Monday, August 27, 2012

Guilty Until Proven Innocent:Reversing the burden of proof goes against the common law



Guilty Until Proven Innocent:Reversing the burden of proof goes against the common law  based adversarial system of justice and represents a radical departure

The Supreme-Court appointed Special Investigation Team has filed a report finding lack of evidence to charge Gujarat chief minister Narendra Modi for a role in the 2002 killings in the state. This has been widely interpreted as the country’s justice system having absolved Mr Modi of any culpability in the killings. This is absurd, for three reasons.

One, the SIT is not the court. The court has received the SIT report, all right. It still has to evaluate the report, along with the separate assessment, by the amicus curiae appointed by the Supreme Court, of the evidence compiled by the SIT and other material facts. The SIT is an investigation arm, not the judiciary.

Two, lack of evidence does not mean innocence. Take any of the unsolved crimes that dot the case histories of our police forces. Lack of evidence has led to failure to identify, leave alone apprehend, those who perpetrated these crimes. Just because no one has been pronounced guilty, does it mean that these crimes have no culprits?

Even when a plausible culprit is identified, it is possible that there is not sufficient evidence for successful prosecution. The Indian judicial system deems an accused innocent till he is proven guilty. This, of course, is entirely appropriate. However, it has the downside that the more perfect the execution of a crime, the criminal having taken care to destroy the evidence afterwards, the less the likelihood of his being punished.

In Mr Modi’s case, evidence that could have established his guilt, in the form of crucial call records of those fateful days, have wilfully been destroyed by the Gujarat administration. These self-same call records could well have established his innocence as well, had these been available and had these shown that he or his office did not receive repeated, desperate calls from Mr Jafri at the Gulberg society before the mob got to him.

Three, Mr Modi is in command, if anything. He does not waffle, he does not dither and he does not suffer insubordination or indiscipline in the state administration. How come the Gujarat state apparatus wandered into a bout of lethargy precisely when communal tension was at its height and mischief-makers were visibly in action, crying havoc and letting slip the dogs of war? Did Mr Modi temporarily lose control or was he in total control when the state machinery played comatose?

The Supreme Court found it necessary to appoint an amicus curiae to make an independent assessment of the evidence compiled by the SIT. Reportedly, it has reached conclusions different from those of the SIT. The courts would consider this report as well. It is in the public interest to make both the SIT report and the amicus curiae’s report available in the public domain.

