HSBC whistleblower spills Lynch evidence to Senate
Massive drug, terrorism scandal ropes in Obama’s AG nominee
The Senate Judiciary Committee on Wednesday conducted a two-hour session with HSBC whistleblower John Cruz in its investigation of attorney general nominee Loretta Lynch’s role in the Obama administration’s decision not to prosecute the banking giant for laundering funds for Mexican drug cartels and Middle Eastern terrorists, WND sources have confirmed.
WND was first to report in a series of articles beginning in 2012 charges by Cruz, a former HSBC vice president and relationship manager, based on his more than 1,000 pages of evidence and secret audio recordings.
The staff of the Senate Judiciary Committee focused Wednesday on Cruz’s allegations, first reported by WND Feb. 6, that Lynch, acting then in her capacity as the U.S. attorney for the Eastern District of New York, engaged in a Department of Justice cover-up. Obama’s attorney general nominee allowed HSBC to enter into a “deferred prosecution” settlement in which the bank agreed to pay a $1.9 billion fine and admit “willful criminal conduct” in exchange for dropping criminal investigations and prosecutions of HSBC directors or employees.
On Feb. 12, the Senate Judiciary Committee announced Chairman Sen. Chuck Grassley, R-Iowa, had decided to postpone the Senate vote on Lynch’s confirmation until the last week of February, when Congress returns from the Presidents Day recess. The decision is widely attributed to allowing Vitter and the Senate Judiciary Committee staff time to pursue the allegations concerning Lynch’s role in the HSBC scandal.
Cruz called the $1.9 billion HSBC fine “a joke,” explaining to WND that HSBC bank auditors had told him in 2009 that senior managers and compliance officers in New York were fully aware the London-headquartered bank was engaged in a criminal scheme to launder money internationally for Mexican drug cartels and Middle Eastern terrorists.
“The auditors warned me investigating the money laundering could cost me my job,” Cruz said. “The auditors told me in 2009 that nobody in the bank was going to go to jail and that HSBC had already put aside $2 billion in reserves to pay the fine they somehow had reason to suspect back then that the Department of Justice would demand to settle the case.”
Cruz argued that a $1.9 billion fine of an international bank the size of Hong Kong Shanghai Bank, the official name of HSBC, amounted to no more than “a few days operating profit.” He described it as “a cost of doing business” once HSBC had decided to launder money for international criminals.
Senate investigators to hear HSBC recordings
Confidential sources in Washington confirmed to WND that Jason Foster, the chief investigative counsel at the Senate Judiciary Committee, was directing the investigation into Cruz’s allegations against Lynch.
Cruz’s charges and documentation were brought to Sen. David Vitter, R-La., a member of the Senate Judiciary Committee, before the senator announced Feb. 11 that he was opening his own investigation of Lynch.
Foster is considered on Capitol Hill to be one of the Senate’s best, most experienced investigators. A graduate of Georgetown University Law Center, he had more than 15 years experience directing fact-finding inquiries for the Senate Committee on Finance, Senate Homeland Security Committee and the House Committee on Government Reform, before becoming chief investigative counsel for the Senate Judiciary Committee in January 2011.
The Senate Judiciary Committee’s staff questioning of Cruz and his attorney focused on approximately 1,000 pages of HSBC customer account records that Cruz turned over to WND early in 2012. The records were pulled from the HSBC computer system before he was fired by HSBC senior management who didn’t want to investigate his claim to have discovered illegal money-laundering activity at the bank.
As WND reported in a series of articles beginning Feb. 1, 2012, Cruz was able to document a complex criminal scheme that involved wiring billions of dollars of money for Mexican drug cartels and Middle Eastern terrorists thorough thousands of bogus accounts created through identity theft. The scheme used the names and Social Security numbers of hundreds of unsuspecting current and former customers. It allegedly had the active participation of regional bank managers, branch managers and employees, as well as bank compliance officials at hundreds of HSBC locations throughout the nation. The money ultimately was wired by the bank to undisclosed bank accounts internationally.
