[NYTr] Riggs Negotiating Settlement with Justice Department

[nytr at olm.blythe-systems.com]

The Washington Post - Jan 5, 2005
http://www.washingtonpost.com/wp-dyn/articles/A48744-2005Jan4.html

Riggs Negotiating Settlement With Justice Department

By Terence O'Hara and Kathleen Day 
Washington Post Staff Writers

Riggs Bank is trying to reach a settlement with the Justice Department by
the end of the month that would end the federal government's criminal probe
of the company and remove the biggest roadblock to its pending merger with
PNC Financial Services Group Inc., sources familiar with the negotiations
said yesterday.

The negotiations aim to settle any criminal claims against District-based
Riggs Bank, its parent company, Riggs National Corp., and other company
affiliates in connection with the company's scandal-plagued embassy banking
operations, including widespread alleged violations of laws intended to
thwart money-laundering.

The settlement talks have reached a critical stage because of Riggs's
pending merger with PNC, sources said. To complete the $766 million deal by
an April 30 deadline the two companies set months ago, PNC must be satisfied
that it would not be inheriting any unknown criminal liability, said the
sources, who spoke on the condition of anonymity because of the sensitivity
of the negotiations.

Any settlement would be with only the Riggs corporate entities. Individuals
alleged to be involved in wrongdoing would remain open to prosecution, the
sources said. The settlement being discussed would be a deferred
prosecution, in which a company avoids prosecution by acknowledging its
failings, agrees to correct them and cooperates fully with the government on
any further criminal prosecutions of individuals. Sources said any
settlement would probably involve a substantial fine, but amounts under
discussion could not be determined yesterday.

Riggs officials think that without a settlement by the end of this month,
PNC will probably pull out of the deal, sources said. Any fine imposed on
Riggs would probably lead to a corresponding reduction in the price PNC has
agreed to pay for the company. When the deal was announced in July, PNC
offered the equivalent of about $24 a share. But Riggs stock has traded well
below that figure for more than two months, indicating investors think PNC
would negotiate a lower price because of high legal costs incurred by Riggs
this fall and the potential for a criminal fine. Shares closed yesterday at
$21.59, up 25 cents.

Riggs spokesman Mark N. Hendrix and PNC spokesman Brian Goerke each declined
to comment yesterday. A spokesman for the U.S. attorney's office in the
District, which heads the Justice Department's ongoing probe of the bank and
its top executives and directors, also would not comment.

Riggs has been under investigation by the U.S. attorney's office, with the
help of the FBI, the Secret Service, and the Bureau of Immigration and
Customs Enforcement, for much of the past year. The investigations have
focused on the bank's failure to properly monitor and report suspicious
transactions involving former Chilean dictator Augusto Pinochet, the
government of Equatorial Guinea and officials at the Saudi Arabian Embassy,
according to people familiar with the investigations.

The bank was fined $25 million in May by the Office of the Comptroller of
the Currency for failing to report suspicious dealings with Equatorial
Guinea and the Saudi Embassy, and a Senate subcommittee in July detailed
Riggs's dealings with Pinochet. That subcommittee investigation, and
subsequent discoveries by Riggs's own internal investigators, chronicled
suspicious accounts and transactions involving Pinochet, his family and
members of the Chilean military going back at least 20 years that were never
reported by Riggs to law enforcement agencies. The investigations also
uncovered attempts by Riggs officials to disguise the identity of Pinochet's
accounts, including efforts to keep the accounts hidden from bank examiners.