Wednesday, October 30, 2013

The secret plans for London - Why the financial crisis has in reality been a financial revolution

The financial crisis through which we have all suffered (by 'we' I mean the ordinary man and woman), will turn out to have been less of a crisis and more of a revolution.

Ironically, if you have been in a well-paying job, in banking, consulting, IT, head hunting, recruitment, or any of the adjunct functions which serve the City and the financial sector; or you have been in the professional classes, the law, auditing and accounting; or the tame and timid regulatory agencies, the financial crisis has not really caused much damage to you in the longer term.

Oh sure, you may not have drawn down quite such high bonuses as you were used to enjoying, but you have still been able to continue to live very comfortably. Interest rates have been the lowest they have been in any living memory, and they have remained at neo-negative rates for a long period of time. You have been enabled to trade up in your property purchases, borrowing significant sums of money, leveraged on your existing properties, and in so doing, you have enabled the property market to resist the ordinary impact of the crisis.

To a very large number of people however, the 'squeezed middle', those who are coming to the end of their immediate working lives, but who are still supporting elderly parents, as well as children who cannot find jobs; those who are still able to work and at the top of their skills ladder in terms of knowledge and experience, but who are deemed 'too old' to be employed by an ageist jobs market because they are over 55; those who have been made redundant at the wrong age and thus forcibly retired and who have been living on income from insufficient pensions, and who have watched while the government has squeezed the life out of community spending in the name of 'austerity'; those who work in teaching, nursing, policing, the fire service or any of the other vital municipal service provisions on which our communities rely so heavily, there is no end to the damage that the impact of the financial crisis is causing.

The important distinction here is that the very sector whose criminogenic behaviour caused the financial crisis in the first place, the shady banksters with their shoddy banking practices and their concomitant criminal banking activities; the legal services which were used to protect their interests when the criminal banks were confronted by angry clients who demanded redress; the complicit accountants who signed off on every-increasingly dubious audits, and who conspired to make the books balance and the figures look good; and the complicit regulators who looked the other way and became apologists for the wrong-doing of their sector, all these services continue to prosper and thrive.

We have observed the actions of a Parliamentary Commission on Banking Standards which has sat in judgement on the actions of those who wrought so much damage to the body financial, but what has really happened as a result of their deliberations?

Frankly, very little!

The real outcome of the financial crisis has been to cement in post those whose activities and actions did so much to damage the interests of a very large sector of the British people, and has, by so doing, enabled the whole rotten edifice to remain unreformed.

Take, as an example, the HBOS affair.

Back in April this year, the Parliamentary Commission on Banking Standards published its Fourth Report - ‘An accident waiting to happen’: The failure of HBOS.

Commenting on the publication of its Fourth Report, the Chairman of the Parliamentary Commission on Banking Standards, Andrew Tyrie MP, said:

"The HBOS story is one of catastrophic failures of management, governance and regulatory oversight.

The sums would never have added up: the Commission has estimated that, taken together, the losses incurred by the Corporate, International and Treasury divisions would have led to insolvency, regardless of funding and liquidity problems, had HBOS not been bailed out by both Lloyds and the taxpayer.

The Commission concluded that primary responsibility for these failures should lie with the former Chairman of HBOS, Lord Stevenson, and its former Chief Executives, Sir James Crosby and Andy Hornby.

Only Peter Cummings has faced regulatory sanction for HBOS’ failures. The Commission was surprised by this.

The Commission stated openly that It was unsatisfactory that the FSA appears to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the Approved Persons status elsewhere in the UK financial sector. The Commission has therefore asked the regulator to consider whether these individuals should be barred from undertaking any future role in the sector.

For the future, far more needs to be done. Those responsible for bank failures should be held more directly accountable for their actions and face sanction accordingly. The Commission will return to this issue in its Final Report.

The regulators also have a lot of explaining to do when it comes to their role earlier in the HBOS debacle. From 2004 up until the latter part of 2007, the FSA was ‘not so much the dog that didn’t bark as the dog barking up the wrong tree’.

The FSA responded favourably to a Treasury Committee request for a comprehensive report, similar to that prepared on RBS, not just into the failure of HBOS but also into the FSA’s own conduct. The Treasury Committee has appointed specialist advisers whose job will be to ensure that this work is done thoroughly..."

So, taken in the round, this means that a major bank collapsed because those with the responsibility to ensure that they should have done their job properly, failed to exercise their responsibilities properly, with the result that others had to be appointed to oversee their actions.

And the outcome has been to sweep the whole fucking mess under the carpet in a traditional British way of reconciling these scandals.Essentially, it has been decided that those responsible for the biggest banking crash in living memory, to say nothing of the resultant scams, frauds and other examples of financial skulduggery will not face any kind of scrutiny by regulators or government. The revolving door at the top will go round and former regulators will become bankers, accountants will become regulators, the most egregious will be allowed to slink away with their pensions and their pay-off's, while you and I will be ritually and righteously screwed!


