Dickering Over The Price

A man asks a woman if she would be willing to sleep with him if he pays her an exorbitant sum of money. She replies affirmatively. He then names a paltry amount and asks if she would still be willing to sleep with him for the revised fee. The woman is greatly offended and replies as follows:

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.

25 comments on “Dickering Over The Price

  1. Wyrd

    Yes, that is indeed sucky.

    Of course to some of us unwashed, non-lawyer masses, all of the Law is but a mystery. And when we start to find out how it works, even before this HSBC thing, it can seem pretty broken.

    Approximately seven or eight years ago, although I was already fully adult, I was blissfully ignorant of just exactly what the distinction between civil and criminal law was and why that mattered. But then–I had gone to college to learn about computers not about the legal system so I don’t feel as bad as those poor souls who went to college to pass the bar and then couldn’t.

    So when this legal matter was exploding on me and I would complain to my friends about it, I found they were as ignorant as me. They kept saying, “but isn’t the court required to appoint an attorney?” I kept responding, “no. This is a civil case not a criminal case.”

    I understand (now) why it is that in the one instance an attorney will be provided and that in the other instance, you’re totally on your own.

    But it still equates to a situation where, while you might always be guaranteed an attorney in situations where your *basic* civil rights are at stake, if you get into some situation where it’s you vs. the Big Corporate Monster, then depending on the case itself, you might not stand a ghost of a chance. It’ll be a case of who-has-the-most-money-to-burn and that’ll be the corporation.

    So, finding out that the criminal justice system will dicker over price is almost comforting. It’s a little point of confirmation about how I tend to view banks and governments already.

    Due to circumstances of reality beyond their control, they are only ever able to pay lip service to the notion of universal justice for all.

    In reality, the words of fictional character and kinda sleazy ambassador-guy Londo Mollari ring more true. When speaking with a couple that had a really valid grievance that they wanted to bring before the courts, he explained how justice worked on his planet, then looked at them with a sad smile and asked, “How much justice can you afford?”

    And that TV show was, of course, brought to you by a liberal.

    Furry cows moo and decompress.

  2. BL1Y

    We didn’t even do a very good job with the price. $1.9B represents only about 2% of HSBC’s 2011 revenues, 11% of their 2011 profits, and about .07% of their total assets.

    Retelling the joke in the HSBC context would be a bit like this:

    A man asks a woman if she would be willing to sleep with him if he pays her an exorbitant sum of money. She replies affirmatively. He then names a paltry amount and asks if she would still be willing to sleep with him for the revised fee. She again replies affirmatively.

  3. SHG

    I like you, so against my better judgment, I’m allowing your comment in its entirety. But you do realize how unbearably far off-topic it went, right?

  4. Wyrd

    eh.. ok. I guess I’m used to some other blogs where going far off topic is taken lightly. Also, it didn’t seem so far off topic to me. But then we probably have different notions as to what the topic actually is, and I tend to ramble and it’s your blog, your rules.

    I figured I was below the 3000 character limit so I’d just see what happens.

  5. SHG

    I try to run a tight blawg, and while I have no issue with non-lawyers reading or commenting per se, the posts are more directed toward lawyers rather than nons. There are plenty of blogs for non-lawyers to write about their experiences, but this isn’t one of them.  In fact, I’ve found that with the increase in non-lawyers commenting, there has been an inversely proportional decrease in lawyers commenting. This makes me very sad.

  6. SHG

    I used to think so, but when nobody is left to man the ship, and nobody volunteers to take one for the team, what’s there to do?

  7. Bruce Coulson

    Perhaps a better question might be ‘What else was/is HSBC doing?’ What might have been revealed in a criminal investigation that authorities might not want in the public mind?

    So, a fine imposed, and everyone stays quiet. What’s a little (dis)respect for the law among friends? And make sure we tell the little people that really, it’s for their welfare that we refused to prosecute.

