to pay, or cutting a multinational bank a break when the economy is too fragile to take a major hit, they trade off otherwise inflexible principle that drops on the head of lesser defendants like a ton of bricks.
No one suggests that what HSBC did, or its scope or pervasiveness, was inconsequential. Just the opposite.
There is no doubt that the wrongdoing at HSBC was serious and pervasive. Several foreign banks have been fined in recent years for flouting United States sanctions against transferring money through American subsidiaries on behalf of clients in countries like Iran, Sudan and Cuba. HSBC’s actions were even more egregious. According to several law enforcement officials with knowledge of the inquiry, prosecutors found that, for years, HSBC had also moved tainted money from Mexican drug cartels and Saudi banks with ties to terrorist groups.
This is serious stuff. Whether it's true is another matter, but that will never be tested because they found the government's tipping point at $1.92 billion. So what if the government takes every penny you or your company ever made, and levies fines and forfeitures for a million times what you could ever make under their facile way of calculating what it's due. You don't have $1.92 billion to give, so you get prosecuted.
It sucks to be the little guy in a world where "justice" carries a high price tag. But at least there is one thing no one need endure any longer, after this choice by our government. No longer can any government official, any judge, any prosecutor, opine with righteous indignation about how a crime demands punishment. Even if they can do it with a straight face, they surely can't be angry with you for laughing at their joke.
Now that we've established what kind of system of justice we have, the rest is just dickering over price.