Exhibit 10.1

U.S. Department of Justice

     
(U.S. DEPARTMENT OF JUSTICE LOGO) [w05170w0517000.gif]
 
Kenneth L. Wainstein
United States Attorney

District of Columbia

Judiciary Center
555 Fourth St., N.W.
Washington, D.C. 20530

January 27, 2005

Mark J. Hulkower, Esq.
Steptoe & Johnson LLP
1330 Connecticut Avenue, N.W.
Washington, D.C. 20036

     RE: United States of America v. Riggs Bank N.A., Cr. 05-35(RMU)

Dear Mr. Hulkower:

     This letter sets forth the full and complete plea offer to your client,
Riggs Bank N.A. (referred to herein as “Company” or defendant). This offer is by
the Criminal Division of the United States Attorney’s Office for the District of
Columbia (the “Office”) and the Criminal Division of the U.S. Department of
Justice and is binding upon both. Upon receipt, the executed letter will itself
become the plea agreement. The terms of the offer are as follows:

     1. Charges: Pursuant to Fed. R. Crim. P. 11(c)(1)(C), Company agrees to
waive its right to grand jury indictment and to plead guilty to a one-count
information charging a violation of Title 31, United States Code, Sections 5322
& 5318(g), failure to file timely and/or accurate Suspicious Activity Reports.
It is understood that the guilty plea will be based on a factual admission of
guilt to the offense charged and will be entered in accordance with Rule 11 of
the Federal Rules of Criminal Procedure. An authorized representative of the
Bank will admit that the Bank is in fact guilty. By virtue of corporate
resolution dated January 24, 2005, defendant has authorized this plea and has
empowered its outside counsel, Steptoe & Johnson LLP, to act on its behalf for
purposes of this plea. The attached “Statement of the Offense” is a fair and
accurate description of the evidence the government believes it can prove
regarding a relevant portion of defendant’s actions and involvement in the
offense. Company accepts responsibility for the conduct described in the
Statement of the Offense. Prior to the Rule 11 plea hearing, defendant, through
counsel, will adopt and sign the Statement of the Offense as a written proffer
of evidence by the United States.

     2. Penalties and assessments: Pursuant to Fed. R. Crim. P. 11(c)(1)(C), the
United States and the defendant agree that the appropriate sentence in the case
is that the defendant will pay a fine in the amount of $16,000,000 and a special
assessment of $400. This $16,000,000 fine and the $400 special assessment shall
be paid within ten (10) days of sentencing by cashier’s check or certified check
made payable to Clerk, United States District Court for the District of
Columbia.

 

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Mr. Mark J. Hulkower, Esq.
January 27, 2005
Page 2 of 5

     The parties further agree to a five year period of corporate probation with
the following conditions: (1) defendant shall pay the sums set forth in this
agreement; (2) defendant has developed and agreed to submit to the Office its
current Anti-Money Laundering/Bank Secrecy Act compliance program to prevent and
detect violations of law, the receipt of which is hereby acknowledged;
(3) defendant will continue the process it has voluntarily started of closing or
selling, if the process has not already been completed, its Embassy Banking and
International Private Banking divisions; and (4) pursuant to 18 U.S.C. §
3563(a)(1), defendant shall not commit any federal, state or local crimes during
the term of probation.

     The parties agree that if the Company or its parent, Riggs National
Corporation, is sold to a party unaffiliated with the Company as of the date
hereof, whether by sale of stock, merger, consolidation, sale of a significant
portion of its assets, or other form of business combination, or otherwise
undergoes a direct or indirect change of control within the five-year corporate
probation period, that the probation period and all other obligations of the
Company under this agreement, other than the obligations set forth in paragraph
4 herein, shall terminate upon the closing of any such transaction or the
occurrence of any such change of control.

     3. Waiver of Rights: Federal Rule of Criminal Procedure 11(f) and Federal
Rule of Evidence 410 limit the admissibility of statements made in the course of
plea proceedings or plea discussions in both civil and criminal proceedings, if
the guilty plea is later withdrawn. Defendant expressly warrants that it has
discussed these rules with its counsel and understands them. Defendant
voluntarily waives and gives up the rights enumerated in Federal Rule of
Criminal Procedure 11(f) and Federal Rule of Evidence 410. Defendant understands
and agrees that any statements that it makes in the course of its guilty plea or
in connection with this plea agreement are admissible against it for any purpose
in any criminal or civil proceeding, if the guilty plea is subsequently
withdrawn.