Because I am slowly beginning to realise it is becoming clearer that the aftermath of the financial crash and its attendant outcomes was not just an accident waiting to happen. It was carefully thought-through by a group of powerful elites who realised that they could use the implications of the mess left behind by Gordon Brown and Ed Balls.

They could begin to dismantle the benefit culture ethos which had undeniably been allowed to spread like a virus under Brown. Brown believed that the City was bringing in the money because he wanted to believe the bullshit the City told him. He, in turn, extolled their actions in after-dinner speeches at the Mansion House, while spending public money like a man with no arms, until even he was forced to realise there was nothing left in the pot, as Liam Byrne so eloquently reminded his successor in post!

By driving out the poor, the indigent and the work-shy and relocating them to other useless towns and cities in the Midlands and the North, they would free-up a workforce in London who would be willing to work for limited or minimum wages and zero-hours contracts, made up very much of European immigrants driven to the UK by the awful financial conditions at home, ready and willing to service the new post-crisis economy planned for the new London.

In addition, their ambitions have begun a root and branch restructuring of London and the South East, turning the whole sector into an elite commercial and financial 'business' centre, coupled with a highly desirable residential venue of choice for the fantastically wealthy, who will want to use all the banking and financial services offered by the 'new City elites', provided by a new breed of 'ask no questions' lawyers and accountants, and protected by Boris Johnson's incessant promotion of the constantly parroted demand for foreign capital, of whatever nature and provenance, to find its home in London.

The London of the future is intended to become the leading global financial centre, which will become an offshore-haven in its own right for those with money (and there are plenty of them in other countries) to invest.

I have just returned from a business trip, which I shared with an architectural engineer. He was telling me of the vast number of new high-rise residential buildings (over 60 at the last count) that are being constructed in the centre of London. He talked about the number which, once completed, will stand completely empty, having been already purchased 'off plan' by wealthy foreign investors in China, Malaysia, the Middle East and India, who own them but will never live in them. They will stand permanently empty and idle, their windows bare, like huge stationary ghost-structures, a monument to greed and funny-money.

Should you be tempted to believe that I am exaggerating, I am going to quote extensively from an amazing article written by Michael Goldfarb, a writer whose most recent book is;

 '...Emancipation: How Liberating Europe's Jews From the Ghetto Led to Revolution and Renaissance...'

I hope he will forgive me for re-quoting from his piece here, but it is a superb illustration of what I have been trying to say.

Talking about the new property boom being driven by foreign investors, he says;

"...This is what happens when property in your city becomes a global reserve currency. For that is what property in London has become, first and foremost. The property market is no longer about people making a long-term investment in owning their shelter, but a place for the world's richest people to park their money at an annualised rate of return of around 10%. It has made my adopted hometown a no-go area for increasing numbers of the middle class.

According to Britain's Office for National Statistics, London house prices rose by 9.7% between July 2012 and July 2013. In the surrounding suburbs they rose by a mere 2.6%. The gap between London prices and those of the rest of the country is now at a historic high and there is only one way to explain it.

London houses and apartments are a form of money.

The reasons are simple to understand. In 2011, at the height of the eurozone crisis, citizens of the two countries at the epicentre of the cataclysm – Greece and Italy – bought £400m of London bricks and mortar. The Italian and Greek rich, fearing the single currency would collapse, got their money out of euros and parked it some place where government was relatively stable and the tax regime was gentle – very, very gentle. Considering that tax evasion in Italy and Greece was a significant contributory factor to their debt problems, it just seems grotesquely cynical to encourage this kind of behaviour.

But that's what Britain in general, and London in particular, does. The city is essentially a tax haven with great theatre, free museums and formidable dining. If you can demonstrate that you have a residence in another country, you are taxed only on your British earnings.

And the savings on property taxes are phenomenal. The property taxes on New York mayor Michael R. Bloomberg's $20m London home come to £2,143.30 a year. That's $3,430. Clearly, the mayor bought in at the right time. The Google executive chairman, Eric Schmidt, is reported to be house-hunting here – he's looking in the £30m (about $48m) price range. Yet he will pay a similar amount in property tax as Bloomberg does.

There are other facets of London real estate as a medium of exchange. British gross domestic product has yet to return to pre-crash levels, but the financial services industry has roared back. Banks are paying out big bonuses again, and anyone looking for a safe investment is getting into London property.

From the top of Parliament Hill, on Hampstead Heath, look eastward. Out around the Olympic Park and beyond you see clumps of high-rise apartment buildings sprouting like toadstools in a meadow after heavy rain. These aren't being built to meet the calamitous shortage of affordable family housing in the city; they are studio and one- or two-bedroom apartments.

