Friday, March 22, 2013

Calling him a liar to his face - How Sir John Pease of Standard Chartered has been forced to eat his words about sanctions busting!

One of the less enlightening elements of the way in which large banks and their senior management have responded to the wave of regulatory interventions they have brought upon themselves by their own criminality, has been their use of the PR advisers with their carefully-crafted weasel words, which have been used to down-play the level and degree of culpability which has so exemplified the banking sector's criminal wrongdoings.

It is typical of the way in which these institutions seek to position themselves in the best possible light, and how they refuse to acknowledge that their conduct has been criminal, in order to deceive their clients about their true behaviour, because they know that without these subterfuges and economic truthfulness, it would inevitably open them up to other criticism and contumely.

It is almost as if these institutions believe they have right, indeed, a positive duty, to make as little as they can of the opprobrium which has been heaped upon them, and to seek to find ways of minimising their criminality and their thoroughly dishonest behaviour.

There is a criminological explanation for this kind of behaviour, it is called 'Techniques of Neutralisation'. I intend to rehearse this phenomenon here because I believe that in it, we will find valuable explanations for recent public actions and statements by banksters.

Gresham Sykes and David Matza were two US criminologists who wanted to build upon Edwin Sutherland’s 'Differential Association' theory which states that an individual learns criminal behaviour through;

“(a) techniques of committing crimes and;

(b) motives, drives, rationalizations, and attitudes” which go against law-abiding actions (Sykes and Matza, 1957:664).
These techniques reduce the social controls over the perpetrator and are applicable not only to specific juvenile offenders, but also white collar criminals.

Neutralization is defined as a technique, which allows the person to rationalize or justify a criminal act.  There are five techniques of neutralization; denial of responsibility, denial of injury, denial of the victim, condemnation of the condemners, and the appeal to higher loyalties. 

Denial of responsibility is a technique used when the deviant act was influenced by an outside force. This technique goes beyond looking at the criminal act as an accident.  The individual offender feels that they are drawn into the situation, ultimately becoming helpless.  These offenders feel that the environment within which they have to work (in these cases, what they perceive as a degree of over-regulation, or of too many legal requirements with which they have to comply), eventually result in their committing criminal acts.  A common statement used can be often heard;  “It was not my fault.”
Denial of injury occurs when the criminal act causes no physical harm to an identifiable victim.  Criminal acts are deemed deviant in terms of whether or not someone gets physically hurt, and it becomes very difficult if not impossible to focus attention on a large group which is hurt financially. Using this technique the offender views certain kinds of fraud such as PPI as merely 'clever business'. “I assumed that a criminal action meant hurting someone, we did not hurt anyone”

Denial of the victim is used when the crime is viewed as reasonable conduct towards persons who are not deserving of better treatment.  This technique may be used by those who treat their clients like 'mugs' or 'muppets'.  “ Anybody this dumb deserves to get screwed.”  Much of this attitude can be seen in the fraudulent selling of interest rate derivative swaps. A common observation under this heading is 'If we didn't take the money, someone else would have done'.

The technique called the condemnation of the condemners, also known as 'rejection of the rejectors', places a negative image on those who are opposed to the criminal behaviour. The offender ends up displacing his/her deviant behaviour on those they are victimizing and also viewing the condemners as hypocrites,of acting outside the scope of their authority. The behaviour of many City commentators, fellow apologists and banksters over the way in which the New York Financial Services Commissioner dealt with Standard Chartered Bank would fall into this category.

Finally, the appeal to higher loyalties technique is used when the person feels they must break the laws of the overall community to benefit their own particular identified group or /institution. This technique comes into play when a bankster gets into trouble because of engaging in significant risk-taking to deliver extra  profit for his institution. The appeal is to other members of his elite group or industry sector, requiring their support for actions which they have all engaged in at one time or another and which are ideally accepted within the special group as being legitimate  for the greater interest of the institution. A common observation would be 'It cannot be criminal, everyone does it'.

These techniques are regularly resorted to by the banksters when they have been caught out cheating, stealing and defrauding their clients, the market more generally, or flouting international laws. They are deeply offensive to anyone who is familiar with the criminology, and they identify the banksters and their culture as being on a level below bottom feeding, swamp-life in the evolutionary scale of development.

Well, it was reported on Thursday 21st of March that Standard Chartered Bank have been forced into a humiliating apology to US Regulators for comments recently made by the Chairman, Sir John Peace about the bank's recent misconduct over its dealings with Iran.

At a recent press conference on 5th March, dealing with banker's remuneration, questions were asked "concerning individual employee conduct and compensation" following the deferred prosecution agreements in the United States over the Iran sanctions breaking affair.

Sir John had replied, when asked about bonuses for executives: "We had no wilful act to avoid sanctions; you know, mistakes are made – clerical errors – and we talked about last year a number of transactions which clearly were clerical errors or mistakes that were made."

These words, let us state clearly here and now, are deliberate lies, and a classic example of one of the techniques of neutralisation because they are a complete and outright denial of responsibility.

Back in December 2012, Standard Chartered Bank negotiated a deal with US Regulators for their criminal actions in flouting US sanctions against Iran. First, the negotiations which had been dragging on for some months with the New York Department of Financial Services, were finally brought to a head when the Americans threatened to withdraw the bank's licence to do business in New York. Subsequently, the bank entered into a Deferred Prosecution Agreement settlement with the Justice Department, and paid a series of fines amounting to $667 million dollars.

