One of the tacit agreements among those at the very top of the power pecking order is not to criticize each other in public (with a few ritualized exceptions, like roughings up in Congressional hearings).
So while this account, from Susan Beck at Litigation Daily, might not seem all that bad, given the mind-numbing range and variety of bank misdeeds, what is critical to recognize here is the way that these top blue-chip law firms have abandoned their traditional role of helping clients stay on the right side of the knife edge of misconduct. They not only happily helped them disobey, but pushed the accountants into helping with the cover up.
From Beck (hat tip Abigail Field):
For the second time this summer, a major law firm has come under scrutiny for its questionable role advising a bank on transactions with sanctioned countries.
This time the firm is Sullivan & Cromwell, whose work for Bank of Tokyo-Mitsubishi UFJ was revealed in documents filed Monday by the New York State Department of Financial Services…
[Benjamin] Lawsky accused the PwC unit of helping Bank of Tokyo “scrub” a report to state and federal financial regulators about its falsification of wire transfer information for Sudan, Iran and other nations sanctioned for human rights abuses…
Monday’s settlement describes how in 2007 and 2008 Bank of Tokyo and its lawyers pressured PwC to omit incriminating details about its activities in a regulatory report. The agreement says the bank’s lawyers “essentially dictated” part of the report to PwC, rewording a passage that cast doubt on PwC’s review of suspect transactions. (The final language deemed the review “appropriate.”) An unnamed PwC director who is now a partner at the company warned that using certain words to describe the bank’s stripping instructions might get the bank or its lawyers “all twisted up.”
While these portions of the settlement agreement don’t name the law firm, a person familiar with the case confirmed that it is Sullivan & Cromwell, which is identified as the bank’s counsel elsewhere in the documents. The firm is known for having one of the top practices advising clients dealing with the Office of Foreign Assets Control (OFAC), the division of the U.S. Treasury that enforces economic trade sanctions…
In late June, Cleary Gottlieb Steen & Hamilton was on the hot seat for advice it gave to French bank BNP Paribas, which agreed to pay $8.9 billion to the U.S. Department of Justice to settle criminal charges that it conspired to help clients evade U.S. sanctions against Sudan, Iran and Cuba.
Yves here. Even though it’s easy to be jaded about elite misconduct, Sullivan & Cromwell is the blue-chippiest of bank regulatory fixers. For it to go so casually and flagrantly over the line of misconduct, perhaps assuming it had no risk, since the real bagholder was PwC, is still a wake-up call. I can’t say I was shocked, but Abigail Field, who is no naif, yours truly, and apparently Beck as well, saw this as surprising.
Admittedly, law firms have more and more gotten in the business of enabling rather than preventing corporate bad behavior. But the top firms (at least in the past) had to preserve their image of being purer than Caesar’s wife, at least in terms of their public image, to be effective inside operators. That was important with being credible in negotiating with the government. But with the revolving door, cognitive capture, and other forms of soft and overt corruption the new normal, it makes sense that the law firms no longer feel the need to adhere to the old lowest-common-denominator standard of looking, as opposed to actually being, law abiding.