The Attorney-General (left) must prosecute UMNO Youth for attempting to stoke racial and religious hatred online to prove he is impartial in enforcing a “presumed-guilty-until-proven-innocent” clause in the controversial Evidence Act — a law that is widely seen to shackle freedom of speech and dissent on the Internet — the DAP’s Lim Guan Eng said today.
A controversial anti-Christianity poster that was uploaded on a Facebook page that shares the same name as the political wing’s official site but which UMNO Youth says is “unauthorised” has spotlighted the weaknesses in the recently-passed section 114A of the Evidence Act — a clause that, among others, presumes that the named owner of a website is the publisher of the statement.
The poster, which was uploaded last Saturday and taken down the same day, appeared to suggest that votes for Federal Opposition Pakatan Rakyat (PR) will cause Islam to be replaced by Christianity as the country’s official religion.
“We call the A-G, since he defend (sic) 114A of the Evidence Act, to prosecute and charge UMNO Youth because of this post,” Lim told a news conference in George Town today.
“Because the burden of proof now goes to the accused, not to the prosecution because this is now turned backwards, this is now flipped backwards.It is not an indication of my support for the amendment but just to show, now this thing happened, isn’t this a gross injustice?” he said.
An audio clip of the news conference was made available to The Malaysian Insider. Lim, who is also Penang  Chief Minister, said government lawyers must take legal action against UMNO Youth to show they do not practise double standards.
“So if that is the case, UMNO Youth is presumed guilty for making this type of inflammatory statements — they say their web page is hacked and all that — inflammatory statements to create hatred among Christians and Muslims especially during Hari Raya, they are presumed guilty. They must prove themselves innocent.
“So if they do not charge UMNO Youth, this shows there are double standards,” he said.
The DAP Secretary-General said unless the prosecutors act on the ruling party’s youth wing, it would show section 114A “is intended to clamp down on freedom of the Internet, freedom of information and to muzzle the voices of freedom and dissent and to silence dissent against the Barisan Nasional government.”
UMNO Youth chief Khairy Jamaluddin has denied his team was responsible for uploading the poster he described as “offensive”. A representative of the wing, Ibdilillah Ishak, filed a police report yesterday asking for an investigation to be carried on the perpetrators.
The controversial poster had read: “Jika anda setuju untuk jadikan KRISTIAN sebagai agama rasmi persekutuan Malaysia, teruskan sokongan anda kepada Pakatan Rakyat. (If you agree to make CHRISTIANITY the official religion of the federation of Malaysia, continue supporting Pakatan Rakyat.) ‘God bless you my son’.”
Critics and lawmakers from both sides of the political divide are lobbying for the law that could curb Internet freedom to be repealed after it came into force last month.
The amendment to the Evidence Act sparked an uproar in April when it was passed as it introduces a presumption of publication of online content on the publisher or registered owner of a network, and in essence shifts the burden of proof onto the accused.
Khairy (left) and Deputy Higher Education Minister Datuk Saifuddin Abdullah had added their voices to the call to repeal the clause, joining opposition lawmakers already clamouring for the same.
Yesterday, PKR’s Nurul Izzah Anwar said she awaited “the authorities’ speedy action to charge the person held responsible for any posts on the UMNO Youth FB Page”, noting that section 114A would be the relevant law.
The Prime Minister had on Twitter last week said his Cabinet would review the law after several organisations ― including the Malaysian Bar ― chose to black out their websites to signal their opposition to the law.
A day later, however, Information, Communications and Culture Minister Datuk Seri Dr Rais Yatim announced that the law will stay.