The developments are financed by "off plan" buying. Bonus babies look at the blueprints and put their money down with no intention of living in what they've bought – just collecting decades of rent. And it's not just those who work in London's financial district, the City, who buy in. Hot money from China, Singapore, India and other countries with fast-growing economies and short traditions of good governance is pouring into London.

When I say property is money I mean it. An astonishing £83bn of properties were purchased in 2012 with no financing – all cash purchases. That's around $133bn.

The ripple effect of this frankly demented situation is felt all over town. The foreign rich and the City rich (there is some overlap) have made most of the centre of London unaffordable to any but their own kind.

The overall economy of Britain certainly doesn't justify these prices. Bank lending for businesses is flat, but mortgage lending? It's as if the whole British economy is based on housing speculation in the capital.

David Cameron's government seems to think that is the case. Cameron may be pursuing austerity policies elsewhere in the economy, doing virtually nothing to help subsidise employment or industry, but his government has just started a "help to buy" scheme. The government will guarantee up to 15% of the purchase price of a house up to £600,000 ($960,000), if you have a 5% down payment.

Now it is beginning to feel that the next phase of London's history will be one of transience, with no allegiance to the city. I wonder whether those just parking their money here by buying real estate will ever be able to provide the communal sensibility to help the city survive the inevitable shocks it will experience in years to come.

How this story will end doesn't bear thinking about. It seems a very reasonable bet, though, that those who use London property as just another form of money aren't thinking about it at all..."

Saturday, October 19, 2013

I have just discovered yet another reason for why I dislike George Osborne so much!

I really dislike the whole concept of George Osborne. I don't dislike him as a man, I don't know him, but I loathe his entire context, and what he represents.

His latest outburst when discussing his trip to China that 'Britain has lost its sense of ambition' and his calling on the country to 'up its game', is precisely the kind of insultingly elitist bullshit that really alienates vast numbers of people, and which really irritates me!

He probably wouldn't like me very much, if he knew me, but he doesn't.

Osborne is one of the old Anglo-Irish aristocracy, known in Ireland as the Ascendancy. He is the heir apparent to the Osborne baronetcy. He was educated at St Paul's School, London and Magdalen College, Oxford, where he was a member of the elite Bullingdon Club, before working for the Conservative Party as a researcher, special adviser, speechwriter and strategist. In 2005, he ran David Cameron's 's successful party-leadership campaign and was made Shadow Chancellor.

His father is Sir Peter Osborne, 17th Baronet,  who co-founded the firm of fabric and wallpapers designers Osborne & Little. His mother is Felicity Alexandra Loxton-Peacock, the daughter of artist Clarisse Loxton Peacock. His mother was a Labour voter, who worked for Amnesty International.

What I particularly dislike about Osborne's context is the fact that he represents a type and a class which we might have not unreasonably thought had died out of British politics.

In many ways, his whole 'raison' is a pastiche, a sort of cliché, a characterisation from a Bertie Wooster novel, a throwback to another era, a bit part in 'Brideshead Revisited'!

He has just got back from China, where he has been busily toadying up to the Chinese 'nomenclatura'!

Britain, as usual, has left it until the last minute to 'discover' the new China,  - the Germans and other nations have been building strong ties with China for some years -, and we must now parade our rather tattered credentials to make ourselves their new 'best friend'!

Osborne has come back with all the Sino-zeal of the newly evangelised missionary. He says;

"... “You cannot fail to be staggered by the scale of the economic progress and the building that’s happening all around you. It’s astonishing,” he said. 

“I feel both energised by a trip like this because there’s so much more Britain can be doing; I also feel a bit like, my God, we’ve really got to up our game as a country, and the whole of the West has to understand what is happening here in Asia.”

Benedict Brogan's piece in the Daily Telegraph today amplifies the new Osborne enthusiasms.

He describes a man who has observed the industrial and economic milestones that China has created in recent years, and who enthuses about them, using both the language and the idioms of the public school toff.

Suddenly, China is "...a country that left him “staggered” by its success, as he contemplates how Britain should rediscover its capacity for entrepreneurial dynamism..."

Note the emphasis on 'entrepeneurial dynamism'!

Brogan observes that "...His visit — which marked a thaw in relations after David Cameron’s meeting with the Dalai Lama — produced a wealth of useful advances for trade, notably landmark deals for making Britain a global centre for investment in China’s renminbi currency..."

Predictably, the City of London will offer its dubious financial services facilities to provide an offshore centre for untold numbers of currency speculators to trade the renminbi, a currency that will in the future prove to be an increasingly important payment mechanism. Quite how the Chinese will respond after they have been repeatedly fleeced by the City's army of currency spivs and wideboys is not reported.

What this facility will provide however, is an additional offshore market outside Hong Kong for China's criminal money launderers to utilise to move their criminal profits derived from the proceeds of drug trafficking, product counterfeiting, people smuggling, software piracy, and of course, vast swathes of political corruption.

