By Mica Rosenberg
NEW YORK, July 11 (Reuters) - Senior U.S. Department ofJustice officials overruled internal recommendations toprosecute global bank HSBC Holdings Plc for moneylaundering violations because of concerns about the stability ofthe financial system, a congressional report released on Mondaysaid.
In 2013, the Financial Services Committee of the U.S. Houseof Representatives, led by Republican Congressman Jeb Hensarlingof Texas, began investigating the Justice Department's November2012 decision to enter into a $1.92 billion settlement agreementwith HSBC.
The report, which relies on internal records from theDepartment of the U.S Treasury, said then-U.S. Attorney GeneralEric Holder "misled" Congress about the Justice Department'sreasoning for declining to prosecute.
He and other top officials decided against criminal chargesfor London-based HSBC over the recommendations of prosecutors asthey had concerns about financial stability, the report said.
Politicians and others have criticized the JusticeDepartment for not charging high level executives following the2008 financial crisis. The report said it sought to shed lighton the department's decision-making behind the scenes and didnot outline specific recommendations.
The 2012 settlement detailed how Mexico's Sinaloa drugcartel and Colombia's Norte del Valle cartel laundered $881million through HSBC and a Mexican unit and how the bankviolated U.S. sanctions laws by doing business with customers inIran, Libya, Sudan, Burma and Cuba.
No HSBC executives or employees were prosecuted for theviolations, the report said.
HSBC declined to comment Monday on the report. Holder alsodeclined to comment.
The Justice Department did not immediately respond to arequest for comment. The U.S. Department of the Treasurydeclined to comment.
The report said both the Justice Department and Treasury didnot comply with the committee's request for documents, forcingthem to issue subpoenas.
Internal emails in the report show the Justice Department'sAsset Forfeiture and Money Laundering Section, represented bythen-chief Jennifer Shasky Calvery was "considering seeking aguilty plea from HSBC" as early as September 2012.
Senior leadership at the Justice Department, includingHolder, ultimately overruled prosecuting the bank even thoughHolder had testified in front of Congress that "banks are nottoo big to jail," the report said.
Shasky Calvery later joined HSBC in a senior globalfinancial crime fighting role, according to a source familiarwith her plans.
As part of HSBC's agreement with the U.S. government, thebank installed an outside monitor, former prosecutor MichaelCherkasky to improve its anti-money laundering controls. A courtheard in April that despite progress, HSBC was still not doingenough to thwart money laundering. (Reporting by Mica Rosenberg; Editing by Noeleen Walder andGrant McCool)