  8. RP

    A “principled” legal system could not exist, and you wouldn’t want it even if it could. The rule of law must be subject to interpretation based on context and ultimately based on a cost-benefit analysis. Do you think it would be proper for a local prosecutor to try to prosecute the President of the U.S. for jay-walking? No, of course it wouldn’t, even if the President had indisputably jay-walked (e.g., was caught on tape doing so) and even if you and I are prosecuted ourselves for the same offense. It simply wouldn’t be worth the cost of engaging in such an effort, simply for the “benefit” of saying that “no man is above the law.” We might come up with all types of legal reasons and doctrines for why the President could not be prosecuted locally for jay-walking (we might say he was immune, for example) but the underlying rationale would be the same. Prosecuting everybody for the same crime in the same exact manner, in a “principled” way, simply isn’t possible across all circumstances you can think of. Would you execute someone who knew the secret to cure cancer, just to be “evenhanded”? No, you wouldn’t. I don’t know the details of the HSBC case you write about aside from the NY Times editorial, which might not be accurate as to the facts (it seems odd, for example, that the bank did all of these terrible things but the prosecutors can’t go after at least the bank’s officers); but even assuming you are correct what would be the point of prosecuting a company out of “principle” if it topples the whole system? Didn’t a Justice recently make the point that the Constitution isn’t a suicide pact?

  9. LTMC

    So the Feds didn’t want to wreck the economy by filing criminal charges against HSBC, so they picked up their ball and went home. Meanwhile, There’s a man in Montana named Chris Williams who’s facing an 80-year drug trafficking sentence because he owned a legal firearm while operating a medical marijuana dispensary that was licensed and legal under state law. I guess they only troll 18 USC 924 for sentencing enlargements when they’re dealing with the average joe. Prosecutorial discretion indeed.

    But really the decision not to file criminal charges against HSBC wasn’t prosecutorial discretion. You can bet they would’ve gone for blood if they saw an opening, particularly given the offenses involved. Federal prosecutors have shown themselves more than willing to seek completely absurd penalties for drug offenders for years, using a combination of the USSC Sentencing Guidelines and various aggravating statutes that jack up mandatory minimum sentences to prodigious levels. They do it on a regular basis with zero regard for the catastrophic consequences they inflict on their defendants. Just ask Judge Cassell from the District Court of the Central District of Utah, who in 2004 wrote a sentencing order in which he asked the President to use the Executive Pardon to *commute his own sentencing order* after Cassell sentenced Weldon Angelos to a 55-year mandatory minimum sentence, which he called “unjust, cruel, and even irrational.” 345 F. Supp. 2d 1227, 1230 (D. Utah 2004).

    No, what we have here is prosecutors realizing that their hands were tied because the money changers at HSBC learned how to organize their Byzantine operation to make themselves impervious to prosecutorial oversight. Being slapped on the wrist with a fine, even a substantial one, isn’t punishment for these folks. It’s just the cost of doing business. Discretion implies a choice. Federal prosecutors and their state peers had none here.

  10. Rick H.

    Your thesis is incorrect. I (and many others who aren’t the President) would prefer a principled legal system, with or without the scare quotes.

    “Prosecuting everybody for the same crime in the same exact manner, in a ‘principled’ way, simply isn’t possible” – on what basis? Resources? To use your absurd example, maybe jaywalking’s not such a horrible crime, if even the President does it. If fair enforcement of our laws is such a burden on the State, then why bother to prosecute at all? Where there exists such a social hunger for punishment, then the satisfaction of that craving should apply to all citizens equally.

    Standing on principle always means to sacrifice some value. Your argument seems to be that so long as there’s any downside or blowback from the rule of law, screw it; the rich and powerful should be given a pass. Which means, of course, that legislative bloat, criminality and corruption can never be taken seriously. Especially not by those immune from the law.

  11. johnl

    So who is it you think should be charged? Non USA HSBC banks acted in ways that rendered the USA bank’s compliance efforts ineffective. The corporation failed in its responsibility to keep that from happening and for that it has agreed to a civil fine. But it does not boggle the mind, as the NYT asserts, that anyone in a position of authority can make a plausible argument that he didn’t make any culpable decisions. After all, there was obviously a lot of “not getting the memo” going on.

  12. johnl

    There was no crime and they didn’t charge anyone with a crime. But you seem to think it’s a bad thing nobody was charged. And that it’s for complicated reasons they didn’t charge anyone. So, yes, I am missing something.