The Supreme Court verdict on telecom licences has two redeeming features: it establishes the likelihood of judicial review of flawed executive decisions; and, therefore, sets limits on coalition compulsions. A coalition’s junior partners will continue to have elbow-room disproportionate to their size, but not enough for taekwondo. However, the Court has forayed into policymaking and come out smelling of things that all the perfumes of Arabia cannot sweeten. It has a mitigating circumstance: the executive’s failure to set things right on its own. But, the Court has actually added to the mess. The Court clubs spectrum with other natural resources like minerals. Spectrum is different from ore in two key respects. Once ore is converted into metal, it ceases to be. Spectrum just gets used, not exhausted, when used to put through a call or transmit data. Further, ore and the metal obtained by smelting it have globally traded prices. Spectrum cannot be traded across space, whether nation, state or telecom cell. It can be traded only in situ, where it is located. If ore is given artificially cheap to metal makers, whobenchmark their final products against global prices, they get a gratuitous subsidy. The case is strong for using how much someone is willing to pay for ore as the criterion for allocating ore deposits. The new mining bill proposes exactly this. 
Spectrum is comparable to roads and highways: both are used to carry traffic. Traffic cost is a vital determinant of the economy’s competitiveness. If a car made in Gurgaon is globally competitive but by the time it reaches the port, the tolls paid on en route make it too pricey to export, excessive freight would stifle manufacturing excellence. Telecom is also vital infrastructure. If spectrum is priced high, the cost of carrying voice and data will go up. Telecom and roads both make possible new businesses, new ways of doing business and empower the poor in ways the rich cannot imagine. Keeping their costs low improves social welfare and national competitiveness. They generate economic returns that are not captured as revenue in roads or telecom. A huge defect in the estimates of notional loss by the Comptroller and Auditor General is their neglect of economic returns from the fast spread of cheap telecom made possible through the licences issued on Raja’s watch. The economy grows faster and tax collections improve because of faster spread of telecom and computer networks. So, a part of the huge increase in the government’s tax collections over the recent past comes from cheap licences. The government would earn as tax much more than what was forgone as spectrum auction proceeds. Roads and highways suffer wear and tear from traffic while spectrum does not. Roads cost money and effort to produce, while spectrum exists in nature, ready for human use. So, while in some cases, it might not be possible to reduce the cost of roads to zero for the user, it is theoretically possible to bring the cost of spectrum for the user to zero, giving maximum weight to raising economic returns and social welfare. This is impossible if spectrum is allocated on the basis of how much operators are willing to pay for it, but possible if criteria other than those that raise the cost of spectrum are deployed. Are there any such fair criteria? 
True, auctioning spectrum would be most fair to alternate claimants. But that would jack up the cost of telecom and be unfair to consumers, economic growth and, ultimately, longrun revenue growth. It matters a great deal to a small set of telecom operators who gets to offer service. But it is immaterial to consumers and the government whether the service providers are A, B, C or X, Y, Z. What matters is that operators should be competent and that there should be sufficient competition among them. 
    The peculiar thing about the 2G scam is that it was actually about injustice to some aspirant telecom operators but got presented as injustice to the people of India. The CAG’s estimate of notional loss so swayed the public imagination that its failure to look at economic returns and the CBI court’s refusal, finally, to frame a charge of causing loss to the exchequer against any of the scam accused simply failed to register. 
The Court thinks that Raja implemented the first-comefirst-served policy wrongly. So he did. The extent of his misdeed is that he altered the priority of the applicants for receiving spectrum (this is crucial in a spectrum-scarce circle like Delhi). But the set of eligible applicants did not change (see table). 
Advancing the cut-off date arbitrarily disqualified some applications, true. But later applicants would not have got spectrum in any case, after initial applicants got theirs, so this did not materially change anything on the ground. 
First-come-first-served is not the best of policies, true, but has the advantage that it does not arbitrarily jack up the cost of spectrum as auctions do. A draw of lots would be equally fair and transparent. 
Another vital issue is the viability of retrospective remedy of arbitrary policy. Should there be judicial review of licences and permits granted prior to the economic reforms of 1991? Should all mining leases assigned on the faulted first-come-first-served basis be abolished? Will the Court now cancel all telecom licences that were granted since 2001 on a first-come-first served basis, if someone files a petition praying for this? 
The Court’s proper arena is that of law; it should leave policy to the elected government.



date was arbitrarily advanced from Oct 1 to Sep 25 A lengthy jail sentence would have been imposed on national bowler Noor Afizal Azizan for the statutory rape of a 13-year-old girl when he was 19 if he had been older or had used force, coercion or violence, the Court of Appeal said today in a written judgment explaining why it had controversially substituted imprisonment with a good behaviour bond for five years.

The court said, however, that its decision should not be considered a precedent for all future cases involving statutory rape and should be judged on its own merits.

Court of Appeal president Tan Sri Raus Sharif (picture)said in the judgment released today that Noor Afizal, who is now 21, was a “young boy who was extremely remorseful for what he had done and had thrown himself to the mercy of the court by pleading guilty to the charge.”

Raus, who sat with Justices K.N. Segara and Azhar Ma’ah, wrote the grounds of judgment.

Noor Afizal was let off with a RM25,000 bond instead of being jailed after he pleaded guilty to statutory rape, sparking a firestorm online over the court’s message on sex with minors even as it raised questions about the Penal Code and other criminal laws.

Incensed Malaysians have taken to Twitter and Facebook to vent their outrage against the judiciary after the Court of Appeal reversed earlier this month a High Court decision to jail the bowling ace for five years — suggesting that fame and a bright future are enough to ensure a convicted offender gets a ticket away from jail.

But the Court of Appeal pointed out today that its decision to let the bowler off with a bond did not have blanket application, or applied to all cases involving young offenders committing a similar offence.

“If the appellant (Noor Afizal) had been older or if he had used force, coercion or violence on the victim, or if he had tricked the victim... or he had not co-operated with the police and he had not shown any remorse to his act or there is no guarantee that he will not be committing the same offence in future, we would not have any hesitation, as we have done in many other cases of similar nature, to impose a lengthy custodial sentence,” said Raus.

