Senators expressed outrage Thursday at the failure of Riggs Bank (search) executives to act while managers helped former Chilean dictator Augusto Pinochet (search) conceal millions and turned a blind eye to improper payments to officials from Equatorial Guinea.
Striking details such as a suitcase stuffed with cash became public at a Senate hearing into Riggs' handling of the accounts. Lawmakers said it was impossible that bank executives were unaware of the actions.
In fact, the bank's former chairman and chief executive, Joseph Allbritton (search), went to Chile to solicit Pinochet's business a decade ago, and he and other senior bank officials were familiar with the transactions in Pinochet's accounts, senators said.
Account managers, working with Pinochet from 1994 to 2002, set up phony offshore companies and hid the existence of his accounts from U.S. examiners, according to a report by the Senate Governmental Affairs' investigative subcommittee.
During that period, prosecutors in several countries were seeking an accounting and freeze of his assets.
"How do you basically live with yourself?" Sen. Carl Levin, D-Mich., asked Riggs executives. "Somehow or other there's got to be a conscience in here."
Federal regulators were faulted for lax oversight of the bank, which has deep ties to the diplomatic community. U.S. oil companies were cited for payments to officials of Equatorial Guinea and their relatives, and to businesses they controlled.
The State Department has cited the poor West African country for human rights abuses, corruption and diversion of oil revenues to government officials.
With $700 million in accounts and certificates of deposit for the Equatorial Guinea government, its officials and their relatives, the country was Riggs' biggest single customer.
Using wire transfers, some $35 million was shifted from an account that held oil revenues for the country's people and put into offshore companies, the report said.
A former Riggs senior vice president who was in charge of the Equatorial Guinea accounts, Simon Kareri, invoked his Fifth Amendment right against self-incrimination at the hearing and refused to answer questions on the bank's handling of the accounts.
The report said a Riggs account manager brought a 60-pound suitcase full of dollar bills into the bank to make a deposit into an account of Equatorial Guinea's president, Teodoro Obiang.
"If that kind of cash deposit doesn't make a bank sit up and ask questions, I'm not sure anything will," Levin said.
Riggs was fined a record $25 million in May by federal banking regulators for allegedly failing to report suspicious transactions in the Equatorial Guinea accounts and those controlled by Saudi diplomats in Washington.
"I sit here in amazement ... to see how casually they dismissed the rules" to prevent money laundering, said Sen. Frank Lautenberg, D-N.J.
In Chile, President Ricardo Lagos said government authorities may investigate the allegations concerning Pinochet's accounts. Associates of Pinochet, who ruled Chile from 1973 until 1990, denied that the accounts existed.
Pinochet's younger son, Marco Antonio, termed the Senate report "mere lies."
Executives of the U.S. oil companies — Amerada Hess, ExxonMobil and Marathon — said at the hearing they have complied with U.S. anti-bribery laws and have entered only into legitimate business ventures in Equatorial Guinea.
Testimony under oath by a Riggs executive concerning Pinochet's accounts conflicted with sworn written statements by federal regulators whom he formerly supervised. Levin said he wants the Justice Department to investigate the discrepancy.
There is "a very direct conflict on a very critical point," Levin told R. Ashley Lee, executive vice president and chief risk officer at Riggs. Lee was the lead examiner for Riggs at a Treasury Department agency from 1998 until he retired in October 2002 and went to work for the bank two weeks later.
The report said Lee instructed agency staff who had looked into the Pinochet accounts not to put their examination memos or supporting paperwork into the agency's electronic files.
"I made no (such) instructions to anybody," Lee said at the hearing.