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Litigation costs may devastate gold rigger Morgan Chase''s earnings this year
By James Rowley
Bloomberg News Service
Wednesday, March 16, 2005
http://www.bloomberg.com/apps/news?
pid=10000086&sid=aWkzQ4eLXp74&refer=latin_america
Former Chilean dictator Augusto Pinochet and his family over 25
years stashed at least $15 million in more than 125 hidden accounts
at Citigroup Inc. and other banks, a U.S. Senate report said.
Pinochet, 89, whose regime killed and tortured thousands of
Chileans, used the accounts to move funds from offshore holding
companies to personal accounts in the U.S. and to transfer cash to
Chile, said the staff report of the Senate's Permanent Subcommittee
on Investigations.
Senate investigators said the former dictator's use of banks with
U.S. operations was far more extensive than previously disclosed. In
addition to 63 accounts at Citigroup and 28 at Washington-based
Riggs Bank, Pinochet and his family had accounts at foreign banks
with U.S. operations, including Banco de Chile and Espirito Santo
Bank of Miami, a unit of Portugal's Banco Espirito Santo, the report
said.
Before 2004, "U.S. regulators and law enforcement were generally
unaware that Augusto Pinochet had constructed a web of largely
hidden accounts in the U.S. and was using these accounts on a
regular basis to move funds and transact business," the report said.
The Senate report found that Citigroup helped the Pinochet family
set up two offshore holding companies and provided family members
with lines of credit in foreign countries such as Argentina, the
Bahamas, Switzerland, Chile, and the U.K. New York- based Citigroup
has ended those non-U.S. dealings with the Pinochet family, the
subcommittee said.
Citigroup extended loans to the Pinochets and their holding
companies totaling more than $3 million, which were repaid, the
report said. Pinochet used Citigroup accounts to "move funds within
the U.S. and across international lines, transact business, and
construct an international web of secret accounts," the report said.
In a statement, Citigroup said that its accounts for
Pinochet, "which he opened with false documentation using
pseudonyms, were shut down nearly a decade ago." Citibank began
closing remaining accounts in 1998. The bank said it has
developed "industry-leading controls" to combat money laundering.
Pablo Granifo, chief executive of Banco de Chile, didn't return a
message seeking comment. The bank said last month it is cooperating
in a U.S. investigation of money laundering.
Paulo Padrao, a spokesman for Banco Espirito Santo, declined
comment.
Pinochet led Chile following the 1973 military coup that overthrew
President Salvador Allende. Pinochet ruled until 1990 and remained
head of the armed forces until 1998. More than 3,000 people were
killed during Pinochet's regime and about 28,000 were tortured,
according to Chilean government commissions.
Chilean courts broadened probes into Pinochet's rule following his
arrest in London in October 1998 at the request of Spanish Judge
Baltasar Garzon, who sought Pinochet's extradition for trial. The
U.K. allowed Pinochet to return to Chile in March 2000, saying he
was too frail to face trial.
In 2002, Chile's Supreme Court, deciding that Pinochet was mentally
unfit to defend himself, dismissed charges that he covered up the
killings of dozens of people following the coup. The financial
information uncovered by the U.S. Senate may help investigators
bring tax evasion charges against the retired general, said Carmen
Hertz, a human rights lawyer involved in a Chilean investigation of
Pinochet's finances.
"Dictators don't just kill their political opponents," Hertz said by
telephone in Santiago. "They always unlawfully enrich themselves,
and Pinochet isn't the exception."
Hertz filed a court petition to strip Pinochet of immunity from
prosecution and was granted access to some non-public information.
Pablo Rodriguez, a lawyer for Pinochet who spoke on Channel 13
television in Santiago, said the accounts were those of Chilean
military aides abroad.
The Senate report also said foreign affiliates of Banco Atlantico,
now owned by Spain's Banco Sabadell SA, transferred money from
Switzerland, Gibraltar and Spain to Pinochet's U.S. accounts.
The Pinochet family also had accounts at Coutts & Co. (USA)
International of Miami that were set up by family lawyer Oscar
Aitken, the report said. Once part of the international private
banking unit of the Royal Bank of Scotland Group Plc, the Coutts
unit was sold to Banco Santander Central Hispano SA in 2003.
"We have strict anti-money laundering controls and procedures and
cooperate with the relevant national authorities," said Santander
spokesman Peter Greiff. Coutts spokeswoman Carolyn McAdam said the
Edinburgh-based bank had no immediate comment.
Senate investigators noted in the report that the Federal Reserve
Bank of New York conducted three major audits between 1996 and 1998
to correct deficiencies in the money laundering efforts at
Citibank's private banking operation.
Sen. Carl Levin, a Michigan Democrat who helped direct the probe,
said that Citigroup's violations weren't as serious as those by
Riggs.
In January, Riggs pleaded guilty to U.S. money laundering charges
and agreed to pay $8 million to the victims of the Chilean
dictatorship, which the U.S. government cited for human rights
violations. Riggs admitted helping Pinochet and the leaders of oil-
rich Equatorial Guinea launder millions of dollars and agreed to pay
a $16 million fine.
The subcommittee found a total of 28 accounts that Pinochet, his
relatives, and Chilean military officers kept at Riggs Bank over a
25-year period from 1979 to 2002.
Last year, Senate investigators reported that Pinochet had just nine
accounts at Riggs over an eight-year period. Instead the banking
relationship spanned the years 1979 to 2004, according to the latest
findings.
Riggs spokesman Mark Hendrix said the report shows that
problems "depicted as unique to Riggs unfortunately appear to be
systemic in the banking system today.'
Riggs National Corp., the holding company that controls Riggs,
agreed to be bought by PNC Financial Services Group Inc. for $652
million, or $20 a share. Pittsburgh-based PNC cut the price it
originally agreed to pay by 18 percent after the guilty plea. The
U.S. judge who took the Riggs plea questioned whether the fine was
sufficient. He scheduled sentencing for March 29.
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