Business
Column: A huge bank pleaded guilty to conspiring to launder money, so why weren't top executives charged?
By any measure, the lawbreaking by the U.S. subsidiary of Canada’s Toronto-Dominion Bank was spectacular.
The bank, which goes by the name TD Bank in the U.S., facilitated the laundering of more than a half-billion dollars by human traffickers, fentanyl dealers, a major Ponzi schemer and others. It failed to file legally mandated reports of suspicious transactions even though one of the launderers had deposited and withdrawn “more than $1 million in cash in a single day.”
All this was laid out in settlements with the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, announced on Oct. 10. The settlement will cost TD Bank more than $3 billion in penalties and includes a guilty plea to a count of conspiring to violate anti-money-laundering laws. The settlement notes sourly that the bank’s cooperation with authorities was “limited.”
A big bank engaging in criminal conduct has finally been properly punished, but failing to charge individual banking supervisors and executives is wrong and dumb.
— Dennis Kelleher, Better Markets
Noting that the bank’s slogan is “America’s Most Convenient Bank,” Atty. Gen. Merrick Garland stated, “There is something terribly wrong with a bank that knowingly makes its services convenient for criminals.”
Yet the settlement is prompting Justice Department critics to ask whether its terms are just too convenient for the bank. That’s because it lacks a critical deterrent in white collar crime cases: criminal charges against TD’s top executives who were in place while the lawbreaking was in full cry.
That was just one way that the deal allowed “this lawbreaking bank and its reckless leadership to escape the full scope of penalties … necessary to effectively deter future criminal acts,” Sen. Elizabeth Warren (D-Mass.) stated last week in a scathing letter to Garland.
The Justice Department also charged the bank with “conspiring … to launder” money rather than with money laundering itself, Warren observed — a distinction that frees the bank from a federal law that might have resulted in the loss of its banking license in the U.S.
The department’s failure to charge TD Bank’s top executives thus far, Warren wrote, is at odds with the agency’s own explicit commitment to “individual accountability,” as Deputy Atty. Gen. Lisa Monaco put it in a speech earlier this year. “Companies can only act through individuals,” she said. As of now, only two low-level TD Bank employees have been charged in the money-laundering scheme. Warren asked Garland to explain his approach to the TD Bank deal by Nov. 15.
Garland stated in announcing the settlement that his agency’s “criminal investigations into individual employees at every level of TD Bank are active and ongoing” and that he expects “more prosecutions.” He didn’t specify who was in the agency’s gunsights, but the plea agreement says the wrongdoing extended from branch-level employees, who accepted bribes to keep suspect accounts open, to “senior executive management.”
Warren is correct to point out that the failure to charge and convict the high-level executives who oversee wrongdoing, often over a period of years, is a major contributor to the persistence of corporate white collar crime. Official wrist-slaps and “wet smooches” delivered to corporate leaders by federal regulators and prosecutors are the rule, no matter how egregious the misdeed — even when it’s as bad as the Wells Fargo customer fraud.
In that case, the Securities and Exchange Commission imposed a $2.5-million penalty on John Stumpf, the bank’s ex-chairman and chief executive, who had collected about $300 million in compensation while the fraud was going on under his nose. The SEC didn’t even require him to admit his responsibility.
Over the last quarter-century, notes the corporate corruption watchdog Better Markets, the nation’s six largest banks “have been the subject of 490 legal actions against them and more than $207 billion in fines and settlements.” Nevertheless “the responsible individuals at the banks almost always walk away unpunished, with their pockets stuffed with bonus money.”
That applies to the TD Bank case. The settlement is “a big and long-overdue win for Main Street Americans and the financial system,” noted Dennis Kelleher, co-founder and CEO of Better Markets. “A big bank engaging in criminal conduct has finally been properly punished, but failing to charge individual banking supervisors and executives is wrong and dumb. “
Letting them off the hook “sends the wrong message: big banks can still buy get-out-of-jail-free cards for their executives by paying big fines and agreeing to other penalties,” Kelleher commented.
