Posted on 05/29/2004 3:03:06 AM PDT by sarcasm
WASHINGTON, May 28 (Reuters) - An era may be ending for Riggs Bank, a Washington institution where Abraham Lincoln banked and where Harry Truman is reputed to have gone to play poker after hours.
The 168-year-old bank, long synonymous with serving the capital's diplomatic community, may be courting a buyer after being fined by regulators over the handling of foreign accounts. Parent company Riggs National Corp. (RIGS.O: Quote, Profile, Research) on Friday confirmed that it has hired Lehman Brothers to assist in a review of "strategic alternatives," which might include a "business combination with a third party."
Shares of Riggs on Friday rose $2.39, or 12.8 percent, to $21.13 on Nasdaq, after climbing earlier in the session to $21.80, their highest level since July 1999. Trading was halted before Riggs made the announcement.
The announcement comes two weeks after the Office of the Comptroller of the Currency and the Treasury Department levied a $25 million penalty on Riggs' subsidiary, Riggs Bank, for suspected violations of the Bank Secrecy Act, the law aimed at preventing money laundering.
ACROSS FROM THE WHITE HOUSE
Riggs, situated for a time across Pennsylvania Ave. from the White House, has a reputation as banker to presidents and to the large international community in the capital. As of 1993, 21 presidential families had banked there, Riggs says on its Web site.
The bank lent $16 million to the U.S. government to finance a war with Mexico in 1847 and in 1868 supplied the Treasury with $7 million in gold to buy Alaska from Russia. It lists Ulysses Grant and Dwight Eisenhower among former customers.
"Riggs is and has been for as long as anyone can remember ... an integral part of the fabric of the nation's capital," said Steve Bartlett, a former Texas congressman and now president of the Financial Services Roundtable, to which Riggs belongs.
But analysts said Riggs failed to adapt to the post-Sept. 11, 2001 era for banks, when special considerations for foreign customers came under heightened scrutiny from regulators concerned with tracing flows of funds that could be used to finance attacks on the United States.
"The good old boy relationships with foreign embassies -- that day had passed. They just weren't quick enough to realize the world had changed," a former banking official said, speaking on condition of anonymity.
A Riggs spokesman could not be reached for comment.
Regulators say the bank improperly handled accounts with several foreign governments, including Saudi Arabia and Equatorial Guinea.
Regulators charged Riggs with failing to report tens of millions of dollars in withdrawals from accounts related to the Saudi Arabian embassy, and additional large sums withdrawn from Equatorial Guinea accounts and deposited into private accounts. Riggs did not admit or deny any wrongdoing.
STRUGGLES WITH PROFITABILITY
The Federal Reserve this month also directed Riggs to hire an outside consultant to review its board's conduct in connection with the OCC investigations and asked Riggs to submit a written plan to strengthen its board's oversight.
In April, Riggs announced it would exit most of its international banking business. Following the announcement of the fine, the company said it had agreed to conduct a management review, prepare an action plan regarding certain regulatory records and adopt additional internal controls relating to its account relationships and staffing.
Analysts said Riggs has hurt its profitability with high operating expenses.
"At a time when the industry is reaching record earnings and profitability, Riggs continues to struggle," said Gerard Cassidy of RBC Capital Markets.
The bank is controlled by the family of Joe Allbritton, who beginning in the 1970s helped transform Riggs into the preeminent bank to foreign embassies in Washington and foreign embassies around the globe.
Combined, the Allbrittons control about 53 percent of Riggs's outstanding shares. Joe Allbritton is currently vice chairman of the bank's board, but has said he will not run for reelection.
Bad news for old JoJo; the Clintonoids aren't around to bail his ass out.
He has been teasing the bank examiners for years and getting away with it, but it looks like they are getting theirs back.
Regards,
I want to know where the Saudi money went.
To Switzerland, Grand Cayman, or whereever else they need to provide cash for their terrorist activities.
Prediction: Within tenyears, there will be no "House of Saud" ruling in Saudi.
Regards,
Darn, I've been banking with Riggs for years because I figured that they were the one bank that wouldn't get sold to some mega-bank. And here we are anyway.
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