Foster, on behalf of the Senate Judiciary Committee, has requested that Cruz to submit some 70 hours of conversations Cruz secretly recorded of bank management and compliance officers in New York. He also recorded his conversations with law-enforcement authorities, including the Suffolk County District Attorney’s office, the Department of Homeland Security and the IRS.
Cruz played for WND an audio recording he made of a phone call he placed to Jeremy Scileppi, the bureau chief at the office of the Suffolk County district attorney June 25, 2012. Scileppi told Cruz Suffolk County did not want to duplicate other investigations of HSBC money-laundering allegations.
Scileppi explained the Suffolk district attorney had turned over Cruz’s documentation to HSBC security personnel, “so the bank could conduct their own internal investigation,” as well as to the Brooklyn district attorney’s office and to the FBI, a division of the Department of Justice, as is the U.S. attorney’s office for the Eastern District of New York.
“We generally back off the investigation if the FBI or another federal agency is involved,” Scileppi explained. The way it works is that we don’t want two different agencies to chase the same squirrel up the same tree from two different sides, because, then, nobody gets the squirrel. The FBI told us to back off because they were working the HSBC money-laundering investigation.”
Cruz: ‘DHS stonewalled’
One day after WND’s first article on the HSBC money-laundering scandal was published in February 2012, WND received an email from Sgt. Frank J. DiGregorio, a DHS employee in New York.
“I have read your article in WND pertaining to the allegations by John Cruz against HSBC Bank. As a supervisor for Homeland Securities Investigators, I would very much like the opportunity to meet with Mr. Cruz and speak with him,” DiGregario said.
On Feb. 7, 2012, WND attended a meeting with DiGregorio and Graham R. Klein, special agent for the Department of Homeland Security, in an office building on Manhattan’s lower east side that bore no DHS designation, with Cruz attending by telephone.
With Cruz’s approval, WND handed over to DHS all the written documentation and audio recordings Cruz had provided, offering with Cruz’s permission to assist in the investigation in any way possible.
In a meeting lasting over an hour that Cruz audio-recorded without WND’s knowledge, DiGregorio and Klein promised to investigate the evidence and allegations Cruz had presented.
“This is an ongoing investigation,” DiGregorio told WND at the conclusion of the meeting. “Cruz made very serious allegations, and it takes time for us to do our work. But we have not forgotten about Cruz, and we will get back to him just as soon as we can.”
DiGregorio explained that as a detective sergeant in the office of the Queens County district attorney, he is currently assigned to Homeland Security Investigations, where he supervises Special Agent Klein.
Subsequent to the meeting, Cruz told WND he was shocked DHS claimed it was their first contact with him.
“Back in 2010, my attorney turned over information regarding HSBC to DiGregorio,” Cruz said, as reported by WND in an article published May 13, 2012. “Then, on Feb 7, 2012, Homeland Security said my attorneys never spoke to them, that they didn’t know who I am.”
Cruz was shocked.
“DiGregorio called me; he was belittling me,” Cruz recounted. “DiGregorio said I was a disgruntled employee, that I was just here for the money. They said, ‘Why did it take you two years to come forward?’”
IRS continues to stonewall Cruz
WND reported May 13, 2012, Cruz explained he had also presented his allegations and evidence to Internal Revenue Service Special Agent David Wagner and Supervisory Special Agent Kevin B. Sophia. Both were of the U.S. Department of Treasury, IRS, Criminal Investigation Division.
“I met with them in Denver, Colorado, on April 12, 2012, at the IRS office,” Cruz said. “I gave them a computer disc with all the HSBC documents on it. Agent Sophia asked, ‘What would make us believe HSBC employees would acknowledge illegal activity?’ I told them I recorded everything.”
Cruz also handed over to the IRS two discs with approximately 19 to 20 hours he had recorded of his discussions with HSBC employees concerning his allegations.
Cruz told WND the IRS agents were overwhelmed with the volume and detail of the information he handed over.
“The IRS agents said, ‘This is mind-boggling,’” Cruz recounted. “They told me that if the information on the computer disk and in the audio files was as I represented, the IRS agents were talking about arresting HSBC bank employees.”
Cruz noted the IRS was stunned at the dollar magnitude of the suspicious bank transactions he had documented, noting that billions of dollars in tax revenue was being lost, with bank employees transferring money into and out of bogus accounts set up for illegal gain.
