Tuesday, October 30, 2012

Will a High Court Judge finally drive the sharpened stake through Barclays' cold dark heart?

The real truth about Barclays' organised criminal activities, just in the manipulation of LIBOR alone, is now finally starting to become clear, and this raises a vast number of ramifications for all the other criminal banking enterprises involved in the LIBOR rigging scandal.

It is to be hoped that a large number of Barclays' financial manipulators, soon to be named publicly in the High Court action, are beginning to feel the ground becoming very unstable under their feet. If I were involved in any of these cases, I would already be briefing my lawyers that I wanted a deal from the SFO, secure in the knowledge that the price of such an opportunity was a full and frank disclosure of the names of my senior management inside Barclays, and the part they played in the serial abuse of LIBOR.

A major civil action is being brought against Barclays by Guardian Care Homes, whose lawsuit is seen as a major test case for LIBOR-rigging claims. The decision of the Court to allow the case to go forward to trial, now potentially opens the door to billions of pounds of further legal actions against Barclays and other crooked banks involved in the rate-setting scandal.

The Guardian Care Homes’ claims against Barclays over mis-sold swaps, designed to protect the company against rises in interest rates, amount to about £38m. Barclays faced a preliminary hearing, ahead of a trial, over allegations it mis-sold to a care home group complex interest rate derivatives that were in turn based on false Libor rates. It is alleged that the creation of the false rates through Libor-rigging at Barclays inflated the cost of the swaps to the company. The care home group has already settled a similar swaps claim against Lloyds Banking Group for an undisclosed sum.

Barclays, with their usual brand of arrogance combined with bully-boy tactics responded by saying; '... This business had a suite of advisors and a lot of financial experience and skill in-house. We understand that (the plaintiffs) entered into their swaps with sufficient understanding to exercise their own judgment as to whether the products would meet its business objectives. They are a significant business, which owes Barclays £70m. We do not believe the case has merit and will defend it.” 

Such phrases are very common from large financial institutions, particularly when they are looking down the barrel of the gun, so expect nothing else.

But the runes don't look very good for Barclays right now.

The bank was given a torrid time at the High Court in London on Monday by Lord Justice Flaux, who claimed that Barclays was '...intentionally trying to hide the true scale of the Libor scandal...'

This is an amazing statement from an experienced Judge at the start of a trial and reflects the parlous state of the defence raised by Barclays and their lawyers, which clearly got under the skin of a very experienced High Court Judge.

The Judge accused the bank of “misleading” customers. Allowing the case to continue to trial, the judge described the bank’s attempts to dismiss the Libor aspects of the care home operator’s claim as “shadow boxing” and said they were “doomed to fail”.

I really don't know when I have ever heard such a robust dismissal of a defendant's defence at a pre-trial hearing. The Judge was effectively calling Barclays a bunch of fraudsters and liars, as the description of the act of 'misleading' customers is an allegation that the bank had behaved fraudulently.

But the Judge did not stop there, and over the course of a day-long hearing, he repeatedly rejected Barclays’ objections and said that notwithstanding the pre-trial disclosures already made by Barclays, that the bank would be forced from next month to start to disclose further potentially embarrassing details, such as the identities of staff implicated in Libor manipulation. With exquisite frankness and an absence of disingenuousness, he said;

“...[It] just seems perfectly obvious... that the people responsible for giving those instructions [to manipulate Libor] must have known customers were being misled,” he said.

The QC, representing Guardian Care Homes, which has more than 30 care homes around the country, told the hearing that the disclosures received so far from the bank were “likely to be the tip of the iceberg” and that the case would go to “the heart of the management of Barclays”. He continued with an observation that many people have come to learn about Barclays, to their very great cost. “...Barclays seeks to serve up its own version of the facts, a sanitised version..,”  he said.

Barclays could now be forced to release hundreds of thousands of emails connected to attempts to rig Libor, demonstrating that the bank knowingly sold interest rate derivatives while manipulating the world’s key borrowing rate. What would make it even more piquant is that that disclosure could lead to a whole series of as yet unidentified senior bankers connected to the scandal being named in court when the case comes to trial next year.

Now that would really bring on the pains because they could then all be arrested by the SFO, once the details of their involvement had been outlined in Court. This would solve so much time and trouble, and they could then be invited to consider their position as to whether they wanted to play hard-ball, or roll over and engineer a plea deal! I mean, selling interest rate derivatives at the same time as you are busily manipulating the very underlying interest rate structure, a clear case of 'heads I win, tails you lose' brings a whole new meaning to the phrase 'conspiracy to defraud', and takes the whole scam into a new dimension of criminality!

