DoJ to Pursue Criminal Investigation of Big Banks

The U.S. Justice Department is pursuing criminal investigations of financial institutions that could result in action in the coming weeks and months, U.S. Attorney General Eric Holder said in a video, adding that no company was "too big to jail."

The comments, made in a video posted on the Justice Department's website on Monday, came as federal prosecutors push two banks, BNP Paribas SA and Credit Suisse AG (NYSE:CS), to plead guilty to criminal charges to resolve separate investigations, according to people familiar with the probes.

While Holder did not name any banks, he said he is personally monitoring the ongoing investigations into financial institutions and is "resolved to seeing them through."

"I intend to reaffirm the principle that no individual or entity that does harm to our economy is ever above the law," Holder said in the video. "There is no such thing as 'too big to jail.'"

French bank BNP Paribas warned last week it faces fines from U.S. authorities in excess of $1.1 billion over allegations that it violated U.S. sanctions against Iran and other countries.

The Swiss finance minister met Holder on Friday to discuss a U.S. probe into Swiss banks that allegedly helped Americans evade U.S. taxes, which includes Credit Suisse.

While units of financial institutions have agreed to plead guilty to breaking U.S. criminal laws, such agreements have usually involved foreign subsidiaries that have little contact with U.S. regulators.

Japanese units of UBS AG and Royal Bank of Scotland plc, for example, pleaded guilty in the past two years to resolve criminal charges that their traders manipulated the Libor benchmark interest rate.

A criminal conviction of an entity regulated in the United States could lead authorities to potentially revoke a charter or carry out other punitive measures.

In his video, Holder said prosecutors are working closely with regulators to address the issues before taking action.

"Rather than wall off banks from prosecution, the potential for such severe consequences simply means that federal prosecutors conducting these investigations must go the extra mile to coordinate closely with the regulators that oversee these institutions' day-to-day operations," he said.

"This cooperation will prove key in the coming weeks and months as the Justice Department continues to pursue several important investigations," he said.

The Justice Department has come under fire for bringing few marquee cases against major financial institutions or their executives in the wake of the 2007-2009 financial crisis.

In March 2013, Holder told a U.S. Senate committee that it can "become difficult" to prosecute major financial institutions that have been accused of wrongdoing because they are so large that a criminal charge could pose a threat to the economy. He quickly backtracked on those comments.

The Justice Department has pursued other criminal investigations of financial institutions in the past few years, but many have resulted in deferred or non-prosecution agreements, under which a bank is not actually indicted.

Concerns about the impact of criminal prosecutions on large companies can be traced back to the 2002 indictment and eventual demise of accounting giant Arthur Andersen, which led to the loss of about 25,000 jobs and greater consolidation in the industry.

In light of that case, the Justice Department stepped up its use of agreements that can resolve criminal allegations without the filing of an indictment.

Decisions on how to resolve criminal probes of corporate misconduct usually revolve around how bad and pervasive the conduct was, and how much the company did to fix the problems once uncovered, prosecutors and defense lawyers have said.

Lawyers for banks have expressed concern not only about the potential regulatory fallout of a criminal conviction, but also about how counterparties or clients might react.

Defense lawyers said it would be hard to predict whether some clients, including public pension funds, might choose not to do business with a convicted felon, and whether star employees might then leave.

(Reporting by Aruna Viswanatha; Additional reporting by Julia Edwards; Editing by Caren Bohan and Paul Simao)