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February 19, 2014

For Settlements, Companies Sketch Contours of a Black Box

“Corporations should expect an onslaught of enforcement proceedings from investigations into overseas bribery, manipulation of financial benchmark rates and the issuance of toxic mortgage securities. The question is how much money the government will demand as part of the inevitable settlements, a figure that is difficult to calculate.

“The government is taking an increasingly hard line in seeking large settlements, as shown by the litigation reserves companies are required to set up once they have determined the cost of resolving a case. What we don’t really know, however, is what goes into the process of assessing a penalty and how it relates to the harm caused by a violation.

“Last week, two companies disclosed significant increases in their reserves as a step toward concluding government investigations. BNP Paribas, the French bank, disclosed that it has set aside $1.1 billion to resolve federal and state investigations into whether it violated economic sanctions laws that prohibit dealing with businesses in countries like Iran, Cuba and Sudan.


“The Wall Street watchdog Better Markets challenged the government’s recent $13 billion settlement with JPMorgan Chase over its sales of mortgage securities, which included a $2 billion civil penalty. The organization filed a lawsuit in Federal District Court in Washington, contending that the absence of any judicial review of the agreement violates federal law and the Constitution. The basic complaint is that the Justice Department “acted as investigator, prosecutor, judge, jury, sentencer, and collector, without any check on its authority or actions.”


Read full NY Times article here

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