It’s true that the Justice Department and FinCEN lowered the boom on TD Bank nearly to the maximum in their power. In addition to the financial penalties, which are the largest ever imposed on a U.S. bank in a money-laundering case, the U.S. subsidiary is forbidden for now to grow beyond the $434 billion in assets it held as of Sept. 30 and is restricted from opening more branches or offering new services without government oversight. It must employ an outside compliance monitor for at least five years.
Among the casualties of the government investigation is TD Bank’s planned $13.3-billion merger with Memphis-based First Horizon Bank. The deal collapsed in May 2023 when it emerged that the money-laundering probe would obstruct government approval of the merger.
TD Bank is the tenth-largest commercial bank in the U.S., with 1,100 branches along the Eastern Seaboard from Maine to Florida. But it has been determined to grow while keeping its focus on customer relations — an ambition that regulators say led it to shortchange its anti-money-laundering programs even as it became clear that they were increasingly unable to handle the flow of suspect transactions.
TD Bank Group, the Canadian parent holding company, hasn’t downplayed the gravity of the charges.
“We have taken full responsibility for the failures of our U.S. [anti-money-laundering] program and are making the investments, changes and enhancements required to deliver on our commitments,” Bharat Masrani, CEO of the parent, said after the settlement announcement. “These failures took place on my watch as CEO and I apologize to all our stakeholders.” Masrani is scheduled to step down in April.
To assess whether the penalties levied on TD Bank are appropriate, consider the facts as set forth in the bank’s plea agreement. Money launderers exploited what they saw as holes in the bank’s anti-money-laundering practices from January 2014 through October 2023. Three illicit networks laundered more than $600 million in ill-gotten lucre through TD Bank accounts within that period.
Perhaps the most prolific launderer, according to the governments, was Da Ying Sze, who was known to bank employees as “David” and laundered some $400 million in narcotics profits at the bank.
Sze scarcely tried to conceal his activities: He would often walk into branches carrying bags of cash. It was he who would sometimes make deposits of more than $1 million a day and withdraw it almost immediately by bank checks. The bank “failed to identify Sze” in more than 500 currency transaction reports totaling about $474 million, according to FinCEN.
One day, after witnessing Sze buy more than $1 million in bank checks with cash, according to FinCEN, a branch employee asked a bank office staff member, “How is that not money laundering?” The staffer replied, “oh it 100% is.”
Sze pleaded guilty to federal money-laundering charges in 2022.
The shortcomings of its money-laundering oversight were known to the executives directly responsible for the program and to the bank’s board, the Justice Department said. The bank’s operational response was hopelessly inattentive. Accounts involved in “David’s” network, the department said, made $168.4 million in transactions even “after the Bank determined the accounts should be closed.”
As is so often the case when an institution is found to have broken the law in a major way, this isn’t TD Bank’s first walk on the wrong side. In 2020, it reached a $122-million settlement with the Consumer Financial Protection Bureau over accusations that it charged more than 1.4 million customers illegal overdraft fees. (The bank didn’t admit to the allegations, but the settlement included $97 million in customer restitution. Four years later, the CFPB ordered the bank to pay nearly $28 million for allegedly sending inaccurate negative reports about its customers to credit reporting firms. (The bank again didn’t admit guilt, but the order included about $8 million in compensation to the affected customers.)
Last year, the bank agreed to pay $1.2 billion to settle a lawsuit accusing it of involvement in a $7-billion Ponzi scheme orchestrated by conman Allen Stanford, who is now in prison. The money is earmarked to compensate victims; the bank didn’t admit liability and asserted that it merely provided Stanford’s company with conventional banking services.
In 2017, officials at the Trump-controlled Office of the Comptroller of the Currency quietly reprimanded the bank for a Wells Fargo-like scheme in which bank employees secretly created new accounts for customers or enrolled them in services without their knowledge. The agency didn’t fine the bank or even disclose its action at the time.
As for whether the government’s action will cure TD Bank of its slipshod approach to money laundering, only time will tell.
But there’s reason to wonder if it is effectively cleaning house. Under “clawback” provisions of its executive pay policies, Masrani’s pay was reduced by about $1.245 million last year to $9.55 million, an 11.3% cut from the $10.8 million he received in 2022. (Those figures are U.S. dollar equivalents although he and other executives are paid in Canadian dollars.) Further clawbacks may be imposed on his 2024 pay. His designated successor, Raymond Chun, has been with the company since 1992.
