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Does this house believe the City is full of greed and corruption?

A short while ago, I mentioned that the Financial Services Club were to debate: This house believes that The City is full of greed and corruption.

We had the debate last week, and it was excellent with Ian Fraser and Nick Kochan, two enigmatic investigative journalists of our time, proposing the motion.

Ian and Nick

Ian Fraser (left) is an award-winning journalist, commentator and broadcaster who writes about business, finance, politics and economics. His work has been published by among others The Sunday Times, The Economist, Financial Times, BBC News, Thomson Reuters, Dow Jones, Daily Mail, Mail on Sunday, Independent on Sunday, the Herald, Sunday Herald, The Scotsman, Accountancy, CA Magazine and CityWire.

Since 2008 he has been consulting editor and blogger on Bloomsbury Publishing’s QFINANCE and also blogs for Naked Capitalism, a leading US website for economic and financial views. Some blogs are cross-posted on other sites including The Economic Populist and Seeking Alpha.

Since March 2009 he has been making programmes about the global financial crisis for the BBC. These have included a File on 4 documentary for BBC Radio 4 about HBOS, Trust Me I’m A Banker for BBC Scotland and Carry on Banking for BBC 1 Panorama.

Nick Kochan (right) is a commentator on banking and financial services on compliance and regulation, emerging markets, political and forensic topics.

His work on banking, financial services and the economy has appeared in The Financial Times, the Economist, the Banker and Euromoney magazines. He is regularly consulted by the BBC and Sky for commentary on economy and financial services.

In particular, Nick has established his leadership in the field of compliance and regulation with the publication of his book on money laundering (The Washing Machine, 2006) and more recently on Bribery and Corruption (Corruption: The New Corporate Challenge, 2011).

These two formidable beasts were set up for opposition by two equally formidable characters: Brian Mairs and Colin Slight.

Colin and Brian
 

Brian Mairs leads the Strategic Communications area of the British Bankers’ Association (BBA), and writes, commission and edits articles working with colleagues in the BBA’s Communications team.

A former journalist and HM Treasury press officer, Brian's City career has included heading communications for APCIMS (the Association of Private Client Investment Managers and Stockbrokers) and for CFA Institute across Europe.

Colin Slight is Managing Partner with the Realization Group, and leads the official charity for the Financial Services Club, MAG:NET, where I will be speaking on 5th July alongside Martin Bell, the white-suited independent politician and former war reporter.

The arguments began with Ian putting forward the case that the City used to be run on the basis of people who were interested in appropriate steerage of the City.

They had ethics, morals, judgement and values.

That changed over the past two decades to allow people to now run the City who have no sense of altruism.  They just want to get rich quick.

If people are purely motivated by greed with no sense of ethics, then they rapidly move to abuse, as demonstrated by the recent letter about Goldman Sachs calling their clients muppets.

Various cases were cited from BCCI to Barings, RBS to HBOS, but most of this is under the Chatham House Rule so I cannot repeat word for word what was said.

What I can do is cite Ian Fraser’s blog where he regularly uncovers stories about rogue actions in the financial system, such as:

As you can see, Ian is not a huge fan of the banks, or rather of the banks’ shenanigans, and works tirelessly to expose their misdoings and misdeeds.

It also intrigued me that he mentioned various folks, such as Rowan Bosworth-Davies.  Rowan is an old mucker of mine and will be speaking at the Club in Q4, along with David Bermingham (one of the NatWest Three).

Ian’s thrust of dialogue is that banks were allowed to get away with a lot of greed, through the failure of regulators and government and the lack of appropriate auditing controls.

In fact, he is pretty darned livid that an auditor is now the top regulator, and believes this is where we have the major issue.

I quote this, as Ian blogged about the debate, stating that William K Black, associate professor of economics and law at the University of Missouri, Kansas City, gave testimony to the Federal Crisis Inquiry Commission in September 2010 saying as much:

By the time this crisis began economists (Akerlof & Romer 1993), regulators (Black 1993); and criminologists (Calavita, Pontell & Tillman 1997; Black 2003; Black 2005) had developed effective theories explaining why combining financial non-regulation and modern executive and  professional compensation produced criminogenic environments that led to epidemics of accounting control fraud.

