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Monday, 18 March 2013 11:12

In Bank Tax Cut for Job Scheme, Another Bank Gets Immunity by DOJ

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vault22Jonathan Weil, a Bloomberg columnist, understands the multiple-dangers (to the financial system, to the rule of law, and to creating an elite bubble of impunity) that is posed by Eric Holder's -- as attorney general for President Obama -- granting a right to commit corporate and financial crimes card.

In what has become a multi-year unprosecuted crime spree by banks too big to fail, Weil recently reported on one of the most bollixing failure of the DOJ to prosecute an almost certainly culpable bank – and undetermined senior staffers.  What makes it so flummoxing is the transparent statement of the US prosecutor in charge of the case, who comes off sounding like a state investigator in China or some other dictatorship.  

Here's the background to the case, as Weil reported it on Bloomberg.com:

Dennis Lerner, a former tax director at Commerzbank AG (CBK) in New York, isn’t too big to jail. But the bank he once worked for may well be, along with the other executives there who made his crimes possible.

Lerner, 60, pleaded guilty this week to public-corruption charges. Commerzbank hired him from the Internal Revenue Service in 2011 while he was an examiner responsible for negotiating a tax-fraud settlement with the bank, according to the criminal complaint that prosecutors filed in September. Commerzbank paid the IRS $210 million one day before offering Lerner the job, which he accepted immediately. The figure was 62 percent of the potential taxes due. Bank employees later told federal investigators it had been willing to pay much more money to settle the audit.

“We will not tolerate corrupt government employees and will prosecute and punish them to the full extent of the law,” Preet Bharara, the U.S. attorney for the Southern District of New York, said in a March 12 news release. Notably, Bharara said nothing about prosecuting the people and companies that participate in corrupting them.

Why hasn’t the Justice Department charged Commerzbank or anyone else who worked there? That is a mystery, but perhaps only partly. U.S. Attorney General Eric Holder last week told the Senate Judiciary Committee, in essence, that some financial institutions are indeed too big to prosecute, because of the damage to the U.S. and world economy that might ensue.

So Big

Commerzbank is certainly big. The company had 636 billion euros ($839 billion) of assets on its Dec. 31 balance sheet, making it Germany’s second-largest bank.

BuzzFlash at Truthout believes that the statement by the DOJ US attorney prosecuting the former IRS agent merits repetition: "'We will not tolerate corrupt government employees and will prosecute and punish them to the full extent of the law,'" Preet Bharara, the U.S. attorney for the Southern District of New York, said in a March 12 news release." (Italics inserted by BuzzFlash at Truthout.)

Weil states the obvious to those concerned about a nation that is free of government corruption, prosecutes the guilty, and has people in charge of financial institutions who value a healthy and honest economy: "If we are going to place some banks above the law for the sake of financial stability, we also must recognize the threat this poses to our democracy. For starters, the banks can buy off government officials and get away with it."

Shall we say this is the 15th or 16th commentary we have written on this topic, the last one being, "Eric Holder Enables Dishonesty, Fraud and Likely Criminal Activity on Wall Street."  We've stopped counting.  We did note in the "Eric Holder Enables Dishonesty" column:

Think about the implications of Holder's statement and the DOJ and Obama administration's tacit decision not to pursue cases against individuals in too big to fail financial institutions.  Think about the standard it sets when as a matter of policy, individuals can get away with crimes of incalculable impact upon so many lives -- and to the welfare of the United States.  In essence, the executives who run these behemoth financial enterprises are too powerful to be subject to the laws of the United States of America regarding financial transactions – and now their crimes are committed with global impact.

Yet, we throw kids into jail for selling reefer.

Moreover, there is a supposition to be followed through that many of these banks too big to fail -- for instance ones that knowingly laundry money for the narco cartels and trade with the "enemy" as defined by Congressional legislation -- are in essence de facto criminal enterprises themselves by their very actions that the US DOJ ignores except for fines it or the SEC levies.  These fines, although seemingly large, are just like the cost of drug entrepreneurs paying off government and law enforcement officials to look the other way as the cocaine and heroin enter into the blood stream of America.  They do not stop the banks one iota in functioning in the illegal and dishonest manner in which they make a significant portion of their profit.  

So Holder and the White House are doing more than allowing illegal financial behavior to continue; they are also continuing to tacitly (whatever settlements they claim to reach) allow the financial world to profit from the narco market, to conduct financial transactions with "enemies," including, in some cases, illegal financial transactions that ultimately assist groups like Al Qaeda.  That is not to mention other criminal by-products of the DOJ "see no criminal illegality" stance toward big banks.  In the case of Commerz Bank, the DOJ is sending out a clear signal that it is okay for a large bank to try and bribe a government official. Why? Because only the government official might be prosecuted, not the bank.

The executives of the banks authorizing such a scheme, committing such a crime, get off free, even though these are the types of scenarios – in other areas of the law – that sting operations are set up by government officials to lure the private sector into breaking.  This is then followed by prosecution. But not so for the golfing partners of President Obama, and the former clients (and probably future clients) of Eric Holder and his Covington and Burling crew at the Department of Justice.

Let's ask a simple question here. Did Dennis Lerner, former IRS bank examiner who illegally lowered the tax liability of Commerz bank by nearly 40% do it on his own?  Was it some sort of masturbatory scheme to enrich a bank headquartered in Germany, in which he was being "philanthropic" toward Commerz without any inducement from the bank?

What's astonishing is that this quid pro quo, lowering of the bank's tax payment by around a $100 million dollars occurred one day before he was hired by Commerz with lord knows how many perks and no doubt an extremely cushy salary. No doubt he quickly became Commerz's in-house excerpt on how to avoid paying taxes.

We ran a commentary, "Holder Admits That Department of Justice Believes Big Bankers Are Above the Law."

Even then, we didn't realize the ever-burgeoning extent of rampant DOJ corruption toward the non-prosecution of big banks and their executives.

Holder may privately claim that the decision was made not to pursue criminal charges against Commerz or its executives because the German government owns 25% of Commerzbank.

If so, were that the case, it's an international cancer on our financial system that Holder is allowing to metastasize.

(Photo: Wikipedia)