SJT remains silent on Riggs Bank relationship

University President Stephen Joel Trachtenberg declined to comment this week on whether he would be reevaluating his relationship with Riggs Bank as federal officials conduct an investigation into the institution’s financial practices.

In a brief discussion with The Hatchet on Wednesday, Trachtenberg, who serves on the bank’s board of directors, declined to discuss the organization’s legal troubles, which include a federal criminal probe into possible money laundering (On Monday and Tuesday, he also declined through an assistant to talk about the bank).

Riggs has already paid $25 million in civil penalties for failing to comply with money laundering statutes.

The connection between GW and Riggs runs deeper than Trachtenberg’s position on the bank’s board. Robert Allbritton, Riggs’ CEO and son of its largest shareholder, is a member of the GW Board of Trustees (Albritton refused through a spokesman to comment). In addition, Riggs is one of four or five banks that handle the University’s finances.

Trachtenberg referred all questions about Riggs to the bank’s spokesman, Mark Hendrix. But Hendrix was equally unwilling to talk about GW’s connections to the bank, and refused to comment on the investigation. He had, however, previously told The Hatchet, “All the publicity about Riggs has been whether we’ve made timely compliance in releasing information pertaining to the Bank Secrecy Act.” This law requires that banks report suspicious activities of its clients to federal regulators.

Hendrix added that Riggs was taking all necessary actions to rectify its legal discrepancies.

According to reports in The Washington Post, the bank had been fined millions of dollars due to failures to ensure that clients’ money did not come from or fund illicit activities. Riggs accounts were linked to officials from the Embassy of Saudi Arabia, the totalitarian government of Equatorial Guinea and former Chilean dictator Augusto Pinochet.

Simon P. Kareri, a Riggs employee who was in charge of the accounts, was fired earlier this year on suspicion of embezzlement.

The Riggs investigation has led to the criticism of its directors, including Trachtenberg. In a July 15 opinion piece in The Post, columnist Steven Pearlstein accused Riggs’ directors of negligence, and singled out Trachtenberg and other prominent Washington powerbrokers as being responsible.

Pearlstein said Trachtenberg and others “not only ignored regulators’ early warnings of lax procedures, but in some cases even resisted efforts to close out the Pinochet and Equatorial Guinea accounts.”

While Trachtenberg has come under fire for his relationship with Riggs, he has not had any legal action brought against him. Experts said board members might be liable for the practices of businesses they oversee.

John Banzhaf, a GW law professor who has successfully sued fast food and tobacco companies, said liability depends on “how clear was this to a board member. Ordinarily, they’re presented with the information that management wants them to have.”

Trachtenberg also receives monetary compensation for serving on Riggs’ board, but has previously declined to discuss specific figures. Since March, Trachtenberg has acquired about $15,000 in Riggs stock, according to Yahoo! Finance.

In interviews this summer, University officials said Riggs’ troubles would not lead them to find another banking partner. Executive Vice President and Treasurer Louis Katz said the bank does “normal” transactions with GW, mainly lending and commercial checking.

“We obviously have to continue to see what happens … but from where we are now, there are no issues as far as credit worthiness and service with the bank,” Katz said.

-Michael Barnett contributed to this report.

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