Martin Sabrow
The struggle for access to the Stasi files dates back to the peaceful revolution
in East Germany in the autumn of 1989. In November 1989, the
Ministry of State Security (MfS) was transformed into the Office of National
Security (Amt für Nationale Sicherheit, ANS), with the hidden
purpose of securing secret police structures and documents for the postdictatorial
era. This attempt failed, and the people responded with the
“storming of the Normannenstraße,” Mielke’s stronghold in Berlin, in
order to stop Stasi agents from destroying evidence. The storming was
successful; it represented a victory for the people and for civil rights.
In the end, the “Round Table” decided to destroy the files of Markus
Wolf’s intelligence branch, but the majority of the documents concerning
the internal activities of the MfS could be saved. In May 1990, the East
German People’s Chamber appointed a special committee under the
chairmanship of Joachim Gauck to control the dissolution of the MfS/
ANS. Then in September 1990, the German Unification Treaty obliged the
Bundestag to entrust MfS records to a Special Commissioner of the Federal
Government (later Federal Commissioner) for the files of the former
State Security Service, the so-called Gauck Agency, which began operations
with fifty-two employees. In December 1991, according to the same
provision of the Unification Treaty, the Bundestag approved the “Stasi
Records Law,” which granted the access to the records. The law was
passed by a broad coalition of CDU, FDP, and SPD deputies, with abstentions
from the PDS and the Green Party. Its famous Paragraph 32
regulates the unlimited access to “documents without personal information”
and to “copies of documents with personal information rendered
anonymous.” The other personal information that the Gauck Agency was
allowed and obliged to release can be divided into three categories: documents
with written consent of the person concerned, documents with
personal information about employees and beneficiaries of the MfS, and
“information about persons of contemporary history or holders of political
office, as far as they are not directly or indirectly affected persons.”
This curious, obscure definition distinguishes between guilty parties,
who were not supposed to benefit from the law, and three categories of
victims: “persons directly affected,” i.e., those deliberately targeted by the
MfS, “indirectly affected persons,” i.e., those mentioned secondarily in a
Stasi investigation, and finally a group with little claim to secrecy because
of their prominent public role—the people of contemporary history. In
1996, the law was amended to insure that “the secrecy of mail, correspondence,
and telecommunications [would] be limited due to this act.”
In the ten years that followed, millions of applicants gained access to
the Stasi files through this law. The Gauck (now, Birthler) Agency today
has thousands of employees organizing the access to the Stasi files, which
are located in the central archives of the former MfS in Berlin and in
various regional archives. A special department (“Research and Education”)
pursues scholarly research, organizes conferences, and publishes
monographs; Mielke’s state security apparatus has thus become one of
the best investigated parts of the former dictatorship. The Stasi records,
encompassing more than 500,000 feet of documents, are in principle open
to all interested researchers. The public became used to the flood of
revelations that emerged from the reading of the Stasi files by former
victims and journalists; thousands of the Stasi’s “unofficial employees”
were exposed. The law proved to be one of the rare legacies of the East
German grassroots citizens movement that survived reunification—it
turned out to be a tremendous success.
But at the end of ten years, the very same law was widely criticized.
This unexpected situation arose when, through a series of legal moves,
former chancellor Helmut Kohl forced the Federal Commissioner to seal
all Stasi documents relating to him and his political role. The law underwent
a series of transformations that restricted the access to the Stasi
documents, thereby undermining the basis for public information about
the GDR. Henceforth, scholarship on the MfS and other facets of the
“second German dictatorship” could not reach the standard of former
investigations for lack of source material. How can this unexpected turn
be explained, especially since it occurred at the same time a general
interest in coming to terms with the past—from the Herero massacre to
the Holocaust—stood out as a phenomenon in Germany and elsewhere?
The first explanation is the political background to the quarrel. It
began at the end of 1999, just when the donation scandal of the CDU
rattled the political sphere like an earthquake. For weeks it threatened to
split the conservative party. The coincidence was no accident. In the slow
process of sifting unknown material in the files of the MfS, the Federal
Commissioner had come across protocols of “bug activity” and recordings
of telephone calls emanating from the inner circles of the West German
government in the 1970s and 1980s. This material seemed to contain
some evidence of the attitude of CDU leaders in the party donation case
and therefore drew unusual attention. Once it was made public, it led to
critical questions from journalists and from the Ministry of the Interior
under Otto Schily. These critics were concerned that the effort to come to
terms with the GDR legacy interfered with politics in the Federal Republic.
Gauck retreated a bit and made his position on the law and files more
precise: the agency would no longer make public any original protocols
of the “illegally” bugged conversations but would still make the Stasi
summaries accessible. In April 2000, Kohl applied to inspect his personal
files. In November, he demanded that the agency withhold any material
that concerned him until he had personally reviewed it.
Personal factors also must have played an important role. No one
involved in the matter appeared open to compromise, and all acted with
remarkable stubbornness. For Gauck’s successor Marianne Birthler, the
