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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Tillipman and Block: Should criminal settlements be available to corporate recidivists?

Few corporations are willing to risk the extensive legal costs, reputational damage, and potentially devastating collateral consequences of a trial. Thus, unsurprisingly, corporate settlements have proliferated in recent years, becoming a staple of the U.S. criminal justice system.

While settlements offer a level of certainty to corporate defendants, they have the potential to create a two-tiered justice system. Indeed, particularly with regard to corporate recidivists, corporate settlements have been regularly criticized as a mere “cost of doing business.”

It is important to note at the outset that in many instances, we view settlements as beneficial. For example, they provide a level of certainty to both the government and companies. They also enable the government to hold corporations accountable without the expense of a trial. And the government generally demands significant cooperation and compliance improvements as a condition of settlement.

The agreements, however, are not without their drawbacks. We see the continued use of these agreements with corporate recidivists to be problematic. For example, corporations like HSBC repeatedly agree to pay fines, while often continuing their improper, and in some instances, illegal behavior.

As we said in the prior post, HSBC has accrued $4.8 billion in penalties in 23 criminal and civil enforcement actions (not including violations committed by subsidiaries). HSBC’s top offenses include banking violations, anti-money-laundering deficiencies, fraud, toxic security abuses, and mortgage abuses.

While in most cases a settlement can be effective in combatting corruption, sometimes harsher measures are necessary to ensure a settlement is not merely another “cost of doing business.” And HSBC appears to be a perfect example of a corporation that seems unaffected by settlement agreements.

In fact, a 2005 e-mail from Chirstopher Lok, HSBC’s head of global bank notes, indicated HSBC’s desire to continue to do business with terrorist groups: “After the [Office of the Comptroller of the Currency] closeout and that chapter is hopefully finished, could we revisit Al Rajhi [a Saudi Arabian bank which has been linked to terrorism] again? London compliance has taken a more lenient view.”

In cases involving corporate recidivists, the most obvious solution is to prosecute, convict and jail responsible individuals. While the DOJ has indicated that this is priority in recent years (i.e., the Yates Memo) the policy pronouncements provide little reassurance in the face of such troubling patterns of non-compliance, corruption and fraud. ​

When average citizens see the same company names in headlines announcing corporate criminal settlements, it gives the impression that these companies are buying their way out of prosecutions. While the costs of settling these cases may inflict modest pain on the companies paying the settlements, the greatest cost may be the public’s faith in the U.S. system of justice. 


Jessica Tillipman, pictured above left, is a Senior Editor of the FCPA Blog and Assistant Dean at The George Washington University Law School. You can follow her on Twitter at @jtillipman

Samantha Block, right, is a 3L at The George Washington University Law School. 

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1 Comment

  1. Case in point – HSBC’s Form 6-K filed with the SEC today.

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