Two of the world's biggest banks, facing the threat of criminal charges, are mounting final bids for leniency.
To avoid the fallout from pleading guilty — no giant bank has done so in more than two decades — BNP Paribas and Credit Suisse made last-ditch appeals to prosecutors and regulators in recent weeks, according to people briefed on the talks. The private meetings came after prosecutors sought guilty pleas from the parent companies of both banks: BNP of France over doing business with countries like Sudan that the United States has blacklisted, and Credit Suisse for offering tax shelters to wealthy Americans.
While BNP and Credit Suisse proposed more modest guilty pleas from their subsidiaries rather than parent companies, the people briefed on the talks said, prosecutors appeared to balk at those overtures, challenging broader public concerns that banks have grown so important to the economy that they are effectively "too big to jail."
In the case of Credit Suisse, which recently created a subsidiary to house the "U.S. offshore business," prosecutors have privately indicated that they are unwilling to charge the newly formed unit. The bank is now expected to strike a deal with prosecutors as soon as this week, the people briefed on the talks said.
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BNP made its own appeals. Underscoring the gravity of a guilty plea for the bank, BNP's chief executive and two of his top lieutenants traveled to Washington and New York to make their case last week, the people said.
They reserved last Thursday for meeting BNP's regulators in Manhattan — the Federal Reserve Bank of New York and Benjamin M. Lawsky, New York State's top financial regulator. At a morning meeting in Mr. Lawsky's conference room overlooking the Statue of Liberty, according to two of the people briefed on the talks, the regulator explained his plans to penalize at least a dozen BNP employees for their role in processing transactions for Sudan and Iran.
But the crucial meeting occurred two days earlier in Washington, the people said, on Tuesday afternoon at the Justice Department's headquarters. It was there that the executives outlined concerns about a guilty plea to the three prosecutors leading the case: David A. O'Neil, head of the department's criminal division; Preet Bharara, the United States attorney in Manhattan; and Cyrus R. Vance Jr., the Manhattan district attorney.
At the meeting in Mr. O'Neil's second-floor conference room, the BNP executives — Jean-Laurent Bonnafé, the chief executive; Philippe Gijsels, chief strategy officer; and Jean Clamon, head of compliance and internal control coordinator — discussed the potential reverberations of a guilty plea, the people briefed on the talks said. The bank's lawyers at Sullivan & Cromwell — H. Rodgin Cohen, a dean of the Wall Street legal world, and Karen Patton Seymour, a partner at the firm — accompanied them. Patrick Fitzgerald, a partner at Skadden, Arps, Slate, Meagher & Flom and a former top federal prosecutor in Chicago, also attended the meeting on the bank's behalf.
The pitch was simple. The executives and lawyers warned that a guilty plea could wreak havoc on BNP and the broader economy well beyond France's borders.
The argument — playing on the fear that criminal charges could prompt regulators to revoke a bank's license to operate, the corporate equivalent of the death penalty — helped the British bank HSBC escape criminal charges in 2012. It also stoked a public outcry that Wall Street giants have grown so large and important that they cannot be charged.
But the prosecutors appeared to brush off the concerns, according to the people briefed on the talks, having heard similar appeals in cases involving softer penalties like so-called deferred prosecution agreements. Mr. O'Neil and Mr. Bharara, in questioning the bank's lawyers and executives, indicated they had doubts that a guilty plea would imperil the bank or the economy.
The pushback from prosecutors also stemmed from concerns that BNP did not fully cooperate with the investigation. The prosecutors have complained that BNP was too slow to alert authorities to wrongdoing, according to the people briefed on the talks, a delay that might have cost the prosecutors a chance to charge bank employees before a five-year legal deadline.
The investigation, led in part by the F.B.I. in New York, has centered on whether the bank processed transactions for countries that the United States government has placed under sanctions. BNP conducted its own internal inquiry that "identified a significant volume of transactions that could be considered impermissible" from 2002 to 2009.
Despite the evidence, prosecutors took a number of precautions when pursuing the guilty plea. In weighing the punishment, the prosecutors held their own meetings with regulators to gain assurances that a guilty plea would not cost the bank its license to operate in the United States.
Without such cooperation, guilty pleas can be elusive. Last week, in a video published on the Justice Department's website, Attorney General Eric H. Holder Jr. remarked that "we have made great strides in improving this type of coordination between our prosecutors and other governmental regulators," adding that "this cooperation will prove key in the coming weeks and months as the Justice Department continues to pursue several important investigations."
In the case of BNP, prosecutors and regulators cleared the way for a guilty plea at a meeting on April 18. At the meeting, led by the New York Fed's general counsel, Thomas C. Baxter Jr., regulators signaled that they would not revoke BNP's charter in the event of a guilty plea. William C. Dudley, the New York Fed's president, stopped by to lend support to the position that the bank should not escape an appropriate criminal punishment, according to one of the people briefed on the talks.
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Mr. Lawsky, the New York State superintendent of financial services, also assured prosecutors that he would not pull BNP's charter. Instead, the people said, he told prosecutors that he would consider imposing steep penalties on BNP and its employees. He might also temporarily suspend the bank's ability to transfer money through New York branches on behalf of foreign clients.
Mr. Lawsky and Mr. Baxter later met on their own to coordinate their response to a guilty plea from BNP, according to one of the people briefed on the talks. At the meeting on Friday, at the New York Fed's headquarters in Lower Manhattan, the regulators also discussed the potential guilty plea from Credit Suisse, the person said.
That investigation has hinged on similar deliberations between regulators and the Justice Department in Washington, the people briefed on the talks said. The bank would be the biggest financial institution to plead guilty since Drexel Burnham Lambert.
A plea would come on top of a cash penalty. The penalty, the people said, will exceed the $780 million that Switzerland's largest bank, UBS, paid to resolve a similar case in 2009.
The BNP and Credit Suisse investigations could lay the groundwork for actions against American banks as well. While the new prosecutorial strategy applies to American banks like Citigroup, those investigations are at an earlier stage, and it was unclear whether they would warrant criminal charges.
But even if prosecutors discover criminal wrongdoing, bringing a criminal charge is hardly a foregone conclusion. Unlike BNP and Credit Suisse — and many other foreign banks with operations in New York that are regulated by the New York Fed and Mr. Lawsky — most giant American banks answer to another regulator, the Office of the Comptroller of the Currency.
The comptroller, Thomas J. Curry, has often been critical of Wall Street misdeeds. But Mr. Curry has explained to prosecutors that he is bound by rules that could require him to reconsider a bank's charter in the event of a criminal conviction.
The issue culminated last September in a case involving JPMorgan Chase. Mr. Bharara traveled to Mr. Curry's offices in Washington, government records show, seeking clarity on the potential repercussions of charging the nation's biggest bank over its ties to Bernard L. Madoff.
Mr. Curry, while vowing not to interfere in the case, pointed to a federal law that requires the comptroller's office to hold a hearing about potentially terminating "all rights, privileges and franchises of the bank" after a criminal conviction. Ultimately, JPMorgan received a penalty of roughly $2 billion from Mr. Curry and Mr. Bharara, but did not have to plead guilty.
The Manhattan federal prosecutor, however, is finding ways around the hearing, which applies only to money laundering convictions. Other charges, including wire fraud and bank fraud, do not automatically require a hearing. Even in the case of sanctions violations, as with BNP, prosecutors can charge a bank under a separate statute that does not require a hearing.
"The good news is that this dynamic is changing for the better," Mr. Bharara said in the recent speech, "and I expect you will see hard proof of that in the future."
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