As for the board of directors, who receive annual stipends of $260,000 (Canadian) per year, none of the 14 directors other than Masrani has publicly indicated any intention to step down. Eleven were in place during the 2014-23 period, when money launderers ran rampant through the bank; the longest-serving director has been on the board since 2010. If TD Bank is to get a new broom, it’s unclear where it will come from.
Business
Defiant independence from the Federal Reserve catches Trump off guard
WASHINGTON — White House officials were caught by surprise when a post appeared Sunday night on the Federal Reserve’s official social media channel, with Jerome Powell, its chairman, delivering a plain and clear message.
President Trump was not only weaponizing the Justice Department to intimidate him, Powell said to the camera, standing before an American flag. This time, he added, it wasn’t going to work.
The lack of any warning for officials in the West Wing, confirmed to The Times, was yet another exertion of independence from a Fed chair whose stern resistance to presidential pressure has made him an outlier in Trump’s Washington.
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Powell was responding to grand jury subpoenas delivered to the Fed on Friday related to his congressional testimony over the summer regarding construction work at the Reserve.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions,” he added, “or whether instead monetary policy will be directed by political pressure or intimidation.”
For months, Trump and his aides have harshly criticized Powell for his decision-making on interest rates, which the president believes should be dropped faster. On various occasions, Trump has threatened to fire Powell — a move that legal experts, and Powell himself, have said would be illegal — before pulling back.
The Trump administration is currently arguing before the Supreme Court that the president should have the ability to fire the heads of independent agencies at will, despite prior rulings from the high court underscoring the unique independence of the central bank.
The decision by the Justice Department to subpoena the Fed over the construction — a $2.5-billion project to overhaul two Fed buildings, operating unrenovated since the 1930s — comes at a critical juncture for the U.S. economy, which has been issuing conflicting signals over its health.
Employers added only 50,000 jobs last month, fewer than in November, even as the unemployment rate dipped a tenth of a point to 4.4%, for its first decline since June. The figures indicate that businesses aren’t hiring much despite inflation slowing down and growth picking up.
The government reported last month that inflation dropped to an annual rate of 2.7% in November, down from 3% in September, while economic growth rose unexpectedly to an annual rate of 4.3% in the third quarter.
However, the long government shutdown interrupted data collection, lending doubt to the numbers. At the same time, there is uncertainty about the legality of $150 billion or more in tariffs imposed on China and dozens of countries through the International Emergency Economic Powers Act, which has been challenged and is under review by the Supreme Court.
As inflation has cooled, the Fed under Powell has incrementally cut the federal funds rate, the target interest rate at which banks lend to one another and the bank’s primary tool for influencing inflation and growth. The Fed held the rate steady at a range of 4.25% to 4.5% through August, before a series of fall cuts left it at 3.5% to 3.75%.
That hasn’t been enough for Trump, who has called for the rate to be lowered faster and to a nearly rock bottom 1%. The last time the central bank dropped the rate so low was in the dark days of the early pandemic in March 2020. It began raising rates in 2022 as inflation took off and proved stubborn despite the bank’s efforts to rein it in.
Mark Zandi, chief economist at Moody’s Analytics, said there is room to continue lowering the federal funds rate to 3%, where it should be in a “well functioning economy, neither supporting or restraining growth.”
However, muscling the Fed to lower rates and reduce or destroy its independence is another matter.
“There’s no upside to that. It’s all downside, different shades of gray and black, depending on how things unfold,” he said. “It ends in higher inflation and ultimately a much diminished economy and potentially a financial crisis.”
Zandi said much will hinge on the Supreme Court’s decision on whether Trump can remove Federal Reserve Governor Lisa Cook, which he sought to do last year, citing allegations of mortgage fraud she denies.
While Powell’s term as chairman ends in May, his term as a governor — influencing interest-rate decisions — extends to January 2028. A criminal indictment over the construction project could provide Trump the legal justification he needs to remove him altogether.