situation was extremely difficult. As a newcomer, she had to prove she
was capable of replacing the hero Gauck and managing the crisis. The
quarrel enabled Kohl, who had lost political power and now risked tarnishing
his personal reputation, to distract public attention from the central
issues of the donation scandal. For his part, Otto Schily had the
opportunity to return to his roots as a state defense lawyer.
Birthler remained firm. She stated that the agency was obliged to
release requested material according to the law and that she could not
grant individuals the privilege of personally vetting these materials as
this would affect the access rights of historians and the media. As expected,
Kohl appealed to the Administrative Court on November 27 to
prevent any release of documents concerning him. Birthler, in return,
decreed that those concerned would be informed before “their” documents
were made accessible to allow them to object. But this half-hearted
move did not help. In July 2001, Kohl was handed a full victory in court;
his files had to be kept secret. The court ruled that “persons of contemporary
history” are also protected.
Days later, Otto Schily came forward with an unusual measure, the
“high noon ultimatum”: He would take legal action against the Federal
Commissioner if she continued to release documents to the public. When
an appeals court, the Federal Administrative Court, upheld the earlier
ruling that restricted personal information about Kohl and, consequently,
every concerned individual who had not been a Stasi member, Birthler
changed her tactics. She closed all exhibitions, all information and documentation
centers about the Stasi, shut down the agency’s web site, and
denied nearly all applications for historical research. Her actions elicited
a protest from the Simon Wiesenthal Center in Jerusalem, which accused
the authorities of blocking access to Nazi-related documents in the
MfS archive. The scholarly community also reacted with dismay when
Birthler stated in April 2002 that most of the 2,000 current requests for
research had to be postponed or refused in the wake of the Kohl decision.
In an article, Birthler explained that henceforth “historical research using
Stasi documents is possible only within narrow limits.”1 Experts criticized
the drastic and far-reaching restrictions on scholarly work, which
prompted the Bundestag to amend the law. In July 2002, the Bundestag
approved the amendment with the SPD, Greens, and FDP voting against
the CDU.
In September 2003, the Berlin Administrative Court approved a petition
by the Birthler Agency to make the Kohl documents public, in
principle, without violating his constitutional rights. But even this seemingly
clear ruling was not the last word. Kohl lodged an appeal and, in
June 2004, the Federal Administrative Court reached a final compromise
on Stasi material relating to individuals of contemporary history. The
court ruled that no information concerning the private lives of these
persons could be made public. The court extended this limitation to all
tapes and verbatim protocols of illegal listening in private or official
rooms and—this was new—to all internal Stasi reports, analyses, and
interpretations based on such protocols; all information collected through
spying was restricted. Moreover, the court tightened limits on who could
apply to see the information: only scholars working on the history of the
Stasi could request information, and they had to insure that this information
would neither be published nor communicated to others. Personal
information could no longer be released for educational purposes or to
the media without the written consent of the person concerned.
It is difficult to decide who finally won the quarrel over the Stasi files,
Kohl or Birthler. Both declared victory. The court assigned one third of
the costs to Kohl and two thirds to Birthler. Newspaper editorials and the
German Journalists Union deplored the consequences for historians of
the GDR. Birthler declared that the ruling would undermine many scholarly
projects but would still allow for the release of most of the Kohl
papers. In order to decide the question of victory, we have to dig a little
bit deeper. The dynamics of the quarrel may be explained by the transformation
of an administrative conflict into a highly personal struggle
between Kohl and Birthler, but this obscures the broader cultural implications
of the conflict as an indicator of the state of affairs since reunification.
Taking a closer look, the original statute opened “access to the
records of the Ministry of State Security of the former GDR to the public
and to individuals in order to clarify and illuminate the practices of State
Security,”2 in other words, to delegitimize the SED dictatorship and to
educate the population. Here, the basic tension between a presumed
public interest and the sphere of individual rights, a conflict between the
demands of historical appraisal and the protection of personal data as
required by law, is already apparent. The customary declassification
waiting period of thirty years was not implemented for East German
archives, with the interesting exception of the documents of the GDR
Ministry of Foreign Affairs. The Stasi files were not considered part of the
“ordinary” political heritage which should belong to the public after the
end of the ordinary time limit. Therefore, the use guidelines always followed
political rather than legal or archival considerations.
General restrictions had always existed regarding access to the documents
of supranational organizations, foreign countries, and files relating
to intelligence gathering, counter-intelligence, and terrorism. Additionally,
the original law for the Stasi files included the rights of affected
persons to demand the redaction of information that concerned them. For
the same reason, users were never granted access to any index or file card.
All along, it was only the Gauck/Birthler Agency that could retrieve,
classify, and present material—often in a revised version with names and
sequences blacked out due to the privacy exemption. The employees of
the Gauck/Birthler Agency enjoy unrestricted access. Although they are
