A near-final chapter in the international drama of Riggs Bank is unfolding in a federal courtroom as a judge prepares to rule whether the Washington institution is being punished enough for failing to report its suspicious transactions involving foreigners, including former Chilean dictator Augusto Pinochet.
The $16 million fine Riggs agreed to pay is the largest criminal penalty ever imposed on a bank of Riggs’ size, according to prosecutors. In addition, the bank faces a record $25 million civil fine levied by a Treasury Department agency last May.
The plea agreement with prosecutors means the old-line Washington institution with a franchise on dealing with the capital’s diplomatic community avoided prosecution and cleared the way for its parent Riggs National Corp. to be sold to Pittsburgh-based PNC Financial Services Group Inc. for $643 million.
U.S. District Judge Ricardo Urbina was to rule at a hearing Tuesday on final approval of the plea agreement.
Attorneys for Riggs Bank entered a guilty plea before Urbina on Jan. 27 to a criminal felony charge of failing to report suspicious transactions, including those in accounts of Pinochet and members of his family. 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 time, Urbina expressed some skepticism about the adequacy of the penalty, saying he wondered whether $16 million represented “just a business expense” for Riggs, a midsize institution with some $6.4 billion in assets.
In a report released two weeks ago, Senate investigators charged that Riggs’ dealings with Pinochet and his family were far more extensive and long-standing than had been known. The report said the relationship stretched from 1979 to 2004 and involved 28 accounts and certificates of deposit at the bank rather than the nine previously reported.
At the January hearing, the prosecutors revealed a list of deceptions they said were used by Riggs managers to conceal Pinochet’s ownership of the assets. They included establishing fake offshore companies and altering his name on some of the accounts. This occurred at a time 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.
The Justice Department has been investigating the Riggs executives’ handling of some foreigners’ accounts, including those held by Pinochet, Saudi diplomats and officials of the government of President Teodoro Obiang in Equatorial Guinea.
The West African country, which has been cited by the State Department for human rights abuses, corruption and diversion of oil revenues to government officials – it is Africa’s third largest oil producer – became Riggs’ biggest single customer with nearly $700 million in accounts and certificates of deposit. Riggs managers helped Obiang set up an offshore shell corporation that took in deposits of more than $11 million during two years of questionable transactions, according to prosecutors.
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.
Riggs National’s chairman and CEO, Robert L. Allbritton, abruptly resigned this month, relinquishing his position and board seat in a move that stripped his family, the bank’s biggest shareholder, of executive control of the bank and any direct representation on its board.
Allbritton’s announcement came 10 days after he and his family agreed to pay $1 million into a new $9 million fund for Chilean victims of Pinochet’s tenure. The bank is paying the remaining $8 million.