TD Bank executives oversee $670 billion drug money laundering scheme, avoid jail

On March 7, 2024, Attorney General Merrick Garland, speaking at the American Bar Association's 39th Annual White Collar Institute, gave an impassioned soliloquy on the importance of criminally prosecuting individual corporate executives for serious corporate crimes:

[O]ur first priority in the area of white-collar crime is going after individual bad actors… All of us in this room know that the acts of corporations are actually the acts of individuals. All of us in this room who have counseled corporations—and I did very early on in my career—know that the greatest deterrent to white-collar crime is fear of individual prosecutions of the executives and companies. But the most important element of this is the rule of law. That people see that if a corporate executive is held to account, is in prison for a corporate crime, people are being treated equally, that there isn't a different set of rules, that like circumstances are treated alike. That increases respect for the rule of law, and, conversely, without that, people's respect for the rule of law goes down in every element.

On October 10, 2024, Garland held a press conference and announced that TD Bank had illegally laundered over $670 million of drug money. "By making its services convenient for criminals, TD Bank became one," Garland declared. According to Garland, TD Bank admitted that "at various times high-level executives, including the person who became the bank’s chief anti-money laundering officer, knew there were serious problems with the bank’s anti-money laundering program," but "failed to correct them." TD Bank, Garland said, "chose profits over compliance."

The criminal information filed by the Department of Justice (DOJ) provided further details on the involvement of high-level executives. The DOJ found that the failure of corporate executives "to appropriately fund the Bank’s AML [anti-money laundering] program… resulted in a willfully deficient AML program that allowed three money laundering networks to exploit the Bank." Over an 11-year period, TD Bank's "senior executive leadership were made aware of certain of the concerns identified by… regulators and auditors" regarding the bank's capacity to monitor transactions. 

Deputy Secretary of the Treasury Wally Adeyemo, speaking alongside Garland, emphasized that TD Bank's crimes harmed real people. "I want to be clear, these systemic failures did not just create hypothetical vulnerabilities, but they resulted in actual, material harm to American citizens and communities," Adeyemo said. "Time and again, unlike its peers, TD Bank prioritized growth and profit over complying with the law."

Although Garland and the DOJ documented the involvement of top TD Bank executives in serious crimes, Garland did not announce the criminal indictment of any of TD Bank's executives. Instead, the corporate entity pleaded guilty to "conspiring to violate the Bank Secrecy Act and commit money laundering" and agreed to pay a fine of about $3 billion. The only individuals charged were two low-level bank employees.

The announcement runs counter not only to Garland's March 2024 remarks but also official DOJ policy. According to Section 9-28.210 of the DOJ Justice Manual:

Prosecution of a corporation is not a substitute for the prosecution of criminally culpable individuals within or outside the corporation.  Because a corporation can act only through individuals, holding individual wrongdoers criminally liable may provide the strongest deterrent against future corporate wrongdoing.  Provable individual criminal charges should be pursued, particularly if they implicate high-level corporate officers, even in the face of an offer of a corporate guilty plea…

This is perhaps why, in the course of his announcement, Garland emphasized that "[o]ur criminal investigations into individual employees at every level of TD Bank are active and ongoing." But close observers of corporate criminal prosecutions are highly skeptical that any individual prosecutions will emerge. 

Jesse Eisinger, a journalist at ProPublica and author of The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives, told Popular Information that Garland's claim that the investigation of executives is ongoing was "boilerplate" and "one of these empty statements that they frequently offer." According to Eisinger, although the fine was large, it can be absorbed by TD Bank as "a cost of doing business."

In a statement, TD Bank CEO Bharat Masrani said that TD Bank has "taken full responsibility for the failures of our U.S. AML program." Masrani said the "failures took place on my watch as CEO and I apologize to all our stakeholders." But despite overseeing the bank as it became a hub for money laundering and expressing remorse, Masrani is not facing any consequences. In September, after 10 years as TD Bank CEO, he announced his intention to retire next April. Bharat received $10 million in compensation in 2023, will receive a retirement package, and remain a paid consultant with the company at least through October 2025. 

“This settlement lets bad bank executives off the hook for allowing TD Bank to be used as a criminal slush fund," Senator Elizabeth Warren (D-MA) said. "The Department of Justice and the Office of the Comptroller of the Currency need to do better in enforcing our anti-money laundering laws.”

The Loretta Lynch factor

How did TD Bank negotiate a settlement that allowed it to pay a fine and, in all likelihood, avoid criminal prosecution of its executives? It hired a lawyer who was very familiar with the inner workings of the DOJ: former Attorney General Loretta Lynch. 

Lynch is currently a partner at the high-powered corporate law firm Paul Weiss where she "advises clients on complex government and internal investigations and high-stakes litigation matters, including those that implicate significant regulatory enforcement issues, that involve substantial reputational concerns, and that are international in scope." Top partners at Paul Weiss reportedly charge "$2,000 an hour or more." 

Because the DOJ is underresourced, prosecutors often rely on internal investigations overseen by the defendant's attorney — in this case, Lynch. The plea agreement describes aspects of TD Bank's internal investigation and how it assisted in the DOJ's case. 

Eisinger argues that "[o]ne of the major problems with American corporate malfeasance and white-collar prosecutions is that the Department of Justice has become a training ground for future white-collar defense attorneys." He called the involvement of a former attorney general "very cozy" and "very lucrative for Loretta Lynch." 

Why corporate executives usually avoid accountability

TD Bank is not an anomaly. Corporate executives rarely face criminal prosecution for corporate crimes.

In 2016, Warren released a report entitled “Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy.” The report documents how individuals who commit corporate crimes often escape punishment even though individuals at a corporation that violates the law are also liable for the violations. Warren's report reviewed 20 criminal and civil cases from 2015 and found that the federal government “failed to require meaningful accountability from either large corporations or their executives involved in wrongdoing.” 

There are real challenges to prosecuting corporate executives. Sally Yates, who served as Deputy Attorney General under Lynch, explained in a May 2016 speech that "it is not easy to disentangle who did what within a huge corporate structure – to discern whether anyone had the requisite knowledge and intent." Yet Yates claimed the DOJ was "doing everything we can to overcome the barriers… and hold accountable those who are responsible for corporate wrongs." 

But, as the TD Bank case illustrates, little progress has been made. A 2017 article by Duke Law's Andrew Park notes that prosecutors investigating corporate crimes "generally only bring cases they believe they can win." The complexity of corporate prosecutions, along with the limited resources of the DOJ, means that a victory over a high-profile corporate executive is seldom assured. As a result, they rarely happen.