There are so many ordinary people who have been screwed over by the Barclays Organised Crime family, and I am certain that this news of their arch enemy being slapped down by the Judge will have gladdened their hearts. It is to be hoped that the new revelations will reach right up into the top floor suites and name the guilty men!

The British Government has repeatedly failed to pin the banking bastards down because they have relied too much, and believed too many of the lies ritually trotted out by the suits; while the British people have been so poorly protected by the pathetic regulatory regime that has been allowed to masquerade as a meaningful interface between the banks and the public.

And pathetic they have truly been. The PPI fraud scandals which all took place on their watch have still not been settled, and despite the fact that the figures for monies being set aside to recompense losers are now admitted to be over £10 billion owed by UK banks, it is obvious no lessons have been learned.

It is now reported this week that after a reversal by the Financial Ombudsman Service of two decisions not to award compensation to victims, banks could now face thousands more additional claims from small businesses over more fraudulent behaviour, through the mis-selling of the interest rate swaps. Banks, including all of Britain’s major high street lenders could now be hit with a flurry of further claims that could potentially cost them millions of pounds after the surprise FOS judgements. In findings published this week, two unnamed banks were ordered to pay hundreds of thousands of pounds in compensation to two customers mis-sold interest rate swaps.

In one case alone, the new FOS verdict recommends the lender pay compensation that could cost it more than £500,000. Eleven banks, including the usual suspects, Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland, have signed up to a Financial Services Authority redress scheme for swap mis-selling.

Giving evidence to the Treasury Select Committee this week, Sir Donald Cruickshank, who has carried out several reviews into the banking industry for previous governments, said the recent Libor-rigging scandal represented only the “tip of the iceberg” of the problems facing lenders.

Guto Bebb, a Conservative MP said the FOS judgement showed the new scandal could be “bigger than PPI ”, which has already cost the industry more than £10bn.

“The finding that banks are responsible for the advice they give is very significant and represents a complete change from the 'buyer beware’ approach previously taken,” said Mr Bebb.

Barclays has made the largest provision against swap mis-selling claims, putting aside £450m to pay compensation, while HSBC and RBS have each made smaller provisions. Lloyds has said it does not expect the costs of the scandal to be “material”.

The FSA currently estimates more than 40,000 swaps have been sold. Hector Sants, the former chief executive of the FSA, said he wished “bankers had been more honest” as he complained that many senior industry executives had been “self-delusional” about the risks their firms were taking.

More money set aside to compensate swaps fraud will mean reduced profits, and therefore reduced tax revenues for UK plc, as I reported only last week! But yet no-one in the Regulatory Establishment has been called to task for this wholesale failure to protect British public interests against this tidal wave of organised crime. No one has been challenged and asked 'what the hell were you doing while all this criminality was taking place'. No-one's resignation has been urged, at least not publicly, and no-one inside the regulatory agency has apparently been disciplined. When it comes to dealing with the 'too big to fail, too big to jail banks', it is clearly no point hoping that the FSA will do anything!

So we must rely on the good sense and the sharp intellect of a High Court Judge who has the power to make demands that Barclays cannot just ignore, in the same way as they have repeatedly ignored the laws designed to bring controls to fraud, sanctions breaking and money laundering. The Judge remains our last defender of decency, truth and morals and we must all hope that he will be the man to drive the sharpened stake through the dark heart of the great vampire bank that has sucked the life-blood out of so many!

Sunday, October 28, 2012

Jobs for the boys and girls at the FSA!

Regular readers of this blog will know that I have long been very critical of the failure of the FSA to police the financial markets effectively!

I have never tried to disguise my contempt for the way in which the lead regulator has consistently failed to use their prosecutorial powers to bring actions against financial criminals. 

I am unrepentant in my firmly-held beliefs that only strategically-targeted prosecutions brought against some of the most egregious organised crooks and Mafiosi who work in the City will work to stop them. 

It would have a salutary impact upon the widespread incidence of criminal conduct which has been exposed in the recent examples of organised theft, fraud and money laundering, and perpetrated by some of the biggest names in the banking sector!

Criminalising the bastards is the only way to take them down, and exclude them from the financial sector. It is a solution whose time came of age a long time ago, and I don't know what is stopping it being used aggressively, remorselessly and with maximum prejudice. I think it is a class issue and too many people in the regulatory sector come from the same social background, and they are frightened to exercise their powers too effectively for fear of being excluded from the gilded job opportunities that await former regulators in the banks and the Big 4 consultancies if they don't rock the boat too much!

I have long wondered at the reasons behind this wholesale lack of moral courage and ambition to go after the biggest criminals and to bring them down. When I was at the Fraud Squad, our primary aim was to go for the most high-profiled crooks we could set our sights on! The FSA was tasked with the job of taking down financial criminals from its earliest days, and it has had the powers to prevent financial crime and to prosecute market manipulators, insider dealers and money launderers since 2001.

