AREB’s solution: a vulture fund penalized by FinCEN for managing a bank that laundered money in Santo Domingo

Original Article Source “Exposing the Real JC Flowers & Co

 

The American vulture fund chosen by the AREB, J.C. Flowers, to manage the assets of Banca Privada D’Andorra (BPA), is an old acquaintance of FinCEN. J.C. Flowers bought a small bank in the US, which was penalized by the agency within the Department of the Treasury for having carried out large monetary transactions with murky clients in Mexico and the Dominican Republic.

The Saddle River Valley Bank was a small entity with two branches in New Jersey that was struggling to overcome the recent financial crisis. J.C. Flowers looked for a bank to invest in as a strategy to gain access to other bankrupt entities through the SRVB Federal Deposit Insurance Corp., which would also allow them to have access to an electronic banking network in Latin American countries. Under the management of J.C. Flowers, between 2009 and 2011 the aforementioned entity from New Jersey moved $1.5 billion in financial transactions with clients from Mexico and the Dominican Republic – a country that is well known to the President of the Andorran Government, Toni Martí – while at the local level it was only able to move around $120 million.

Unlike BPA – in which the same Andorran authorities have not had another option than to recognize that the immense majority of the clients and financial transactions do not raise a single doubt in regard to their legality – in Saddle Ricer Valley Bank’s case its legitimate domestic banking transactions were nonexistent compared to its participation in money laundering operations in Latin America. For this reason, the Latin American line of business of Saddle River attracted the attention of FinCEN, which opened an investigation into them in 2011.

Shortly after it became known that the FinCEN was investigating Saddle River Valley Bank, J.C. Flowers sold the bank’s assets in a hasty manner, accepting an undervalued offer from Union Center National Bank, which was a significant loss of money for the minority shareholders of the then troubled New Jersey bank. In 2013, the New Jersey bank accepted a fine from FinCEN of $8.2 million given the various charges against it including the inability to use a program to effectively combat money laundering. J.C. Flowers claimed that it new nothing about the activities at Saddle River Valley Bank (SRVB) despite having spent nine months reviewing the bank’s documents before deciding to buy it. It seemed unthinkable not to realize it given the fact the bank managed relatively few deposits, and instead had transactions with Latin American clients that increased the bank’s assets by fifteen times.

In 2012, the minority shareholders, who had lose a lot of money, decided to sue SVRB and J.C. Flowers for not fulfilling their pledges to renew and revive the New Jersey bank. The legal proceedings came to an end at the request of the parties and also by the man who had been in charge of the bank and one of its founding partners, Conrad Caruso, who was the initiator of the suit, and the rest of the plaintiffs and defendants who remain anonymous. The case was finally resolved with a financial settlement: $1.2 million.

All of this brings to mind the fact that the claims by AREB, that choosing J.C. Flowers ensures that they have “achieved all the objectives laid out in the BPA resolution plan,” seem rather hypocritical. Which objectives would those be? Finding a buyer that had a bank that was laundering massive amounts of money and that was penalized by FinCEN? To give a constantly growing bank to a vulture fund that claimed it did not recognize it acquired a bank that was making transactions valued at a minimum of $1.5 billion in a bank that only had $120 million in assets? Does the AREB expect from J.C. Flowers the same treatment and ethics that this US company showed the United States? Or perhaps all this is just an attempt to sell the bridge bank at any price with the sole objective being to brush under the rug the incompetence of the Andorran government in managing the crisis caused largely by itself, and its lack of transparency.

TIMELINE

2006: Conrad Caruso founded Saddle River Valley Bank (SRVB) with the goal of creating a business that offers investment and loan services to local businessmen.

2007-2008: SRVB gets rather mediocre returns and the financial crisis hits them hard. They intend to survive.

2009: During the first nine months of the year, J.C. Flowers begins a courtship with the bank and starts to scrutinize its balance sheets before coming to an agreement to take over majority control of the bank. During this time, the bank begins to offer international transfers. In October of that year, J.C. Flowers reaches an agreement to acquire the subsidiary of the bank, SRV Holdings LLC for about seven million dollars.

2010: SRV Holdings officially acquires the necessary assets to take over majority control of the bank.

2011: SRVB’s operations attract the attention of the regulator, which orders them to stop violating established anti-money laundering laws, and instead they establish programs to avoid them. The company ignores the warnings and FinCEN opens an investigation.

2012: The bank fights back to save itself and, in this context, agrees to sell the majority of its assets and deposits to Union Center National Bank for $9 million, an incredibly undervalued price. At the same time, six minority shareholders, including the founder of the bank, Conrad Caruso, sues the bank, its board and J.C. Flowers for bringing the bank to the ground.

2013: Saddle River Valley Bank accepts a fine of $8.2 million from FinCEN. Flowers had sold the bank’s assets in 2012, but the events under investigation were carried out from 2009 to 2011, during the time in which J.C. Flowers was in charge of the bank’s management. J.C. Flowers denied having knowledge of the facts and never filed official charges.