U.S., HSBC urge court to block release of money laundering report

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By Brendan Pierson

<span class="articleLocation”>Lawyers for the U.S. government and HSBC
Holdings Plc on Wednesday urged a federal appeals court
to block release of a court-appointed monitor’s report on how
HSBC is working to improve its money laundering controls.

During an oral argument before a three-judge panel of the
U.S. Court of Appeals for the Second Circuit, they argued that a
Brooklyn federal judge overstepped his authority when he ordered
that the report be made public last year.

A lawyer representing the HSBC mortgage customer who moved
to unseal the report countered that it should be released in
part because of “huge public interest in understanding what is
happening in this case.”

The monitor who prepared the report was appointed as part of
a 2012 deferred prosecution agreement in which HSBC admitted to
violating U.S. sanctions laws and failing to stop Mexican and
Colombian cartels from laundering hundreds of millions of
dollars in drug proceeds through the bank.

HSBC agreed to pay a $1.92 billion fine and to be monitored
by former New York prosecutor Michel Cherkasky, now the
executive chairman of the compliance company Exiger, for five
years. Under the deal, Cherkasky’s reports on the bank’s
progress have not been public.

Hubert Dean Moore, an HSBC mortgage customer, moved to
release one of the reports in late 2015. U.S. District Judge
John Gleeson, who was overseeing the deferred prosecution
agreement but has since left the bench, granted Moore’s motion
last year.

Jenny Ellickson, arguing for the government on Wednesday,
said Gleeson had improperly interfered with prosecutors’ work.

She said releasing the report would make it harder for the
government to enforce the deferred prosecution agreement because
sources at HSBC would be less likely to cooperate.

“The importance of the monitor’s confidential sources is
critical here,” she said.

Circuit Judge Gerard Lynch, one of the judges on the panel,
expressed skepticism of that argument, saying that sources were
most likely to suffer retaliation from HSBC, which received the
monitor’s reports anyway.

Paul Clement, representing HSBC, said it would not be fair
to the bank to have the report released, when the original
agreement called for reports to be confidential.

David Schulz, who represents Moore pro bono, said it was
prosecutors, not Gleeson, who had overreached.

When Lynch pressed him to explain what gave Gleeson the
power to order the report’s release, Schulz cited his “inherent
supervisory powers” over the case.



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