WASHINGTON – A federal judge on Tuesday approved a $16 million criminal fine against Riggs Bank (search) for failing to report suspicious transactions involving foreigners. The plea agreement closes a chapter for the bank, which is expected to disappear soon as an independent concern.
U.S. District Judge Ricardo Urbina ruled that Riggs is being punished enough for its admitted misconduct, which included dealings with former Chilean dictator Augusto Pinochet (search) and members of his family.
A federal prosecutor said at the hearing that new charges will be brought in the near future against individuals involved in the Riggs affair, based in large part on information obtained through the bank's cooperation in the ongoing criminal investigation.
Riggs pleaded guilty Jan. 27 to a criminal felony charge. The $16 million fine that Riggs agreed to pay immediately is the largest criminal penalty of that type ever imposed on a bank the size of Riggs — a midsize institution with some $6.4 billion in assets — according to Justice Department prosecutors. In addition, the bank has agreed to pay a record $25 million civil fine levied by a Treasury Department (search) agency last May.
Noting Riggs' 169-year-old history as a prestigious Washington institution, Urbina said it now stands "as a greedy corporate henchman of dictators and their corrupt regimes."
The parent of Riggs — which had a franchise on business with the capital's diplomatic community — is to be sold to Pittsburgh-based PNC Financial Services Group Inc. (PNC) for $643 million.
While deeming the $16 million fine appropriate, Urbina said it was impossible to measure the "atrocities" and violations of human rights perpetrated by Pinochet's regime and in Equatorial Guinea, which he said was abetted by Riggs' "enabling criminal activity."
At the January hearing, Urbina had expressed some skepticism about the adequacy of the penalty, saying he wondered whether $16 million represented "just a business expense" for Riggs.
Having been satisfied that it was sufficient, the judge's approval of the plea agreement with prosecutors means that Riggs avoids prosecution and clears the way for its parent Riggs National Corp. to be acquired by PNC, a regional banking powerhouse more than 12 times bigger than Riggs.
The bank's guilty plea was for violating money laundering laws by failing to report to authorities suspicious transactions, including those in the accounts of Pinochet and his family members, and officials of the government of President Teodoro Obiang (search) in Equatorial Guinea.
Justice Department prosecutors laid out a case in which, they said, Riggs officials aggressively courted foreign political figures to win their banking business, failed to exercise proper oversight and aided these customers' illegitimate uses of the bank.
At the January hearing, the prosecutors revealed a list of deceptions they said Riggs managers used to conceal Pinochet's ownership of the assets. They included establishing fake offshore companies and altering his name on some accounts. This occurred when prosecutors in several countries were trying to freeze Pinochet's assets and bring him to justice for alleged crimes against humanity during his reign in Chile from 1973 to 1990
Equatorial Guinea in West Africa — which the State Department has cited for human rights abuses, corruption and diversion of oil revenues to government officials — is Africa's third-largest oil producer. It became Riggs' biggest single customer with nearly $700 million in accounts and certificates of deposit.
PNC is buying Riggs National, stripped of the embassy and international business that got the bank into trouble, in a cash-and-stock deal that is scheduled to be completed by the end of May.
Under terms of the plea agreement, Riggs will be on probation for five years or until the merger with PNC is consummated. The bank also will continue to cooperate with federal and other law enforcement authorities in their investigations.
The bank recently said it expected to report a loss of $100 million for 2004.