The City of London will predictably not turn a hair, and indeed, it looks as if this new deal has already been given a kind of official seal of approval, arising out of Osborne's visit. What he has done of course is to open the London market up to yet another source of vast swathes of criminal and black money, but then he and his fellow toady, Bo-Jo (Boris Johnson), seem less concerned about that as long as the money continues to flood in to EC3!

No, Osborne was "...evidently galvanised by what he had seen and learnt, and itching to take on those who caution against engaging with the world’s largest dictatorship. Throughout, it seemed, China’s success stood as a reproach to Britain’s loss of ambition..."

And this is what I truly resent about Osborne and his class!

There is, it seems, this received political wisdom that we in the UK have suddenly lost all our ambition, we have become anaesthetised against wanting to be commercially and financially successful.

Nothing could be further from the truth. There are countless good, well-educated, young men and women in this country who are aching to get jobs, trying desperately to find work, any work, which will get them off the benefits treadmill. Just trying to get through the week is a big enough hurdle, never mind starting up a new business, or building an entrepreneurial ideal.

The problem with politicians, and particularly the posh toffs like Osborne, who have never missed a meal in their lives; who have never wondered how next week's rent would be paid; who have never had to decide whether to eat or get their shoes mended; is that they simply cannot understand what it is like to be so potless, that you would do anything rather than live in the way you are forced to.

It is all very well pontificating about the way "...China teach(es) us that we have lost our capacity for hard work? He points out the obvious cultural and political differences. “I’m not sure anyone in Britain would want to have imposed on them the Chinese work ethic,” he sneers. “But I do think there’s an ambition in the country and a sense of optimism and 'can do’ which our country had in the Victorian age and had at other points in our history.”

Yes, he finally makes the point. China has now reached the same stage as that of Britain in the Victorian era, with everything that entails.

Osborne still, it seems, wants to live in a twilight world where Britannia rules the waves, where the humble but deserving poor doff their caps to him and his ilk as they trundle by in their sumptuous carriages, and the plebs know their place!

He is reaching back to an age when Britain was the sweatshop of the Empire, where there was no universal right to education; where women did not have a vote; where there was no National Health Service; no Industrial safety requirements; no efforts to make the workplace a more humane environment; where miners died in their hundreds in huge pit accidents because their owners were too mean to put in the necessary means of providing pit safety; where the ordinary working man and woman had no political voice; where the State could not be challenged; and the most usual means of penal sanction for any crime worth more than a shilling was death by hanging. An age when political corruption was rife, and the political class was bought and sold at the hustings.

This is an age which he and his Cabinet friends can yearn for, and clearly still do, and bear in mind, every single one of these conditions is relevant to modern day life in China.

China is still among the most corrupt nations on the planet, and its people are kept in their place in a straightjacket of political repression. China does not recognise human rights, and it is not a democracy within the real meaning of the word.

Watchdog groups believe that actual judicial execution numbers greatly exceed officially recorded executions; in 2009, the Dui Ha Foundation estimated that 5,000 people were executed in China – far more than all other nations combined. The precise number of executions is regarded as a state secret.

The level of corruption in public life is breathtaking. A report from  the Carneigie Endowment for Peace reports that;

"...Though the Chinese government has more than 1,200 laws, rules, and directives against corruption, implementation is spotty and ineffective.  The odds of a corrupt official going to jail are less than three percent, making corruption a high-return, low-risk activity.  Even low-level officials have the opportunity to amass an illicit fortune of tens of millions of yuan.

The amount of money stolen through corruption scandals has risen exponentially since the 1980s.  Corruption in China is concentrated in sectors with extensive state involvement, such as infrastructure projects, real estate, government procurement, and financial services.  The absence of competitive political process and free press make these high-risk sectors susceptible to fraud, theft, kickbacks, and bribery.  The direct costs of corruption could be as much as $86 billion each year.

The indirect costs of corruption (efficiency losses; waste; and damage to the environment, public health, education, credibility and morale) are incalculable.  Corruption both undermines social stability (sparking tens of thousands of protests each year), and contributes to China’s environmental degradation, deterioration of social services, and the rising cost of health care, housing, and education.

China’s corruption also harms Western economic interests, particularly foreign investors who risk environmental, human rights, and financial liabilities, and must compete against rivals who engage in illegal practices to win business in China..." 

Osborne seeks to deflect any reference to this phenomenon. Brogan quotes him saying;

"...What does he say to those who fear China’s dark side? “We’ve got to start by understanding that China is an ancient civilisation with a long and proud history. If you start by understanding that and treating that with respect that’s a good place to begin.” China’s growth has lifted hundreds of millions out of poverty, he points out. It is sometimes easy to forget that within our lifetime it was a country of famine. “China is what it is. And we have to either be here or be nowhere.”