  13. SHG

    Yes, you are missing something. I thought that had been conclusively established. It’s the “complicated reasons” as explained by the government that creates the problem. Whether innocent HSBC paid all that money for no reason is its own business; it’s the government’s claim at issue, claiming that crimes were committed but it chose not to prosecute because HSBC was too big to fail.  I can only explain it to you; I can’t understand it for you.

  14. johnl

    You seem to be attributing a lot of weight to press conference chest thumping. There was no crime, so nobody was charged. Then Holder trolls out a story that he is Atlas holding the universe in place with this act of not charging these innocent screw-ups. And Holder is a troll for the ages, so the NYT and NPR are rolling with that. But look past the chest thumping at the case itself, you will see the real reason why nobody was charged.

  15. SHG

    Since you persist, here’s the deal. Holder’s trolls may be dead wrong when they claim HSBC is dirty, but is some guy who calls himself JohnL on a comment on the internet who baldly asserts HSBC innocent more credible?

    The fact is HSBC paid a bundle to buy its way out, and agreed to monitors. You can’t scream innocent after the first billion dollars. People laugh at you. If you want to be innocent, tell the government to go to hell. Innocence doesn’t cost $1.92 billion, and the more you protest HSBC’s innocent, the more disingenuous you come off.

    And finally, this is all about the government’s assertion that it would have prosecuted but HSBC was too big to fail. What this is not is about the bad things HSBC did or didn’t do, until somebody comes along and makes it about that. And why would he want to make it all about evil HSBC when it wasn’t? It’s kinda incredibly stupid and makes HSBC look even worse.

    Do you understand better?

    By the way, see the “reply to this” button below each comment?  Try using it so you don’t look like a total n00b. That’s how you have a conversation on a blawg. You really haven’t done yourelf any favors here, particularly since I tried to help you and you were too clueless to understand that I was saving you from looking like a fool.

  16. johnl

    HSBC has agreed that it failed to perform legally required monitoring, and has agreed to pay a fine. They was a lot of failure, so it’s a big fine. I am not defending HSBC. I am questioning the credulity of the reception to the chest thumping. A scapegoat would have made things easier for HSBC as well as DOJ. You are letting this chest thumping convince you that there are scapegoats getting pardoned, but there were no good scapegoats. If you don’t want to read the actual findings of the investigation then you shouldn’t get too invested in Holder’s rhetorical flourishes.

  17. SHG

    You’re still not getting it, but you’re wasting my bandwidth. I’ve given you four tries, and all you’ve done is embarrass yourself. That’s enough.

  18. RP

    Even-handed prosecution is not possible, because it is an abstract principle that cannot be applied under all circumstances that you can think of. I’m not saying that “so long as there’s any downside or blowback… the rich and powerful should be given a pass,” in your words. I’m saying that the rule of law is not absolute and we necessarily apply a cost-benefit analysis to how we interpret it. If I’m 90 years old and have terminable cancer, and am caught stealing a loaf of bread, prosecutors will not treat me the same way as other offenders. Call it prosecutorial discretion, cite to a guideline somewhere in the Court Rules, or call it whatever you wish, but the fact is that the “rule of law” has to be interpreted under the circumstances, by fallible human beings. And your example about the “rich and powerful” cuts both ways, because obviously prosecutors have sometimes gone after the rich and powerful, more so than “regular” offenders, so as to “send a message.” Is that evenhanded enforcement? The point is that textual language of the law — the “black letter law” — doesn’t exist apart from our interpretation of it. So, criticize the govt.’s decision about not going after HSBC all you want (and it probably should be criticized) but don’t pretend that the law has to be applied equally everywhere, as a matter of “principle” or, more importantly, that a “principled” position is necessarily the moral one. I seem to remember the villan inspector from Les Miserables was a pretty principled guy.

  19. SHG

    There are normal parameters within which a principled application of law can differ while being rational. That’s what you refer to when you speak of prosecutorial discretion. This goes beyond those parameters and anything remotely principled.

  20. Sgt. Schultz

    I get the impression you’re a shill paid for by HSBC to run around the internet and scream that HSBC is innocent. Was that what you were going for?

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