     The defendant further agrees to waive its right to a pre-sentence
investigation report under Fed. R. Crim. P. 32(b). The parties will request a
date for sentencing within 60 days of the date of this plea. Should this date
need to be rescheduled the parties will work together to find a mutually
agreeable and convenient date.

     4. Continuing Cooperation: This Office agrees that the Company has fully
cooperated with its investigation, has accepted responsibility for its conduct,
and has voluntarily terminated the operations of the areas of the Company where
the conduct at issue occurred. Company agrees to continue to cooperate with the
government. Company shall cooperate truthfully, completely, and forthrightly
with this Office and other federal, state, and local law enforcement authorities
identified by this Office in any matter as to which the government deems the
cooperation relevant. Company acknowledges that its cooperation may include, but
will not necessarily be limited to, producing documents and records, answering
questions, providing sworn written statements, and testifying before grand
juries or at trials.

     5. Government Concessions: In exchange for defendant’s guilty plea, the
United States will not bring any additional criminal charges against Company or
any of its current, former, or future subsidiaries or affiliates in connection
with any conduct, whether presently

 

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Mr. Mark J. Hulkower, Esq.
January 27, 2005
Page 3 of 5

known by the Office or not, relating to the attached statement of the offense,
the subpoena duces tecum issued to Company dated September 28, 2004, the Office
of the Comptroller of the Currency document request issued to the Company dated
July 22, 2004, and/or any other matters arising from conduct arising in or
relating to the Embassy Banking and/or International Private Banking divisions
of the Company or any current or former affiliate.

     6. Regulatory Agencies: Your client understands that this Office can make
no binding promises about future action by any bank regulatory agency. This
Office agrees that upon request from the Defendant it will advise such
regulatory agencies or any other element of federal or state government of
Defendant’s acceptance of responsibility, its full and complete cooperation with
the Office’s investigations, its voluntary decision to close its Embassy Banking
and International Private Banking divisions, and the Defendant’s ongoing
remediation efforts.

     7. Court is Not Bound: Defendant understands that this plea offer is
contingent upon acceptance by the Court. If the Court refuses to accept any
provision of this plea agreement, neither party shall be bound by the provisions
of the agreement, and the defendant shall have the right to withdraw its plea
pursuant to Fed. R. Crim. P. 11(c)(5).

     8. Breach of Agreement: Company agrees that if it fails to comply with any
of the provisions of this plea agreement, makes false or misleading statements
before the Court, commits any further crimes, or attempts to withdraw the plea,
the United States will have the right to characterize such conduct as a breach
of this plea agreement. In the event of such a breach, (a) the United States
will be free from its obligations under the agreement and may take whatever
position it believes appropriate as to the sentence (for example, should your
client commit any conduct after the date of this agreement - examples of which
include but are not limited to, obstruction of justice and false statements to
law enforcement agents, the probation office or the Court - the government is
free under this agreement to seek an increase in sentencing based on that
post-agreement conduct; (b) defendant will not have the right to withdraw the
guilty plea; (c) defendant shall be fully subject to criminal prosecution for
any other crimes which it has committed or might commit, if any, including
perjury and obstruction of justice; and (d) the United States will be free to
use against defendant, directly and indirectly, in any criminal or civil
proceeding any of the information or materials provided by it pursuant to this
agreement.

     In the event of such breach, any such prosecutions of the defendant not
time-barred by the applicable statute of limitations on the date of the signing
of this agreement may be commenced against the defendant in accordance with this
paragraph, notwithstanding the running of the applicable statute of limitations
in the interval between now and the commencement of such prosecutions. Defendant
knowingly and voluntarily agrees to waive any and all defenses based on the
statute of limitations for any prosecutions commenced pursuant to the provisions
of this paragraph.

     9. Complete Agreement: No other agreements, promises, understandings, or
representations have been made by the parties or their counsel than those
contained in writing herein, nor will any such agreements, promises,
understandings, or representations be made

 

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Mr. Mark J. Hulkower, Esq.
January 27, 2005
Page 4 of 5

unless committed to writing and signed by Company, Company’s counsel, and an
Assistant United States Attorney for the District of Columbia.