That may be true, that may be what we have to do, but let us not pretend that there is any virtue entailed by reverting to Victorian standards of business conduct.

In Victoria's era, we may have run an entrepreneurial Empire, but it was not difficult because it was based on a complete disregard for human rights in exactly the same way that China's social model works today. We should not lose sight of the fact that in doing business with China, the Chinese Government benefits enormously as well, because by being seen to be happily linked to the UK, it gives China international credibility which she might otherwise not enjoy.

We cannot ignore China's shortfallings, no matter how much money she dangles in our faces. The bankers can hardly wait to start providing trading services for the Chinese currency, but it was ever thus. We started out by turning the Chinese on to Opium, now we are going to provide them with even more efficient money laundering facilities. Commercial imperatives may predicate that we have to sit down at the same table with the Chinese, but we would do well to use a long spoon!

Friday, October 11, 2013

Why the SFO are not getting the convictions they should!

In a Reuters report on Monday 7th October 2013, the Serious Fraud Office (SFO) said that the law must be changed if critics want to see more companies in court for misconduct.

Serious Fraud Office Director David Green said he was constantly being compared unfavourably with U.S. enforcement agencies, which prosecute far more companies for fraud. 

Mr Green may feel not a little vexed at being compared with his US counterparts, but the US officers have powers that David Green can only dream about.

This is the seminal issue when we come to discuss prosecuting serious financial crime in the City - do we want to bring the fat-cats to justice, and I mean really bring the criminal bastards down to size - or are we merely going through the motions of the criminal justice process, and then standing down at the last minute and wringing our hands and saying how unfair it all is that we don't have all the powers we need?

Now I am not saying that David Green is a whinger, far from it, and I am really sure he wants to get some prosecutors and investigators around him who really want to take the fight to the enemy. This means finding men and women who are not going to do the usual, 'British' thing and be content to start the fight against the City criminals with one hand tied behind their backs.

No, what we need are some men and women with fire in their belly, who are sick and tired of the grave injustices being perpetrated in the name of criminal justice as far as the City fat cats are concerned, and who want to even up the score! We need young prosecutors who are hungry for promotion, who are not interested in playing by the conventional rules, and who are willing to start bringing some really unpleasant pressure on the organised criminals in suits who daily crowd into the City to commit financial crimes.

This is what happens in the United States, young prosecutors start off really wanting to stick the boot in, because in so doing, they make a name for themselves as good prosecutors, and this aids and assists their career prospects. In the UK, all too often young prosecutors see their role as a rather refined and gentlemanly one, where it is not considered  'good form' to go for the jugular, and where their role is a high-minded process!

The SFO (so it is claimed) faces a much higher burden of proof than U.S. agencies, having to show a company's board is complicit.

"The email trail has a habit of drying up at the middle management level," Green told an American Bar Association conference on white collar crime on Monday.

Of course it does, so what? There are other ways of obtaining evidence against those at the top of the organisation without worrying about email trails. Obviously the trail dries up at the middle management level, these people are not stupid. Senior management insulates itself against the every-day operations and decision methods, so as to be able to deny any association with any wrong-doing when it comes to light.

But, do we think they don't hear the gossip, when a trader in the dealing room suddenly pulls off a spectacular 'hit'. Do we think they aren't aware when some dope runs up an enormous loss. 

Sure, there are traders who can cover up for a while, but City dealing rooms and trading floors are hot-houses of gossip, rumour and innuendo, and everything is known at the end of the day. 

Does anyone seriously believe that Sgr Roberto Diamante and his capo-regimes didn't know about the LIBOR shenanigans?

The real trick about being a successful white-collar prosecutor is to treat every posh defendant as if he were the same as a Peckham drug-pusher - and expect him to behave in the same way - to hire the best shyster he can afford, to get the best brief; to splash his money around on pre-trial legal actions, trying to disrupt the prosecution's trial preparations; to find ways of buying false and perjured evidence; to interfere with witnesses; to make up false documents and to lie through his teeth in the witness box!

This means the prosecution must also find every nasty trick in the book to hit him with during the investigation, and adopt an outright refusal to 'play nice' with his solicitors.

David Green is adamant that; "If it is in the public interest for more corporate prosecutions, the test (of proof of complicity) must be lowered."

We shouldn't be worrying about this - it will take years and years to accomplish and the lawyers will fight tooth and nail to prevent it going through Parliament successfully!

There are other ways of dealing with these cases.

The British need to stop being so mealy-mouthed about investigating white-collar criminals, and begin to use other techniques.

We need to start learning again how to 'turn' potential defendants into witnesses. We did it back in the early 1980s, and it was hugely effective.

In the US, they invite a putative defendant to become a 'cooperating' witness, and they spell out to him the consequences of failing to cooperate with the prosecutors. He is offered a deal he would be a complete idiot to refuse. In return for clemency, he is expected to work with the prosecutors, to give evidence against his co-defendants, to engage in taped conversations with them in an attempt to entrap them into making admissions of guilt, etc.

