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An attorney for banking regulators pointed to a fax Tuesday that could prove crucial in determining whether attorney Carlos Loumiet purposely tried to protect corrupt executives at the defunct Hamilton Bank. The fax from Hamilton Bank to West Merchant Bank of London discussed the dumping of a downgraded Russian loan and the purchase of a junk Hong Kong loan at above-market prices. Special counsel Lee Strauss, in opening statements of a civil proceeding that could bar Loumiet from representing banks, said the attorney split pages of the fax to make the transactions look separate in two reports he was producing for the Hamilton auditors. The cover sheet of the fax was also discarded. Loumiet, who led the legal team from Greenberg Traurig dealing with the bank’s outside auditor, is on trial in a case brought by the Office of the Comptroller of the Currency that started Tuesday in Miami before Administrative Law Judge Ann Z. Cook. Auditors at Deloitte & Touche raised questions about the international loan swap handled by the same brokers. Greenberg Traurig, which represented Hamilton as outside counsel, was hired to do an independent investigation of the transactions. Strauss has charged Loumiet – who exclusively represents banks – with conflict of interest, as well as suppressing evidence and causing general harm to the bank. The auditors wanted to know if Hamilton officials had illegally swapped newly downgraded Russian loans for junk Latin American and Asian debt at above-market prices to hide a $3.1 million loss. The Office of the Comptroller of the Currency, which shut down the Miami bank in 2002, is seeking a $250,000 fine and wants to bar Loumiet from representing any federally insured financial institution. He represented the bank while with Greenberg Traurig and is now a partner at Hunton & Williams. “This recklessness is not from a newly minted attorney caught in a rookie mistake,” OCC special counsel Lee Strauss told the judge. “He is a sophisticated, experienced attorney.” Loumiet seemed to take the proceedings calmly. He wore a pinstripe suit and talked with Strauss about the winless Miami Dolphins during a break. His attorney, Alan Greer, claimed Loumiet is being made a scapegoat for poor OCC oversight. “This isn’t even 20-20 hindsight. It’s 20-10,” Greer of Richman Greer told the judge. Loumiet is expected to testify in his defense. Strauss claimed Loumiet and his Greenberg Traurig team, including fellow partner Robert Grossman, were negligent in reviewing documents about Hamilton’s policy on international loans. Greer countered that negligence isn’t enough to ban the veteran attorney from banking work – that the government will have to prove malfeasance. The OCC attorney pointed to the fax as the most telling sign of intentional wrongdoing. The Sept. 21, 2000, fax transmission shows Hamilton Bank general counsel J. Reid Bingham confirming an adjusted price trade of a Moscow loan for Hong Kong debt with a West Merchant Bank of London official, Strauss said. Adjusted price trades are illegal transactions designed to hide losses from auditors and regulators. Loumiet purposely got rid of the fax’s cover page, Strauss claimed, dramatically ripping off a page in front of the judge. Auditors were able to put together the two pieces of the puzzle when they noticed the identical fax heading and later had the bank restate its financial statement. Strauss called the two reports generated by Greenberg Traurig “worse than worthless” because they protected the felons running Hamilton. Loumiet’s assertion that Hamilton always paid full price for its securities and loans was false because a paper trail showed officials paid close attention to market prices, Strauss said. “All he had to do was look at them to see the bank officers were selling him a bill of goods,” he said. When Loumiet told auditors Hamilton always purchased assets at full price, not at market value, the bank’s attorney was talking about loans not securities, Greer said. He said the OCC is parsing out sentences in the two reports, saying it is clear when the reports are read as a whole that the information on the Hong Kong transaction was from the same fax. Trading of emerging market debt in the late 1990s was fairly new, and even the OCC policy was to purchase debt as loans with underwriting rather than as securities, he said. That applied to the Hong Kong and Latin American debt purchases after the Russian loans were sold. Greenberg Traurig, which was paid $240,000 for the reports, received $1.6 million in fees from Hamilton in 2001 and 2002. Bank CEO Eduardo Masferrer collected a $1.8 million bonus. Greer said in his opening statements that OCC investigators had the same documents as Loumiet and were just as fooled by the bankers at the time. Greer repeated previous statements that the hearing is a “professional death penalty case” with huge implications for attorneys who work with financial institutions. The Hamilton failure cost taxpayers $127 million. Masferrer was convicted of 16 counts of fraud and sentenced to 30 years in federal prison. Two other bank officials pleaded to securities fraud and received two-year sentences. Greenberg Traurig and Grossman paid a combined $925,000 in penalties to settle OCC allegations. Neither the firm nor Grossman admitted any wrongdoing. Loumiet refused to deal. This article originally appeared in the Daily Business Review , a publication of ALM.

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