“When he steps down in May, will he stay on the board or does he leave? That will make a difference,” Zandi said.
A key issue will be how much independence the Fed retains, he said, given the central bank’s role in establishing the U.S. as a safe haven for international bond investors who play a key role funding the federal deficit.
The investors rely on the bank to keep inflation under control, or they will demand the government pay more for its long term bonds — though the subpoenas had little effect so far Monday on bond prices.
“There are scenarios where the bond market says, ‘Oh my gosh, we’re going to see much higher inflation, and there’s a bond sell-off and a spike in long-term rates,” he said. “That’s a crisis.”
Zandi said that even if the worst-case scenarios don’t play out, it will take time for the Federal Reserve to reestablish its reputation as an independent bank not influenced by politics.
“I’m not sure investors will ever forget this,” he said. “Most importantly, it depends on who Trump nominates to be the next chair of the Federal Reserve — and how that person views his or her job.”
Lawmakers from both parties have questioned the motivation behind the investigation.
North Carolina Sen. Thom Tillis, a Republican member of the Senate Committee on Banking, Housing and Urban Affairs, has said he plans to oppose the confirmation of any nominee for the Fed until the legal matter is “fully resolved.”
“If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis wrote in a social media post.
Sen. Elizabeth Warren, the top Democrat on that committee, accused Trump of trying to “install another sock puppet to complete his corrupt takeover of America’s central bank.”
“Trump is abusing the authorities of the Department of Justice like a wannabe dictator so the Fed serves his interests, along with his billionaire friends,” Warren said in a statement.
Rep. French Hill (R-Ark.), the chairman of the House Financial Services Committee, also expressed skepticism about the inquiry, which he characterized as an “unnecessary distraction.”
“The Federal Reserve is led by strong, capable individuals appointed by President Trump, and this action could undermine this and future Administrations’ ability to make sound monetary public decisions,” Hill wrote in a statement.
As Hill raised concerns about the investigation, he added he personally knew Powell to be a “person of the highest integrity.”
House Speaker Mike Johnson (R-La.), meanwhile, dismissed the idea that the Justice Department was being weaponized against Powell. When asked by a reporter if he thought that was the case, he said: “Of course not.”
Times staff writers Wilner and Ceballos reported from Washington and Darmiento from Los Angeles.
Business
Mattel introduces its first Barbie with autism, headphones on and fidget spinner in hand
Mattel is releasing its first autistic Barbie doll.
Created in partnership with the Autistic Self Advocacy Network (ASAN), the toy launched Monday is meant to represent children with autism spectrum disorder and how they experience the world.
The doll joins the Barbie Fashionistas line, which features more than 175 looks across various skin tones, body types and disabilities.
Previous additions include Barbie dolls with Type 1 diabetes, Down syndrome and blindness.
The Barbie with autism was in development for more than 18 months. ASAN, the nonprofit disability rights organization run by and for the autistic community, provided guidance as to how the doll can most accurately represent the various experiences people on the autism spectrum may relate to and celebrate the community.
The toy features elbow and wrist articulation, which allows for stimming and other gestures. Her eyes are shifted to the side to avoid eye contact.
She carries a fidget spinner and a tablet. She also wears noise-canceling headphones and a loose-fitting dress that allows for less fabric-to-skin contact.
To celebrate the new doll, Mattel is donating more than 1,000 autistic Barbies to pediatric hospitals across the country that offer specialized services for children on the spectrum. According to the autism nonprofit, Autism Speaks, one in 31 children and one in 45 adults in the U.S. has autism.
“Barbie has always strived to reflect the world kids see and the possibilities they imagine, and we’re proud to introduce our first autistic Barbie as part of that ongoing work,” said Jamie Cygielman, global head of dolls at Mattel, in a press release.
She added that the doll “helps to expand what inclusion looks like in the toy aisle and beyond because every child deserves to see themselves in Barbie.”
The toymaker’s investments in diversity and representation have proved commercially successful.
The Fashionistas line launched in 2009 and has provided the opportunity to create dolls beyond Barbie’s original look. In 2024, the most popular Fashionistas dolls globally included the blind Barbie and the Barbie with Down syndrome. The wheelchair-using doll has also consistently been a top performer since its debut in 2019.