For many years since its inception, the FSA has routinely ignored the responsibility given to it by Parliament. In 1998 I was commissioned to write a review for H.M.Treasury, examining the state of money laundering controls in the London markets. In the course of so doing I was able to interview a number of senior officials from the putative FSA about the way in which they would use their new powers to deal with financial crime. One official said to me;

“…There is an anxiety about the new criminal functions which we are being tasked to accept…various elements such as insider dealing, market manipulation, etc, all tend to colour our internal philosophy towards the question of conducting prosecutions…you really should understand, because of the difficulties associated with obtaining convictions in the criminal courts, there is no unswerving acceptance of the need for wholesale prosecution powers…”

In other words, there was not going to be any serious policy of bringing prosecutions if the FSA could help it!

I have wondered in the past whether the FSA was really serious about financial crime, because they did not seem to invest any serious time or effort into formulating any meaningful response to its existence.

I was once approached at a public conference by a young German woman who asked me if she could have a copy of my paper which I had just presented.  I asked her why she wanted it and she told me that she had been seconded to the FSA from Goldman Sachs for a year's sabbatical. The FSA had entrusted her with formulating their Financial Crime policy, but knowing nothing about financial crime, she was going to every conference she could find and blagging copies of papers she had listened to which she thought might be useful to her.

I rang her manager and suggested that the FSA hire me for a couple of weeks to come in and teach this young woman what she needed to know about financial crime so that she could make a genuinely valid contribution to the debate. His answer was interesting. He said;

'...Why on earth would be bother to consult you? If we need any low-level consulting of this kind we can get it all for free from one of the Big 4 consulting firms. They do it for nothing for us because they like to be privy to our thinking...'

That put me firmly in my place!

I have written many times that proper criminal prosecutions are the only way to ensure that the financial sector will ever toe the line. Anything else is just window dressing. Why should financial practitioners who steal their client's money or defraud them by mis-selling, or who manipulate the LIBOR market to the financial detriment of others, be allowed to walk away from the consequences of their actions without any meaningful penalty?

I have presented strong written evidence demonstrating that criminal prosecution contains the greatest exclusionary impact for wrong-doers and means that they can never come back to their former stamping grounds, because their former business partners will not do business with them. So why does the FSA continue to focus on fines and regulatory penalties for serial offenders, which they know the business sector does not fear or respect?

One answer which has occurred to me is that perhaps the people who are employed to enforce the financial crime criminal agenda inside the FSA are simply not competent enough, or perhaps lack specific criminal investigatory experience, to enable them to know how to go about dealing with these criminals. Perhaps they feel inhibited by their lack of knowledge and skills to be able to take on and face down these scumbags.

Make no mistake, going up against a professional financial criminal, particularly if he has a solicitor present, requires good knowledge, sharp skills and a lot of moral courage. You have to first know how to handle the situation where the bad guy is going to attempt to needle you and get under your skin, suggesting that you are a financial incompetent who doesn't understand the arcane rules of his market. You have to know how to give as good as you get and take the initiative so he never gets the upper hand!

He is going to try and make you feel small, so that even you begin to doubt yourself, and you must know how to get under his skin and past his guard if you are going to be effective.

You have to know how to deal with a suspect when he has to be cautioned and how to conduct an interview that will be admissible later on in Court and won't get thrown out because you missed one of the many myriad rules of conduct for the treatment of suspected persons.

All these skills come with time, repeated experiences and many court appearances. You don't just acquire them by osmosis, copying other's copies of power-point, or watching old repeat episodes of Inspector Morse.

A properly trained detective, who is one of the very few people fully equipped to deal with criminals, spends his or her entire career studying the composition and psychology of the criminogenic personality, and all will admit that it is a never-ending learning curve!

Just because someone is a solicitor does not mean that they are going to have the skills necessary for these requirements. Of the solicitors in the regulatory milieu, the vast percentage of them undertook their training in City commercial firms, where they specialised in civil law. Criminal law is still looked down upon in many law firms inside the Square Mile, although some have begun to develop more wide-ranging regulatory/criminal practices as more and more of their natural client base find themselves potentially falling foul of the criminal law.

I worked in a major City law firm for ten years advising and dealing with financial criminality, and most of the solicitors I met and worked with had forgotten any of the criminal law they had ever studied in their first year at university. Few of them had any knowledge at all of the many criminal offences which make up the range of offences most often committed by the fat cat community!

So, with this thought in mind, I decided to look at the FSA financial crime team and see what qualifications they could muster between them to demonstrate their ability to deal with full-on criminals! I thought that they must at least have someone who may just have worked in the police or at SOCA or perhaps NCIS in the old days!

