United States v. HSBC Bank USA, N.A.

Decision Date12 July 2017
Docket NumberDocket Nos. 16-308(L),16-1068,August Term, 2016,16-353,16-1094
Citation863 F.3d 125
Parties UNITED STATES of America, Plaintiff-Appellant, v. HSBC BANK USA, N.A., and HSBC Holdings plc, Defendants-Appellants, Hubert Dean Moore, Jr., Appellee.
CourtU.S. Court of Appeals — Second Circuit

Jenny C. Ellickson (Kenneth A. Blanco and Sung-Hee Suh, Deputy Assistant Attorneys General; M. Kendall Day, Chief, Asset Forfeiture and Money Laundering Section; Laura Billings, Trial Attorney, Asset Forfeiture and Money Laundering Section, on the brief), U.S. Department of Justice, Criminal Division, Appellate Section, for Leslie R. Caldwell, Assistant Attorney General, Washington, DC; Julia Nestor and Alexander A. Solomon (on the brief), Assistant United States Attorneys for the Eastern District of New York, for Robert L. Capers, United States Attorney for the Eastern District of New York.

Paul D. Clement (Viet D. Dinh, Jeffrey M. Harris, Megan M. Wold, Christopher G. Michel, on the brief), Kirkland & Ellis LLP, Washington, DC; Samuel W. Seymour and Alexander J. Willscher (on the brief), Sullivan & Cromwell LLP, New York, NY; Jeffrey B. Wall (on the brief), Sullivan & Cromwell LLP, Washington, DC, for Defendants-Appellants.

David A. Schulz (Thomas B. Sullivan, Maxwell S. Mishkin, on the brief), Levine Sullivan Koch & Schulz, LLP, New York, NY, for Appellee.

Kevin W. Goering, Norwick, Schad & Goering, New York, NY, for Amicus Curiae Brandon L. Garrett, in support of Appellee.

Dennis M. Kelleher, Better Markets, Inc., Washington, DC, for Amicus Curiae Better Markets, Inc., in support of Appellee.

Bruce D. Brown (Gregg P. Leslie, D. Victoria Baranetsky, on the brief), The Reporters Committee for Freedom of the Press, Washington, DC, for Amici Curiae The Reporters Committee for Freedom of the Press, American Society of News Editors, Association of Alternative Newsmedia, The Center for Investigative Reporting, CNBC, Daily News, L.P., Dow Jones & Company, Inc., The E.W. Scripps Company, First Look Media Works, Inc., Forbes Media LLC, The Foundation for National Progress, Gannett Co., Inc., Hearst Corporation, International Documentary Assn., Investigative Reporting Workshop at American University, Digital First Media, MPA—The Association of Magazine Media, National Newspaper Association, National Press Photographers Association, The New York Times Company, The Newspaper Guild Communications Workers of America, Online News Association, Reporters Without Borders, Seattle Times Company, Tully Center for Free Speech, and National Public Radio, Inc., in support of Appellee.

Before: Katzmann, Chief Judge, Pooler, and Lynch, Circuit Judges.

Judge Pooler concurs in a separate opinion.

Katzmann, Chief Judge:

We are called upon in this case to address the role of a district court in monitoring the implementation of a deferred prosecution agreement. In December 2012, plaintiff-appellant the United States entered into a five-year deferred prosecution agreement (the "DPA") with defendants-appellants HSBC Holdings plc and HSBC Bank, USA, N.A. (collectively, "HSBC"), deferring prosecution of charges under the Bank Secrecy Act, the International Emergency Economic Powers Act, and the Trading with the Enemy Act. The still-pending agreement provides that if HSBC complies with its extensive obligations under the DPA, the government will seek the dismissal of those charges at the conclusion of the DPA's term. If, on the other hand, HSBC breaches the DPA, the government may seek to convict HSBC on the deferred charges. To inform that determination, the DPA provides for the appointment of an independent monitor charged with preparing periodic reports on HSBC's ongoing compliance with anti-money laundering laws and with the DPA itself.

When the government and HSBC jointly moved for a speedy trial waiver, the district court (Gleeson, J .) invoked its supervisory power both to review and "approve" the DPA on its merits and to condition its approval on the court's monitoring of the DPA's implementation. In the exercise of that asserted authority, the district court subsequently ordered the government to file a confidential report prepared by the independent monitor regarding HSBC's compliance with the DPA (the "Monitor's Report"). In November 2015, appellee Hubert Dean Moore, Jr., a member of the public, moved to unseal the Monitor's Report. The district court granted the motion, subject to redactions, finding that the Monitor's Report was a "judicial document" to which the public enjoyed a qualified First Amendment right of access. The government and HSBC appeal the district court's unsealing and redaction orders, arguing that the district court ran afoul of separation of powers principles in involving itself in the implementation of the DPA.

We agree. By sua sponte invoking its supervisory power at the outset of this case to oversee the government's entry into and implementation of the DPA, the district court impermissibly encroached on the Executive's constitutional mandate to "take Care that the Laws be faithfully executed." U.S. Const. art. II, § 3. In the absence of evidence to the contrary, the Department of Justice is entitled to a presumption of regularity—that is, a presumption that it is lawfully discharging its duties. Though that presumption can of course be rebutted in such a way that warrants judicial intervention, it cannot be preemptively discarded based on the mere theoretical possibility of misconduct. Absent unusual circumstances not present here, a district court's role vis-à - vis a DPA is limited to arraigning the defendant, granting a speedy trial waiver if the DPA does not represent an improper attempt to circumvent the speedy trial clock, and adjudicating motions or disputes as they arise. Because the Monitor's Report is not now relevant to the performance of the judicial function, it is not a "judicial document" and the district court erred in ordering it unsealed. Accordingly, we reverse.

