Legal ethics for corporate compliance lawyers

At the end of may this year, a group of corporate lawyers of some of the most important banks in the world flew to Paris to meet at the Trianon Palace, a luxury hotel chain Waldorf Astoria is very close to Versailles, bearing in mind a corporate compliance. What were the legal controllers of banks such as Goldman Sachs, Barclays, Citigroup, Deutsche Bank or JP Morgan seated at the same table? Very simple: agree.

Apparently, this meeting has been held since many years ago; perhaps, even, a couple of decades. However, there has been a report published in ‘Bloomberg’ from the testimony (anonymous) of some of its members to that finally brought to light, much to the dismay of many of those present. These have complained that some of the members, who are required to complete confidentiality, have decided to talk about the meeting.

Not only that, but these moles have also explained the topics that have been addressed in those days of relaxation and business. Basically, what was discussed between dishes of the restaurant of Gordon Ramsey, and between session and session of spa is to develop a common strategy to deal with the collective actions, that is to say, to the demands raised jointly in the big banks, and in which they can get to get in game thousands of millions of dollars.

A case that changes everything

As explain the sources of the story of ‘Bloomberg’ who attended the meeting, the topic was put on the table by the legal officer head of Morgan Stanley, Eric Grossman, in the wake of a case which occurred a few months before. In September 2015, several Wall Street banks (including Goldman Sachs, JP Morgan, Citigroup and HSBC) were forced to agree a settlement value of 1.890 million dollars in a case of insurance of non-payment (CDS) to various organizations, such as the Association of Retired Employees of Los Angeles County.

All eyes at the table had to divert to Rohan Weerasinghe, general counsel of Citigroup, whose decision to pay 60 million in the summer of 2015 opened the doors for the other big banks did the same, costing them a total of almost 600 million. As noted, Citigroup was quick to agree to a settlement before the possibility of being subjected to an antitrust investigation by the european authorities, which would have put the case clearly in his against. However, this was closed shortly after, so the feeling with which they became the legal guardians of the elite of Wall Street is that they had paid too much for a case that very probably would not have lost (or would have agreed to a lower price).

In recent years, lawyers who defend the collective actions have begun to use strategies of “divide and conquer”. Instead of dealing with the sector as a whole, decide to reach an agreement quickly with one of the banks, which forces the rest to do the same. Why? By the well-known as a theory of joint and several liability (joint and several liability”) that, in the application u.s., causing the company to be found guilty to be in charge of paying all damages and claim its share to other companies. In other words, the last to get up from the table, pays the bill.