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!


AbogadoNZ said...

Thank you for the succinct explanation Rowan. It will be interesting to see if the mud sticks or whether some grubby back room deal is put together to avoid criminal liability. One issue I should like to see is how the ordinary pension funds who unwittingly invested in Barclays (and others) stand. It would appear that trough LIBOR manipulation and 'mis-selling' of PPI who is to be held to account. Surely if both can be sheeted back to management then the prospect of personal liability arises. Any views?

Rowan Bosworth-Davies said...

It would seem to me that with any investment, if it can be shown that if the manner of the investment model, in whole or in part, is tainted by criminality, then the whole product is tainted. If it can be demonstrated that the incitement or the guiding hand behind the criminality belongs to the a member of the management team, then by default, a personal liability must arise. Both the mis-selling and the manipulation are crimes, we are both id idem on that, but I fear we will need the SFO to bring a successful prosecution. That, or a private prosecution brought by a group of investors who are willing to fund the case on a 'class' basis, ie, as a private prosecution. Not impossible, but difficult as I suspect the AG's office would then remove it from the private sphere, hand it to the CPS with orders to kill it! Call me cynical!

AbogadoNZ said...

Thanks Rowan - Why am I not surprised at your observation on the private prosecution route. Perhaps there is one glimmer of hope in that a well funded 'class' action could buy some publicity along the way making the AGs position difficult. Worth a punt... Ashley

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The Fatsnacker said...

Barclays at it again


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David Darten said...

I think with recent developments that has brought fear and trepidation to the rich and mighty while leaving the poor and less-privilledged mashed and squashed; it might be worth the government verifying the accounts and audits of Barclays to save us more sorrows.

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