By Christopher M. Matthews
When BNP Paribas SA stared down the barrel of an unprecedented
criminal settlement for violating U.S. economic sanctions, it
turned to a reliable source of help: Sullivan & Cromwell
LLP.
One of the law firm's partners, Karen Seymour, steered France's
largest lender by assets through rough waters that some feared
might take down the whole bank or at least leave it substantially
damaged.
BNP ultimately pleaded guilty in June to processing billions of
dollars on behalf of Iran, Sudan and other blacklisted countries,
using a network of satellite banks to disguise the transactions. It
paid nearly $9 billion in fines, one of the most severe bank
settlements ever. But the bank survived and avoided more harmful
collateral consequences that could have resulted from any
conviction.
Banks have long turned to Sullivan & Cromwell to handle
high-stakes cases. Some of the biggest settlements have involved
violations of U.S. economic sanctions, a legal market the firm has
dominated, in no small part, because of Ms. Seymour and her
husband, Sam.
The Sullivan & Cromwell lawyers, who met at the firm in the
1980s, never handle matters together, but either Karen Seymour or
Sam Seymour have worked on six of the seven largest sanctions
settlements ever. The seventh involved another Sullivan &
Cromwell lawyer, Steven Peikin.
Recent work for Mr. Seymour, 57 years old, includes HSBC
Holdings PLC's $1.9 billion settlement with U.S. authorities over
money laundering and sanctions violations in 2012, while Ms.
Seymour, 53, helped steer ING Groep NV's $619 million settlement
over sanctions violations that same year with U.S. authorities.
"A big settlement is a big settlement," Mr. Seymour. said. "But
sometimes success is judged by the subtle wording of a settlement
that may spare the bank a lot of pain."
The couple, who live in Brooklyn and run marathons together,
have both been at the firm for nearly 30 years, each with detours
to serve as federal prosecutors in the Manhattan U.S. attorney's
office. They sometimes work 18 hours or more a day, especially in
the heat of negotiations. They are parents to two sons and, at a
home on Long Island, enjoy their roles as amateur beekeepers.
Mr. Seymour, who has tried more than 15 criminal jury trials as
a prosecutor, came back to the firm in 1991 after three years in
the U.S. attorney's office, just as Wall Street firms, including
Sullivan & Cromwell, expanded their white-collar practices,
work some firms once regarded as déclassé. Mr. Seymour is chairman
of the firm's criminal-defense group and has represented some of
the world's largest banks.
Ms. Seymour successfully prosecuted Martha Stewart for
obstruction of justice in 2004. The Texas native, the first female
trial lawyer to make partner at Sullivan & Cromwell, serves as
co-managing partner of the firm's litigation group, with a client
roster that rivals her husband's.
They may be one of the most high-powered legal couples in the
country, but colleagues said they don't take themselves too
seriously.
"There is absolutely nothing worse than overhearing Sam's
conference calls at home," Ms. Seymour said during a recent
interview at the firm's offices in Manhattan's financial
district.
H. Rodgin Cohen, the firm's senior chairman, praised the
couple's work and said they are part of a bigger team at Sullivan
& Cromwell that has cemented its reputation as a top Wall
Street firm. The team, which includes partners Mr. Peikin, Nicolas
Bourtin, Elizabeth Davy, Michael Wiseman and Alexander Willscher,
has represented nearly every one of the 20 largest banks.
The stakes couldn't have been higher in the BNP case. Some banks
enter into deferred-prosecution agreements, which allow them to
avoid a potential criminal conviction that could be a death
sentence, because it can trigger the revocation of a bank's
charter. BNP is one of only two financial firms to plead guilty
this year, the first such pleas in 25 years. The last major
financial firm to plead guilty before this year, Drexel Burnham
Lambert, collapsed months after its 1989 plea.
BNP's plea led some legal observers to question just how good of
a deal it got, especially as it was accompanied by a large
financial penalty. Prosecutors involved in the negotiations
privately credit Sullivan & Cromwell for helping the bank avoid
a worst-case outcome.
"They just got it," one senior prosecutor said.
Once it became clear that prosecutors wouldn't budge on the
plea, Ms. Seymour identified the collateral consequences and helped
prosecutors coordinate with regulators to ensure the bank's
survival, the people said.
"If you don't know the landscape, you can really fall into some
traps," she said.
Some of the firm's victories were subtle. New York's Department
of Financial Services initially considered stripping the bank's
ability to transact in dollars, a potentially catastrophic outcome,
according to people briefed on the negotiations, but ultimately
agreed to suspend dollar-clearing operations for just one year at
the business lines involved in the misconduct.
That isn't to say the negotiations were smooth sailing.
"These are contentious matters. These are not friendly matters,"
said Mr. Bourtin, speaking generally and not about the BNP case.
"It's about trust, not about whether they like you or not."
According to Mr. Bourtin, who handled Dutch bank ABN Amro Group
NV's $500 million settlement with U.S. authorities in 2010 over
sanction violations, prosecutors have become more aggressive in
recent years. Guilty pleas were on the table in past negotiations,
but the Justice Department appears to have made a political
decision to push harder for guilty pleas, he said.
Prosecutors are also asking Sullivan & Cromwell's clients to
turn over employees who may have been involved in any alleged
illegal conduct. The development is challenging for lawyers, who
can be put in the position of investigating senior executives
within the companies that have hired them. Making determinations
about whether specific employees were knowingly involved in any
illegal conduct is among the most difficult parts of an internal
investigation, Ms. Seymour said.
Prosecutors didn't charge anyone individually in the BNP case,
but they said the bank's unwillingness to come clean earlier made
it difficult to investigate individuals they suspected, a factor
that increased the size of the bank's penalty, according to court
documents.
The Justice Department's new posture may be alarming to Sullivan
& Cromwell's clients, but it likely means more business for the
firm, whose top partners can charge more than $1,000 an hour.
So far, the only banks to plead guilty in prosecutors' new push
have been foreign, BNP and Credit Suisse Group AG, which admitted
in May to helping U.S. clients hide offshore assets. But Sullivan
& Cromwell lawyers agree it is only a matter of time before a
U.S. bank is forced to follow suit.
"That chapter is yet to be written," Ms. Seymour said.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
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