     If the foregoing terms and conditions are satisfactory, Company may
indicate its assent by signing the agreement in the space indicated below and
returning the original to me once it has been signed by Company and its counsel

     

  /s/ Kenneth L. Wainstein

 

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  KENNETH L. WAINSTEIN

  UNITED STATES ATTORNEY
 
   

  /s/ Steven J. Durham

 

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  STEVEN J. DURHAM

  ROBERT R. CHAPMAN
GERALD BALACEK
ASSISTANT U.S. ATTORNEYS
Fraud & Public Corruption Section
555 Fourth Street, N.W.
Washington, D.C. 20530
(202) 514-8316  
 
   

  CYNTHIA STONE

  SENIOR TRIAL ATTORNEY
U.S. Department of Justice
Asset Forfeiture & Money Laundering Section
1400 New York Avenue, N.W.
Bond Building, 10th Floor
Washington, D.C. 20530

     On behalf of Riggs Bank N.A. (“Company”), I have read this plea agreement
and have discussed it with the corporation’s attorney, Mark J. Hulkower of
Steptoe & Johnson LLP. Company fully understands this agreement and agrees to it
without reservation. Company does this voluntarily of its own free will,
intending to be legally bound. No threats have been made to Company. Company is
pleading guilty because Company is in fact guilty of the offense identified in
paragraph one.

     

  RIGGS BANK N.A.
 
   
Date: January 27, 2005
  /s/ Robert L. Klivans

 

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  Robert L. Klivans, Esq.

  Vice President and General Counsel

 

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Mr. Mark J. Hulkower, Esq.
   
January 27, 2005
   
Page 5 of 5
   
 
   
Date: January 27, 2005
  /s/ Mark J. Hulkower

 

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  Mark J. Hulkower, Esq.

  Attorney for the Defendant

 

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STATEMENT OF OFFENSE

United States of America v. Riggs Bank N.A., Cr. 05-35 (RMU)

Background

     1. Riggs Bank N.A. (“Riggs Bank”) is a financial institution organized,
licensed and doing business under the laws of the United States with a principal
place of business in Washington, D.C. Riggs Bank is the principal subsidiary of
Riggs National Corporation, a publicly traded bank holding company based in
Washington, D.C. Riggs Bank is a “financial institution” as defined in 31 U.S.C.
§ 5312; a “bank” as defined in 31 C.F.R. § 103.11(c); and an “insured bank” as
defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. §
1813(h)). The Office of the Comptroller of Currency (“OCC”) has supervisory
authority over Riggs Bank. The Board of Governors of the Federal Reserve System
(the “Federal Reserve”) has supervisory authority over Riggs National
Corporation.

     2. The Bank Secrecy Act, 31 U.S.C. § 5311 et. seq., and its implementing
regulations (collectively, the “BSA”), which Congress enacted to address an
increase in money laundering criminal activity utilizing financial institutions,
require insured banks and other financial institutions to maintain an effective
BSA and anti-money laundering (AML) program to detect and report suspicious
activity therein that might be indicative of money laundering and other
financial crimes, maintain certain records, and file reports that are especially
useful in criminal, tax or regulatory investigations or proceedings. From the
U.S. government’s perspective, the BSA regulatory regime constitutes law
enforcement’s first defense against the misuse of the U.S. financial system by
money launderers and terrorist financiers.

     3. Riggs Bank was required pursuant to the BSA to maintain appropriate
procedures to ensure compliance with the BSA to guard against money laundering.
These compliance programs, at a minimum, required Riggs Bank to:

     a. provide for a system of internal controls to assure ongoing compliance;

     b. designate an individual or individuals responsible for coordinating and
monitoring day-to-day compliance;

     c. provide training for appropriate personnel; and

     d. provide for independent testing for compliance to be conducted by bank
personnel or by an outside party.

31 U.S.C. § 5318(h)(3); 12 C.F.R. § 21.21.

Suspicious Activity Reporting

     4. Riggs Bank was required pursuant to the BSA to file with the Department
of Treasury and in some cases appropriate Federal law enforcement agencies, in
accordance with

 

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the form’s instructions, a Suspicious Activity Report (“SAR”) when it detected
the type of activity described below. This requirement replaced the criminal
referral process and became effective on April 1, 1996. According to the form’s
instructions, Riggs Bank was required to file a SAR with the Department of
Treasury’s Financial Crimes Enforcement Network (“FinCEN”) no later than thirty
(30) calendar days after the date of initial detection of facts that constituted
the basis for filing a SAR. 31 U.S.C. § 5318(g); 31 C.F.R. § 103.18 (previously
designated at 31 C.F.R. § 103.21); and 12 C.F.R. § 21.11.