In the Malacca Sessions Court, the judge had imposed a RM25,000 bond with good behaviour for five years on Noor Afizal after he pleaded guilty to raping the girl at a hotel in Ayer Keroh, Malacca on July 5, 2010.

However, the public prosecutor had appealed to the High Court on September 20 last year and obtained a five-year custodial sentence, the mandatory minimum for rape under the Penal Code.

According to the facts of the case which was laid down in the written judgment of the Court of Appeal today, Noor Afizal had checked into a hotel in Malacca on July 5, 2010 together with the girl who was then 13 years and four months old.

The two had what was described as consensual sex. The next morning Noor Afizal sent the girl home.

The girl did not complain to anyone and the incident only came to light when her father read about what she had done in her diary.

Raus pointed out today that Noor Afizal’s bond was in fact a suspended jail sentence and that he would always have a criminal record as a rapist.


by Karpal Singh (08-26-12)
Dr Mahathir Mohamad (left with Mukhriz) has challenged me to prove that he has made seditious comments against the royalty during the Parliamentary debates leading up to the 1993 constitutional amendments on the monarchs’ immunity.
It would have been better for Mahathir to have agreed to be subpoenaed as a witness in my trial. The court would be a better forum to expose Mahathir. However, as I have been challenged, I am prepared to pick up the cudgel.
In tabling the Constitutional (Amendment) Bill, 1993 to set up the Special Court to take away the immunity from legal process of the King and the Rulers, Mahathir, uttered the following, among the many other, seditious remarks during a time when he had no Parliamentary immunity from being charged in court for making those remarks:
Jika Malaysia ingin menjadi sebuah negara yang mengamalkan Demokrasi Berparlimen dan Raja Berperlembagaan, kekebalan yang diberikan kepada Raja-Raja perlulah dihapuskan. [Tepuk]’ [Hansard 18 January, 1993, page 16]
“Sebenarnya ketiga-tiga Perdana Menteri dahulu, sebagai Penasihat kepada Raja-Raja, telahpun menegur Raja-Raja berkali-kali semasa mereka berkhidmat. Saya tahu teguran ini dibuat kerana perkara ini telah dilaporkan dalam Mesyuarat Jemaah Menteri dan juga Majlis Tertinggi UMNO berkali-kali.
“Allahyarham Tun Hussein Onn semasa menjadi Perdana Menteri pernah dalam ucapan bertulis di suatu Mesyuarat Majlis Raja-Raja, yang dihadiri hanya oleh Duli-Duli Yang Maha Mulia atau wakil-wakil mereka sahaja, menegur dengan kerasnya perbuatan Raja-Raja yang tidak harus dilakukan.
“Tetapi teguran ini tidak berkesan. Pekara-perkara yang disentuh terus dilakukan juga, bahkan ditingkatkan. Apa yang tidak pernah dibuat di zaman British dan pada tahun-tahun awalan Malaysia merdeka, dilakukan dengan semakin ketara da meluas.’ [Hansard, Jan 18, 1993, page 19]…
“Kerajaan memang mendengar dan menyedari akan pandangan dan kemarahan sebilangan rakyat yang mengetahui perbuatan Raja. Demikianlah kemarahan mereka sehingga ada, terutama di kalangan generasi muda, yang menganggap Sistem Beraja sudah ketinggalan zaman.
“Tetapi oleh kerana Akta Hasutan dan larangan terhadap mengkritik Raja, Raja tidak mendengar dan tidak percaya kepada Penasihat mereka apabila maklumat disampaikan berkenaan kegelisahan rakyat. Raja dan keluarga Diraja nampaknya berpendapat bahawa semua ini adalah ciptaan Penasihat-penasihat Raja untuk menakutkan Baginda atau untuk merebut hak Raja.
“Dalam keadaan ini, Raja bukan sahaja akan meneruskan amalan-amalan yang tidak disenangi atau disukai oleh rakyat tetapi juga akan melakukan perkara-perkara yang lebih dibenci oleh rakyat. Jika trend ini tidak disekat, perasaan rakyat terhadap Raja tentu akan meluap dan menjadi begitu buruk sehingga pada suatu masa nanti rakyat mungkin tidak lagi dapat membendung perasaan mereka. Perasaan yang diluahkan dalam surat-surat kepada akhbar sebenarnya sudah lama wujud.
“Dengan izin, Tuan Yang di-Pertua, saya ingin membaca petikan daripada satu rencana yang dihantarkan kepada akhbar The Straits Times pada 1946 oleh seorang tokoh Melayu yang terkemuka, apabila British mencadangkan penubuhan Malayan Union. Tokoh ini kemudian memegang jawatan yang tinggi dalam Kerajaan. Rencana in tidak disiarkan oleh akhbar Straits Times tetapi ia disampaikan kepada saya baru-baru ini oleh penulis.
“Penulis ini menyatakan, dengan izin ‘All intelligent Malay leaders ought now seriously to give most profound and careful thought to the question whether the time has not arrived when the Malay Royalty (I mean the Sultan and Raja) should gracefully withdraw themselves altogether.’