pledged to secrecy and subject to the directives of the authorities, they
can nevertheless use their privileged knowledge of names and code
names for more precise research, even in non-classified documents. They
have a lead on sources and interpretations which cannot be entirely controlled
by the scholarly community.
All of these unique customs and guidelines point to the same basic
problem. In the case of Stasi files, two different cultural norms and value
systems meet. On the one hand, the broadly acknowledged principle of
historicization—a social consensus that “the truth will heal”—urges us to
uncover the Stasi files without distinction to help shed light on the past:
“Quod est in actis, est in mundo!” By contrast, our democratic and legal
culture recognizes the individual’s right to control the use of personal
data. In that respect, it is of decisive importance how any information to
be released was obtained. It goes without saying that the Stasi’s operations
would have been considered illegal in the West. Scarcely any Stasi
report could ever be admitted in a Western court of law because it does
not conform to the legal order of a constitutional state. Here, historicization
cannot be reconciled with the rule of law. To release documents
would, in a sense, prolong the dictatorship and revictimize those injured
by Stasi espionage, but to withhold the documents might be seen as
minimizing or protecting the dictatorship.3 That is why the former
agency chief Joachim Gauck angrily commented on the first ruling in the
Kohl case that the court had disregarded the rights of a formerly oppressed
people.4 Even after the final court decision, these issues persist; it
is still possible that an endless series of questionable compromises will
cause the Administrative Court to revisit them on a regular basis.
The Stasi documents law and the establishment of the Gauck Agency
bore a Janus face. The totalitarian heritage of a state based upon surveillance
was incorporated into the political culture of a liberal constitutional
state that functions according to the rule of law. The Stasi documents law
created an exceptional situation in the service of a moral purge and the
education of the public. The millions of requests for access are proof that
the strategy succeeded and met with the approval of the vast majority of
East and West Germans after 1990.
Why, then, did this conflict emerge so late? Marianne Birthler was
quite right when she reminded the court that her “practice of releasing
documents was never objected to by the Bundestag, which receives the
annual report of the agency, nor by the federal government, which is
legally in charge of the agency.”5 During the transition period from
spring to autumn 1990, there was no awareness of the incompatibility of
a moral/psychological purge and the prevailing privacy laws; the Bundestag
nearly unanimously adopted the Stasi files law passed by the GDR
Volkskammer in 1990. As the unification process got underway, the
difference between formal and material justice quickly became visible.
Bärbel Bohley, one of the most famous voices of the civil rights movement
in East Germany, declared, “We hoped for justice, and what we got was
the law.” Some employees of the Gauck Agency tried to use their privileged
knowledge politically, attempting, for instance, to shoot down the
last GDR prime minister Lothar de Maizière by denouncing him as Stasi
informer “IM Cerny.” But such attempts remained exceptions, and it took
years for this conflict to embroil the entire Stasi file complex.
There are at least three reasons for the lag. First, the documents
mostly concerned East Germans, who were not primarily concerned with
the problem of protecting their personal rights but with uncovering their
treatment by the Stasi. Secondly, the groups of readers who were not
personally involved—scholars, journalists, employers—were interested
in open access to the files, whereas those groups with a great interest in
restricting access—Stasi employees and collaborators—had lost their legitimacy
in the public sphere and had little opportunity to articulate their
views. Thirdly, access to the Stasi files was perhaps the only truly revolutionary
act during the collapse of the SED regime. In contrast to the
peaceful demonstrations and demands for legal travel to other countries,
the storming of the Stasi offices and the seizure of the files was an act of
open revolt, justified only by the power of the people as a natural social
force which itself establishes the law. Thus, the files became a revolutionary
symbol, an historical act of civil courage that became a point of pride
for East Germans and a legacy for a new, unified Germany—that is, until
the files went from marking Eastern assimilation to Western values to
challenging Western integrity.
From this point of view, the ongoing debate over the Stasi files is a
late product of the “crisis of unification” which emerged in the mid-
1990s. It reflects an ongoing battle between historicization and individualization
as leading social values. The conflict refutes any naïve belief in
a fast and harmonious reunification of Germany and demonstrates that a
democracy cannot easily absorb the legacy of a dictatorship. In my opinion,
however, when this diagnosis is compared with the scandalous way
postwar Germany treated the National Socialist past in the 1950s—either
with silence or a facile coming to terms—it offers more light than shadow,
even for historians, who suffer most from the new legal status of the
partly sealed Stasi files.
1 Marianne Birthler, “Stasi-Unterlagen für Forschung und Medien—zum Rechtsstreit um
den Aktenzugang und zur Novellierung des Stasi-Unterlagen-Gesetzes,” Der Archivar 55,
no. 4 (2002): 298.
2 Marianne Birthler, “Der Zugang zu den Unterlagen des Ministeriums für Staatssicherheit
der DDR für Forschung und Medien,” Deutschland Archiv 36 (2003): 376.
3 See Birthler’s arguments in Birthler, “Stasi-Unterlagen für Forschung und Medien,” 299.
4 See Constanze von Bullion, “’Dieses Urteil ist ein Schritt zurück’. Der frühere Behördenchef
Joachim Gauck zeigt sich enttäuscht, die meisten Politiker in Berlin aber sehen ihre
Auffassung bestätigt,” Süddeutsche Zeitung, March 9, 2002.
5 Ibid.