     5. Riggs Bank was required pursuant to 12 C.F.R. § 21.11 to report any
transaction conducted or attempted by, at, or through the bank, if it involved
or aggregated at least $5,000 in funds or other assets, and the bank knew,
suspected, or had reason to suspect that:

     a. The transaction involved funds derived from illegal activities or was
intended or conducted in order to hide or disguise funds or assets derived from
illegal activities (including without limitation, the ownership, nature, source,
location, or control of such funds or assets) as part of a plan to violate or
evade any federal law or regulations or to avoid any transaction reporting
requirement under federal law or regulation. or

     b. The transaction was designed to evade any requirements promulgated under
the BSA. or

     c. The transaction had no business or apparent lawful purpose or was not
the sort in which the particular customer would normally be expected to engage,
and the bank knew of no reasonable explanation for the transaction after
examining the available facts, including the background and possible purpose of
the transaction.

Currency Transaction Reports

     6. Riggs Bank was required pursuant to the BSA to file a Currency
Transaction Report (“CTR”) for each non-exempted deposit, withdrawal, exchange
of currency, or other payment or transfer by, through, or to Riggs Bank that
involved a transaction in currency of more than $10,000. Title 31 C.F.R. §
103.28 required Riggs Bank to verify and record on a CTR the true name and
address of the individual presenting the transaction, as well as the true nature
of the entity or person on whose behalf the transaction was to be effected. 31
U.S.C. § 5313(a) and 5322 and 31 C.F.R. § 103.22(b)(1) (previously designated at
31 C.F.R. § 103.22(a)(1)) and § 103.28.

Due Diligence and Enhanced Due Diligence

     7. Beginning in or about the mid-1990’s as a result of a high profile
Department of Justice investigation of Mexican foreign leaders and U.S. banks,
there was a greater public awareness that private banking accounts, maintained
for high net worth foreign persons, as well as accounts for leaders of foreign
governments, posed significant risks of money laundering activity and, as such,
needed to be scrutinized more closely than ordinary accounts.

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     8. In January 2001, the Department of the Treasury and the federal banking
regulators issued guidance to banks on the application of anti-money laundering
programs to private banking accounts maintained on behalf of politically exposed
persons, particularly current and former officials of foreign government. The
guidance identified the risk that such accounts could be used to launder the
proceeds of political corruption, and identified numerous “red flags” indicative
of such activity, including structured transactions such as the use of multiple
cashier’s checks. As a result of the passage of the USA Patriot Act of 2001, by
July 2002, enhanced scrutiny of private banking accounts of senior foreign
political figures, their family and close associates, became statutorily
mandated. Specifically, the statute, 31 U.S.C. 5318(i), and the interim final
rule issued by FinCEN in July 2002, 31 C.F.R. § 103.18, required banks such as
Riggs Bank to take reasonable steps to:

     a. ascertain the identity of the nominal and beneficial owners of, and the
source of funds deposited into, such account as needed to guard against money
laundering and report any suspicious transactions; and

     b. conduct enhanced scrutiny of any such account that is requested or
maintained by, or on behalf of, a senior foreign political figure, or any
immediate family member or close associate of a senior foreign political figure,
that is reasonably designed to detect and report transactions that may involve
the proceeds of foreign corruption.

31 U.S.C. § 5318(i)(3).

     9. Throughout this period, senior officers at Riggs Bank were informed of
Riggs Bank’s problems in complying with its obligations under the BSA from the
OCC, the Federal Reserve and from internal reviews. Although the regulators
never instituted formal corrective action during this period, the warnings of
problems within this area of the Bank should have put Riggs Bank on notice that
this was a significant problem that needed addressing. Moreover, Riggs Bank had
an independent statutory obligation to determine whether its compliance program
was effective. 31 U.S.C. § 5318(h)(1)(D).

     As a result of these documented deficiencies, and Riggs Bank’s failure to
correct them, on July 16, 2003, the OCC issued a consent order, setting forth
remedial action that the bank must immediately take in order to correct
significant deficiencies with their money laundering compliance program. This
consent order set forth specific and detailed steps that the Bank must take, to
be accomplished within specific time frames.