“Jika pandangan seperti ini sudah ada pada tahun 1946, apakah ia tidak mungkin wujud semula pada tahun 1993 [Tepuk] jika Raja-Raja tidak dihalang  daripada melakukan perbuatan-perbuatan yang tidak diingini?” [Hansard, 18 January, 1993, page 20-22]…
Sebelum ini terdapat banyak insiden dimana Raja menganiaya rakyat, Raja menyalahi undang-undang civil dan criminal, Raja menyalahgunakan wang serta harta Kerajaan dan Negara, Raja menekan dan menganiaya pegawai-pegawai’ [Hansard, Jan 18, 1993, page 26]
These are among the passages in Mahathir’s speech as reflected in the Hansard. The passages exude serious and often explosive instances of sedition to which the Attorney-General has chosen to give a blind eye.
I challenge Mahathir to come to court voluntarily at my trial and testify and justify what he uttered in Parliament on January 18, 1993. I hope he will not run away from this challenge.
The Rachel Corrie lawsuit has exposed a culture of impunity in the Israeli military, where claims of unlawful killings and war crimes are ignored, or superficially investigated [EPA]
 August 28, Haifa District Court in Israel will announce the verdict in the civil lawsuit brought against the State of Israel for the killing of Rachel Corrie in March 2003. For the best part of a decade, Corrie's family has been seeking justice and accountability for the crushing to death by a bulldozer of the American human rights activist. 
The lawsuit, originally filed in 2005, charges the State of Israel "with responsibility for Rachel's killing and failure to conduct a full and credible investigation in the case". 
I have been given access to professional translations of the legal summaries submitted to the court, which analyse the evidence, court testimonies and legal arguments. Whatever the judge's decision, this case has shed light on Israel's grave breaches of human rights and the impunity enjoyed by its military. 
In the summary submitted by the State of Israel, it is claimed that "the IDF is a cautious, proportional, considerate, humanitarian army that acts with caution, proportionality and reasonableness". Yet evidence in the case, corroborated by other incidents external to the killing of Rachel Corrie, suggest that the Israeli army has killed civilians - Palestinians and internationals - as a result of official policy. 
Shocking evidence 
Evidence submitted to the court included extracts from the battalion operations log on the day Rachel Corrie was killed, March 16, 2003. The summary given that evening by the deputy battalion commander (referred to as "Sh R") included the following: 
We must not, as an army, allow such incidents to disrupt the ongoing missions. We are aware of the problem of the foreigners in this area and, as a policy, we do not halt activity because of the presence of foreigners in the area in order to avoid creating a dangerous precedent... But again, this incident was unavoidable and these foreigners should be dealt with and prevented from entering the Strip. 
Here, the IDF officer states that the reason why the bulldozers did not stop their work, despite the presence of foreign activists, was not because of any "security" imperative but to avoid creating a "precedent". 
 US activist's family sue Israel
Even more shocking evidence was to follow. The battalion log then records Sh R as stating that "the rules of engagement are to shoot to kill any adult person on the route". In the State's document, the accuracy of the log at this point is immediately denied, with Sh R testifying that those were not his words "and apparently the operations sergeant misunderstood him" - only a person "identified as a terrorist should be shot to kill". 
However, when the former Gaza Division’s Southern Brigade Commander Colonel Pinhas (Pinky) Zuaretz - in charge in 2003 - was questioned in court, he affirmed these instructions. 
Q: And on the level of principle, a person who comes to this [Philadelphi] route in the daytime, it is permissible to kill him.
A: Affirmative.  
When Col Zuaretz was shown the deputy commander's remarks in the operations log, "he said that the statements were correct and accurately reflect the open-fire orders and that every adult person who comes into the route, from the standpoint of the open-fire orders, can be hit". 
These words are all the more chilling when you remember that within seven weeks of Rachel Corrie's killing, award winning journalist James Miller and activist Tom Hurndall, both British citizens, were shot and killed in Rafah - and in the case of Miller, the same deputy commander was involved (as he testified to during questioning by the plaintiffs' lawyer as part of the Corrie suit). 
