PNC agrees to buy troubled Riggs bank
Friday, July 16th 2004, 8:53 am
By: News On 6
PNC Financial Services Group Inc. agreed Friday to buy Riggs National Corp., which is under investigation for allegedly failing to prevent, and in some cases fostering money laundering, for about $779 million in stock and cash.
Its Riggs Bank subsidiary, an old-line Washington institution with deep ties to the diplomatic community, has been sanctioned and is under criminal and congressional investigation for allegedly helping hide money for former Chilean dictator Augusto Pinochet and other lapses.
Riggs was fined a record $25 million in May by federal banking regulators for alleged violations of laws against money laundering in its handling of cash transactions in Saudi-controlled accounts under investigation for possible links to terrorism financing.
The proposed merger announcement comes a day after senators investigating Riggs operations expressed outrage at senior bank officials' failure to act while managers helped former Chilean dictator Augusto Pinochet conceal millions in assets and turned a blind eye to improper payments to officials of Equatorial Guinea.
Lurid details _ such as a suitcase stuffed with cash _ emerged at a Senate hearing into Riggs' handling of the accounts. Lawmakers insisted it was impossible for high-level bank executives to be unaware of the actions.
In fact, the bank's former chairman and chief executive, Joseph Allbritton, went to Chile to solicit Pinochet's business a decade ago, and he and other senior bank officials were familiar with the transactions in Pinochet's accounts, senators said.
Riggs, a midsize institution, is the largest bank based in the Washington area with $6 billion in assets, 50 branches and a virtual monopoly on embassy business in the capital.
``Riggs's strong banking franchise gives us an excellent platform on which to build in the extremely appealing metropolitan Washington marketplace,'' PNC Chief Executive James Rohr said in a statement.
PNC is offering $321 million in cash and 7.5 million of its common shares.
The boards of directors of both banks unanimously approved the deal, PNC said.
Shortly after it was sanctioned in May, Riggs National said it had hired an investment bank to advise it on a possible sale.
Facing the sanctions by regulators last spring, Riggs retrenched in its foreign operations and the head of the family that controls the bank resigned from the board of Riggs National. The moves were viewed favorably by Wall Street.
Riggs earned $3.9 million in the first quarter, down from $5.9 million a year earlier. Annual earnings have not exceeded $25 million since 1999.
PNC Financial, based in Pittsburgh, has its roots in traditional banking dating back to the 1800's, but has moved into a variety of financial services. Its flagship remains PNC Bank, which operates in Delaware, Kentucky, New Jersey, Ohio, and Pennsylvania. It had annual revenues of nearly $6 billion last year.