     In response, Riggs Bank invested more than $50 million to develop and
implement a new bank-wide information system solution, a new compliance staff
was hired, and new compliance procedures and policies were developed. These
investments, in several instances, bore a direct relation to the discovery of
the conduct set forth below.

     Notwithstanding these efforts, Riggs Bank proved unable to correct the BSA
issues

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identified by the OCC in the 2003 consent order within the time frames set forth
therein. As a result, on May 13, 2004, four additional orders were entered into
by Riggs Bank and its regulators, including an additional OCC consent order and
the assessment of concurrent $25 million penalties against Riggs Bank by FinCEN
and the OCC. The government contends that Riggs’ failure to comply with the
requirements of an effective BSA/AML program led to the failure to report
numerous suspect transactions conducted through the bank, particularly those
transactions involving specific foreign political leaders who were engaged in
private banking with Riggs.

Pinochet Accounts

     10. Augusto Pinochet was the de facto leader or president of Chile from
1973 to 1990, and the Commander-in-Chief of its armed forces from 1990 to 1998
and a Chilean Senator from 1998 to 2002. His rule was marked by allegations of
significant human rights abuses as well as other crimes.

     a. In October 1998, a Spanish magistrate issued an arrest warrant for
Pinochet for crimes of genocide, terrorism and torture. At that time, Pinochet,
who was in the United Kingdom for medical treatment, was detained pending
extradition hearings. That magistrate also issued an attachment order purporting
to freeze all Pinochet assets worldwide.

     b. By March of 2000, Spain, Switzerland, Belgium and France had issued
warrants against Pinochet for human rights crimes. Ultimately, the United
Kingdom dismissed all extradition warrants against Pinochet, who was then
returned to Chile. Nearly 60 human rights cases had been filed in Chile against
Pinochet and were under active investigation. These included inquiries into
Pinochet for his role in the “Caravan of Death,” in which 19 persons
disappeared, as well as “Operation Condor,” which involved allegations that
Pinochet ordered the torture and killing of hundreds of political opponents
during his rule.

     c. On August 8, 2000, the Chilean Supreme Court issued a ruling divesting
Pinochet of senatorial immunity, thereby removing a significant hurdle to his
prosecution for these crimes. On January 29, 2001, Pinochet was placed under
house arrest in Chile. In May of 2001, Pinochet assets were reported to have
been frozen in Bermuda pursuant to a treaty request made by the Spanish
government.

     11. From in or about 1994 until 2002, Pinochet and his wife, Lucia Hiriart
Rodriguez, maintained multiple bank accounts, investments, and certificates of
deposits at Riggs Bank (the “Pinochet Accounts”). The Pinochet Accounts were
located at Riggs Bank in the United States and at its London branch.
Additionally, in 1996 and 1998, Riggs Bank assisted Pinochet in the
establishment of two offshore shell corporations in the Bahamas – Ashburton
Company Ltd. and Althorp Investment Co., Ltd. Both shell corporations were
listed as nominal owners of bank accounts and certificates of deposits
maintained by Pinochet. The OCC’s publicly-available Bank Secrecy Act/Anti-Money
Laundering Comptroller’s Handbook (September 2000) generally identifies offshore
corporations, as well as financial transactions involving bank secrecy

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jurisdictions, as being a high risk for money laundering.

     12. During this time period, Pinochet deposited more than $10 million into
the Pinochet Accounts. Riggs Bank failed to conduct sufficient due diligence as
to the source of the funds being deposited into the Pinochet Accounts, and
failed to report transactions it knew or had reason to know were suspicious.

     a. The OCC’s publicly available Bank Secrecy Act/Anti-Money Laundering
Comptroller’s Handbook (September 2000) states: “Effective account opening
policies and procedures should address who is accountable and who has the
authority for opening and documenting new private banking accounts, reviewing
documentation when accounts are opened, maintaining updated documentation, and
reviewing documentation and transactions on an ongoing basis. In addition, banks
should document the identity and source of wealth of all customers requesting
custody or private banking services.” Contrary to the caution advised by the
OCC, little due diligence was conducted on the source of Pinochet’s wealth,
other than obtaining a document suggesting that he earned approximately $12.3
million in “commissions, fees and honoraria” between 1956 and 1997, had acquired
approximately $450,000 in personal savings, and noting that he declared on his
Chilean tax returns gross income between approximately 40 and 58 million Chilean
pesos per year for the years 1998, 1999 and 2000. Know Your Customer standards
and practices evolved over the period that the Pinochet Accounts were maintained
at Riggs Bank; however, no attempt was made to reconcile Pinochet’s stated
wealth with the volume of subsequent deposits until 2002.