The Israeli soldier convicted of manslaughter in the case of Tom Hurndall, Sergeant Taysir Hayb, told a military court that he only did what he was "supposed to", that "anyone who enters a firing zone must be taken out. [The commander] always says this". He added: "They tell us all the time to fire; that there is approval. All the troops [in Rafah] fire without approval at anyone who crosses a red line". 
That summer, a report by Chris McGreal for The Guardian documented in detail incidents of Palestinian children being killed by the Israeli army. A military spokesperson told McGreal that he could not name the IDF commander in Gaza in his article, since "he has admitted his soldiers were responsible for at least some of those killings" and "in this day and age that raises the prospect of war crimes, not here but if he travels abroad he could be arrested sometime in the future". That commander, of course, was Col Zuaretz. 
Culture of impunity
The Rachel Corrie lawsuit has further exposed a culture of impunity in the Israeli military, where claims of unlawful killings and war crimes are ignored, or superficially investigated. The plaintiffs' summary, for example, describes how the doctor who carried out the autopsy on Rachel Corrie at the Institute for Forensic Medicine "destroyed evidence documenting the proceedings of the autopsy, evidence that might have contained additional findings supporting the plaintiffs' version". Overall, the plaintiffs claim that "the work of the investigation team" suffered from "significant defects", with a lack of "ingenuity, experience and possibly even the will to arrive at the truth". 
 Inside Story - Justice for Rachel Corrie?
Just last week, it was revealed by Amira Hass in Ha'aretz that the US government concurs with the plaintiffs assessment, and that "Israel's investigation into the death of American activist Rachel Corrie was not satisfactory, and wasn't as thorough, credible or transparent as it should have been". In May 2011, US Ambassador to Israel Dan Shapiro told the US Senate Foreign Relations Committee: 
For seven years, we have pressed the government of Israel at the highest levels to conduct a thorough, transparent and credible investigation of the circumstances of her death. The government of Israel has responded that it considers this case closed and does not plan on reinvestigating the incident. 
This serious criticism echoes findings in the 2005 Human Rights Watch (HRW) report "Promoting Impunity", which adjudged Israel's "operational and Military Police investigations into Corrie's killing" to have fallen “far short of the transparency, impartiality and thoroughness required by international law". HRW was able to obtain a copy of the summary of the IDF's "operational investigation", a document "laden with generalities and emotive commentary", containing "major factual errors" such as the incredible statement that "no signs substantiate assertion that Ms Corrie was run over by a bulldozer". 
Just last week, Human Rights Watch issued fresh condemnation of what it called Israel's "broken military criminal justice system" following a military trial that "failed to hold anyone accountable for the killings of a mother and daughter" in Gaza during the massacre of "Operation Cast Lead". 
Human rights organisations have long complained about the lack of accountability in the Israeli military. Various studies have produced statistics such as "a complaint made to the military law enforcement bodies of offenses by soldier against Palestinians have a 96.5 per cent chance of being dismissed without an indictment being filed against the suspected soldiers". Over a 10-year period, indictments were filed in just 3 per cent of the cases where B'Tselemdemanded a criminal investigation into the killing of Palestinians by soldiers. 
The plaintiffs end their response to the State of Israel's summary with the Mahmoud Darwish poem "Think of Others", "on the premise that these are the words the deceased would have addressed to the soldiers who were involved in precipitating the end of her young life". Another Darwish poem, "Our Country is a Graveyard", is a reminder of the injustices recorded and resisted by Rachel and many others - and an opportunity to affirm that those responsible will have their day in court. 
Gentlemen, you have transformed our country into a graveyardYou have planted bullets in our heads,and organised massacres.Gentlemen, nothing passes like thatwithout accountAll what you have doneto our people isregistered in notebooks. 