There is nothing secret about the names involved, they can be found on the FSA office chart which is freely available on the Web! I have used the edition dated September 2012 so I assume it is reasonably accurate.

Tracey McDermott has a recently been confirmed as the new Director of the Enforcement and Financial Crime Division. Ms McDermott is a former solicitor in a City practice and has been with the FSA since 2001. She was acting Head for a year after Margaret Cole, another lawyer, resigned, and she has had some successes in securing convictions for insider dealing, while other cases are pending.  She will also claim success for fining three small banks for failures in their Money Laundering administrative provisions, cases arising out of the FSA report of June 2011

However, her willingness to think outside the box in criminal matters and her faulty interpretation in this area of expertise was tested quite strongly when she gave evidence in front of the House of Commons Treasury Select Committee on 16th July 2012, investigating the LIBOR scandals.

She was pinned on the ropes by David Ruffley, Conservative M.P for Bury St Edmunds, who pressed her on why the FSA did not act as a prosecutor in the LIBOR case against Barclays. Ms McDermott replied that it was not the FSA’s area of expertise to bring such cases and that a discussion usually takes place with the relevant authorities who might bring a prosecution.

As an answer it revealed a lack of rigour, and indeed was not wholly factually correct.  David Ruffley revealed that in contrast to the FSA stance that it did not have the powers to pursue criminal investigations into such wrongdoing, some of the committee members had received senior counsel advice that that was not the case and that the FSA could indeed have pursued criminal probes under legislation including the 1968 Theft Act or the 2006 Fraud Act.
Ms McDermott replied that the regulator did not have a general power to prosecute or investigate criminal wrongdoing but that it could conceivably have prosecuted as a “private prosecutor”. This narrow interpretation of the FSA role was later criticised by the Select Committee who indicated that the FSA had an overriding responsibility to prevent crime in the financial sector, and that taking action against Barclays for this crime fell within that category.
Another public document which deserves greater scrutiny however is the FSA Financial Crime Newsletter dated October 2012, Issue 16.
In this document Ms McDermott gives a fairly laudatory report on the workings of her Division, for which, no doubt she may be forgiven, after all, if she doesn't, who will?  What is interesting however is the announcement that a gentleman called Bob Ferguson is taking extended leave from his role of Head of Department for Financial Crime and Intelligence, and who his replacement will be.
Mr Ferguson it transpires is an academic layer who holds a visiting professorship at Queen Mary College, University of London. He has been in regulation since joining the Securities and Investments Board in 1987, and has been a career regulator ever since. While he has a fine pedigree as a theoretical lawyer specialising in regulatory law, I can see no evidence from my researches that he has ever undertaken any criminal investigations or dealt with any financial criminals in his career. He has helped to formulate the FSA's handbook of Rules and Guidance and led on the development of the FSA Principles. For the last five years he has been involved in the build up of the FSA's financial crime and intelligence work, and we all know just how forceful has been the FSA response to financial crime in that time. I mean no disrespect to Mr Ferguson personally, no doubt his work has made a meaningful and significant contribution to deterring financial crime in the UK!
So, who is replacing him?
Step forward Sharon Campbell.
Now, I know very little about Ms Campbell and I can find very little out about her. For all I know, she may be highly skilled and trained in financial crime investigation and interdiction. She may have studied financial crime methodology as part of a criminology course at University. She may have served with distinction in a police force, MI5, H.M.R.C, or H.M Treasury, investigating serious financial crime and money laundering. She may have been part of the FATF specialising in AML interdiction best practice, and she may have huge competence in criminal psychology. She may have travelled abroad to assist foreign governments implement AML laws and regulations, she may have taught and mentored foreign police agencies and financial intelligence units.
She may have all or any of these skills, but if she has, we are not told. So we have to make do with such information as can be dredged up from publicly-available sources.
In her LinkedIn entry, Ms Campbell advises us that she attended Geoffrey Chaucer (school?) from 1981-1988.
From 2011 to September 2012 she was Head of the Department for Authorisations.
Her previous role was as Head of Department for the Central Analysis & Reporting Department.  

Prior to this, She was Manager of the Retail Intermediaries & Mortgage Sector team, mortgage intermediary supervisors and for leading a team with responsibility for a programme of large, cross-FSA initiatives.

Before joining the FSA, she had various roles with companies in the financial services industry, including sales and sales management, compliance and programme management roles for various companies, including HBOS and Zurich Financial Services.