A short extract from 'Insider Out', the book written by Dennis Levine, a major Insider Dealer, demonstrates just how the US system can work.

"...Liman (his lawyer) spelled out the situation for me. This was America. I had freedom of choice. One, I could plead not guilty and stand trial. But, I had no chance of winning. The prosecutors would probably convict me under RICO (The Racketeer and Corrupt Organisations Act), and throw me into prison for a long time, and, quite literally, confiscate all of my possessions and throw my family on the street. Two, I could plead guilty and refuse to cooperate, but I would have to plead to RICO. The consequences of choice number two, Liman said, were similar to those of choice number one. Three, I could agree to forfeiture of the proceeds of my trading and plead guilty to lesser charges, which the government would allow me to do, if I agreed to cooperate; we could undoubtedly negotiate a similar settlement of the civil charges.

'...You're going to do some time...' Liman warned. But choice number three would result in a shorter sentence and - far more importantly - would allow my family to survive. He recommended that we enter into plea-agreement negotiations with the Government..."

This is how to deal with white-collar criminals, and the US authorities have refined their tactics over the years. Plea bargaining systems enable prosecutors to go after criminals who might otherwise be able to remain free from the impacts of the criminal justice process. The systems they have invented were originally designed to go after the 'Cosa Nostra', the Sicilian organised crime families who controlled major crime in most US cities. They quickly realised that financial criminals on Wall Street behave in exactly the same way as people whose names almost inevitably end in vowels, and they adopted the use of the organised crime investigation and prosecution tactics to deal with them.

The Americans have no qualm about likening Wall Street wise guys to Mulberry Street wise guys, and they make good use of the tactics. That is why I get so angry and depressed when I hear British regulators and prosecutors talking about 'light touch' regulation when it comes to dealing with the City filth! I get angry when I hear them insouciantly talking about how to handle City crime, and particularly when they ask me, in their condescending way, what do I know about this problem! I want to ask them why they are so sure that there are not other ways of dealing with the Square Mile robbers! I want to know why they are so unwilling to think outside the box and make a play for the biggest criminals on the patch!

I am afraid it all comes down to something the criminologist Edwin Sutherland once said about white collar criminals. In his seminal book 'White Collar Crime' published in 1949, Sutherland said;

"...‘There is a consistent bias involved in the administration of criminal justice under laws which apply to business and the professions and which therefore involve only the upper socio-economic group..."

In 'White Collar Crime', Sutherland argued that the behavior 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.

But there is no reason why we cannot demand that our prosecutors start finding themselves some cojones, and get some new tactics to take on the bad guys! We have too many prosecutors hiding behind the process and not having the bottle to step out from behind the immense barriers that the Police and Criminal Evidence Act can pose, and start thinking laterally. You can take on the banksters without falling foul of PACE! You can operate effectively without failing to comply with the disclosure provisions.

What you need is good legal knowledge, an ability to outsmart the slimy City solicitors, all of whom have jumped on the bandwagon of the financial crime phenomenon, and the balls to take on the barristers in Court, and play them at their own game! At the end of the day, it is all about having the moral courage to stick to your determination to see these men behind bars, and that means finding all the reasons to charge these people with crimes, not finding reasons not to bring prosecutions. If you can't get them for specialist fraud charges, then think of something else!

I know that there are many young prosecutors who, reading this, would say, '...who the hell is this guy to say this to us...' I know this may sound like a tall order, but my Fraud Squad colleagues and I who did it in the past, and who laughed in the faces of the pompous lawyers as the Old Bailey judges sentenced their cringing whining clients to periods of imprisonment for their crimes, know how it's done, and if they are interested we can show them how to do it.

There was a time when we were required to seek the approval of a Government Minister before we could bring certain charges under the Companies' Acts, and the approval was almost always refused! So we started to bring charges under the Theft Act and other criminal statutes which didn't need civil servants to crawl all over our evidence, and we got convictions.

Charges could have been brought against any number of financial practitioners who had engaged in the defrauding of clients under the PPI frauds. Then, when they were charged, they could have been invited to consider giving evidence against their managers, in return for lenient treatment for a guilty plea! The same tactic could have been used against the managers and when charged, invited to give evidence against their directors, in return for leniency and a guilty plea. This is a fairly aggressive tactic, but it works, and prosecutors must consider its use.

The real truth is that prosecutors have got to stop wanting to have lily-white hands, and be prepared to get down into the street and start mixing it up with the defence lawyers. You may rest assured that the defence will pull out every stunt in the book to get their clients acquitted. We used to have barristers who would work with us on the preparation of the cases and who would advise and guide on the evidence they needed for the charges they wanted to bring. 

