On Thursday, March 21, Sir John Peace conceded that he lied to investors on March 5, 2013 when he said of Standard Chartered Bank,
"We had no willful act to avoid sanctions; you know, mistakes are made - clerical errors - and we talked about last year a number of transactions which clearly were clerical errors or mistakes that were made..."
Specifically, he now says that these remarks were "both legally and factually incorrect" because Standard Chartered had previously conceded that it deliberately laundered money.
In plain English, what Sir John said is called lying. Or, if you prefer the language of securities lawyers, he engaged in deliberate misrepresentation. He also violated Standard Chartered's deferred prosecution agreement with US authorities.
Here is the full statement today.
Sir John should resign immediately as chairman of Standard Chartered.
Look carefully at the dates. He lied to investors on March 5 but did not issue this correction until March 21 - apparently after US regulators threatened the bank with renewed prosecution.
If the March 5 remarks were a genuine mistake, Sir John could have retracted them the same day. March 6, 7, and 8 were also pretty much wide open for retractions.
Standard Chartered - in the person of Sir John - has deceived prosecutors, regulators, and the investing public. This is outrageous executive behavior and it cannot be tolerated in a company that holds a US banking license.
If Sir John does not resign, he should be removed by the board of Standard Chartered.
If the bank's board refuses to act, this will signal that it is not competent to oversee the operations of a global bank.
Senator Elizabeth Warren asked recently: before you lose your banking license,
"How many billions of dollars do you have to launder for drug lords?"
Fed Governor Jerome Powell replied (with the wording from the same Politico article),
"I'll tell you exactly when it's appropriate" to consider pulling a bank's license, he said. "It's appropriate when there's a criminal conviction."
Standard Chartered Bank signed a deferred prosecution agreement which, among other things, requires it to take responsibility for its previously illegal sanction-busting actions.
If the chairman publicly and deliberately denies responsibility - in explicit violation of this agreement - he should step down or be forced out. How can the authorities now have any reasonable confidence that Standard Chartered will comply with the rest of its agreement, including,
"Under the cease and desist order, Standard Chartered must improve its program for compliance with U.S. economic sanctions, Bank Secrecy Act, and anti-money-laundering requirements."
If Sir John does not go, Mr. Powell and his colleagues should pull the bank's license.
If under such circumstances the Board of Governors of the Federal Reserve finds it cannot take action, then we must consider amending the Federal Reserve Act.
Simon Johnson is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You, available from April 3rd. This post is cross-posted from The Baseline Scenario. Read more from the Fiscal Affairs series here.