In September 2012 she was appointed as Head of Financial Crime and Intelligence?
One of the issues which repeatedly raises itself during debate about those who work within the FSA (soon to be FCA), is the apparent degree of ease with which they are allowed to switch between roles, moving from one job to another.
A recent series of comments on the Money Market website demonstrate what ordinary members of the public feel about this game of musical chairs that goes on all the time in the FSA. When talking about another job change in the Department of Retail Enforcement, the following comments were posted.
'...No mention of salary or performance bonus structure. I have every faith in the remuneration committee to see him alright. It's not real money in Quangoland...'
'...Would have been nice to see the appointment go to someone outside the FSA  rather than from the same family. I think someone needs to open the windows at Canary Wharf to let in some fresh air, it must be quite thick by now with the smell of all those snouts in the trough...'
'...Have just sent an FOI request to the FSA as to whether the post was advertised externally, if there were any external candidates shortlisted. Basically it was a shoe-in for the trough merchants in-house...'
'...I think this is disgusting and just goes to show that re-arranging the letters above the door will not make any difference come January 13th. Same old people making the same old mistakes, brings a whole new meaning to desk share, must be fun being able to find a new desk when the music stops. " Oh look, I'm head of retail enforcement"...'
Of course, it may well be that these people are the best there is for the role on offer, and that no amount of diligent searching and public advertisement will identify someone who might just have similar, or dare we say it, 'better' skills and experience! Or perhaps it is as I said earlier, they just don't care very much about financial crime and can't be bothered to look!

Wednesday, October 24, 2012

Deferred Prosecutions - more '...get out of jail free cards...' for the City mafias - When are this Government going to start taking city financial crime seriously?

I am so angry, I am finding it hard to restrain my otherwise genteel prose and not adopt some basic Anglo Saxon language instead.

I opened the newspaper this morning to be confronted with the strap-line '...Plea Bargains for UK...' The story opened;
'... The Government is to give the green light to the introduction of plea bargains in the prosecution of complex financial crime.
The Ministry of Justice is set to publish its response to consultation on “deferred prosecution agreements” the legal mechanism companies will be able to use to avoid prosecution for financial crimes such as bribery.
Legislation could follow as soon as early next year. Barry Vitou, partner at law-firm Pinsent Masons said: “There have been rumours for sometime that the Government is looking to accelerate the introductions of DPAs. It fits with the Government’s crime agenda it is now pursuing.”
It is assumed any new law will mimic the US model. The law allows companies to agree a deal with prosecutors, including paying a fine and setting remedial action, in return for avoiding prosecution...'
If this discredited Government ever wanted to be able to dispel the damaging impression that they were too close to the organised criminals and the gangsters who run the City of London; that they were still captured, financially and politically by the disgusting vested interests who squeeze the billions of pounds out of the sleazy funds that daily flow through the financial sewers of the London markets; that they protect the interests of those who benefit from the vile profits from money laundering, Bribery and Corruption on a global scale, foreign tax evasion, or home-bred tax avoidance for corporate entities who thumb their nose at British Corporation Taxes; or those who process the uncountable billions of dollars, pounds and euros that are generated by the global drug barons and which have made the City of London economically drug dependent, they should not have announced this specific piece of criminal justice policy right now.
Let us dispel one lie right away. What is proposed is not 'plea bargaining' by any stretch of the criminal imagination. If you want to give it a name, then call it by what it truly is and that is a craven capitulation to the vested interests of the financial sector, who have just been given another 'get out of jail free' card by this most feeble of Governments.
This proposal is 'Prosecution Avoidance', even the press release says so. It is a means of not being prosecuted for major crimes, how on earth can this be called 'plea bargaining'?
Plea bargaining takes place when criminal charges have been brought, the defendant charged by a prosecutor, and the defendant is now at a stage of the process when he is confronted with the full understanding of the gravity of the indictment against him, for which he will be tried.
He is then invited to indicate which charges he will be willing to plead guilty to immediately, having received an indication from the prosecution of the amount of jail time they are going to invite the judge to accept as a fair and just outcome of the plea agreement. The defendant knows he is going to jail as a convicted criminal, he is now merely negotiating the amount of time he has to serve!
Plea bargaining is something I have been advocating for some time, having seen how effectively it could be used in the US courts, particularly against white collar criminals. I studied plea bargaining in the US courts while travelling on a Winston Churchill Travelling Fellowship, and the topic of my study with which I was expected to comply was '...Methods and systems designed to make Fraud trials more effective in the UK...'
I studied plea bargaining in the Federal Courts in Washington, and in two separate State courts in Pennsylvania and in New York. I sat with the judges on the Bench and was given a completely free rein to interview Judges, prosecutors, both federal and district attorneys, defence attorneys, police officers, and Court administrators, and I observed the plea bargaining process first hand in a large number of trials.
Upon my return to England I completed a full report of my findings which were circulated around Whitehall, the SFO, the Treasury, the AG's Office, the Bar Council, and the Law Society. Upon submission, my report disappeared into a legal black hole and I never heard anything about it again! Nevertheless, it was there to be used if so desired and it had the full approval of the Manhattan D.A.s office as an accurate exemplar of plea bargaining.
So, I am not going to accept the casual use of the suggestion that what is proposed here is a rigorous 'plea bargaining' process, because it is not. The use of this process-specific phrase is a typical piece of British chicanery, emanating from some weasel-mouthed civil servants in the Department of Justice, who have taken it upon themselves to use this honourable phrase to give the impression that the British are about to take white collar crime seriously.
Mark my words, as this debate continues we will hear a lot more of this big lie being spread about, that this is an effective and just way of dealing with white collar crime cases. We will be faced with more lies when we are told that this policy demonstrates that the Government is illustrating its toughness in going after the major white collar criminals, and dealing with them in a draconian manner. They will spin the effect of this law, they will dissemble, they will lie, they will float a package of untruths and distortions about this policy, and they will say how they are now getting really tough and prosecuting more white collar criminals.
Well don't believe a word of it, because it is all total bollocks!
The Government is talking about introducing what are called 'Deferred Prosecution Agreements' (DPA). These are yet another soft-option, hire purchase equivalent for the fat cats!
Today, Justice Minister Damian Green started the bullshit smothering process when he said that the new arrangements would give prosecutors an "effective new tool" to tackle economic crime.
"Fraud alone is estimated to cost the UK £73 billion each year, yet far too few serious cases are brought to justice,"  he said. "It is clear we must find new and better ways of ensuring organisations who commit criminal wrongdoing do not get away with it. DPAs... will ensure that more unacceptable corporate behaviour is dealt with including through substantial penalties, proper reparation to victims and measures to prevent future wrongdoing."
The new DPAs will allow organisations to voluntarily admit to wrongdoing and resolve to make things right. Where a prosecutor, such as the Crown Prosecution Service (CPS) or Serious Fraud Office (SFO) agrees that a DPA is an appropriate course of action, it will be able to defer prosecution in exchange for a range of stringent conditions.
The agreement will be made in open court and details of the wrongdoing and sanctions published. If the prosecutor is satisfied that the organisation has fulfilled its obligations by the end of the deferral period there will be no prosecution, but if the conditions are not met then the organisation could still be prosecuted.
This is just the biggest load of unadulterated crap! The perpetrator has nothing to lose, and everything to gain. The bank isn't going to be prosecuted, they have successfully avoided such an outcome, so what else could they possibly want?
The perpetrator, (well, in reality his slippery lawyers, all of whom will profit mightily from these proposals, a feature which will make their adoption by the snooty 'Magic Circle' of City Solicitors far more easy to effect, because the whole process will not mean ultimate criminalisation, so they won't have to get their lily-white hands grubby dealing with criminals) will effectively be allowed to determine the outcome of the proceedings, in consultation with the prosecutors.
A DPA is a wonderful Christmas present for a lazy prosecutor, because he will not even have to worry about going into court to run a contested case, so it will suit the criminal law illiterates inside the regulatory agencies, who will benefit again because they can now start showing the number of DPAs as part of their commitment to firmer regulation.
This process is so transparently corrupt and dishonest it makes me sick with anger!
DPAs will now become the de facto benchmark for dealing with City financial crime. The banks and the financiers are going to have a field day. They are willing to pay fines quite happily; they pay compensation quite happily; they will pay costs quite happily, because it doesn't  come out of their pockets, so it doesn't hurt them one iota. The financial penalties only hit their shareholders, so it does not matter, and who cares anyway!
They will agree to any proposals a prosecutor asks for, because it will only mean throwing other people's money at the remedial requirements. They will sit back, nod their heads, commit to everything they are asked, and then get on with the business of engineering more financial crimes.
Oh, and don't think for one minute that the likelihood of their being prosecuted at some stage in the future if they don't behave, holds any basis of reality, cos' it just ain't going to happen! The passage of time, helps witnesses go missing, forget their evidence, lose exhibits, and generally make the reality of a lawyer-backed application for a dismissal of all charges so much more likely.
This truly is one of the most spineless and craven actions by this increasingly discredited Government. To announce this total cop-out of all levels of responsibility for the prosecution of financial crime in the City, at exactly the same time as the Prime Minister is talking big about the need to get tougher with ordinary criminals, is nothing more than the purest hypocrisy.
It's all about being hard on working class criminals because that gets votes, while letting the City off scot-free. Every time the FCA comes up against a piece of organised crime in the financial sector, the perpetrator's lawyers will be straight on the phone talking sweetly about a DPA, because otherwise, '...our clients will reserve their rights and will fight you tooth and nail, and it will take you years and huge costs just to come up with some charges with which you will then have to go to court and roll the dice...'
Take it from me, the FCA will roll over every time, and offer a DPA. The banks will accept it because it means that no-one ends up with a criminal conviction, (which as we now know, is the only thing they fear), and everyone lives to defraud another day!
What makes it worse is that the regulator and the government will spin this dishonest process as being a meaningful effort to combat City crime, while all the time, the frauds, the rip-offs, the money laundering, the insider dealing, the bribing, the corrupt practices, the facilitation of the needs of the dodgy foreign dictators and their blood money will continue.
This such an awful betrayal of ordinary working people who have been repeatedly fucked over by the criminal British banking system, that I am lost for the words to describe how I truly feel. It is symptomatic of this Government and the way they have completely lost touch with the ordinary meaning of words and the truth of the banking scandals which continue to engulf this country.
There is only one way to combat City crime, and that is to prosecute the wrong-doers as hard and as often as possible, so the message gets through to every Mafiosi in the Square Mile. We need ambitious criminal prosecutors and tough specialist fraud  investigators who have proper criminal knowledge and understand the way the criminal mind works, and who are not scared, yes, let's use that word, who are not scared to take on the City establishments and their slippery servants with their weasel words, their mobile moralities and flexible integrity!
We did it in the 1970s and early 1980s, when I was at the Fraud Squad, and before the City fathers got scared of our nasty policing tactics and our honestly-held ambitions to lock up the City fat cats, and lobbied the Government and their Machiavellian civil servants, to clip our wings. I am proud that I was part of that era, and I feel sorry for my colleagues who are prevented from doing this good work today.
The Government can try and bull-shit us as much as they like. They can lie, and dissemble, and spin the truth as hard as they like about being tough on financial crime, but this piece of craven caving in to vested City interests isn't going to do it!