They did not prejudice their professional status in giving of their very best skills to help us win our cases.

Next year, Britain introduces what are mistakenly referred to as U.S.-style plea bargaining deals, otherwise known as deferred prosecution agreements (DPAs), whereby a company is charged but the prosecution is suspended in return for a fine, compensation or other sanctions.
David Green realises, as I have done for a long time that DPA's are a waste of time.

"If the prosecution of a corporate is so difficult as it is at the present without the change I propose, why should a corporate agree to enter a DPA at all?" Green said.

This is precisely the point. Prosecutions have got to be made more certain, and lengthy prison sentences a certainty upon conviction. Any man facing the likelihood of 15 years inside for a white-collar crime, will certainly think twice if he is offered a 'get out of jail free' card! We have got to start treating City crime as serious organised crime, which is what it is, and stop pussy-footing around with these men who are making millions of pounds and walking away scot free.

David Green has said the SFO would not hesitate to prosecute even difficult cases, and that "blockbuster" funding reserves were on tap to pursue big cases such as the rigging of Libor, the benchmark London interbank offered rate, and others.

This is good news indeed, strong budgets are needed to go after the big City players. The irony is that after a couple of really good convictions, there would be an wholesale change of attitude among those chancers in the Square Mile who might be persuaded to give it a run, in the mistaken belief that they would not be prosecuted.

Once the message got home that the SFO would come down on City fraud like a ton of avenging angels, there would be a big change of attitude towards City crime. That is because everyone who works in the City is a 'percentages' man, every deal is looked at with the primary enquiry, 'what's in this for me', and if the chances of an extended stay inside outweigh the promise of a financial profit, they will not do it!

It is simply because there has been no likelihood (and I mean absolutely none, nada, zilch, zero chance) of any of these people even being invited in to Elm House for a little chat about their conduct, that they have been committing these crimes with the degree of impunity they have demonstrated and getting away with it for so long.

So, we need new powers for the SFO, we have got to make City financial crime an organised crime that doesn't pay; we have to get a team of experienced detectives into the SFO to help the staff there get the evidence they need; we need to see aggressive, angry young lawyers with fire in their souls who can reflect Oliver Cromwell's aphorism '... I had rather have a plain, russet-coated Captain, that knows what he fights for, and loves what he knows, than that which you call a Gentle-man and is nothing else...' and we need to find a new attitude of moral certainty among those who will regulate this marketplace.

At present, the City of London is a criminal sink, and it has been getting away with too much for too long. It has been allowed to because the politicians and civil servants, and their satraps have pulled the claws and blunted the teeth of the SFO to such an extent, that it has become a laughing stock.


Monday, October 07, 2013

Barclays Bank must think we are complete idiots! The sheer arrogance of their advertising.

Barclays Bank, one of the UK's leading criminogenic banking institutions, took a full page advertisement on the back page of the Sunday Times, asking the unbelievably trite question 'Does your bank have free wi-fi in its branches? Make Barclays your bank".

What complete and utter bollocks!

What is it going to cost Barclays to extend Broadband to the public sectors in their branches? Why on earth would Barclays think that any sensible person in their right mind would be persuaded to bank with this flaky bunch of rogues, just because of the offer of a free wi-fi connection?

We have to examine this advert in the full context of the wrongdoing that Barclays has carried out in recent times, and we have to ask ourselves how great their arrogance has become, when they clearly believe that all they have to do to make themselves attractive to new customers is to offer them free wi-fi?

You can just imagine their marketing people examining the proofs for this page lay-out, and saying;

"...Oh yes, that's fantastic, a free wi-fi offer, that'll bring the mug-punters into the counters in their hoards..!"

This is all that Barclays think they have to do to restore their grubby and tattered reputation! This is the limit of their imagination and demonstrates beyond peradventure that they have not learned any lessons from their recent brushes with the law. As far as they are concerned, as long as they can dangle some cheap bauble to the potential marketplace, then they think that the general public will snap up the opportunity to open an account with them, without any further thought!

Let us just refresh our memories about some of Barclays more memorable forays into the unfettered free-market capitalism so beloved of their former Capo, Sgr Roberto Diamante!
Barclays was fined £290m ($450m) in June 2012 for trying to manipulate a key bank interest rate (LIBOR) which influences the global cost of loans and mortgages.

Its traders lied to make the bank look more secure during the financial crisis and, sometimes - working with traders at other banks - to make a criminal profit.

In August 2010, Barclays Bank  had a sanction-busting fine approved . Barclays had agreed a settlement with the US Justice Department over dealings with Cuba, Iran, Sudan, and Burma, all countries subject to US sanctions.

A US judge approved a settlement under which Barclays Bank was fined $298m (£191m) for sanctions-busting. However, despite approving the deal, which meant that Barclays avoided a criminal prosecution, Judge Emmet Sullivan still queried if the fine was enough.