     b. In approximately April of 1999, the name of Riggs Bank London account
74041013 was changed to “APU,” removing the name Pinochet from the account. In
December of 2000 the name on Riggs Bank account 76835282 was changed to “L.
Hiriart and A. Ugarte,” removing the name Pinochet from the account. The
government contends that all of these actions could have had the effect of
preventing U.S. law enforcement, bank regulators or others with a lawful and
legitimate need to examine the accounts from discovering or tracing Pinochet’s
money.

     c. From the early 1980’s and continuing for more than a decade, Riggs
International Bank Corporation (“RIBC”), an Edge Act subsidiary of Riggs Bank,
maintained bank accounts, nominally for various Chilean military attaches, but
which appear to have been used by Pinochet himself. An internal Riggs Bank
investigation located documents that described two of these accounts as “fronts”
for Pinochet, and that internal investigation further revealed transfers of
funds into and out of those accounts from accounts belonging to Pinochet and his
family, at other banks. Riggs Bank has since closed RIBC.

     d. Certain Riggs Bank officer(s) and employee(s) avoided using Pinochet’s
last name, even in routine internal communication, referring to him as “our
prominent client in Chile,” “the Washington client,” or other aliases, including
his wife’s maiden name or his maternal family name. Files involving the Pinochet
account would not be labeled with his name, but rather with a code, such as “Red
Fox – Chile.” On August 9, 2000, the day after Pinochet

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was stripped of immunity in Chile, a Riggs Bank employee noted in a memorandum
Pinochet’s “change in legal status” and stated that “overseas legal proceedings
also included legal ‘freezing’ of assets in a third country”. It is possible
that Riggs might receive legal and applicable instructions to ‘freeze’ the
client’s assets and to reveal all information “regarding the client.” The
memorandum avoided referring to Pinochet by name.

     13. Over the course of the history of the Pinochet Accounts, a number of
suspect transactions were conducted by or directed by Pinochet. Certain Riggs
Bank officer(s) and employee(s) transferred monies in a manner that appears to
have been intended to avoid scrutiny. Among those transactions were:

     a. March 26, 1999: Pinochet prematurely terminated a certificate of deposit
held in a London account at Riggs Bank and transferred the funds, approximately
$1.6 million, to a Certificate of Deposit at Riggs Bank in the United States;

     b. August 18, 2000: purchase at Riggs Bank of 8 cashier’s checks each in
the amount of $50,000 and payable to Augusto Pinochet, and subsequently
negotiated at Banco de Chile and other banks;

     c. May 15, 2001: purchase at Riggs Bank of 10 cashier’s checks, each in the
amount of $50,000 payable to Maria Hiriart and/or Augusto P. Ugarte, and
subsequently negotiated at Banco de Chile and other banks;

     d. October 10, 2001: purchase at Riggs Bank of 10 cashier’s checks, each in
the amount of $50,000 payable to L. Hiriart and/or A.P. Ugarte, and subsequently
negotiated at Banco de Chile;

     e. April 8, 2002: purchase at Riggs Bank of 10 cashier’s checks, each in
the amount of $50,000 payable to L. Hiriart and/or A. P. Ugarte, five of which
were subsequently negotiated at Banco de Chile;

     f. January 16, 2003: purchase at Riggs Bank of five cashier’s checks, each
in the amount of $50,000 payable to L. Hiriart and/or A. P. Ugarte. These
apparently were reissues of five of the April 8, 2002 cashier’s checks, which
had expired.