Monday, October 22, 2012

Why the financial regulatory regime in the UK has been so useless and how we could ensure that these people can no longer let us all down again in the future!

A number of readers of my recent blogs have commented upon my observations about the way in which the financial sector is regulated, and have asked why, if the organised criminality of the City is so blatant and so obvious, should more of the most egregious criminals not be prosecuted with more dynamism and effectiveness?

Viewers who watched my interview on the critical Max Keiser Report will recall Max Keiser's genuine annoyance at the way in which the criminals in the City appear to get away with the most serious offences, because the police are prohibited from going after them.

Max referred to them as 'financial terrorists', and challenged me to share his views. While I can sense the outrage in his arguments, I am a lawyer by training, a fraud detective by inclination still, and a financial criminologist through academic  discipline, and I know that phrases such as 'terrorist' and 'terrorism' have academic and juridical definitions which we mistake and mis-use at our peril.

For these reasons, I could not share his use of the phrase, but I am still happy to adopt the use of the phrases 'organised crime' and 'organised criminals' to define the people who engage in this institutionalised level of gross criminality within the financial sector! They behave in the same way as any mafia or organised crime enterprise, they obey the same codes of 'Omerta' and they have strictly hierarchical structures which tend to insulate the upper reaches of the organisation, and remove them from the more blatant exercises of criminality, allowing them deniability, while permitting them to profit from those excesses. For all these good reasons, I have no qualm in calling them what they are, taken together they are organised criminals; their institutions are mafias, and their top executives behave like gangland bosses.

Watching 'Roberto Diamante', Godfather of Barclays, giving his nauseating evidence to the Select Committee, while backed up by his consigliore's, getting all chummy and personal with the Committee Members, calling by their first names, and telling them how much he loved his banking 'family', reminded me of nothing so much as a scene which could have come direct from the 'Godfather'!

William Chambliss, an American criminologist put it this way;

‘...One of the reasons we fail to understand business crime is because we put crime into a category that is separate from normal business. Much crime does not fit into a separate category. It is primarily a business activity...’

When dealing with such people, it is necessary to confront them with the correct and proper tools and resources, and that is why I say that the present regime of financial regulation is useless, because in this country we have traditionally failed to adopt the proper mechanisms and employ the right people to go up against these criminals. And this is why we consistently fail!

For some reason which I have never understood, there is an accepted wisdom within the British administrative psyche that teaches that the only people who should be allowed to have any responsibility when it comes to dealing with those from the upper socio-economic class, are people who come from the same class and cultural background!

Quite how this piece of inspired lunacy was allowed to become embedded in the British sub-culture is hard to understand, but there it is,  as immutable as the laws of the Medes and the Persians!