TOP-SECRET – Russia transferred Iranian defense system codes to Israel


The Wikileaks website is releasing more than five million documents, including intelligence-related email correspondences from the US intelligence company Stratfor. The emails are said to be between senior intelligence and military persons involved with the company from both the past and the present.

One of the emails includes information from a source that claims Israel gave Russia codes for UAVs that were sold to the Georgian army in exchange for codes for the Tor-M1 air defense system Russia sold to the Iranian army.

According to foreign publications, Iran signed an arms deal with Russia in 2005, which saw the procurement of medium-ranged air defense systems. According to the source, whose remarks were posted on Wikileaks, Russia transferred the communication codes for the systems to Israel, in exchange for codes present in the UAVs that Israel sold to Georgia.

The source is a former officer in the Mexican army, and is described as a reliable source.
Accordingly, the Georgians discovered the Russian-Israeli move, which is why they are now seeking a substitute for the UAVs they procured from Israel.

FBI unveils – Payment Processor for Internet Poker Companies Pleads Guilty in Manhattan Federal Court to Bank Fraud, Money Laundering, and Gambling Offenses

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RYAN LANG, a payment processor who worked directly with senior executives from Pokerstars, Full Tilt Poker, and Absolute Poker (the “Poker Companies”), pled guilty today to money laundering, fraud, and gambling offenses in connection with a scheme to deceive banks into processing hundreds of millions of dollars in Internet gambling transactions. LANG pled guilty this morning before U.S. Magistrate Judge Theodore H. Katz.

According to the superseding information filed today in Manhattan federal court, the superseding indictment unsealed on April 15, 2011 in which LANG was initially charged, other documents previously filed in the case, and statements made in court:

In late 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act (“UIGEA”), making it a crime to “knowingly accept” most forms of payment “in connection with the participation of another person in unlawful Internet gambling.” After several Internet gambling businesses withdrew from the U.S. market following the passage of the UIGEA, Pokerstars, Full Tilt Poker and Absolute Poker became the top three Internet poker operators continuing to do business in the United States. Because United States banks were largely unwilling to process Internet gambling payments, companies turned to third party payment processors, including LANG, who were willing to disguise the payments so they would appear to be unrelated to Internet gambling.

LANG worked closely with the heads of Pokerstars and Full Tilt Poker, as well as with other senior executives from all three Poker Companies, through a payment processing company that had employed him prior to the passage of the UIGEA. After its enactment, LANG left his employer and began searching for other payment processing methods that the Poker Companies could use to obtain access to the United States financial system, notwithstanding the new law. From at least 2007 through May 2010, LANG brokered a series of relationships between senior executives at the Poker Companies and various payment processors who had the ability to electronically transfer funds both to and from U.S. customer bank accounts as “electronic checks” or “e-checks.” As LANG knew—and discussed with executives from the Poker Companies—payment processors working for the Poker Companies created phony shell companies to disguise the poker transactions so that banks would not learn that the payments were connected to Internet gambling.


