Behind the Standard Chartered Settlement; Up in Smoke; US Stocks Struggle for Gains
RICHARD QUEST, HOST: Better expensive than embarrassing. Tonight, we investigate the real reasons why Standard Chartered settled in New York. Smoke and mirrors. Tobacco companies hit back at an Australian court ruling on cigarette branding. And on a Rolls. Demand for the luxury car's rising, and I'll get a firsthand look live. I'm Richard Quest and, of course, I mean business. Good evening. It's paid its penance, and now Standard Chartered faces old problems with new realities. A federal investigation still hangs over the bank's deals linked to Iran, and while some of the terms of the settlement, it also means its future will never be the same. Here are the unresolved issues for Standard Chartered. First, the inquiry from the federal regulators. Now, it's ongoing. It includes bodies like the Fed, the US Treasury, and Justice Department, and Standard says it continues to negotiate with those authorities. So, that will undoubtedly in the fullness of time cost money. Then there's the terms of the DFS settlement. Money-laundering monitors at the bank must now report to the regulators for at least two years. These are monitors that will be in Standard Chartered in New York, and those monitors will be overseen by newly appointed, permanent auditors. It's like having watch guards all the time. The deal may have secured Standard Chartered's new bank -- New York banking license for now, but of course the jury is out on who won and who lost, and that is the big debating point. Join me over in the library and you'll see. Well, you take the stock market's view, Standard Chartered won. The market's up now 4 percent. It's probably only showing a loss of about 6 to 9 percent over the total loss in the whole fiasco. But the share price came back. It's up 16 percent from its crisis lows. It's just off its down by about 5 percent year-to-date. And what that price tells us is that pragmatism won the day. Standard Chartered settled for the $340 million to prevent a greater loss further down the road. "Pragmatic" is exactly the word that's used by the company. According to the chief executive, Peter Sands, in an e-mail memo to staff, he said, "We had to settle, we had to act in the interest of our shareholders and customers in staff." Best interests at heart. And he also says that there can often be various different reasons why people settle, $340 million. Put it into perspective. It is less than ING paid, $619 million, for money-laundering charges. It is half the amount that HSBC has put aside for its Mexican money laundering charges. So, by putting the money and paying it now, even though -- even though there may be other liability further down the road, it has to some extend neutralized it. Joining me now from New York is the attorney Alan Abramson who always helps us out understanding these US litigious matters. Alan, if you had to come off your lawyerly fence, who won and who lost so far?</s>ALAN ABRAMSON, ATTORNEY: Well, good evening, Richard. It's tough to come off this fence, but I think in the first round, I think Standard Chartered scored a technical victory. I think the $340 million penalty was quite small given the scope of the conduct, and I think they got off lightly here.</s>QUEST: So --</s>ABRAMSON: However, I do think the New York regulator score some points here, and the most important point was, initially Standard Chartered said that 99 percent of their transactions were perfectly legitimate and at most we were talking about $14 billion. And as a result of this settlement, they've acknowledged that it involved hundreds of billions of dollars and that many of the transactions were not kosher --</s>QUEST: Right, but hang on a second. Hang on. Hang on. What you are basically saying is the rail politic of paying $340 million and hoping everybody forgets about it rather than going to the mat in a battle.</s>ABRAMSON: Well, what I said, though, is this is just the first round. This isn't the last battle that they're going to have to face. And I think for the first go-round with the first regulator, a local New York regulator, they did quite well. But I don't think this case is over yet. I think we have a long way to go.</s>QUEST: And if we take a look at the allegations: money laundering, tens -- hundreds of billions, Iran sanctions involved, they -- there are critics out there today saying if you or I did something like this in other circumstances, we'd be locked up for a very long time.</s>ABRAMSON: Well, those critics are correct. In addition to the allegations involving money laundering, clearly there are allegations involving filing false documents, wire fraud, mail fraud. All of those things are still on the table. And I can tell you that if anyone committed those sorts of crimes, if they are found out, they are prosecuted and, Richard, they go to jail. And given the scope of these allegations, it seems incredible to me that there hasn't been a single prosecution yet of any of the individuals that were involved in making these decisions. Having said that, when -- it's not over yet, and I believe that the state prosecutor in Manhattan, the New York District Attorney's office and the federal prosecutor in Manhattan and the southern District Attorney's office, they haven't given up on this yet, and I think they're going to be moving forward.</s>QUEST: So, you think it's still possible, even though Standard Chartered may have gone for a strategic victory, you think it's still possible that handcuffs will be out before Christmas or New Year?</s>ABRAMSON: I -- not only do I think it's possible, I think it's likely. The scope of this investigation is so large that I think that any prosecutors office is going to find that they have sufficient evidence to move forward and at least charge individuals for their individual decisions and their individual wrongdoing.</s>QUEST: Finally, Alan, the regulator involved, Mr. Lawsky, he came under such criticism for his florid language, "rogue institution," "staggering cover-ups" -- it read like a good bodice- ripper novel that you and I might read on holiday. Does he come away from this with credit for having led the way when others, perhaps, were fearful?</s>ABRAMSON: I think this is a real feather in his cap because, most of all, he got the bank to acknowledge that this was a widespread problem involving billions of dollars and not just an isolated incident.</s>QUEST: We'll have you back when the arrests -- if they do come -- come along to talk us through what happens then. Alan Abramson, always talking to us, he has a good common sense of what's happening in New York. Coming up on QUEST MEANS BUSINESS in a moment, it's a big case, it concerns the tobacco industry. They've lost the battle against plain packaging in Australia and now, of course, the whole incident goes global.</s>QUEST: QUEST MEANS BUSINESS, good evening.