A. The DPA

HSBC Holdings plc ("HSBC Holdings"), incorporated and headquartered in England, is the ultimate parent company of one of the largest banking and financial services groups in the world. HSBC Bank USA, N.A., headquartered in the United States, is a federally chartered banking institution and an indirect subsidiary of HSBC Holdings.

In December 2012, following an investigation that lasted more than four years, the United States entered into a five-year deferred prosecution agreement with HSBC. See Joint App. 30–104. Under a typical DPA with a corporate defendant, the defendant admits to a statement of facts, submits to the filing of criminal charges against it on the basis of those facts, and agrees to a forfeiture or fine and to institute remedial measures. In exchange, the government agrees to defer prosecution and to ultimately seek dismissal of all charges if the defendant complies with the DPA. If the government determines that the defendant has breached the DPA, however, the government may rip up the agreement and pursue the prosecution.

The government's DPA with HSBC followed this framework. As contemplated by the DPA, the government filed a four-count criminal information (the "Information") charging HSBC Bank, USA, N.A. with willfully violating the Bank Secrecy Act by failing to develop, implement, and maintain an effective anti-money laundering program (Count 1) and by failing to conduct due diligence on correspondent bank accounts held on behalf of foreign persons (Count 2). As a result of these failures, some $881 million in drug trafficking proceeds were laundered through HSBC Bank USA, N.A. The government also charged HSBC Holdings with violating U.S. sanctions laws by willfully facilitating financial transactions in the United States for various sanctioned entities, in violation of the International Emergency Economic Powers Act (Count 3), and with willfully facilitating financial transactions for sanctioned entities in Cuba, in violation of the Trading with the Enemy Act (Count 4). In addition, HSBC admitted to a 30-page Statement of Facts and agreed to forfeit $1.256 billion to the United States.

HSBC further agreed to continue to cooperate fully with the government and to adopt (or continue to adhere to) dozens of measures designed to remediate the deficiencies in its compliance program. To that end, HSBC Holdings agreed to retain an independent compliance monitor (the "Monitor") to be approved by the government. As set forth in an attachment to the DPA, the Monitor is charged with "evaluat[ing] ... the effectiveness of the internal controls, policies and procedures of HSBC Holdings and its subsidiaries ... as they relate to [those entities'] ongoing compliance with the Bank Secrecy Act, International Emergency Economic Powers Act, Trading With The Enemy Act and other applicable anti-money laundering laws ..., as well as [with] the enumerated remedial measures [in the DPA]." DPA, Attach. B ¶ 1. The DPA requires the Monitor to submit periodic reports to HSBC and the government detailing his findings and making recommendations designed to improve HSBC's compliance with the DPA and with anti-money laundering laws generally. By the terms of the DPA, the Monitor's reports are intended to remain non-public.

Finally, the DPA provides that the government will seek to dismiss the Information with prejudice at the conclusion of the DPA's term if the government determines that HSBC has fully complied with the DPA. If, on the other hand, the government "determines, in its sole discretion, that [HSBC] ha [s] (a) committed any crime under U.S. federal law subsequent to the signing of th[e] [DPA], (b) at any time provided in connection with th[e] [DPA] deliberately false, incomplete, or misleading information, or (c) otherwise breached the [DPA]," all bets are off and the government may pursue the deferred charges. DPA ¶ 16.

B. Proceedings Before the District Court

For a DPA to function as intended, the parties...

To continue reading

Request your trial
56 cases
  • Rochester Drug Co-Operative, Inc. v. Hiscox Ins. Co., 6:20-CV-06025 EAW
    • United States
    • U.S. District Court — Western District of New York
    • June 11, 2020
  • Olson v. Major League Baseball
    • United States
    • U.S. Court of Appeals — Second Circuit
    • March 21, 2022
    ... ... 20-1831-cv 20-1841-cv August Term 2020 United States Court of Appeals, Second Circuit ... USA v. Presidio Eng'rs and Contractors, Inc. , 960 ... v. Abilene Nat'l Bank , 726 S.W.2d 537, 540 (Tex. 1987) (explaining ... United States v. HSBC Bank USA, N.A. , 863 F.3d 125, 134 (2d Cir ... ...
  • United States v. Donziger
    • United States
    • U.S. Court of Appeals — Second Circuit
    • June 22, 2022
    ... ... Am. Int'l Grp. v. Bank of Am. Corp. , 712 F.3d 775, 778 (2d Cir. 2013). B Second, even if ... HSBC Bank USA, N.A. , 863 F.3d 125, 138 (2d Cir. 2017) (quoting United States ... ...
  • United States v. Manzano (In re United States)
    • United States
    • U.S. Court of Appeals — Second Circuit
    • December 18, 2019
    ... ... Arab Bank, PLC , 706 F.3d 92, 107 (2d Cir. 2013) (quoting SEC v. Rajaratnam , 622 ... 2439, 65 L.Ed.2d 468 (1980) ; accord United States v. HSBC Bank USA, N.A. , 863 F.3d 125, 135 (2d Cir. 2017). Their supervisory ... ...
  • Request a trial to view additional results
1 firm's commentaries
  • John C. Coffee, Jr. – Boeing and the Future of Deferred Prosecution Agreements
    • United States
    • LexBlog United States
    • July 1, 2024
    ...Said To Seek Boeing Guilty Plea To Avoid Trial In 737 MAX Crashes,” New York Times, June 30, 2024. [3] See U.S. v. HSBC Bank USA, N.A., 863 F.3d 125, 129 (2d Cir 2017); U.S. v. Fokker Services BV, 818 F.3d 733, 744-45 (D.C. Cir 2016). [4] The facts in U.S. v. HSBC, supra, involve essentiall......
5 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT