Category Archives: JP Morgan

Christmas 2014 round up of financial crimes with no one going to jail.

My husband made a very valid point a few days ago and I have been thinking about it every day since. He pointed out that when we (Paul and I) started looking at misconduct in the financial industry and specifically HBOS, we couldn’t get anyone to take our allegations seriously because no one believed us. That was in 2007 and it took until late 2009 to actually get the FSA involved and 2010 before the police got involved – even although we made allegations to the police in November 2007. We’re not a lot further forward now in December 2014 because the criminal trials for that alleged crime won’t start until September 2015 – and even then, I’m not holding my breath.

It was disappointing no one believed us in 2007 but not surprising because the idea banks, or rather bankers, might be crooks, was out of the question back then. Bankers were seen as respectable professionals and your bank manager was so trustworthy, he or she could even sign your passport. The same doesn’t apply now and no one bats an eyelid at the concept of crooked bankers – in fact bad conduct is what we expect from them, to the point even the good guys (yes I do acknowledge there are still many good bankers our there) are tarred with the same brush.

Paul’s point was simple: It was tough back in 2007 because no one believed us, so nothing was done. Now, everyone knows the financial sector is rife with fraud and corruption and still nothing has been done! Not just in the case we reported – right across the board and in thousands of cases. Even more alarming is the fact that, in many instances I know of, where people have tried to report financial crime, the police will not investigate it! In all probability this is because they don’t have the budgets to investigate such a glut of criminality in austerity Britain – but that is of no help to the victims who are frequently told – “it’s a civil matter.” No it’s not – crime is never a ‘civil matter’ and even victims of PPI have a right to report it as a crime, get a crime number and, if applicable, also have it investigated. Of course that might damage crime statistics.

But no. Most financial crime is just swept under the carpet as “mis-selling” or “restructuring” and resolved by bank shareholders’ paying huge fines to the FCA. Think about that for a moment – we all believe bankers have committed criminal acts but nothing has happened. It just beggars belief and is really as scary as hell because, what it actually means is, we can no longer rely on the Law and really do have a two tier criminal justice system. There isn’t another, plausible explanation.

This terrifying thought was brought home again when I read the latest excellent Matt Taibbi article in Rolling Stone magazine: http://www.rollingstone.com/politics/news/the-police-in-america-are-becoming-illegitimate-20141205 where he is talking about the disparities in the US legal system and it reminded me that I still haven’t had a reply to my letter to Mr Cameron of December 2012 when I asked for some clarification about the apparent immunity bankers have from prosecution. In that letter, which I wrote after reading some worrying comments from Andrew Bailey (now head of the PRA), I said:

Mr Cameron, unless I am completely mistaken, Mr Bailey seems to be telling us that banks, and therefore bankers, are now officially considered to be above the law in this country and that, in the interests of confidence in the banking industry (which is already at rock bottom among the British public, and therefore can hardly sink any lower), they cannot be prosecuted.

I am writing to ask you, as Prime Minister, for some clarification.

Does your government endorse the notion that banks and bankers should be given a licence to commit criminal acts without any fear of prosecution? Is this now official government policy? Are the British public now being asked to accept that, despite incontrovertible evidence of multiple criminal acts by banks, including money-laundering, drug-money-laundering, Libor rigging, multiple frauds and assorted Ponzi schemes, bankers are considered to be immune from prosecution? And if so, can I ask on what grounds your government, or indeed the government of any democratic country, can justify such a policy?” Full letter here: http://www.ianfraser.org/dear-mr-cameron-if-bankers-are-above-the-law-we-need-an-urgent-explanation/

I didn’t write the letter to be confrontational – although I must admit I am incredibly disappointed the PM’s strong words in the run up to the last election about what should happen to criminal bankers, turned out to be hot air and no more. This is what he said to Jeff Randall in January 2009:

“I think that we need to look at the behaviour of banks and bankers and, where people have behaved inappropriately, that needs to be identified and if anyone has behaved criminally, in my view, there is a role for the criminal law and I don’t understand why is this country the regulatory authorities seem to be doing so little to investigate it, whereas in America they’re doing quite a lot.”

I wrote the letter because I genuinely wanted some reassurance from the Prime Minister that bankers are not above the law; we don’t have a two tier legal system and; something would be done to redress this inequitable situation.

So what has happened to clarify or allay my concerns since December 2012? Well a few things have happened but not what I was expecting. For example:

  1. I’ve never had a reply.

  2. Several banks have been found guilty of money laundering and even money laundering for drug cartels. And the only penalty has been a huge tax on the bank’s shareholders who have paid massive fines for the conduct of bankers. But no one has gone to jail.

*given that banks (buildings or legal entities) don’t have any physical ability to pick up the phone and negotiate with drug cartels – such deals had to be done by bankers. So why have no bankers been held responsible?

  1. Many banks have been found guilty of making billions of pounds with the PPI scam. They’ve had to pay the money back in many cases but, I assure you, not all cases. So again, the shareholders have lost a fortune. But no one has gone to jail.

* I often wonder who invented PPI? Did senior bankers sit down and plan how best to get thousands of their customers to take out insurance policies which cost them a fortune but could never be used? Or did someone in a bank find a recipe for creating and implementing PPI in a fortune cookie?

  1. As a founder member of SME Alliance, I talk every day to people whose businesses have been totally destroyed with various, ridiculously (and I would suggest deliberately) complicated financial products under the collective name of swaps. I’m not a victim of a swap and I know little about them (I’m learning fast) but even their titles smack of more contempt for businesses e.g. vanilla swaps. Can you have chocolate or strawberry? Probably. The FCA have said many of these products should never have been sold to ‘unsophisticated’ clients and in some cases banks have had to give the money back. However, the years it has taken for this to happen and the devastation these products have caused, apparently do not necessitate banks having to pay out billions in compensation. The redress scheme the FCA has come up with has conveniently been limited to peanuts – and no one has gone to jail.

* A journalist was telling me the other day of a case where someone challenged the FCA decision multiple times and was eventually awarded £500k – but of course the bank interest and charges on his account over the time it took to challenge the bank’s conduct meant the victim got nothing and the bank paid themselves £500k. You couldn’t make it up.

  1. The now infamous business recovery units like RBS/GRG have been merrily acquiring, appropriating, stealing their clients’ assets left right and centre and sadly RBS have not been working in isolation. It has caused outrage – it’s been all over the news, MPs have held debates on the subject, Committees have interviewed senior bankers and regulators and even the ever cautious BBC have suggested some bankers are crooks. http://www.bbc.co.uk/programmes/b04t6jy1 But no one has gone to jail.

* As a victim of HBOS Reading (similar model) I have so much to say on this – but am having to keep quiet for now but not forever.

  1. And while the likes of GRG and HBOS Reading have caused many businesses to fail, a separate scandal has specifically targeted farms across the Country for over 20 years. Repeated allegations have been made against a man called Des Phillips and various of the 59 companies he has been or is a director of including UK Farm Finance, UKCC and UK Acorn Finance. And some of our major banks have been heavily implicated in these allegations as have other ‘professionals’. It’s a sickening story which has resulted in many family farms being repossessed and, sadly, farmers committing suicide. You can hear about it here: http://www.bbc.co.uk/programmes/b040hzz5 or read about here: http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm141111/halltext/141111h0001.htm No one has been prosecuted so no one has gone to jail.

  2. Bankers or traders have been found guilty of rigging LIBOR. Again, massive fines have been levied – another penalty on shareholders. However, in this instance it looks possible some bankers will go to jail and one banker has even pleaded guilty. But let’s not get too excited that justice might be done. Read this: http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing

As you can see the banker concerned could get up to 10 years in jail but we don’t know who he is or what bank he worked for and reporting on this case is heavily restricted. Presumably, after the other three people charged have had their trials, we might know more. But I wouldn’t bet money on it – especially if the banker in question worked for one of the State subsidised banks. But it’s a start.

I could make the list much longer but, to date and looking at the 6 instances above, money laundering, PPI, Swaps, asset theft including farms and LIBOR rigging, it’s certain 1 person in the UK will go to jail and 4 people might. And when you look at the trail of poverty, misery, desperation and devastation these crimes have caused, it is unbelievably disappointing – not to mention scandalous, that our regulators, justice system and worse still, our Government, have let this happen. In fact it is morally and ethically reprehensible.

Of course individual bankers do go to jail quite regularly – they’re usually quite low down in the pecking order and their offences (with a few noticeable exceptions) just about make it into their local newspapers. But the top dogs – the ones who make policy – the ones who instigate and oversee the kind of conduct which allowed all of the above to happen, seem to remain above the law. Which begs the question – why do we have laws?

Meanwhile, the Government have issued the following figures regarding crimes to businesses:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284818/crime-against-businesses-headlines-2013-pdf.pdf

I haven’t read it in any great detail but I’m pretty sure it doesn’t mention the wholesale destruction of SMEs by banks. I sometimes think we should move the Houses of Parliament to Canary Wharf and have done with it before La La Land spreads across the whole of London.

Here in the real world we are in the run up to what will be another very austere festive season for many people in Britain – and I’m not just talking about people or SMEs who have been defrauded by banks. I’m talking about those families who’ve lost jobs and/or benefits and most of all, those people relying on food banks or who have lost their homes and now live on the street. A lot of people would say – me included – our major banks and therefore our most senior bankers, were very instrumental in causing our national austerity. And, post the so called Credit Crunch, those same banks (especially the part State owned ones) have done little to help the economy and much to damage it further. Unbelievably, the people at the top of those banks continue to be heavily rewarded.

For example, yesterday (13th December) I was reading an article about the top paid European Bank CEO’s. http://www.cityam.com/1415705309/which-ceos-european-bank-have-biggest-pay-checks-two-uk-banks-take-second-and-third-place

Hmmm – £7.4M. Even when you deduct 50% tax, that still leaves approximately £71k a week. I think you could have one hell of a Christmas with that remuneration package!

Mind you, every silver lining has its own cloud and I suddenly thought – I bet it’s really tough finding the perfect Christmas gift for these top bankers because, what do you buy for the man or woman who has everything? So maybe La La Land has its own problems at Christmas.

Shame you can’t gift wrap integrity – if we could give some of them that, the whole Country might feel more festive. Still, there’s always the good old standby gift – Monopoly. After all, banks have bought, sold, packaged and mortgaged every property on the board many, many times over – but, to date, they have been very adept at steering clear of the “Go to Jail” square. But then I’m guessing Al Capone thought he would never lose ‘games’ either.

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Following on from yesterday’s Indy article about the HBOS Rights Issue, can we at least stop subsidising fraudulent conduct in banks?

Tom Harper’s excellent article questioning whether or not investors were given key financial facts regarding the HBOS Rights Issue in 2008, provoked some serious outrage on the ‘Twittersphere’ yesterday – and quite rightly so. http://www.independent.co.uk/news/business/news/hbos-accused-of-misleading-the-public-over-4bn-rescue-9701791.html

I don’t suppose the Government, Lloyds, the Regulator or the BoE will be happy with that line of investigation. Not least because it opens the door to a whole torrent of questions about how many other transactions, involving state subsidised banks, have been less than transparent?

And perhaps the biggest question will be – was the information in the Lloyds/HBOS Merger proposal, as accurate and transparent as it should have been?

I am sure Lloyds bank will say the HBOS Rights Issue was nothing to do with them as it pre-dated the merger. But in order for the Merger Proposal to be correct, it should have contained watertight data about the financial state of HBOS – which, reading Tom’s article, I’m not sure it could have? I’ve looked at the Proposal and it relies on financial accounts for HBOS and Lloyds TSB dating back to 2005 – although conveniently, it only relies on unaudited accounts for HBOS in 2008. Not that it makes much difference because, sadly and to add weight to yesterdays article, the Big 4 auditors appear to have been equally confused as to the solvency of the banks despite the audited accounts, as shown in another excellent article by Ian Fraser, November 2010: http://www.ianfraser.org/connolly-i-do-believe-that-auditors-performed-well/

What I find really upsetting about all this was brought home this morning by an article from the Positive Money site (following up on an article by Jill Treanor in the Guardian). The article dates back to December 2013 and explains, in very clear and simple terms, how banks continue to be subsidised and why. https://www.positivemoney.org/2013/12/uk-banks-benefited-38bn-big-fail-state-subsidy/ And of course, if we are still subsidising the part state owned banks – we are also subsidising bankers’ bonuses – which, considering neither Lloyds nor HBOS have managed to comply with the terms and conditions of the 2008 bailouts, seems entirely unjust not to mention bonkers. In a letter I received from the Treasury dated 15/05/09, Lloyds and HBOS agreed to meet the following terms:

A range of conditions are attached to the recapitalisation package. Lloyds TSB and HBOS have agreed that over the next three years they will maintain the availability and active marketing of competitively priced lending to homeowners and to small businesses at 2007 levels. They will also provide support for schemes to help people struggling with mortgage payments to stay in their homes and the expansion of financial capability initiatives. The remuneration of senior executives will follow strict guidelines – both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentives schemes will be reviewed and linked to long-term value creation, taking account of risk, and restricting the potential for “rewards for failure”). The Government will also be consulted on the appointment of new independent non-executive directors…”

Joining up all the dots, I begin to get a very clear picture of La La Land and it’s not pretty. As I am definitely a layman in these matters (albeit a fairly well informed one), I thought I’d take this opportunity to share my view of what’s happened over the last few years.

Round up of events in La La Land.

In 2008 and after exceptional spending sprees by both the banks and the public, the proverbial finally hit the fan and many banks ran out of money. The Government, terrified they’d have a repeat of the Northern Rock débâcle, gave the banks billions from the taxpayers’ coffers. As this resulted in mass austerity, the Government were loath to let anyone know exactly how bad a shape some of the banks were in (some were insolvent) and they certainly didn’t want the public to know the exact details of the billions being handed over, so they did their best to keep it all quiet. They (and the banks) even kept it quiet from the people being asked to invest in the banks via rights issues and/or sanction the HBOS-Lloyds merger, although they didn’t have to keep it quiet from institutional investors, because they were ‘in the know’ and had no intention of investing in insolvent banks.

The banks took the money but totally ignored the social responsibility that went with it (terms and conditions) in the same way they ignore little things like money laundering laws or Principle 1 of the FSA Principles of Business: A Firm must conduct its business with integrity. Actually I struggle to see how most banks comply with any of the FCA Principles: http://www.fca.org.uk/static/documents/handbook-releases/high-level-standards136.pdf Section 2.1

However, after the credit crunch the banks could no longer be seen to lend with reckless abandon (which was a bit annoying, as they rather liked basing bonuses on inflated loan books), so they invented other reckless and ingenious ways of making money – e.g crippling the SME sector and stealing assets. Best of all, having totally screwed up and taken everyone’s money, they came up with their most ingenious plan to date – they sold us all the simple concept that – if we didn’t allow bankers to keep taking bonuses, they’d walk away – and then we’d all be screwed. To make sure that dreadful day never comes, we continue to subsidise banks so they all live happily ever after.

That sounds like a pretty dark fairy story and the darkest bit is – it’s not a fairy story. So I hope somewhere, someone in authority (not mentioning any names Mr Tyrie) will have read Tom Harper’s articles, Ian Fraser’s articles and I’m hoping Max Keiser will invite Paul Moore back on the Keiser show to talk about the appalling behaviour of HBOS, Lloyds and other banks. Because, crazy as is it and despite all the rules, laws and regulators we have, I think our best chance of getting banking reform is to report bank misconduct to the media and then spread the word via Twitter? Of course, that could ultimately do enormous damage to some banks but I can see little alternative to this course of action. It’s a huge problem that while we definitely do have regulators, it seems La La land is out of their jurisdiction – which is the obvious reason they cannot do anything to penalise errant bankers.

*Here’s a thought – if we’re going to rely on journalists to clean up the banking world – maybe we should be paying our financial journalists (and their research teams) more and getting rid of regulators? We’d save a fortune and get some results.

Anyway, what upsets me most about all this is how we continue to let ourselves be mugged and my point is: If banks are intent on continuing to cheat their customers, destroy SMEs and refusing to compensate the people they defraud while insisting they still get huge bonuses – fine. It seems there’s little we can do about it. But can we please, please stop subsidising this conduct?

Bank reform or tokenism? Rule No 1. “Don’t ever side with anybody against the family”.

I don’t particularly like August. It doesn’t mean holiday time for my family – it just means a month when Paul and I can make little progress towards ever having a holiday because everyone to do with the HBOS scam we’re determined to see exposed, is on holiday. Still, this year August has at least given me some quiet time to continue with my book, which is going well. I can even say I’m enjoying writing it now even although it is taking me back over some very dark times including 22 eviction hearings because, for HBOS/LBG, screwing my business wasn’t enough and they wanted my home as well.

I’ve put as much humour as possible into the book because, as in the ‘Wolf of Wall Street’ story, I can see that what people really enjoy knowing about, is the excesses and madness of the banking world. They want to be entertained and disgusted at the same time – which is maybe why the ‘Wolf of Wall Street’ is a rather one sided story or ‘romp’ that focused entirely on events in ‘La La Land’ but totally ignored the effects banking or bankers have had on the rest of the world. All the same, the film was entertaining and, let’s face it, some of us might give bankers a bit more latitude if they looked like Leonardo de Caprio. But it also made me worry and contrary to what I have previously considered possible, I’m beginning to think maybe bankers are indeed starting to achieve Mafia status? We can’t control what they do but we can make great films about them. Well, if that’s the way we’re going, let’s do it – I have just the script. Although casting could be a bit of an issue with our Britbank villains.

However, there is one overwhelmingly depressing thing that really pains me while I’m writing the book about my own experience with banks and bankers – over the last 7 years and despite bucket loads of rhetoric from Governments, regulators and the endless committees who have, apparently, investigated the causes of the ‘credit crunch’, nothing has changed. Nothing at all. And that’s bad.

I have this horrible gut feeling that, while everyone, including bankers, insist that what we all want is a better banking system devoid of excessive risk, dodgy derivatives and dubious standards, actually, what the banking world really want is to carry on with “business as usual.” In reality, what’s happening now is an even bigger whitewash than all those we’ve already had. While the headlines insist bankers are about to get their comeuppance and even the SFO are threatening to investigate bank malpractice, behind the scenes and very casually, the right people are being put into the right places to make sure the cracks in the walls get a new round of sticky plaster. The ‘revolving door’ is quietly turning again. But moving the chairs around on the Titanic, didn’t do any good after the last credit crunch and moving the same chairs again, won’t stop another crash. Yet again, we have senior bankers acting as regulators – it doesn’t work.

For example, looking back many people, including me, would say HBOS, in the years running up to the credit crunch, became an absolute basket case of a bank. With hindsight even PCoBS, the TSC and the Regulator, would have to agree. Point 137 (page 44) from the PCoBS report into HBOS (HBOS – An Accident Waiting To Happen. April 2013) concludes under the heading of “Conclusion – a manual for bad banking”:

The downfall of HBOS provides a cautionary tale. In many ways, the history of HBOS provides a manual of bad banking which should be read alongside accounts of previous bank failures for the future leaders of banks, and their future regulators, who think they know better or that next time it will be different. We will ourselves seek to draw further lessons from the case of HBOS as we frame recommendations for the future in our final Report. http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/144.pdf

You can take your pick of damning extracts from the FSA Bank of Scotland Public Censure Report (March 2012) but I think point 4.14 explains a lot about the seemingly star struck Exec’s of BoS and their ‘risky’ management:

In relation to large leveraged transactions, these deals involved lending over £75 million or a substantial equity investment which meant they had to be sanctioned by the Executive Credit Committee. There was a significant increase in the volume and complexity of deals that this committee approved during 2006 and 2007. There were 199 approvals of lending in excess of £75 million in 2006 (which represented total

lending of £56 billion), which increased to 361 such approvals in 2007 (which represented total lending of £96.2 billion). There were 56 approvals of lending over £250 million in 2006 (which represented total lending of £36.2 billion), which increased to 110 such approvals in 2007 (which represented total lending of £64 billion. The size of these transactions meant that any default would have a high impact on the book http://www.fsa.gov.uk/static/pubs/final/bankofscotlandplc.pdf

I’m interested in that extract because it confirms how the excessive loans to companies like Corporate Jet Services Ltd http://www.independent.co.uk/news/uk/politics/exclusive-the-cameron-crony-the-private-jet-company-and-a-crash-landing-that-cost-taxpayers-100m-9350090.html had to have been authorised by very senior people in the Bank and not, as LBG would have us believe, by a regional bank manager. But in truth, it wasn’t just BoS that was running amok – it was the whole of HBOS. But the FSA didn’t censor HBOS and maybe because the CEO of HBOS held a senior position in the FSA ?

I remember having a conversation with Bill Sillett (the named respondent for any queries about the Censure Report) who visited Paul and I in April 2012. I asked him back then why the Report only covered the period from 2006 to 2008 when I know for a fact HBOS was acting like a fruit loop from at least 2002. Here’s his reply, taken from my notes of the meeting 11th April 2012:

BS spoke briefly about the time scales of the FSA report and why they chose the period 2006 to 2008. He said Crosby was effectively out of the bank in that period. He said they chose that narrow remit because going back further could have involved another year of work.

I think “Crosby was effectively out of the Bank in that period” is highly significant. Obviously, had the report highlighted poor management of BoS when Crosby was the CEO of HBOS (parent of BoS), it would have caused a few red faces for the FSA. But what I still find amazing is – Mr Crosby may have come out of the Bank in 2006 but, from November 2007, he went from being a Director of the FSA to Deputy Chairman – and that was in the same period when HBOS was already under heavy scrutiny by the Bank of England. And even when the proverbial hit the fan in October 2008 and HBOS got the secret £25.4BN, apparently no one in the Tripartite Authority felt it was inappropriate for Sir James, as he was then, to continue on as the Deputy Chair of the Authority most responsible for regulating banks!

I make the point in my book:

Aside from the fact the people advising the Bank of England on how to cope with various banks losing hundreds of billions of pounds were predominantly bankers (from commercial banks), I’m very confused by the fact Gordon’s chum, Sir James Crosby (now plain old Mr Crosby), the former CEO of HBOS until mid 2006, managed to retain his position of Deputy Chairman of the FSA right through the credit crunch, the bailouts and beyond? Did Gordon Brown realise the FSA were supposed to monitor the Banks so that such disasters couldn’t happen? Had he even heard of the FSA I wonder? (NEXT PASSAGE REDACTED)……..

…..So why did JC keep his position with the regulator? Possibly it was so his friends in high places, like Gordon Brown and Alistair Darling, who appointed him to oversee Government projects, wouldn’t get egg on their faces. In 2006 Gordon appointed JC to lead a ‘Public, Private Forum’ on Identity theft and in April 2008 Alistair Darling appointed him to advise the Government on how to “improve the functioning of the mortgage markets.” And then, of course, there was his knighthood in July 2006 for services to the financial industry.

Oh well, water under the bridge now and Sir James did eventually resign from the FSA in February 2009 when the allegations made by Paul Moore in 2004, could no longer be ignored. Although according to both the FSA and James Crosby, his departure was nothing to do with Paul Moore. Here’s a statement from La La land, as reported by the BBC 11th February 2009:

Sir James said in his statement that HBOS had “extensively investigated” Mr Moore’s allegations, concluding that they “had no merit”. Mr Moore was the former head of risk at HBOS.

“I nonetheless feel that the right course of action for the FSA is for me to resign from the FSA board, which I do with immediate effect,” Sir James added.

The FSA said: “[The] specific allegations made by Paul Moore in December 2004 regarding the regulatory risk function at HBOS were fully investigated by KPMG and the FSA, which concluded that the changes made by HBOS were appropriate.”

“It should also be noted that the FSA’s concerns about HBOS’ risk management framework considerably pre-dated the allegations by Mr Moore,” the FSA said in a statement.

Excuse me? The FSA’s concerns about HBOS pre-dated Paul Moore’s allegations and – what did they do about it? They made the CEO of HBOS a Director of the FSA in January 2004 and then promoted him to Deputy Chair. Confused – you should be.

Here’s the point – as at today’s date, the Chairman of the FCA, which took over from the FSA, is now John Griffith-Jones, who held the position of Chairman of KPMG at the time Mr Moore made his allegations and who must have sanctioned the report refuting those allegations. And, because, some would say that in the corporate world at least, “incest is best”, KPMG were also the auditors of HBOS at the time they prepared the report. I share the concerns of Ian Fraser – none of us should be reassured when the financial industry is so keen to ‘Keep it in the family.’ In June 2012, Ian wrote:

I was surprised and exasperated to learn last week that chancellor George Osborne has rubber-stamped the appointment of John Griffith-Jones, the senior partner of KPMG, as chairman-designate of the Financial Conduct Authority, one of the two financial regulators that will take over from the soon-to-be-disbanded FSA. As the news of this “revolving door”,“poacher-turned-gamekeeper” appointment sank in, my disappointment bordered on outrage.

http://www.ianfraser.org/financial-regulation-with-griffith-jones-appointment-britain-keeps-it-in-the-family/

I was equally outraged Ian – and I begin to wonder what kind of ‘family’ the big banks and their auditors belong to? The Corleone family?

Meanwhile, over at the FRC, Sir Win Bischoff, former Chairman of Lloyds Banking Group (the parent of HBOS), has taken the post of Chairman while simultaneously becoming the Chair of a division of JP Morgan. You could not make it up!

I put up some details the other day about the history of the great and good on the Board of the PRA. https://spandaviablog.wordpress.com/2014/08/12/sir-win-bischoff-chairman-of-the-frc-and-also-a-chairman-of-jp-morgan-the-revolving-door-to-la-la-land-is-spinning-off-its-hinges/

Question: in the same way I sincerely doubt Sir James Crosby (as he was) was ever seriously going to let the FSA rumble the many and varied dodgy scenarios going on in HBOS while he was Deputy Chair, does anyone really believe John Griffith-Jones or Sir Win Bischoff are the right people to head up our regulators? Is Win Bischoff ever going to expose anything really bad that happened in Lloyds under his watch? Is Griffiths-Jones going to take action against KPMG or the HBOS audits under his watch. Is the forthcoming report into the failure of HBOS really going to highlight anything that would compromise those members of the ‘family’ who are still active?

Are we really on the road to reform in our banking sector – or have the powers that be, just made moved the chairs on the Titanic yet again and put the same established and reliable old foxes in place to guard the chicken coups? In my opinion, all this talk of reform is just tokenism.

I am fully aware the PRA are in the process of preparing the report on the failure of HBOS. I am also aware – as is Paul Moore – they fully intend to exclude issues that were fundamental to the Banks’ failure. Apparently, some of the really catastrophic or even criminal conduct in HBOS, is not considered relevant and consequently, is not part of the PRA remit. Yet again, they are not going against ‘the family.’

Interesting day – Ian Fraser, Tom Harper, Richard Brooks all aware of FRC conduct.

Interesting day of research (always for the book) and many thanks to Ian Fraser, Tom Harper and Richard Brooks, for pointing me in some interesting directions, especially with reference to my recent blogs.

I started my new blog site with some details about the HBOS rights issue and the Lloyds/HBOS Merger, which, after reading the BoE report on the ELA given to HBOS and RBS in 2008 does, regrettably, seem to have been a rather unfortunate ‘con’ (I just can’t find a more PC word for it) on the shareholders of Lloyds and HBOS and also on the tax payer. I can say that, in the circumstances, I fully appreciate the Tripartite Authorities were definitely ‘over a barrel’ at the time but, all the same, the losers, as always, were the little people. All of us little people who now live with such austere conditions, that hundreds of thousands of people in Britain now rely on food banks:

A food bank charity says it has handed out 913,000 food parcels in the last year, up from 347,000 the year before. The Trussell Trust said a third were given to repeat visitors but that there was a “shocking” 51% rise in clients to established food banks. It said benefit payment delays were the main cause. In a letter to ministers, more than 500 clergy say the increase is “terrible”. The government said there was no evidence of a link between welfare reforms and the use of food banks. http://www.bbc.co.uk/news/business-27032642

Paul has been out all day helping someone with a long running case against HBOS. When he came home, he asked if there were any interesting e-mail or tweets. I said Tom Harper tweeted me an article by Mark Kleinman about: The Chancellor has ruled out a sale of Lloyds shares to the public ahead of the next general election, Sky News can reveal.