LANG, 37, a Canadian citizen and resident, voluntarily returned to the United States to face the charges pending against him. He faces a maximum sentence of 30 years in prison.

Mr. Bharara thanked the FBI for its outstanding work in the investigation, which he noted is ongoing. Mr. Bharara also thanked Immigration and Customs Enforcement’s Homeland Security Investigations’ New York and New Jersey offices for their continued assistance in the investigation.

To date, five additional defendants initially charged in the superseding indictment have appeared in the United States—Bradley Franzen, Ira Rubin, Brent Beckley, Chad Elie, and John Campos. Franzen pled guilty on May 23, 2011; Beckley pled guilty on December 20, 2011; and Rubin pled guilty on January 17, 2012. Beckley and Rubin are scheduled to be sentenced on April 19, 2012 and May 12, 2012, respectively. Charges are still pending against Elie and Campos, and they are presumed innocent unless and until proven guilty. Elie and Campos are scheduled for trial on April 9, 2012 before Judge Kaplan.

This matter is being handled by the office’s Complex Frauds Unit. Assistant U.S. Attorneys Arlo Devlin-Brown, Niketh Velamoor, Andrew Goldstein, and Nicole Friedlander are in charge of the criminal case, and Assistant U.S. Attorneys Sharon Cohen Levin, Jason Cowley, and Michael Lockard are in charge of related civil money laundering and forfeiture actions.

TOP-SECRET – U.S. Army Intelligence Support to Urban Operations Field Manual


With the continuing growth in the world’s urban areas and increasing population concentrations in urban areas, the probability that the US Army will conduct full spectrum operations in urban environments is ever more likely. As urbanization has changed the demographic landscape, potential enemies recognize the inherent danger and complexity of this environment to the attacker, and may view it as their best chance to negate the technological and firepower advantages of modernized opponents. Given the global population trends and the likely strategies and tactics of future threats, Army forces will likely conduct operations in, around, and over urban areas—not as a matter of fate, but as a deliberate choice linked to national security objectives and strategy. Stability operations––where keeping the social structure, economic structure, and political support institutions intact and functioning or having to almost simultaneously provide the services associated with those structures and institutions is the primary mission––may dominate urban operations. This requires specific and timely intelligence support, placing a tremendous demand on the Intelligence warfighting functions for operations, short-term planning, and long-term planning.

Providing intelligence support to operations in the complex urban environment can be quite challenging and may at first seem overwhelming. The amount of detail required for operations in urban environments, along with the large amounts of varied information required to provide intelligence support to these operations, can be daunting. Intelligence professionals must be flexible and adaptive in applying doctrine and tactics, techniques, and procedures (TTP) based on mission, enemy, terrain and weather, troops and support available, time available, and civil considerations (METT-TC).

As with operations in any environment, a key to providing good intelligence support in the urban environment lies in identifying and focusing on the critical information required for each specific mission. The complexity of the urban environment requires focused intelligence, and a comprehensive framework must be established to support the commander’s requirements while managing the vast amount of information and intelligence required for urban operations. By addressing the issues and considerations listed in this manual, the commander, G-2/S-2, and intelligence analyst will be able to address most of the critical aspects of the urban environment and identify both the gaps in the intelligence collection effort and those systems and procedures that may answer them. This will assist the commander in correctly identifying enemy actions so that US forces can focus on the enemy and seize the initiative while maintaining an understanding of the overall situation.

1-73. A population of significant size and density inhabits, works in, and uses the manmade and natural terrain in the urban environment. Civilians remaining in an urban environment may be significant as a threat, an obstacle, a logistics support problem (to include medical support), or a source of support and information. The most significant problem regarding the local population is the fact each person is a potential threat and can participate in an insurgency, terrorism, or other disruptive activity.

1-74. One of the most violent examples in US military history was the Viet Cong. The Viet Cong laid mines and demolitions, conducted ambushes and sniping, performed information collection missions for Hanoi, and even participated in force-on-force engagements, primarily during the Tet Offensive in 1968. The difficulty for the US and allied forces operating there lay in the fact that the Viet Cong looked like their neighbors, often held jobs, and raised families in pro-government neighborhoods, and, in some cases, even served in the South Vietnamese Army.