Founded in 1945, Mattel started out of a Los Angeles garage. Over the last 80 years, the El Segundo-based company cemented itself as a multibillion-dollar toy company with products and brands like Fisher-Price, Hot Wheels cars and American Girl.
The new autistic Barbie is available starting Monday through Mattel Shop and retailers nationwide.
Business
Kanye West sues ex-employee over Malibu mansion lien
Kanye West, the rapper now known as Ye, is suing his former project manager and his lawyers, alleging they wrongfully put a $1.8-million lien on his former Malibu mansion.
The suit, filed in Los Angeles Superior Court on Thursday, alleges that Tony Saxon, Ye’s former project manager on the property, and the law firm West Coast Trial Lawyers, “wrongfully” placed an “invalid” lien on the property “while simultaneously launching an aggressive publicity campaign designed to pressure Ye, chill prospective transactions, and extract payment on disputed claims already being litigated in court.”
Saxon’s lawyers were not immediately available for comment.
Saxon, who was also employed as West’s security guard and caretaker at the Malibu property, sued the controversial rapper in Los Angeles Superior Court in September 2023, claiming a slate of labor violations, nonpayment of services and disability discrimination.
In January 2024, Saxon placed the $1.8-million “mechanics” lien on the property in order to secure compensation for his work as project manager and construction-related services, according to court filings.
A mechanics lien, also referred to as a contractor’s lien, is usually filed by an unpaid contractor, laborer or supplier, as a hold against the property. If the party remains unpaid, it can prompt a foreclosure sale of the property to secure compensation.
Ye has denied Saxon’s allegations. In a November 2023 response to the complaint, Ye disputed that Saxon “has sustained any injury, damage, or loss by reason of any act, omission or breach by Defendant.”
According to Ye’s recent complaint, he listed the property for sale in December 2023. A month later, he alleged, Saxon and his attorneys recorded the lien and “immediately” issued statements to the media.
The suit cites a statement Saxon’s attorney, Ronald Zambrano, made to Business Insider: “If someone wants to buy Kanye’s Malibu home, they will have to deal with us first. That sale cannot happen without Tony getting paid first.”
“These statements were designed to create public pressure and to interfere with the Plaintiffs’ ability to sell and finance the Property by falsely conveying that Defendants held an adjudicated, enforceable right to block a transaction and divert sale proceeds,” the complaint states.
The filing contends that last year the Los Angeles Superior Court granted Ye’s motion to release the lien from the bond and awarded him attorneys fees.
The Malibu property’s short existence has a long history of legal and financial drama.
In 2021, West purchased the beachfront concrete mansion — designed by Pritzker Prize-winning Japanese architect Tadao Ando — for $57.3 million. He then gutted the property on Malibu Road, reportedly saying “This is going to be my bomb shelter. This is going to be my Batcave.”
Three years later, the hip-hop star sold the unfinished mansion (he had removed the windows, doors, electricity and plumbing and broke down walls), at a significant loss to developer Steven Belmont’s Belwood Investments for $21 million.
Belmont, who spent more money to renovate the home, had spent three years in prison after being charged with attempted murder for a pitchfork attack in Napa County. He promised to restore the architectural jewel to its former glory.
However, the property has been mired in various legal and financial entanglements including foreclosure threats.
Last August, the notorious mansion was once again put on the market with a $4.1 million price cut after a previous offer reportedly fell through, according to Realtor.com.
The legal battle surrounding Ye’s former Malibu pad is the latest in a series of public and legal dramas that the music impresario has been involved in recent years.
In 2022, the mercurial superstar lost numerous lucrative partnerships with companies like Adidas and the Gap, following a raft of antisemitic statements, including declaring himself a Nazi on X (which he later recanted).
Two years later, Ye abruptly shut down Donda Academy, the troubled private school he founded in 2020.
Ye, the school and some of his affiliated businesses faced faced multiple lawsuits from former employees and educators, alleging they were victims of wrongful termination, a hostile work environment and other claims.
In court filings, Ye has denied each of the claims made against him by former employees and educators at Donda.
Several of those suits have been settled.
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