As Edwin Sutherland, the original author of the phrase 'White Collar Crime' once put it so succinctly;

"...The behaviour of persons of respectability, from the upper socio-economic class, frequently exhibits all the essential attributes of crime, but that it is only rarely dealt with as such. This situation arose, he said, from a tendency for systems of criminal justice in Western societies to favour certain economically and politically powerful groups and to disfavour others, notably the poor and unskilled who comprise the bulk of the visible criminal population..."

So, when the agencies of social control like the Civil Service, the financial regulators or the agencies which provide for financial self-regulation come to hire their staff, they perennially hire people like themselves, 'one of us', a 'safe pair of hands', someone who isn't going to rock the boat.

The financial sector culture demands that they be treated wholly differently from ordinary criminals. indeed, in my experience, the financial sector and its compliance officers completely reject the concept that theirs is in any way a 'policing function'. They will deny on a stack of bibles any suggestion that their role is intended to provide any sort of policing control mechanism, and they refuse to adopt policing tactics. To make things worse, very few of them have any experience or knowledge of the definitions or workings of the criminal law.
This of course is a huge mistake, because the banksters they are regulating are behaving like criminals in every sense. If the people who are required to supervise their compliance with the law. don't know the wider law, then they are never going to be competent or capable at dealing with these professional criminals.

But they will never, ever, stop to consider hiring former senior detectives to be posted to these roles. It is something that just will not happen, because the police and the way in which they want to deal with the criminal class, doesn't fit nicely with the accepted way of dealing with these banksters and their satraps.

Detectives don't differentiate between classes of criminal, people who deliberately go out of their way to break the criminal law are viewed as criminals, regardless of the cut of their suit!

I experienced this first hand when I was head of investigations and enforcement at one of the UK's early self regulating organisations. I was hired by the chief executive who had known me when I was a detective, and he was very happy to employ my skills. But they were deeply resented by the other members of the Compliance Department, who were always accusing me of treating our members with scant regard for their status.

I couldn't have given a flying fuck for their status, I saw my function as protecting the interests of the investing public and if these criminals were intent on getting in my way, then my intention was to disabuse them of that idea pretty quickly. I used my professional detective skills to get the evidence we needed to discipline these criminals, and this became deeply resented, not only by those I put out of membership and thus out of business, but by my colleagues who felt that I was not giving them as much leeway as they felt that their membership allowed them.

When I pointed out that these people were stealing their client's money or cheating them out of what they were lawfully owed, offences which I always reported to the police at every occurrence, and for which I would give evidence, once they were charged, because I would have already acquired the necessary evidence, it became clear that my policies were considered to be unfair, and because I was adopting 'policing tactics', the other members of the Compliance Executive looked for ways of getting rid of me.

How we change this state of affairs, I do not know. I do know that employing lawyers whose only experience is in civil litigation is not the right way to go about acquiring the necessary skills needed to be able to deal with professional banksters.

Civil litigation is an entirely different set of skills from criminal prosecution, so hiring civil litigators is a waste of time, because they simply do not have the mental state of aggression needed to take on the biggest criminals. What we need are efficient and previously successful  prosecutors who have a deeply engrained knowledge of the criminal law, supported by former detective investigators who have the experience and skills for going after criminals, the more elevated, the better, and who enjoy taking them down and locking them up. But a broadly based knowledge of the criminal law and its implications is the primary requirement.

Look at the rubbish promulgated by Martin Wheatley and the FSA about the supposed absence of relevant criminal legislation to deal with the LIBOR scandals! As I have previously written, there are enough laws to go after the criminals for LIBOR offences, for PPI fraud, and for a whole raft of criminality, so let's get on with it.

If the Government were to adopt these proposals, bring in a retiring criminal Judge as CEO of the FCA, hire a leading criminal barrister as the Head of Enforcement, and bring in some decent former fraud detectives, none of whom would be frightened of going up against Chief Executives of banks, then we would begin to see a real change.

No sooner would rumours of bank scandals begin to surface, then these investigators would be in the banks, using their powers to seize evidence, arresting potential suspects, and undertaking searching and aggressive investigations. There wouldn't be any 'deferred prosecutions' or convenient little sweetheart deals, just paying a few fines while all the gangsters retained their profits and their dividends.

There would be aggressive charges laid to which the alleged perpetrators would be invited to nominate pleas at an early stage to mitigate the length of prison sentence they were going to serve if they were convicted. There would be huge personal fines, pension funds would be frozen and used to capitalise compensation or asset recovery actions.

In this way, the Government could begin to demonstrate a real commitment for going after city criminals and doing something proactive to start to put the City back on a fair and even footing.

None of this requires any change in the law; none of it requires any alteration of the existing regime. It just needs an exercise of the will to see the job done!