1-75. Another consideration when dealing with the local population is their ability to hinder military operations. Regardless of causes or political affiliations, civilian casualties are often the focal point of press coverage, often to the point of ignoring or denigrating any previous accomplishments. Within the operational continuum, and especially during the conduct of urban operations, commanders can expect to encounter restrictions on their use of firepower and challenges in their ability to conduct combat support and combat service support missions. In the current operational environment, it is unacceptable to our leaders and the American population to inflict large numbers of civilian casualties.



Money Laundering – HSBC May Face Criminal Charges For Illegal Transactions With Iranian Clients

A pedestrian passes a branch of HSBC bank in London, Monday, Feb. 27, 2012. Buoyant trading in Asia helped HSBC Holdings PLC, Europe’s biggest bank by market value, report a 28 percent increase in full-year profit Monday, a marked contrast to the performance of other big British banks. (AP Photo/Kirsty Wigglesworth)

HSBC Reports Being Under Investigation For Illegal Money Transactions Connected With Iran

HSBC Holdings Plc said it will likely face criminal or civil charges from an expanding investigation into its ties to allegedly illegal money transactions, including some tied to Iran.The disclosure in a regulatory filing shows the increasingly serious nature of inquiries into the London-based bank’s business.HSBC already is the subject of multiple U.S. law-enforcement probes for ties to illegal money transactions. Monday’s filing was the first time the bank disclosed that Iranian transactions are under scrutiny and that it could face a criminal charge.The bank’s HSBC USA Inc unit said investigations are being conducted by the Justice Department, the district attorney in Manhattan, two Treasury department agencies and the Federal Reserve. It said those inquiries were examining “historical transactions involving Iranian parties and other parties subject to” U.S. economic sanctions. Financial institutions doing business in the United States are prohibited from aiding sanctioned countries or banks.

In recent years, the Manhattan district attorney and Justice Department have settled with a number of European banks that operated transfer systems for Iranian clients. Banks aided clients trying to improperly move money by removing, or stripping out, references that could tip off a U.S. bank system to a transaction tied to Iran or another sanctioned state.

HSBC disclosed the new details in a filing with the U.S. Securities and Exchange Commission as part of the bank’s 2011 annual results. HSBC USA provides commercial and consumer banking and operates 461 branches. The bank previously said in securities filings that it was facing inquiries and it had received grand jury subpoenas.

