An old-line Washington bank deliberately helped former Chilean dictator Augusto Pinochet conceal his wealth, move funds and evade efforts under court order to seize his assets, Senate investigators say.
Riggs Bank managers, working with Pinochet from 1994 to 2002, set up phony offshore companies and hid the existence of his accounts from U.S. examiners, according to the report being released Thursday.
The government recently fined Riggs a record $25 million for allegedly violating money laundering laws for the way it handled Saudi Embassy accounts and those held by officials of Equatorial Guinea.
The Senate report also details a pattern of lapsed oversight by regulators and questionable actions by Riggs managers in the handling of the Pinochet accounts. Investigators contend a bank vice president suppressed government documents related to Pinochet's accounts while he worked for the government as a regulator supervising Riggs.
The bank, in a statement Wednesday, said, "It is clear that Riggs did not accomplish all that it needed to."
The 100-page report is based on a yearlong investigation by the Republican and Democratic staffs of the Senate Governmental Affairs investigative subcommittee.
The panel's Democratic staff made the review public ahead of the panel's hearing Thursday at which Riggs officials and federal bank regulators were testifying.
"When a bank such as Riggs operates with such reckless abandon and federal regulators are so ineffectual in their oversight, it does little to inspire confidence in our country's determination to stop money laundering," said Sen. Carl Levin, D-Mich., who requested the report.
Investigators also discovered large payments by oil companies, including U.S. concerns, to Equatorial Guinea officials and their relatives and to businesses they controlled. That raised concerns about corruption, the Senate investigators said.
Riggs, a Washington-based institution since the mid-19th century, has a near-exclusive franchise on business with the capital's diplomatic community. It was accused by federal regulators earlier this year of failing to report suspicious transactions in accounts controlled by diplomats from Saudi Arabia and officials of Equatorial Guinea.
The bank neither admitted nor denied wrongdoing when it agreed to pay the civil fine in May in a settlement with the Office of the Comptroller of the Currency, a Treasury Department division.
An agency spokesman, Robert Garsson, said the Senate report's recommendations would be studied.
According to the report, Riggs employees dealing with the Pinochet accounts during 1994-2002, while Chilean prosecutors were seeking an accounting and freeze of his assets:
- Helped Pinochet set up phony offshore companies.
- Opened accounts in their names and otherwise altered names on the accounts to conceal his control of them.
- Transferred $1.6 million of his funds from London to the United States. Pinochet, who was president of Chile from 1973 until 1990, was under house arrest in Britain during part of the period in question. Chile's Supreme Court in 2002 declared him unfit to stand trial on grounds of health problems and his mental condition.
- Conducted transactions through Riggs' own accounts to hide Pinochet's involvement in some cash transactions.
- Hid the existence of his accounts from comptroller's office examiners for two years and initially resisted the regulators' requests for information.
In July 2002, the lead examiner for Riggs in the comptroller's office, R. Ashley Lee, instructed agency staff who had looked into the Pinochet accounts not to put their examination memos or supporting paperwork into the agency's electronic files, the report said.
That was contrary to the agency's practice, it said. Lee was the lead examiner for Riggs from 1998 until he retired in October 2002 and went to work for the bank two weeks later. He was promoted to vice president and chief risk officer for Riggs last October.