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Riggs Bank

From Academic Kids

Template:Infobox Company Riggs Bank Template:Nasdaq was a Washington, DC-based commercial bank with branches located in the surrounding metropolitan area and offices around the world. It was acquired by PNC on 16 May 2005. Since the 1980s Riggs was controlled by the Albritton family, but control of the bank was lost due to corporate scandals and management problems.

Contents

History

The earliest incarnation of Riggs Bank was formed in 1836 when William Wilson Corcoran opened a small brokerage house. In 1840, Corcoran and George Washington Riggs, the son of a neighbor, formed "Corcoran & Riggs", which offered checking and depositing services. The bank got a major boost in 1844, when The U.S. government assigned Corcoran & Riggs to be the only federal depository in Washington. In 1854 Corcoran retired, and the bank changed its name to "Riggs & Co." After accepting a government charter, "Riggs National Bank" was born in 1896. By 1900, Riggs was twice as large as any other bank in D.C. Riggs embarked on a successful project to become known as the bank of embassies and diplomats, and by 1950 most embassies in Washington were customers. Since then, many branches have been opened within embassies in Washington D.C. and London. After several scandals in the early 2000s, Riggs bank was bought by PNC for $779 million on July 16, 2004. As a condition of the purchase, the scandal-ridden embassy business will be phased out, and Riggs will refocus on retail banking.

Trivia

Political connections

Riggs has always had useful political connections from its inception. In recent years Riggs bank has invested a great deal in solidifying its relationship with President George W. Bush. In 2000, Jonathan Bush, President Bush's uncle, was appointed CEO of Riggs Bank's investment arm. The Allbritton family, which controlled the bank for decades, has made itself extremely well-connected to the Bush family.[1] (http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=78928#3) During Bush's inauguration parade, he waved to Mr. Albritton and yelled "Hey, Joe, how are you?" Mr. Albritton has raised money for Bush's campaign and donated the portrait of Ronald Reagan that hangs in the White House.[2] (http://www.washingtonpost.com/wp-dyn/articles/A62544-2004Jun22_5.html)

Scandals

In recent years, Riggs has been mired by scandal. Investigators have been surprised that so little oversight was conducted involving suspicious international transactions, especially after the 9/11 attacks.

Saudi money transfers

A Saudi named Omar al-Bayoumi housed and opened bank accounts for two of the 9/11 hijackers. About two weeks after the assistance began, al-Bayoumi's wife began receiving monthly payments totaling tens of thousands of dollars from Princess Haifa bint Faisal, the wife of Saudi ambassador and Bush confidant Prince Bandar bin Sultan, through a Riggs bank account.[3] (http://www.msnbc.com/avantgo/839269.htm) Upon discovery of these transactions, the F.B.I. began investigating the bank for possible money-laundering and terrorist financing.

Although the F.B.I. and later the 9/11 Commission ultimately stated that the money was not intentionally being routed to fund terrorists, investigators were surprised to see how lax the safeguards at Riggs Bank were. Several Saudi accounts were discovered to have financial improprieties, including a lack of required background checks and a consistent failure to alert regulators of large transactions, in violation of the law. Many of these transactions involved Prince Bandar personally, often transferring over $1 million at a time.

Pinochet's frozen funds

Augusto Pinochet, the former dictator of Chile, has been widely accused since 1973 of corruption, illegal arms sales, and torture. In 1994, Riggs officials invited Pinochet to open an account at Riggs Bank. Arrested in 1998 in Britain for possible extradition to Spain, his accounts were ordered frozen by court orders. A recent U.S. Senate report has revealed that Riggs executives helped Pinochet disguise millions of dollars that had been stolen from the Chilean people, although some of Pinochet's supporters have claimed that the money came from supporters outside Chile. By using shell companies and hiding accounts from federal regulators, Riggs illegally allowed Pinochet to retain access to much of his fortune[4] (http://www.washingtonpost.com/ac2/wp-dyn/A63814-2004Nov19?language=printer).

The Senate report also indicated that regulators were negligent in holding the bank accountable. Although Pinochet's accounts at Riggs had been reported in U.S. and British newspapers, and although these accounts were largely unreported to regulators, those same regulators never made a serious effort to investigate. The comptroller tasked with investigating Riggs in 2002, R. Ashley Lee, was later given an executive position at Riggs.

The disclosure of the Riggs accounts reignited the case against General Pinochet, and a ruling that he was not mentally competent to stand trial was overturned when it was proven that the general himself had orchestrated some of the huge transactions. In 2004, he was ordered to stand trial for crimes against humanity, and additional claims of mental and physical incompetence have been overruled.

Equatorial Guinean funds

In July 2004, the US Senate published an investigation into Riggs Bank, into which most of Equatorial Guinea's oil revenues were paid until recently. This showed that accounts based at the embassy to the United States of Equatorial Guinea were allowed to make large withdrawals without properly notifying federal authorities. At least $35 million were siphoned off by long-time dictator of Equatorial Guinea, Teodoro Obiang Nguema Mbasogo, his family and senior officials of his regime.

Simon Kareri, the Riggs employee in charge of the Equatorial Guinea and other accounts, stands accused of money-laundering in separate charges. As the account manager, it is alleged that he established a fake holding company in his wife's name, and diverted funds into this account.

In the Senate Permanent Subcommitee on Investigations hearing in July, 2004, Mr. Kareri, under advisement from legal counsel, refused to answer any questions of the panel by invoking his 5th Amendment Rights.

In that hearing, the President of Riggs Bank was asked why the bank would willingly enter into a business arrangement with the dictator of Equatorial Guinea, a man who willingly exercises his hold over his people with demonstrations of murder and torture on state-run television. In a copy of correspondence to President Mbasogo, the letter, "thanked the president for his establishment of several bank accounts, and encouraged a working relationship to help establish and secure the stable reign of his country..."

Repercussions

Riggs Bank was fined $25 million for violations of money-laundering laws. Subsequently, Riggs pleaded guilty and paid a $16 million fine for violations for the U.S. Bank Secrecy Act. Also, on Feb 2005, the bank and Allbritton family agreed to pay 9 million to Pinochet victims for concealing and illegally facilitating movement of Pinochet money out of Britain. No similar payment has been made with regard to Equatorial Guinea, as reported in this weekly Anti-Money Laundering Report (http://www.innercitypress.org/finwatch.html) from the Fair Finance Watch (http://www.fairfinancewatch.org/africa.html#obiang) Riggs and its executives have denied any wrong-doing, although some may now face criminal trials. Members of the Albritton family were forced to stand down from the bank board. PNC Bank has purchased the Riggs Bank and closed its embassy banking business in order to refocus on retail banking; as of 16 May 2005, all Riggs Bank, N.A. branches opened both under the auspices and bearing the logo of PNC.

The severe scandals at such an august company have shaken the industry. U.S. Congress is considering establishing a single federal agency to enforce money-laundering and terrorist-financing laws. Daniel P. Stipano, deputy chief counsel at Riggs's lead regulator, said, "What happened with Riggs is unacceptable. It cannot be repeated."

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