HSBC Holdings plc SEC Form 6-K – February 2012 (

In October 2010, HSBC Bank USA entered into a consent cease and desist order with the Office of the Comptroller of the Currency and the indirect parent of that company, HNAH, entered into a consent cease and desist order with the Federal Reserve Board. These actions require improvements for an effective compliance risk management programme across the Group’s US businesses, including US Bank Secrecy Act (‘BSA’) and Anti Money Laundering (‘AML’) compliance. Steps continue to be taken to address the requirements of these Orders to ensure compliance, and that effective policies and procedures are maintained.
The AML/BSA consent cease and desist orders do not preclude additional enforcement actions against HSBC Bank USA or HNAH by bank regulatory or law enforcement agencies, including the imposition of civil money penalties, criminal fines and other sanctions relating to activities that are the subject of the AML/BSA cease and desist orders. HSBC continues to cooperate in ongoing investigations by the DoJ, the Federal Reserve and the Office of the Comptroller of the Currency in connection with AML/BSA compliance including cross-border transactions involving its remittance and its former bulk cash businesses.
HSBC continues to cooperate in ongoing investigations by the DoJ, the New York County District Attorney’s Office, the Office of Foreign Asset Control (‘OFAC’), the Federal Reserve and the Office of the Comptroller of the Currency regarding historical transactions involving Iranian parties and other parties subject to OFAC economic sanctions.
In April 2011, HSBC Bank USA received a summons from the US Internal Revenue Service directing HSBC Bank USA to produce records with respect to US-based clients of an HSBC Group company in India. While the summons was withdrawn voluntarily, HSBC Bank USA has cooperated fully by providing responsive documents in its possession in the US to the US Internal Revenue Service, and engaging in efforts to resolve these matters.
HSBC continues to cooperate in ongoing investigations by the DoJ and the US Internal Revenue Service regarding whether certain Group companies acted appropriately in relation to certain customers who had US tax reporting requirements.
In April 2011, HSBC Bank USA received a subpoena from the SEC directing HSBC Bank USA to produce records in the US related to, among other things, HSBC Private Bank Suisse SA’s cross-border policies and procedures and adherence to US broker-dealer and investment adviser rules and regulations when dealing with US resident clients. HSBC Bank USA continues to cooperate with the SEC.
HSBC continues to cooperate with an investigation by the US Senate Permanent Subcommittee on Investigations related to AML/BSA compliance, OFAC sanctions and compliance with US tax and securities laws.
In each of these US regulatory and law enforcement matters, HSBC Group companies have received Grand Jury subpoenas or other requests for information from US Government or other agencies, and HSBC is cooperating fully and engaging in efforts to resolve matters. It is likely that there will be some form of formal enforcement action which may be criminal or civil in nature in respect of some or all of the ongoing investigations. Investigations of several other financial institutions in recent years for breaches of BSA, AML and OFAC requirements have resulted in settlements. Some of those settlements involved the filing of criminal charges, in some cases including agreements to defer prosecution of these charges, and the imposition of fines and penalties. Some of those fines and penalties have been significant depending on the individual circumstances of each action. The investigations are ongoing. Based on the facts currently known, it is not practicable at this time for HSBC to determine the terms on which the ongoing investigations will be resolved or the timing of such resolution or for HSBC to estimate reliably the amounts, or range of possible amounts, of any fines and/or penalties. As matters progress, it is possible that any fines and/or penalties could be significant.
US mortgage-related investigations
In April 2011, HSBC Bank USA entered into a consent cease and desist order with the Office of the Comptroller of the Currency and HSBC Finance and HSBC North America Holdings Inc (‘HNAH’) entered into a similar consent order with the Federal Reserve Board following completion of a broad horizontal review of industry residential mortgage foreclosure practices. These consent orders require prescribed actions to address the deficiencies noted in the joint examination and described in the consent orders. HSBC Bank USA, HSBC Finance and HNAH continue to work with the Office of the Comptroller of the Currency and the Federal Reserve Board to align their processes with the requirements of the consent orders and are implementing operational changes as required.
These consent orders require an independent review of foreclosures pending or completed between January 2009 and December 2010 (the ‘Foreclosure Review Period’) to determine if any customer was financially injured as a result of an error in the foreclosure process. Customer outreach efforts are required, including mailings to customers and industry media advertising, to notify borrowers with foreclosures pending or completed during the Foreclosure Review Period of the foreclosure complaint review process and their ability to request a review of their foreclosure proceeding. The costs associated with the foreclosure review include the costs of conducting the customer outreach plan and complaint process, and the cost of any resulting remediation.
These consent orders do not preclude additional enforcement actions against HSBC Bank USA, HSBC Finance or HNAH by bank regulatory, governmental or law enforcement agencies, such as the US Department of Justice (‘DoJ’) or State Attorneys General, which could include the imposition of civil money penalties and other sanctions relating to the activities that are the subject of the consent orders. The Federal Reserve Board has indicated in a press release relating to the financial services industry in general that it believes monetary penalties are appropriate for the enforcement actions and that it plans to announce such penalties. An increase in private litigation concerning these practices is also possible.
It has been announced that the five largest US mortgage servicers (not including HSBC) have reached a settlement with the DoJ, the US Department of Housing and Urban Development and State Attorneys General of 49 states with respect to foreclosure and other mortgage servicing practices. HNAH, HSBC Bank USA and HSBC Finance have had preliminary discussions with bank regulators and other governmental agencies regarding a potential resolution, although the timing of any settlement is not presently known. Based on discussions to date, HSBC recognised provisions of US$257m in the fourth quarter of 2011 to reflect the estimated liability associated with a proposed settlement of this matter. Any such settlement, however, may not completely preclude other enforcement actions by state or federal agencies, regulators or law enforcement bodies related to foreclosure and other mortgage servicing practices, including, but not limited to matters relating to the securitisation of mortgages for investors, including the imposition of civil money penalties, criminal fines or other sanctions. In addition, such a settlement would not preclude private litigation concerning these practices.
Participants in the US mortgage securitisation market that purchased and repackaged whole loans have been the subject of lawsuits and governmental and regulatory investigations and inquiries, which have been directed at groups within the US mortgage market, such as servicers, originators, underwriters, trustees or sponsors of securitisations, and at particular participants within these groups. As the industry’s residential mortgage foreclosure issues continue, HSBC Bank USA has taken title to an increasing number of foreclosed homes as trustee on behalf of various securitisation trusts. As nominal record owner of these properties, HSBC Bank USA has been sued by municipalities and tenants alleging various violations of law, including laws regarding property upkeep and tenants’ rights. While HSBC believes and continues to maintain that the obligations at issue and the related liability are properly those of the servicer of each trust, HSBC continues to receive significant and adverse publicity in connection with these and similar matters, including foreclosures that are serviced by others in the name of ‘HSBC, as trustee’.
HSBC Bank USA and HSBC Securities (USA) Inc. have been named as defendants in a number of actions in connection with residential mortgage-backed securities (‘RMBS’) offerings, which generally allege that the offering documents for securities issued by securitisation trusts contained material misstatements and omissions, including statements regarding the underwriting standards governing the underlying mortgage loans. These include an action filed in September 2011 by the Federal Housing Finance Agency. This action is one of a series of similar actions filed against 17 financial institutions alleging violations of federal securities laws and state statutory and common law in connection with the sale of private-label RMBS purchased by Fannie Mae and Freddie Mac, primarily from 2005 to 2008.
HSBC Bank USA has received subpoenas from the Securities and Exchange Commission (‘SEC’) seeking production of documents and information relating to its involvement and the involvement of its affiliates in specified private-label RMBS transactions as an issuer, sponsor, underwriter, depositor, trustee, custodian or servicer. HSBC Bank USA has also had preliminary contacts with other government authorities exploring the role of trustees in private label RMBS transactions. HSBC Bank USA also received a subpoena from the US Attorney’s Office, Southern District of New York seeking production of documents and information relating to loss mitigation efforts with respect to residential mortgages in the State of New York and a Civil Investigative Demand from the Massachusetts State Attorney General seeking documents, information and testimony related to the sale of RMBS to public and private customers in the State of Massachusetts from January 2005 to the present.
HSBC expects this level of focus will continue and, potentially, intensify, so long as the US real estate markets continue to be distressed. As a result, HSBC Group companies may be subject to additional litigation and governmental and regulatory scrutiny related to its participation in the US mortgage securitisation market, either individually or as a member of a group. HSBC is unable to estimate reliably the financial effect of any action or litigation relating to these matters. As situations develop it is possible that any related claims could be significant.