     14. The transactions in the preceding paragraph were unusual and
suspicious. Certain Riggs Bank officer(s) and employee(s) knew or had reason to
know that these transactions were suspicious, but failed to file a SAR on any of
these transactions until after bank regulators, a subcommittee of the United
States Senate, or law enforcement discovered these transactions.

     a. The Spanish attachment order, which purported to effect the restraint of
assets throughout the world, was reported in the international media by October
of 1998. Moreover, the fact of the Spanish investigation was well known before
that, and U.S. and international media had reported that the United States was
cooperating with the Spanish on the Pinochet

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matter at least as of June 1997. The Spanish judicial attachment order was never
domesticated, served on Riggs Bank, or otherwise made legally operative in the
United States or the United Kingdom. When Riggs Bank became aware of the Spanish
judicial attachment order it sought legal counsel and was advised that the
freeze was not legally operative in the United States although, as noted above,
certain Riggs Bank officer(s) and employee(s) were concerned that such a freeze
could ultimately be effected in the United States.

     b. It was highly unusual that such large transactions would be broken up
into smaller cashier’s checks. The normal mode of transferring large sums of
money within the international financial system is a wire transfer, which is the
fastest, cheapest and most reliable system for moving funds. Moreover, as
certain Riggs Bank officer(s) and employee(s) knew, these funds were physically
transported to Pinochet in Chile, either by express mail or by certain Riggs
Bank officer(s) and employee(s).

     c. The $1,000,000 in cashier’s checks that constituted the May 15 and
October 2001 transactions was not taken directly from Pinochet’s accounts, but
rather was first passed through a Riggs Bank clearing account. This was against
bank policy. No legitimate reason existed for first transferring those funds
from the Pinochet Accounts to the Riggs Bank clearing account, except for
attempting to obscure an audit trail, and making it more difficult to trace the
transfer of Pinochet’s funds. Moreover, except for the first two checks issued
on August 18, 2000, these transactions were in Pinochet’s wife’s maiden name or
Pinochet’s maternal family name, making any search for Pinochet’s assets more
difficult. Notwithstanding, the bank’s internal investigators were able to track
and report to enforcement authorities all of the above transactions, although
not in a timely manner.

     15. Riggs Bank terminated its relationship with Pinochet in 2002.

Equatorial Guinea

     16. Equatorial Guinea (EG) is a country approximately the size of Maryland
on the west coast of Africa. In 1995, billions of dollars of oil reserves were
discovered within EG territorial waters, resulting in a significant influx of
capital from businesses in the United States and elsewhere. Its President,
Teodoro Obiang Nguema, came to power in 1979 in a military coup, and his
re-elections in February 1996 and December 2002 were largely viewed by the
United States government and by international observers as tainted by fraud and
intimidation. Public corruption had long been considered a significant problem.
In late 2002 and early 2003, there was growing media attention that leveled
specific and detailed allegations of corruption within the Obiang government.

     17. From in or about 1996 to in or about 2004, Riggs Bank maintained
numerous accounts for EG. Over the course of this period, Riggs Bank opened over
30 accounts for the EG government, numerous EG senior government officials, and
their family members. Riggs Bank opened multiple personal accounts for the EG
president and his relatives and assisted in establishing offshore shell
corporations for the EG president and his sons (collectively, the “EG

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Accounts”). By 2003, the EG accounts had become Riggs Bank’s largest single
relationship with balances and outstanding loans that totaled nearly
$700 million.

     18. Despite numerous large cash deposits, suspect wire transfers connected
to oil revenues, and Riggs Bank’s own KYC policies and procedures, Riggs Bank
failed to conduct sufficient due diligence as to the source of some of the funds
being deposited into the EG Accounts.

     19. In September 1999, Riggs Bank assisted the EG President Obiang in the
establishment of Otong S.A., an offshore shell corporation, incorporated in the
Bahamas, and held a money market account for the corporation. Otong was a
Private Investment Company (PIC). The OCC, in its Bank Secrecy Act/Anti-Money
Laundering Comptroller’s Handbook, described the special risks involved with
PICs: “PICs are incorporated frequently in countries that impose low or no taxes
on company assets and operations or are bank secrecy havens. Banks should
exercise extra care when dealing with beneficial owners of PICs and associated
trusts because they can be misused to camouflage illegal activities.”

     20. Over the course of the history of the EG Accounts, the following
transactions took place through an account in the name of Otong S.A (the “Otong
Account”):

     a. April 20, 2000: $1 million deposit of U.S. currency;

     b. March 8, 2001: $1.5 million deposit of U.S. currency;

     c. April 20, 2001: $1 million deposit of U.S. currency;

     d. September 5, 2001: $2 million deposit of U.S. currency;

     e. September 17, 2001: $3 million deposit of U.S. currency; and

     f. April 12, 2002: $3 million deposit of U.S. currency.

