(FROM THE WALL STREET JOURNAL 1/30/16)
By Rachel Louise Ensign
A federal judge ruled Thursday that the public has a right to see a secret report on HSBC Holdings PLC's fight to keep out dirty money, a decision that could upend the way companies privately hash out deals with the government.
The ruling concerns the report of a so-called outside monitor that was appointed to police HSBC as a condition of the company's $1.9 billion settlement with the U.S. government in 2012, in which it admitted to failing to catch money laundering and violating sanctions. As has been the case in other similar cases, the HSBC monitor's reports have so far been kept private.
U.S. District Judge John Gleeson wrote in the ruling that "the public has a First Amendment right to see" the monitor's report, though he said the company and the Justice Department can suggest redactions and that some portions can remain under seal. HSBC, the Justice Department and the monitor, former prosecutor Michael Cherkasky, had all fought attempts to make the report public.
An HSBC spokesman cited the bank's prior opposition to the report's release and said, "We therefore regret this decision and are considering our next steps."
Mr. Cherkasky and the Justice Department declined to comment.
Judge Gleeson said HSBC and the government have to submit proposed redactions of the report by Feb. 12. The use of these outside monitors to police financial institutions that have misbehaved has exploded in recent years, as authorities increasingly insist on them as a condition for not pursuing criminal or civil charges against companies.
The boom in demand has created a lucrative cottage industry made up of former prosecutors and small consulting firms. Top monitors charge rates of as much as $1,200 an hour, according to industry executives. Little is publicly disclosed about what specifically they are supposed to accomplish, what they discover in their examinations or how much they collect for their work. The secret process was the subject of a page-one article in The Wall Street Journal in August.
The ruling was made in response to a former HSBC customer's quest to have the report made public. Hubert Dean Moore Jr., a chemist who lives near Philadelphia, first wrote a letter to the court after what he says was a protracted fight with HSBC over modifying the terms of his mortgage, which was owned by the bank. Mr. Moore said he and his wife tried to get the modification after coming under financial strain from her expensive cancer treatments. He said he wrote the letter out of broad concerns about the bank's controls.
"I'll take that as a win," he said of Judge Gleeson's ruling, of which he was notified by a Journal reporter.
HSBC and the Justice Department both contended that the HSBC monitor's report would do little to help Mr. Moore, but Judge Gleeson ruled that as a public citizen he had the right to see it.
Judge Gleeson wrote that the question of whether to unseal the report concerned his court's responsibility to "ensure that ours is indeed a government of the people, by the people, and for the people."
Many other large banks, including Standard Chartered PLC and Credit Suisse Group AG, are currently under similar monitorships.
Aruna Viswanatha and Max Colchester contributed to this article.