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Riggs Bank


, the bank of choice for former Chilean dictator Augusto Pinochet and other rogue foreign leaders, pleaded guilty Thursday to a criminal charge of failing to report suspicious transactions to bank regulators.

In the plea agreement with federal prosecutors, Riggs will pay a $16 million fine to close the book on a sordid chapter in the history of the 179-year-old Washington, D.C.-based bank. The guilty plea could have ramifications for the pending acquisition of Riggs' parent,

Riggs National

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PNC Financial



PNC and Riggs "anticipate making an announcement regarding the status" of the merger on Feb. 4, according to a press released issued by Riggs. If investors were worried, it didn't show: shares of Riggs rose 2% in midafternoon action Thursday.

In July, PNC proposed buying Riggs, which has 50 branches in the Washington metropolitan area, in a stock-and-cash transaction valued at $779 million. But soon after, federal prosecutors opened a formal investigation into allegations that Riggs laundered money for Pinochet.

To be sure, PNC didn't go into the Riggs merger with blinders on. In May, Riggs paid a $25 million fine to settle a money-laundering investigation begun by the Treasury Department's Office of the Comptroller of the Currency. The fine, one of the biggest ever slapped on a bank, stemmed from alleged violations in Riggs' handling of bank accounts for several Saudi Arabian diplomats.

But the federal criminal investigation had the potential to scuttle the deal. By fall, many on Wall Street were predicting the deal might fall apart.

A trader with a hedge fund that specializes in merger arbitrage says the current betting on Wall Street is that the merger will get done, but at a reduced price. A reduction in the purchase price would be good news for shareholders of PNC, a regional lender based in Pittsburgh. PNC shares rose 3 cents to $53.19.

Still, the door is open for PNC, which many on Wall Street consider a potential buyout candidate, to pull the plug on the deal. The merger agreement with Riggs includes a big escape clause that allows the banks to cancel the deal if there are any "unresolved claims greater than $300,000."

Riggs is still facing a number of lawsuits, including one filed by a group of Sept. 11 family members over the bank's role in providing financing to Saudi families.