NEW YORK – In its investigation of HSBC, the office of Loretta Lynch, then U.S. attorney for the Eastern District of New York, never contacted the whistleblower who exposed to the public the banking giant’s criminal responsibility for money-laundering hundreds of billions of dollars in drug and terrorist funds.
“Nobody from the U.S. attorney’s office in New York ever contacted me, despite numerous attempts that I made to get the documentation I had of HSBC illegal money-laundering to federal prosecutors,” said the whistleblower, John Cruz, in an interview with WND.
Cruz, a former HSBC manager in New York, delivered to WND early in 2012 approximately 1,000 pages of customer account records and numerous recorded conversations with bank management and compliance employees that document massive money-laundering activity.
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 for Mexican drug cartels and Middle Eastern terrorists. Thousands of bogus accounts were created through identity theft by using the names and Social Security numbers of unsuspecting current and former customers. It was done with 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.
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.”
On Dec. 12, 2012, Lynch, acting in her capacity as the U.S. attorney for the Eastern District of New York in Brooklyn, signed for the federal government a “deferred prosecution agreement” in which HSBC admitted to willfully engaging in a multi-billion dollar criminal money-laundering scheme involving money from Mexican drug cartels and Middle Eastern terrorists organizations.
HSBC agreed to pay $1.9 billion in fines to the federal government in exchange for an agreement by the Department of Justice to forgo filing criminal prosecutions against any HSBC management or employees.
“I was ignored totally by Loretta Lynch and the Department of Justice,” Cruz said. “Bank senior auditors told me in 2009 the deal with the federal government had already been cut, that the federal government knew HSBC was involved in money-laundering and a deal had been cut where HSBC would pay $2 billion in fines, but in exchange no bank employees would face criminal charges.”
As WND reported last week, the staff of Sen. David Vitter, R-La., is advising fellow Republican members of the Senate Judiciary Committee to withhold public support for Lynch’s confirmation as the senator’s office investigates her handling of the HSBC money-laundering scandal.
‘Making a lot of money’
Cruz said bank auditors told him in 2009 that HSBC made “a lot of money off all this fraudulent stuff going on.”
The auditors said the federal government watched everything HSBC did, but the bank wasn’t worried.
“The bank auditors told me HSBC was prepared to pay the fine and forget about it. The bank was making a lot of money here,” he said.
“But if I knew about the HSBC money-laundering, you can be sure the federal government knew about it too,” Cruz said. “It was clear HSBC was using the federal wire system to move the drug and terrorist money thorough these thousands of accounts in a scheme that would make it hard for the ordinary person to figure out what was going on.”
In 2012, while WND was contacted by the staff of the Senate Permanent Subcommittee on Investigations regarding its research into HSBC money-laundering, the committee staff did not contact Cruz, nor was Cruz called to testify at the hearings the subcommittee held July 17, 2012, under the title “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History.”
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.”