April 24, 2009 / 7:03 PM / in 10 years

More offshore tax probes in works: NY's Morgenthau

NEW YORK (Reuters) - New York investigators have launched more probes like the $350 million money laundering case against Lloyds TSB Group Plc (LLOY.L) and are also working to uncover wrongdoing in offshore tax havens, prosecutor Robert Morgenthau said in an interview on Friday.

Morgenthau, who announced in February that he will not run for re-election in 2009 after 35 years as Manhattan district attorney, told Reuters he is frustrated with federal bureaucracy, having pressed four U.S. Treasury secretaries over the years to pay more attention to crimes involving offshore money.

“It’s been very difficult. People start talking about offshore money and their eyes glaze over,” Morgenthau, 89, told the Reuters Global Financial Regulation Summit.

“When you think of the magnitude, the New York City budget is like $65 billion; there is $1.9 trillion all told on deposit in the Cayman Islands,” he said.

Morgenthau, whose signature career financial cases include the BCCI and Long-Term Capital scandals, said his office is looking at more cases similar to one in which London-headquartered Lloyds agreed in January to forfeit $350 million to the United States and New York in connection with faking records related to clients from Iran.

The forfeited money was sent to the city and state coffers, which face historic multibillion-dollar deficits in the Wall Street financial crisis.

Morgenthau, white-haired and looking spry in a blue suit at Thomson Reuters offices in Times Square, said, “One niche I see for us is to try to interrupt the transactions through offshore banks and things like Lloyd’s, and we have a couple more of those cases in the works.”

He declined to provide details because they are current investigations, but he said he was going to Washington next week “to talk to people about expediting that.”

Asked whether there is any chance of a crackdown on tax havens under the new administration of President Barack Obama or by the G20, Morgenthau said, “I think there is some indication.”

He said corporate lobbyists have too much power in Washington for significant financial regulatory change to take place.

“The president needs somebody with a baseball bat to get the attention of everyone,” Morgenthau said. “The president’s going to have to figure out a way of getting the attention of all the different bureaucracies.”

Morgenthau said that when he testified to the Senate Foreign Relations Committee in 2004 on offshore havens and the Cayman Islands in particular, no congressional representatives were there from the big banking states of New York, California and Illinois.

“If you want to go back to the roots of campaign contributions, if you’ve got to raise huge amounts of money in order not to offend anybody ... that may be unfair but that is a major issue,” said Morgenthau, a Democrat.

The outgoing district attorney, having run nine times for the office, declined to endorse a successor.

Lawyer Richard Aborn, former judge Leslie Crocker Snyder and Cyrus Vance, Jr, 54, a former prosecutor under Morgenthau and the son of U.S. President Jimmy Carter’s secretary of state, have indicated they will run in the Democratic Party primary in September.

With his tenure over at the end of December, Morgenthau said there are many things he wants to finish.

“I’ve got so many things I want to get done between now and the end of the year,” he said. “I’ve got a lot of stuff in the oven we’ve got to get out.”

Reporting by Grant McCool; editing by John Wallace

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