  On the surface, it looked like a simple game of "Gotcha," when New York Bank regulators blew the whistle on London's Standard Chartered Bank for laundering money. The fact that the money was allegedly tied to Iran cast a major shadow on the allegations, given the Islamic Republic's "bad guy" image in American policy circles.
Big money was said to be involved when a NY State regulator, Benjamin Lawsky, considered a publicity-seeking cowboy in banking circles, made the explosive charge that Standard Chartered bank abetted $250 billion of money-laundering transactions with Iran.
On the surface the case was open and shut and headline-making, even though other federal regulators didn't immediately jump in with guns blazing.
Then, as Reuters reported, it all became even murkier when Britain's Central Bank governor portrayed Lawsky as marching to his own tune, and out of step with federal regulators in Washington. "'One regulator, but not the others, has gone public while the investigation is still going on,' the Bank of England's Mervyn King said at a news conference in London."
Suddenly, the plot thickened, even as the media tide carried with it the assumption that the bank was guilty as sin. With the Regulator calling Standard Chartered a "Rogue Institution," its shares began dropping in value. In one morning's trading, on the basis of accusations in a press release and uncontested legal charges, the bank lost $16 billion after the unproven allegations that US. Sanctions on Iran were violated hit the press.
Bank officials initially contested the scale of the transgression indicating that only a small part of its business with Iran was involved, no more than $14 million. Federal regulators also implied that NY State was exaggerating the scale of any potential problem and that Lawsky's language was unnecessarily "strident."
But it is strident language that gets attention in a media that rarely bothers to investigate issues like these.
Not mentioned in the first stories was that Standard Chartered had met Lawsky's office months earlier, but nothing was said then about any high crimes and misdemeanors.
That would change when the opportunity for a big media story materialized. Now, Lawsky was treating this case as major violation of national security, saying: "This is a case about Iran, money laundering, and national security," Lawsky said. "We will continue to work closely with our law enforcement partners, both federal and state, in this effort. No bank, big or small, foreign or domestic, is above the law."
Sounds dramatic, doesn't it? But the British were furious because their investigation was not complete, but, whatever the truth, the perception of wrong-doing began killing the bank's stock price. An auditing firm accused of fudging the numbers also adamantly denied it.
Bank critics in the U.S. lashed out at the British regulators who criticized a lack of protocol by the NY regulator. Wrote James Kwak on BaselineScenario.com, a leading economics blog:
Standard Chartered almost certainly conspired to evade U. S. sanctions?* Why are they mad at Benjamin Lawsky instead of at Standard Chartered? And when you think a violation of inter-regulator "protocol" is worse than a systematic plan to defraud the U. S. government and break sanctions against Iran, of all countries--it's hard to imagine how you could be more captured, without knowing it.
Is this true? No Court has agreed with the accusation, and now none will because there has now been a settlement with no admission of guilt,
Standard Chartered initially said they would fight back. CEO Peter Sands issued this statement: "(We) fundamentally reject the overall picture and believe there are no grounds for them to take this action," he told reporters. The threat to cancel the bank's license to operate in New York would be "wholly disproportionate."
It turns out that the pressure to punish the bank was partly due to fury at a colorful comment allegedly made by a Standard Chartered executive who challenged the arrogance of New York regulators in a conversation way back in 2006.
Bank Executive Richard Meddings allegedly said: "You f---ing Americans. Who are you to tell us, the rest of the world that we're not going to deal with Iranians?"
Daring to criticize the self-righteousness of U.S. regulators and U.S. policy in a off the record comment (not even in a document) apparently marked the bank for retaliation by flag-waving and thin-skinned regulators.