     21. Riggs Bank failed to determine the background and possible purpose of
these transactions, and failed to file a SAR until after the OCC and
Congressional investigators brought the transactions to the bank’s attention.
These transactions were suspicious because of the cash nature of the deposits,
because of the lack of understanding as to the source or destination of the
money, and because the transactions were not the sort in which the particular
customer would normally be expected to engage.

     22. Additionally, Riggs Bank filed inaccurate CTRs on these cash deposits.
The CTRs listed the Otong account as an exporter of timber, rather than a PIC
controlled by the EG president. Certain Riggs Bank employee(s) knew this
representation to be inaccurate.

     23. From June 2000 to December 2003, 16 separate wire transfers, totaling
approximately $26.4 million, were sent from an EG oil account at Riggs Bank,
which held oil royalty payments to the government of EG, to an account in the
name of Kalunga Company, S.A. at Banco Santander in Madrid, Spain. Kalunga
Company, S.A., is an EG corporation. At the time of the transfers, certain Riggs
Bank employee(s) did not know, but should have known, the circumstances and
purpose behind the transfer and the purpose or function of Kalunga Company,

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S.A. Riggs Bank failed to conduct adequate due diligence on what it knew or
should have known was a high risk account and failed to file a SAR or declined
to conduct the transaction. These transactions were uncovered by a Riggs Bank
internal investigation and reported to the appropriate enforcement authorities,
although not in a timely manner. Riggs Bank voluntarily terminated its entire
relationship with EG in 2004. The same Riggs Bank internal investigation also
unearthed that the account officer with responsibility for the EG accounts had
engaged in misconduct for his personal benefit. The individual in question was
terminated and matter referred to the appropriate enforcement authorities.

* * * *

     Riggs Bank N.A. has reviewed the foregoing Statement of the Offense with
its attorneys and agrees that the foregoing is a true and accurate description
of Riggs Bank’s conduct in this matter.

         

      RIGGS BANK N.A.
 
       
DATE: 1/27/05
  By:   /s/ Robert L. Klivans

     

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      /s/ Mark J. Hulkower

     

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      Mark J. Hulkower, Esq.

      Attorney for Riggs Bank N.A.

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

         
UNITED STATES OF AMERICA
  :                  Criminal No.          (RMU)

  :    
v.
  :    

  :    
RIGGS BANK N.A.,
  :                       VIOLATIONS:

  :    

  :   31 U.S.C. §§ 5322(b) & 5318(g); 31 C.F.R.

  :   § 103.18; 12 C.F.R. § 21.11
Defendant.
  :    

  :    

INFORMATION

     The United States Attorney informs the Court that:

     1. At all times relevant to this Information, Defendant RIGGS BANK N.A.,
was a financial institution as defined in Section 5312, Title 31, United States
Code, and Section 103.11(c), Title 31, Code of Federal Regulations, that is an
insured bank.

     2. From between on or about March, 1999, and continuing through December,
2003, in the District of Columbia, Defendant RIGGS BANK N.A., did knowingly and
willfully (1) fail to report suspicious transactions, and (2) fail to report
suspicious transactions in a timely manner, and (3) fail to report suspicious
transactions in an accurate manner, relevant to possible violations of law or
regulations, as required by the Secretary of the Treasury, in violation of Title
31, United States Code, Sections 5318(g)(1) and 5322(b) and Title 31, Code of
Federal Regulations, Section 103.18 and 12 Code of Federal Regulations,
Section 21.11

KENNETH L. WAINSTEIN
UNITED STATES ATTORNEY
D.C. BAR #

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  BY:   /s/ Steven J. Durham

     

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      STEVEN J. DURHAM

      ROBERT R. CHAPMAN

      GERALD BALACEK

      ASSISTANT U.S. ATTORNEYS

      Fraud & Public Corruption Section

      555 Fourth Street, N.W.

      Washington, D.C. 20530

      (202) 514-8316  
 
       

      CYNTHIA STONE

      SENIOR TRIAL ATTORNEY

      U.S. Department of Justice

      Asset Forfeiture &

        Laundering Section

      1400 New York Avenue, N.W.

      Bond Building, 10th Floor

      Washington, D.C. 20530
 
       
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