“Relationship Managers” Handled Collapsed Silvergate and Signature Banks’ Crypto Accounts; Citibank’s Dictator Accounts; and JPMorgan’s Jeffrey Epstein Accounts

By Pam Martens and Russ Martens: June 12, 2023 ~

Bank Money (Thumbnail)A dangerous malignancy has been growing on the U.S. banking system for at least two dozen years: It’s the job function benignly called the “Relationship Manager.”

In October 2013, Carmen Segarra, a lawyer and former Bank Examiner at the Federal Reserve Bank of New York, filed a federal lawsuit alleging that Relationship Managers there, who were assigned to delicately manage relationships between the New York Fed and the powerful Wall Street banks, had obstructed and interfered with her investigation of Goldman Sachs and tried to bully her into changing her negative findings. When Segarra refused to change her examination, she was fired, according to a federal lawsuit she filed. In 2018, Segarra provided a more detailed accounting of how these corrupted relationships play out in her book, Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street.

Given the influence that the New York Fed has had on the entire U.S. banking system, it should come as no surprise that the job title of Relationship Manager has insidiously made its way into federally-insured banks in the U.S. – with sordid headlines following in numerous cases.

On November 9 and 10, 1999, the U.S. Senate’s Permanent Subcommittee on Investigations delved into the role of Relationship Managers at Citibank’s Private Bank (now part of Citigroup, the Wall Street goliath that forced the repeal of the Glass-Steagall Act). Senator Carl Levin set the tone for the two days of hearings with the following remarks:

“Today we are looking at the private bank of Citibank. It is the largest bank in the United States, and it has one of the largest private bank operations. It has the most extensive global presence of all U.S. banks, and it had a rogues’ gallery of private bank clients. Citibank has been private banker to:

“– Raul Salinas, brother to the former President of Mexico; now in prison in Mexico for murder and under investigation in Mexico for illicit enrichment;

“– Asif Ali Zardari, husband to the former Prime Minister of Pakistan; now in prison in Pakistan for kickbacks and under indictment in Switzerland for money laundering;

“– Omar Bongo, President of Gabon; subject of a French criminal investigation into bribery;

“– sons of the General Sani Abacha, former military leader of Nigeria; one of whom is now in prison in Nigeria on charges of murder and under investigation in Switzerland and Nigeria for money laundering;

“– Jaime Lusinchi, former President of Venezuela; charged with misappropriation of government funds;

“– two daughters of Radon Suharto, former President of Indonesia, who has been alleged to have looted billions of dollars from Indonesia; and, it appears,

“– General Albert Stroessner, former President of Paraguay and notorious for decades for a dictatorship based on terror and profiteering.”

Amy G. Elliott Testifying Before the U.S. Senate Permanent Subcommittee on Investigations in 1999

Amy G. Elliott Testifying Before the U.S. Senate Permanent Subcommittee on Investigations in 1999

Each of the Citibank clients named above had a Relationship Manager. A main focus of the 1999 hearing was on Amy G. Elliott, the Relationship Manager at Citibank who handled the Raul Salinas account. (Salinas had his murder conviction overturned on appeal and was released from prison in 2005.)

During the hearing, Robert L. Roach, Counsel to the Senate investigation, testified that the Relationship Manager’s role is to function as “in-house advocates” for the interests of their clients. Roach explained the services provided to Salinas, brother to then President of Mexico, Carlos Salinas, as follows:

“The private bank…established a shell company for Mr. Salinas with layers of disguised ownership. It permitted a third party using an alias to deposit funds into the accounts, and it moved the funds out of Mexico through a Citibank concentration account that aided in the obfuscation of the audit trail. Cititrust in the Cayman Islands activated a Cayman Island shell corporation called a PIC, or private investment corporation, called Trocca, Ltd., to serve as the owner of record for the Salinas private bank accounts…

“Cititrust used three Panamanian shell companies to function as Trocca’s Board of Directors. Cititrust also used three Cayman Island shell companies to serve as Trocca’s officers and principal shareholders. Cititrust controls all six of these shell companies and routinely uses them to function as directors and officers of PICs that it makes available to private clients. Later, Citibank established a trust, identified only by a number, to serve as the owner of Trocca, Ltd. Raul Salinas was the secret beneficiary of the trust.

“The result of this elaborate structure was that the Salinas name did not appear anywhere on Trocca’s incorporation papers. The Trocca, Ltd. accounts were established in London and Switzerland…

“To accommodate Mr. Salinas’ desire to conceal the fact that he was moving money out of Mexico, Ms. Elliott introduced Mr. Salinas’ then-fiancee Paulina Castanon as Patricia Rios to a service officer at the Mexico City branch of Citibank. Operating under that alias, Ms. Castanon would deliver cashier checks to the branch where they would be converted into dollars and wired into a concentration account in New York. The concentration account is a business account established by Citibank to hold funds from various destinations prior to depositing them into the proper accounts. Transferring funds through this account enables a client’s name and account number to be removed from the transaction, thereby clouding the audit trail. From there, the money would be transferred to the Trocca, Ltd. accounts in London and Switzerland…

“Between October 1992 and October 1994, more than $67 million was moved from Mexico to New York and then on to London and Switzerland by way of this system…Yet no one questioned Mr. Salinas about the origin of these funds. Far from inquiring about the sources of the funds, Ms. Elliott wrote to her colleagues in June 1993 that the Salinas account ‘is turning into an exciting, profitable one for us all. Many thanks for making me look good.’ ’’

Roach further explained how the Relationship Managers’ need to “please the client” trumped their responsibilities under the law, stating that “After Mr. Salinas was arrested, Hubertus Rukavina, the head of Citibank Private Bank at the time, suggested that the Salinas accounts in London be transferred back to Switzerland because they would be afforded more secrecy there.”