I said to Paul (and I said on twitter) I didn’t think this was wise. If I was the Chancellor, I would off load those shares asap. As always, Paul pointed out the folly of my logic. I have just posted a document suggesting the lack of transparency over the HBOS/RBS ELA and the HBOS-Lloyds issue was, potentially, out of order and maybe even fraudulent. Imagine – the Government sell the shares in Lloyds now and then, down the road (and before the election) a scandal – any scandal – breaks about criminal conduct by the senior management of Lloyds Bank or its sick puppy HBOS, that causes the share price of Lloyds Banking Group to drop just after thousands of people have bought shares? Add that to what has already happened. Catastrophe. It’s not impossible in my view.

I think Tom, like Paul, has considered this possibility but me? Well I was so deeply immersed in other research, I didn’t add 1 + 1 up. So well done Mr Osborne, you clearly are wiser than I thought.

Actually, what I was concentrating on was the FRC. Following on from my blog yesterday about the appointment, as Chairman, of Sir Win Bischoff, first to the FRC and then to JP Morgan Europe, ME and Asia, I received two interesting articles from Ian Fraser on the topic. One article was about the extraordinary way in which the FRC had dropped its investigation into BAE Systems (another favourite of mine – and Tom’s http://www.independent.co.uk/news/uk/politics/exclusive-the-cameron-crony-the-private-jet-company-and-a-crash-landing-that-cost-taxpayers-100m-9350090.html ) and the article also said:

The FRC has form when it comes to letting ‘Big Four’ accountancy firms — Deloitte, Ernst & Young, KPMG and PWC — off the hook. On April 11th, The Times’s Alex Spence revealed that the Financial Reporting Council had decided against probing ‘Big Four’ firms’ pre-crash audits of UK banks, simply because it wanted an easy life.

There was a lack of will,” one well-placed insider told The Times. “There was a general reluctance to get into it. It would just be too disruptive, too damaging.

The FRC has yet to make clear whether it is going to bother to launch a specific probe of KPMG’s role as auditor of the disastrous UK bank HBOS in 2001-08. It is apparently sitting on its hands while it waits to see the outcome of the FSA’s whitewash report into the Edinburgh-based bank’s failure. http://www.ianfraser.org/britain-is-fast-turning-into-a-banana-republic-wilfully-blind-to-corruption/

The other article ian alerted me to was one he wrote for The Sunday Times. I can’t read it all because I can’t afford to subscribe (thanks HBOS/LBG) but I trust Ian enough to know it is entirely relevant to my issues about Sir Win and the FRC:

Sir Steve Robson, one of seven RBS non-executive directors to be purged last month, is facing calls to resign as non- executive director of the Financial Reporting Council (FRC).

If Robson remains in his post, critics suggest the FRC could lose credibility. At RBS he was partly responsible for one of the largest bank collapses in UK history.

“The whole civil service ethos is that Caesar’s wife is above reproach,” said Robert Bertram, a corporate lawyer with experience as a non-executive director of listed companies, who served as a member of the Competition Commission.

“Whether or not Robson, a very distinguished public servant, has made his own position untenable, it seems the FRC itself has made it untenable …..http://www.thesundaytimes.co.uk/sto/business/article156107.ece

All serious food for thought from my point of view and the icing on the cake was an article Richard Brooks sent me from Private Eye:

(C) Private Eye

(C) Private Eye

So, an interesting and worrying day. I keep thinking I have discovered important and interesting information. But of course the real ‘investigative journalists’ – and ian, Tom and Richard are three of the best – already know a lot of what I’ve discovered, they’ve published it and, the powers that be have ignored it – so I’m in good company.

Last bit of interesting news I got from my research today, was from the website of 33 Chancery Lane, the Chambers of  John Black QC who is representing the Crown in the Operation Hornet case. Interestingly, while the CPS have not updated their version of events on their website, which refers to 8 defendants and losses of £35M in the Reading fraud, John Black QC has a more updated version:

Operation Hornet (2013-2014) – advising Attorney General, CPS and Thames Valley Police on prosecution of bankers at leading financial institution and other businessmen for corruption, money laundering and fraudulent trading. The forthcoming trials concern an alleged £245m fraud.

As I said, an interesting day.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sir Win Bischoff – Chairman of the FRC and also a Chairman of JP Morgan. The Revolving door to La La Land is spinning off its hinges.

I note it has been announced in the press today (12th August) that JP Morgan has appointed Sir Win Bischoff as chairman of its main legal entity in Europe, the Middle East, and Africa. And here was me thinking Sir Win was out of Banking (he retired from Lloyds Banking Group Plc, Bank of Scotland Plc, HBOS Plc and Lloyds Bank Plc, on 3rd April 2014) and into regulation (he became chairman of the Financial Reporting Council (FRC) on 1st May 2014). Then I realised I don’t really know what the FRC does – maybe it’s not a regulator in which case, being a chair at JP Morgan and also at the FRC, might not be the “fox in the chicken coup” scenario it seems.

I know what the FCA (formerly FSA) and the PRA do or purport to do but I’ve never really looked at the FRC. So I did and this is what it says about its role:

The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. We promote high standards of corporate governance through the UK Corporate Governance Code. We set standards for corporate reporting, audit and actuarial practice and monitor and enforce accounting and auditing standards. We also oversee the regulatory activities of the actuarial profession and the professional accountancy bodies and operate independent disciplinary arrangements for public interest cases involving accountants and actuaries.