The IRS explained to Cruz that the individuals whose identities may have been stolen to set up the apparently fraudulent accounts would also have to be investigated, to see if they were part of the suspicious activity or merely victims.
Either way, the Social Security numbers associated with the suspicious HSBC accounts turned out to be authentic numbers identified in many cases with present or former customers of the bank. And the billions of dollars traveling through the accounts had never been reported for income tax purposes.
“The IRS denied my request to be a whistleblower in the HSBC case,” Cruz told WND. “The IRS said the information I provided did not result in the collection of any fines, so I was not owed any fee by the federal government.”
Cruz: ‘I no longer trust DHS or the IRS’
As WND also reported May 13, 2012, Cruz handed over to WND audio recordings he made of his meetings with DHS and IRS officials – recordings he made without disclosing to the DHS and IRS.
Cruz explained that he no longer trusts even federal law enforcement to do their job investigating and prosecuting HSBC employees who may be involved in illegal bank transactions, as he alleges.
“It’s a circle,” Cruz explained. “I turn over the information to law enforcement, and law enforcement turns around and gives the information right back to the bank for the bank to conduct their own internal investigation.”
Cruz says he was fired by HSBC for bringing forth his charges.
“This is how the bank and employees in the bank make money,” he argued, explaining why he was fired instead of being given awards for meritorious service disclosing the suspicious activities. “It’s a lot easier to make money off fraudulent transactions than it is to make money off legal transactions.”
He indicated he was not concerned HSBC and/or its employees might sue him for libel or defamation.
“Sue me,” he said defiantly, “sue me all you want. Then bring out the proof. I will ask for every document. I will ask for a lot of documents. I will show that I am right, and I will give every tape recording to the public on air, so they can listen to these individuals talking.”
Cruz explained he taped the conversations with federal law enforcement authorities “to cover myself.”
“You never know what’s going to happen,” he explained. “Somebody could say, ‘Oh, you’re involved.’ I need to explain that I’m not involved, but that I reported it. Then, if they deny I reported it, I have the tapes to prove I reported it.”
Cruz affirmed to WND he was accusing by name federal officials in DHS and IRS, as well as officials in the district attorneys offices in Suffolk County and Queens County, New York, of not taking steps to stop immediately what he alleges is money laundering billions of dollars in the United States around the world.
He noted his contact with the IRS was relatively recent, and he has reason to believe the IRS has opened an investigation.
IRS agents Wagner and Sophia did not return WND calls for comment.
HSBC ‘a criminal organization’
Cruz began working at HSBC Jan. 14, 2008, as a commercial bank accounts relationship manager and was terminated for “poor job performance” on Feb. 17, 2010, after he refused to stop investigating the HSBC criminal money-laundering scheme from within the bank.
In his position as a vice president and a senior account relationship manager, Cruz worked in the HSBC southern New York region, a which accounts for approximately 50 percent of HSBC’s North American revenue. He was assigned to work with several branch managers to identify accounts to which HSBC might introduce additional banking services.
Cruz told WND he recorded hundreds of hours of meetings he conducted with HSBC management and bank security personnel in which he charged that various bank managers were engaging in criminal acts.
“I have hours of hours of recordings, ranging from bank tellers, to business representatives, to branch managers, to executives,” he said. “The whole system is designed to be a culture of fraud to make it look like it’s a legal system. But it’s not.”
Cruz explained that after many repeated efforts, he gave up on the idea that HSBC senior management or bank security would pursue his allegations to investigate and stop the wrongdoing.
“My conclusion was that HSBC wasn’t going to do anything about this account, because HSBC management from the branch level, to senior bank security, to executive senior management was involved in the illegal activity I found,” he said.
After repeated attempts to bring the information to the attention of law enforcement officers, Cruz hit a brick wall until WND examined his documentation and determined his shocking allegations were sufficiently substantiated.
“HSBC is a criminal organization,” he stressed. “It is a culture of crime.”
In 2011, Cruz published a book about his experience with HSBC, titled “World Banking World Fraud: Using Your Identity.”