The important issue at stake here is what are the implications of the Deferred Prosecution Agreement (DPA) which the bank entered into to get out from under. The New York state regulator accused Standard Chartered of running a "rogue institution" that conspired with Iran to hide more than $250 billion in illegal transactions for nearly a decade. The bank at the time said the department's findings didn't present "a full and accurate picture of the facts." However, It nonetheless reached a final settlement with the department in September and with the four other authorities in December. 

Under the settlements, Standard Chartered acknowledged it had removed or omitted Iranian information from U.S. dollar wire payment messages, and that it and its employees had engaged in criminal conduct. The agreements Standard Chartered made last year required it to admit wrongdoing over its Iranian dealings and pay fines in exchange for avoiding prosecution. The U.S. can prosecute the bank if it believes the terms were violated. 

Having been privileged to sit in US courts and observe these agreements being arrived at, I can report that the process is both formal and frankly compelling. The person or the institution concerned is asked very clearly whether they admit the truthfulness of the admissions they are about to make. They are told in no uncertain terms that they are not being forced to make these admissions and that if they wish to, they can roll the dice and go to trial. They are warned of the consequences of not abiding by the terms of the agreement, all of which are rehearsed with them, and they are cautioned that the agreement can be rescinded at any time in the deferral period if they violate the deal. There can be no question that they do not understand the entire terms of the process, and no-one who has witnessed the process could accuse the US authorities of 'holding a gun to the head' of the institution. These processes are held in open court or in a Judge's chambers, and they are very formal affairs and intended to be taken seriously.

Having read Sir John's public denial of his bank's wilful culpability in the Iranian sanctions matter, the US authorities have acted swiftly, because Sir John was now in breach of his public undertakings made when the deferred prosecution agreement was entered into. 

Sir John has been a complete fool for making his statement on March 5th, because it flies in the face of the plea agreement made with the Court and denies the truth of the situation admitted in America.

Bur Sir John has been forced to see the error of his ways and has been forced to retract his objectionable remarks in a highly personal and abject mea culpa on behalf of the Bank on Thursday. In a letter to the Stock Exchange, he has been forced to admit saying things that were “legally and factually incorrect”, in other words, they were in breach of the DPA and lies!

“I made certain statements that I very much regret and that were at best inaccurate,” he said, and apologised, personally and on behalf of senior executives. For good measure, he had to get down on bended knee and accept “on behalf of the bank and its employees, for past knowing and wilful criminal conduct in violating US economic sanctions laws and regulations, and related New York criminal laws, as set out in the deferred prosecution agreement”. 

So, there you have it, this humiliating episode is a perfect case study of the techniques of neutralisation and also in the implications of the way in which British bankers seem to believe that despite whatever important agreements they come to with foreign regulators, they can come home and seek to lie and dissemble about the activities to which they have just made vitally important admissions in a U.S.Court hearing.

It is quite incredible that this has happened, this is the arrogance of these people writ large. It says quite openly, 'we don't give a flying fuck for the Americans or their laws', but this is the state of affairs in the UK, where members of the Great and Good will lie themselves blue in the face about their wrongdoings, sooner than admit the plain unvarnished truth, which is that they are a bunch of lying scumbags!

Thankfully, the US Regulators, who are presently smarting under the lash of the new Senate hearings in which serious questions are being asked about how best to deal with such banks in future, have got the message and have forced Pease into a humiliating acknowledgement of his failings.

Whether Sir John's capability to carry on in his role of Chairman of Standard Chartered is in any doubt, is a matter for the relevant authorities and the shareholders. Some, like myself, believe that he should go, resign now to prevent the public face of Standard Chartered from being held up to any further ridicule for having a confirmed liar on its Board.

The problem is that all his City mates will be quietly clustering around him, patting him on the back and saying "...there, there old boy, could have happened to any one of us, don't worry about it, who do the bloody Yanks think they are anyway..."

And all the British press will be slagging off the Americans and accusing them of using their powers to bully Britain because they are jealous of us as a financial centre. 

And the usual apologists will be crawling out from under their stones to rally round the flag, I expect to see BoJo at any second! 

And that, my friends, is really a big part of the problem!


Unknown said...

What a brilliant article! I am very much looking forward to hearing more of this from you at our event in Manchester on 4th April:

AbogadoNZ said...

Another goodie Rowan. So there we have it Sir John Peace is a blatant liar and moreover doesn't give a flying fuck for a legal agreement delivered to a US court and banking regulator. Quite why all the companies on whose boards he sits haven't demanded his resignation is mystery and merely confirms the untouchable status bankers have assumed for themselves. Craven bastards all of them.

simoncz said...

He should be stripped of his knighthood. The words knight and liar cannot properly apply to one person.
The institution has once again been brought ( or bought? ) into disrepute by a banker.

Golem XIV - Thoughts said...

Great article Rowan.

Looking forward to you talk in Manchester.

Just how stupid do you have to be to break a Deferred Prosectution Agreement?

Demetrius said...

Another good one, the Techniques of Neutralisation was especially interesting. Although, I deny it and hold you entirely responsible for this comment which is made in good faith.

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