So, not necessarily a banking regulator but certainly a ‘bankers mates’ regulator. I looked up who exactly is subject to the FRC rules and regulations and who pays for this organisation?:

The Preparers Levy

By agreement with the Department of Business Innovation and Skills and HM Treasury, the Financial Reporting Council is funded partly through a preparers levy on organisations that are subject to, or have regard to, FRC regulatory requirements in preparing their accounts. Companies and other organisations subject to the Preparers Levy are:

All companies listed on the London Stock Exchange with a Premium or Standard listing. (So it is a banking regulator as well) All UK AIM and ISDX (previously known as PLUS) Market group companies. All large private entities with a turnover of £500m or more Large private subsidiaries of listed companies are invoiced on the same invoice as their parent company. Global Depository Receipt companies. Government Departments and other public sector organisations

Basis for the Preparers: Levy Section 17 of the Companies (Audit, Investigations and Community Enterprise) Act 2004, as amended by Part 44 of the Companies Act 2006, confers a power on the Secretary of Stateto make regulations enabling the FRC to recover its costs through a levy. Thus far, thispower has not been exercised. The FRC’s responsibilities are funded through non statutory arrangements on the basis of an understanding with the groups subject to the levy. However, should a voluntary approach prove unsustainable, the FRC will formally request that the statutory power be invoked.

I’m not too sure exactly what that means. Do any companies pay a ‘levy’ on a voluntary basis?And what are they paying for? To be regulated? To be protected? To be part of the club? Sounds a bit like a Mafia organisation getting in collection money to me. You don’t know exactly what you’re paying for – but they do. It continues:

The 2014/15 levy is made up of a minimum levy of £992 and further amounts payable by companies above a certain threshold, with the rate per £m declining in five levy size bands……

Anyway, whatever it means, what concerns me is the phrase “independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.” In my opinion, the quality of corporate governance at Lloyds Banking Group or any of its affiliate companies, was anything but high quality. And that is fairly self explanatory by the the many and varied accusations levied at LBG. For example, the customer complaints as reported in the Telegraph:

The ombudsman said Lloyds Banking Group was the most complained-about business group in 2013.” http://www.telegraph.co.uk/finance/personalfinance/money-saving-tips/10674042/Financial-Ombudsman-reports-record-complaints.html

And the latest massive fines levied on LBG for rigging LIBOR:

The Bank of England (BoE) governor has warned Lloyds Banking Group that “clearly unlawful” conduct over fee manipulation may amount to criminal behaviour as it was fined more than £200m”http://news.sky.com/story/1308901/lloyds-risks-criminal-action-in-rigging-case

Or the way it continues to mistreat its staff and persuade them to mistreat its customers:

Lloyds is continuing to pressurise staff to mis-sell credit cards, loans and insurance, a leaked email has revealed – just months after the bank was fined £28million for promoting a ruthless sales culture.” http://www.dailymail.co.uk/news/article-2721448/Secret-email-shows-Lloyds-pressures-threatens-staff-sales-just-months-fined-28m-mis-selling.html

And all of that is over and above the number of shareholders and investors waiting to sue Lloyds Banking Group over the merger with HBOS, the rights issue or just ripping them off in general.

I fail to see the logic of making the man who was chair of a clearly dysfunctional bank right up to March 2014, the new chair of an ‘independent’ body responsible for overseeing good ‘corporate governance’ in May 2014. And to top it off, he’s now the chair of a division of JP Morgan whose ‘high standards’ in corporate governance, beggar belief:

US bank JP Morgan Chase has agreed to a record $13bn (£8bn) settlement with US authorities for misleading investors during the housing crisis. It is the largest settlement ever between the US government and a corporation.

The bank acknowledged it made “serious misrepresentations to the public”, but said it did not violate US laws.” http://www.bbc.co.uk/news/business-25009683

To me, these latest appointments for Sir Win are not just the normal ‘revolving door’ scenario, this time the door has spun off its hinges and is now endlessly spinning at the gateway of La La Land. And, as if this could not get any more illogical, I checked out the other Board members of the FRC and found former members of KPMG and PwC, a managing partner at Clifford Chance, a former MD at JP Morgan, a retired head of E&Y, the Chief Executive of Standard Life and the former Deputy Chair of Barclays, who is now Chair of Legal and General. I kid you not, these are the people who will keep our major companies, corporations and their auditors in check.

Are we ever going to see this madness stop?

And of course I have my own personal reasons for doubting Sir Win’s ability to preserve ethical or high standards. Something to do with the 3 D’s – delay, deny, dilute for 3 years, then a criminal investigation for the next 4 years and a false bank account paying a £1000+ per hour lawyer to ensure (amongst other unethical things) my family were homeless. But that will all come out in the wash.