GOVERNOR PATERSON AND MANHATTAN DISTRICT ATTORNEY ROBERT MORGENTHAU ANNOUNCE NEW YORK STATE WILL RECEIVE $109 MILLION UNDER DEFERRED PROSECUTION AGREEMENT WITH BRITISH BANK LLOYDS TSB
New York State Recovers $109 Million of a $350 Million Settlement
Governor David A. Paterson and Manhattan District Attorney Robert M. Morgenthau today announced that New York State will receive $109 million of a $350 million settlement under a Deferred Prosecution Agreement with the British bank Lloyds TSB. The settlement relates to a stripping scheme in which the bank caused the falsification of records of New York financial institutions and enabled its Iranian and Sudanese banking clients to access the U.S. banking system in violation of federal law. Stripping is the practice of removing wire transfer information that would identify that the transfers originated from a prohibited source. The United States government prohibits certain countries from accessing U.S. financial institutions and the U.S. banking system. “Lloyds’ actions violated federal restrictions. A distinguished financial institution engaged in illegal conduct and now the bank will pay for it,” said Governor Paterson. “New York State will recover $109 million which will help us as we work to recover from the collapse of the financial services industry as a whole. Going forward, we must continue to be vigilant in our regulation of the financial services sector.”
“I want to congratulate District Attorney Morgenthau for his office’s exemplary work in this case. Over 40 years ago, he established a special unit in the District Attorney’s office to investigate securities fraud, and ever since, he has tenaciously fought every kind of financial misconduct,” added Governor Paterson. “I also want to commend the attorneys and investigators from the Department of Justice for their great work, as well as New York State Banking Superintendent Richard Neiman for assisting in this investigation. Today is a good day for New York and a good day for justice. ” Manhattan District Attorney Robert Morgenthau said: “This settlement is important for two reasons. First, it contributes much needed revenues to the State's treasury in this time of economic distress. Second, it highlights the danger Iran represents in trying to obtain materials that threaten the security of New Yorkers, as well as all Americans. We are continuing to pursue cases of stripping by other banks to ensure that New York banks are not used to evade federal sanctions.” Superintendent of Banks Richard H. Neiman said: “This case highlights the complexity and globalization of financial markets and stresses the importance of cooperation between global regulators and enforcement agencies. I commend the Department’s Criminal Investigation Bureau, which is unique in its mandate to assist other regulatory and law enforcement agencies in their investigations, and we were pleased to have done so in this case.”
The agreement was announced by District Attorney Morgenthau on January 9, 2009. In the agreement, Lloyds admitted that from 2001-2004 it falsified the business records of banks in Manhattan by engaging in a systematic process of altering wire transfer information to hide the identity of its clients. This process allowed the illegal transfer of more than $300 million on behalf of Iranian banks, including Bank Melli, Bank Saderat, Sepah Bank and others. While Lloyds voluntarily left the Iranian market by 2004, the Sudanese business, which resulted in the illegal transfer of over $20 million, continued into 2007, after the beginning of the investigation. The transfers were made to buy goods and services from U.S. companies and to finance the purchase of goods and services from foreign vendors that sought payment in dollars. The investigation into Lloyds’ stripping activities grew out of an investigation into the suspicious movement of money by alleged Iranian front companies and charities. The settlement was the result of a joint investigation by the Manhattan District Attorney’s Office and the Asset Forfeiture and Money Laundering Section of the United States Department of Justice. The New York State Banking Department also assisted with the investigation. The Manhattan District Attorney’s Office and the Department of Justice continue to jointly investigate stripping activities.