TOP-SECRET – Fukushima Daiichi Nuclear Power Station Photos 20, 28 February 2012

[Image]A worker is given a radiation screening as he enters the emergency operation center at Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. Japan next month marks one year since the March 11 tsunami and earthquake, which triggered the worst nuclear accident since Chernobyl in 1986. (Issei Kato)
[Image]Destroyed unit 3 reactor building of Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant is seen in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]Workers wearing protective suits and masks work atop of No. 4 reactor building of Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant in Fukushima prefecture, northern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]A worker wearing protective suit and mask works atop of destroyed unit 4 reactor building of Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant in Fukushima prefecture, northeastern Japan, Monday, Feb 20, 2012. (Issei Kato)
[Image]Tokyo Electric Power Co.’s reactor buildings, from right, No.4, No.3, and No.2 [damaged No.2 has been enclosed, see following photo], are seen at tsunami-crippled Fukushima Dai-ichi nuclear power plant in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]The unit 2 reactor building of Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant is seen through a bus window during a press tour in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant is seen from bus window during a press tour in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]Workers wearing protective suits and masks construct water tanks, seen through a bus window during a press tour at Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]Unit 6, left, and unit 5 reactor buildings of Tokyo Electric Power Co.’s tsunami-crippled Fukushima Dai-ichi nuclear power plant are seen through a bus window during a press tour in Fukushima prefecture, northeastern Japan, Monday, Feb. 20, 2012. (Issei Kato)
[Image]Trucks are overturned before the Unit 4 reactor building of stricken Fukushima Dai-ichi nuclear power plant of Tokyo Electric Power Co., in Okuma town, Fukushima prefecture, northeastern Japan Tuesday, Feb. 28, 2012. (Yoshikazu Tsuno)
[Image]Stricken Fukushima Dai-ichi nuclear power plant buildings of Tokyo Electric Power Co., are seen in Okuma town, Fukushima prefecture, northeastern Japan Tuesday, Feb. 28, 2012. (Yoshikazu Tsuno)
[Image]A journalist checks radiation level with her dosimeter near stricken Fukushima Dai-ichi nuclear power plant of Tokyo Electric Power Co., during a press tour led by TEPCO officials, in Okuma town, Fukushima prefecture, northeastern Japan Tuesday, Feb. 28, 2012. (Yoshikazu Tsuno)