Amy Elliott, according to Roach, even advised Mrs. Salinas “that it might be wise to move the Trocca, Ltd. account out of Citibank because it might be more difficult for Mexican authorities to obtain account information from a non-U.S. bank.”

Jes Staley

Jes Staley

The most infamous Senior Relationship Manager today is Jes Staley, the former high-level employee of JPMorgan Chase who managed Jeffrey Epstein’s accounts at the bank as Epstein engaged in the sex-trafficking of underage girls and was able to withdraw tens of thousands of dollars of cash from his bank accounts monthly, without triggering the required alarm bells within the bank’s compliance departments. This is what the U.S. Virgin Islands alleges in an ongoing federal lawsuit against JPMorgan Chase over its aiding and abetting of Epstein:

“In 2006, a JP Morgan Rapid Response Team noted that Epstein ‘routinely’ made cash withdrawals in amounts from $40,000 to $80,000 several times per month, totaling over $750,000 per year. In addition, Mary Erdoes admitted in her deposition that JP Morgan was aware by 2006 that Epstein was accused of paying cash to have underage girls and young women brought to his home. In the years that followed, JP Morgan employees, including senior executives, emailed internally that Epstein was under investigation or had been sued for trafficking or sexual abuse. This includes an email in 2010 between Mary Erdoes and Jes Staley regarding a federal investigation of Epstein for child trafficking; a 2011 email summarizing a few 2010 news stories connecting Epstein to human trafficking and promising to ‘monitor the accounts and cash usage closely going forward;’ and a 2011 compliance memo noting that ‘[n]umerous articles detail various law enforcement agencies investigating Jeffrey Epstein for allegedly participating in child trafficking and molesting underage girls’ and that ‘Epstein had settled a dozen civil lawsuits out of court from his victims regarding solicitation for an undisclosed amount.’ Internal emails also questioned who Epstein’s clients were, circulating an article regarding whether Epstein was running a Ponzi scheme.

“Indeed, Epstein’s behavior was so widely known at JPMorgan that senior executives joked about Epstein’s interest in young girls. In 2008, for example, Mary Erdoes received an email asking her whether Epstein was at an event ‘with miley cyrus.’ In her deposition, Mary Erdoes testified that JP Morgan terminated Epstein as a customer in 2013 after she became aware that the withdrawals were ‘actual cash.’ However, Epstein had made substantial cash withdrawals every year he banked with JP Morgan, including more than $800,000 per year in 2004 and 2005.”

Wall Street On Parade has now discovered that the two collapsed federally-insured banks, Silvergate Bank and Signature Bank, that were involved with two separate and nefarious crypto exchanges run by Sam Bankman-Fried and his rival, Changpeng Zhao (“CZ”), also deployed the job title “Relationship Manager” to handle large, lucrative clients.

In a job posting, Silvergate Bank detailed the duties of a Relationship Manager II to include the following:

“Be the ‘voice of the customer’ as it relates to product and process decisions. This may include the introduction of new products and services and the customer research that is required in order to bring them to market. Providing banking services to private clients also requires frequent interaction with Compliance, Cash Management and Technology personnel. Often, a healthy dialogue is needed in order to figure out the best way to efficiently and effectively serve clients in this space. Once internal decisions have been made, the role of the Relationship Manager is to communicate the impact of these decisions to clients in the most effective manner possible.”

Silvergate Bank is facing numerous lawsuits alleging that the bank aided and abetted Sam Bankman-Fried’s crypto frauds by improperly moving customer funds held at his crypto exchange, FTX, to his hedge fund, Alameda Research. Federal prosecutors have charged that Alameda and its principals looted more than $8 billion from FTX customer accounts. On March 8, Silvergate Bank said it was voluntarily winding down and liquidating, but there now appears to be serious issues with how that is playing out. (See our report: Disgraced Silvergate Bank Hints It May Not Be Able to Cover All of Its Deposits; Fed Slaps It with a Cease and Desist Consent Order.)

Relationship Managers at Silvergate Bank did not need a college degree. According to the job postings, a high school education would suffice along with financial industry or management experience.

Signature Bank, which was seized by regulators and put into FDIC receivership on March 12, includes this job duty in one of its job listings for a Relationship Manager: “Provides ongoing relationship servicing with current clients to maintain goodwill and gain additional business; Handles sensitive client relationships and larger client needs.” (Italics added.)

Signature Bank also did not require a college degree for the job of Relationship Manager, listing just “a High school diploma or general education degree (GED)” and financial industry experience.

Last week, the Securities and Exchange Commission sued the crypto exchange, Binance, related entities, and its founder, Changpeng Zhao (“CZ”), in federal district court in Washington, D.C. As part of the complaint, the SEC alleges that Binance mishandled customer funds and that companies affiliated with Binance were able to move billions of dollars to foreign jurisdictions using bank accounts at Silvergate Bank and Signature Bank.

On June 6, the SEC supplemented its federal lawsuit by requesting:

“an emergency action application seeking a temporary restraining order freezing assets, directing defendants to repatriate assets held for the benefit of customers of the Binance.US crypto trading platform, and seeking other emergency relief against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings, Inc., and their founder, Changpeng Zhao, to ensure that Binance.US customers’ assets are protected and remain in the United States through the resolution of the SEC’s pending litigation of this matter.”

Isn’t it long past the time for the Senate Banking Committee to hold hearings and shine a bright light on exactly what Relationship Managers are doing inside the nation’s taxpayer-backstopped, federally-insured banks?

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