What was Standard Chartered to do? Stand on principles and its "facts" and possibly loose its license in New York, or try to settle -- without admitting wrongdoing. At the same time, more investigations are underway in connection with its alleged violations of U.S. sanctions laws.
What do you think happened? The bank did a quick calculation and decided to pay up rather than be shut down. They coughed up $340 million in a case that smacks of official extortion dressed up as high principles. The NY regulator has the power to close the bank if it believes the bank is untrustworthy, even if the bank is not guilty of any particular transgression. The Bank says the accusations deal with only 1 percent of some 60,000 Iranian wire transfers that New York regulator claims were involved.
Naked Capitalism (NC) reports that the regulator tried to shake Standard Chartered down for even more money:
The amount agreed was less than he was initially rumored to be seeking, which was in the $500 to to $700 million range. However, as we also indicated, in a "good" settlement, neither side gets what it wants. And given that the Federal authorities were roused by the New York action and are also reported to be negotiating settlements, they will likely have to secure decent dollar amounts so as not to be perceived to be completely incompetent, which would have cut into what SCB would pay to New York.
The NC website also explains, "SCB was handling Iran's foreign oil sale related payments. Meanwhile in London, according to Fortune, "Money managers' reacted to the U.S. allegations that Standard Chartered hid money tied to Iran with these words: Everyone does it."
The U.S. business magazine added, "Talk that the bank could lose its ability to work and trade in the state is being dismissed as simply 'loony.'"
Meanwhile, money managers in the City believe that the bank's credit looks solid and its equity value is now cheap compared to its peers -- even ones that have their plates full with their own scandals ranging from the Libor fixing to insider trading. Nevertheless, the company's stock and bonds are expected to trade at a discount to its peers until the bank either resolves the issue or sets aside the cash to deal with it... It wasn't too long ago that the big European banks actually flaunted their close relationship with entities connected to Iran."
The Guardian seemed sympathetic to Standard Chartered too, reporting that the bank called its decision "pragmatic... in the best interest of shareholders and customers."
The newspaper explained: "The loss of its banking licence would be more damaging than the fine, although Sands on Tuesday told the Business Standard paper in India -- where the bank has a high street banking operation -- that he did not believe the bank would be stripped of its ability to conduct business directly in the U.S."
Ian Gordon, banks analyst at Investec, said: "It has taken the nuclear option off the table and suggests the total settlement will be manageable."
Maybe Richard Meddings was right, even though the exercise of his "freedom" of speech has proven very costly. Ironic isn't it, that sanctions are supposedly in place to stop Iran from going nuclear, just as fact challenged regulators use the "nuclear option" to get their way.
And so it goes, another day in the world of banking where hypocrisy reigns and trillions in global money laundering are ignored. Prosecution of wrongdoers are few and far between because officials get more pats on the back from their bosses for bringing in money rather than putting wrong doers in jail. A government that has dragged its feet in prosecuting crimes committed by the likes of Bank of America or Goldman Sachs has no problem going after small fry like Standard Charteedr to show that they are "doing something" with Iran as the pretext.
This tale of regulatory complicity feels like all the stories we read about the police shaking down the mafia so they can be cut in to the rackets.
Wall Street has become a place where real financial fraudsters go unpunished while inflated cases like this get the attention especially when a demonized "evil doer" like Iran is said to be involved. Real crimes like the way sanctions hurt ordinary Iranians go unreported.

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