It looked like the bank was "getting a free ride here," he said. Barclays refused to comment on the affair.

In 19 January 2011, Barclays were fined £7.7m by the UK regulator for misselling Aviva’s global balanced income and global cautious income funds. This activity was defined as “a damning indictment” of the banks’ sales-driven advice models.

The bank had to return £59m in compensation for failing to provide adequate investment advice to more than 12,000 of its customers, many of whom were retirees who suffered losses in the financial crisis.

The FSA said that Barclays had failed to ensure that two Aviva funds were suitable for clients who invested nearly £700m in them between 2006 and 2008. Many were seeking additional income and Barclays staff failed adequately to explain the risks involved, the regulator said.

In July 2013 Barclays bank was ordered to pay a fine by the US energy regulator for allegedly manipulating electricity prices.

According to the Federal Energy Regulatory Commission (FERC), who proposed the fines in October last year, Barclays had been manipulating energy prices between November 2006 and December 2008 in states such as California.

The bank and four of its power traders, Daniel Brin, Scott Connelly, Karen Levine and Ryan Smith, are expected to have to pay a total of $453 million (£299 million) within 30 days to the US Treasury.

On Tuesday night (July 16th) a report outlined Mr Connelly must pay a $15 million fine while Mr Brin, Ms Levine and Mr Smith face a $1 million fine each. Mr Connelly, who is the managing director for North American power at Barclays, is facing the largest fine because he is believed to be the leader of the scheme.

Additionally, Barclays must give up $34.9 million in profits, which will be paid into low-income aid schemes in California, Arizona, Washington and Oregon.

FERC based its claim against Barclays on a series of emails between traders, which suggested they were working together to manipulate the index for energy pricing in Western parts of the US. It said that the traders, who have now left the bank, knew they had committed unlawful activities as they had been losing money through power markets deliberately to improve the bank's financial position.

However, Barclays contested the findings. In a statement, it said: "We are disappointed by the action FERC took today. We believe the penalty assessed by the FERC is without basis, and we strongly disagree with the allegations made."

It added that its trading was within the law and that it had cooperated fully with the FERC on the matter. Moving forward, it said: "We intend to vigorously defend this matter."

Subsequently, Barclays Bank has further admitted that ' was likely to suffer a £50 million fine for the handling of its Qatari bail out...'

These are just reports of recent actions in which Barclays have found themselves on the wrong side of the law and there are others.

I have not touched on Barclay's contribution to the PPI deliberate criminal fraud scandal in the UK, nor its anti-money laundering failures where the FSA singled out Barclays for a large transaction reporting fine of £2.45 million in 2009.

When it comes to reports about money laundering however, Barclays seems to be able to count on a lot of friends to keep its dirty dealings out of the public gaze.

One of my regular readers, Carol, has specific concerns about the way in which Barclays has conducted itself in recent years, particularly with regard to the way in which it has been engaged in alleged money laundering activities.

Carol is a shareholder, and attends Barclays public meetings and she does what she can to get details of certain specific allegations of wrongdoing by Barclays. She is constantly obstructed and denied information, which, as a shareholder, I believe she is entitled to receive.
She has written to the Financial Conduct Authority to seek their help in obtaining details of alleged wrong-doing entered into by Barclays Bank. The latest letter she has received from the FCA is typically obtuse, but demonstrates the degree to which the regulators are 'captured' by their constituency!

The letter notes that Carol, 

"...continue(s) to have difficulty in resolving your concerns about Barclays Bank plc, and that you would like us to comment on these matters. I have reviewed previous correspondence with you, and note that in 2008 the Financial Services Authority (specifically ............) advised that we would not be corresponding with you any further on this subject. I would confirm that the position of the Financial conduct Authority (FCA) has not changed, and ...the FCA will not be entering into further correspondence-about Barclays Bank plc.

Any further correspondence received from you on the subject of Barclays Bank plc will be placed on file but will not be acknowledged or responded to.

I hope this is helpful to you and has confirmed our position on this subject..."

So, whatever has gone on, it is clear that the Regulator does not intend that the shareholders should have any right to know! With friends like these, what does Barclays have to fear from any meaningful regulatory intervention?

So, my advice to anyone who is thinking of opening an account with Barclays Bank is;

"...Don't be fooled by these cheap gee-gaws, these silly offers of free wi-fi in their branches...."

Ask yourselves some searching questions like whether Barclays are a suitable bank to be investing your money in, considering all the fines they are receiving for breaking the law at every possible opportunity.

This is much closer to the point - do you want to be the client of a bank whose criminogenic activities would make Al Capone blush for shame? Are you really so gullible that the offer of free wi-fi is going to make you overlook all the wrongdoing that this once respected institution has engaged in?

I very much doubt it, but I do believe that we have a constant duty to remind ourselves of the dishonest actions of those who want our money!