Second Circuit Ruling on HSBC Deferred-Prosecution Agreement Suggests Judges Are Potted Plants
When then-Judge John Gleeson ruled in early 2016 that the public had a right to see a report by an independent monitor on how HBSC was faring since it entered into a controversial five-year deferred prosecution agreement, he noted that he was, after all, not, “to borrow a famous phrase, a potted plant.” His ruling came in a case filed by Hubert Dean Moore, an HSBC mortgage customer from Pennsylvania who wanted to know whether there were still problems at HSBC and asked the court to order disclosure of the 1000-page report. HSBC had and has publicly revealed ongoing and serious problems that the monitor identified.
In its ruling on July 12, the Second Circuit reversed Gleeson’s decision, saying judges have no “freestanding supervisory power” to review and approve such agreements or ensure compliance with them. The three-judge panel did not say judges were like a “potted plant,” but that was largely the thrust of the ruling.
In deciding to approve the HSBC deal, Judge Gleeson noted that supervisory power in the context was novel, but found it important in deciding whether to approve such a significant deal. After all, the case involved almost $2 billion dollars in penalties for what was then the largest money-laundering related prosecution of all time. The conduct involved transactions on a grand scale (over $880 million) with Mexican drug cartels, terrorist-linked organizations, and entities in a range of sanctioned countries. And yet prosecutors were seeking to resolve the matter in court without following the standard judicial process for approving a plea agreement. The speedy trial clock would be tolled for five years, pending the bank’s compliance with the detailed terms of the agreement, which included penalties and any reforms required by the independent monitor. Judge Gleeson ordered in a separate ruling the public release of the monitor’s report, subject to redactions, pursuant to a judge’s supervisory power over criminal proceedings generally, in part because this was no ordinary corporate prosecution. He noted the “heavy public criticism” of the deal’s lenient treatment of the bank, which avoided a conviction, and its employees, none of whom were prosecuted. The judge said it was “appropriate and desirable for the public to be interested and informed in the progress of the arrangement between DOJ and HSBC that the government chose to make the centerpiece of a federal criminal case.”