Revisiting the Financial Crisis: the HSBC Florida Connection

HSBC was a major player in the subprime mortgage crisis in 2007. HSBC had debt of $10.5bn because of of the housing crisis. The bad decision making of HSBC shouldn't be surprising. HSBC was arguably the biggest money laundering bank in the world. The scope of the money laundering operations by HSBC are listed in a 339 report by the Senate Committee on Homeland Security and Government Affairs. HSBC was involved in money laundering operations to Iran, drug cartels and third party banks dealing with terrorist organizations. No banker for HSBC has been charged by the United States.

Attorney General Eric Holder told Sen. Charles Grassley that HSBC is too big to jail.

Mr. Holder said: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

The HSBC Florida Connection

Miami Beach residents Mauricio Cohen Assor and Leon Cohen Levy are a father and son who were sentenced to 10 years for hiding $33 million from a secret hotel sales. In 2000, the Cohens sold the New York Flatotel for $33 million. The Cohens placed the $33 million in the Swiss branch of HSBC Holdings Plc. The Cohens hid the money in a bearer share accounts. Here is the Investopedia definition.

An equity security that is wholly owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner of the stock, nor does it track transfers of ownership. The company disperses dividends to bearer shares when a physical coupon is presented to the firm.

The bearer share accounts was a way that HSBC used to not keep track of the Cohens' money. The Cohens used friends and family members to pretend they owned shares of the stock. The stock was registered to the Panamanian company Blue Ocean Finance Ltd., and Whitebury Shipping Time Sharing Ltd., a BVI bearer share company.

In April of 2007, HBUS executive Claude Mandel, the Relationship Manager, removed Mauricio Cohen's name from the Whitebury account. Mandel attempted to covert the Whitebury account from a BVI to a Bahamian bearer share corporation. The catch was Cohen would have to declare ownership. Transcripts show that Cohen would not do that.

Despite Mr. Mandel’s insisting that his bearer shares would need to be registered, Mr. Cohen convinced Mr. Mandel to check if he could convert Whitebury into a Panamanian bearer share corporation. Mr. Cohen indicated again that he did not want to put names on the shares; when Mr. Mandel said that the shares would need to state the names, Mr. Cohen said: “But, I can’t put that, otherwise I have to declare them in the United States? I can’t do that, I don’t want to declare… otherwise, I have to close the accounts with you and go to Geneva.”

There is much more on HSBC to I plan on writing about in the future. The banking practices of HSBC and other financial institutions show that the financial crisis of 2008 didn't happen by accident. Greed and recklessness played a huge role in the crash of 2008.

U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History by Michael Robert Hussey