We also explained why these were near perfect frauds and explained how control frauds used their compensation and hiring and firing powers to create a “Gresham’s” dynamic that allowed them to suborn the “independent” professionals that were supposed to serve as “controls” and transform them into allies.  (This is similar to HIV’s ability to infect the immune system.)

So there you have it. Extrapolating from Black, the ‘Big Four’ accountancy firms Deloitte, Ernst & Young, KPMG and PWC, whose duties as auditors are supposed to be to the shareholders not to the management of a company, have been behind the creation of a “Gresham’s” dynamic.

By this, I mean they have provided a cover for ‘white collar’ crime, in exchange for inflated audit fees (or what are increasingly being termed by the accountancy professor Prem Sikka and others as “bungs for silence”).

If true this makes them dangerous institutions, whose imprimatur should increasingly be seen as a negative rather than a positive by investment management firms with a genuine interest in safeguarding their investors money.

Hmmmmm ….

Ian’s seconder Nick was equally diligent in delivering his powerful mantra about City greed and corruption, opening with a video clip that was particularly amusing and engaging:

The video is from some years ago, and shows Saudi Prince Bandar bin Sultan talking about corruption charges.

Prince Bandar is son of the late Crown Prince Sultan bin Abdulaziz Al Saud. 

Prince Bandar was ambassador to Washington between 1983 and 2005, and is Secretary General of the Saudi National Security Council.

He is thought to have fallen out of favour with other princes due to overzealous diplomatic efforts in recent years although, looking at a transcript of the video above, I am not sure he is that diplomatic, just honest:

The way I answer the corruption charges is this. In the last 30 years, we have implemented a development program that was approximately … close to $400 billion worth, OK? Now, look at the whole country, where it was, where it is now. And I am confident after you look at it, you could not have done all of that for less than, let's say, $350 billion.

If you tell me that building this whole country, and spending $350 billion out of $400 billion, that we misused or got corrupted with $50 billion, I'll tell you, "Yes." But I'll take that any time. There are so many countries in the Third World that have oil that are still 30 years behind. But, more important, more important — who are you to tell me this? … What I'm trying to tell you is, so what? We did not invent corruption, nor did those dissidents, who are so genius, discover it. This happened since Adam and Eve. … I mean, this is human nature. But we are not as bad as you think. …

Nick then went through a litany of bank failures, corroborating Ian’s view that the City is rife with corruption and greed .

Answering such accusations is hard, but Brian and Colin proved to be more than up for the job.

Brian went through a long list of reasons why it is not pandemic to banks, but hard wired into the way in which humanity works.

Brian

From the ancient Greek and Roman times through to today, corruption and greed exists anywhere and everywhere it is allowed, and the banking system positively supports the regulation and governance of greed and corruption by being one of the only places where it can be traced, tracked and found.

In fact, the City is an excellent place to stop corruption and greed as this is where it ends up.  That is why the laws around tracing Politically Exposed Persons (PEPs), Money Laundering and more are so integral to the banking system and this is where the governments can find those activities.

So greed and corruption is not rife in the City, but in life, and the City is a machine that can temper, trace, track and eradicate these activities, rather than being the place where it ends up.

Colin was even more offended by the notion that corruption and greed even go together in the same line, as they are totally unrelated.

Greed is programmed within all of us, which is why it is one of the seven deadly sins, but corruption is completely separate and if anyone thinks all of the thousands of people who work in banking are corrupt, then they are wrong.

Sure, there are a few bad apples to spoil the barrel, but that’s true of any industry – politics, religion, business, you name it.  There will always be some rogues and scallywags, but the majority are good, honest, decent hard working people, and so calling all those people corrupt is inherently wrong.

Arguments well upt and well placed, but they did not wash with the audience who voted overwhelmingly in favour of the motion.

My take on it was that the motion was carried more on the emotion of the topic than the facts however, and personally see greed and corruption as being part of the makeup of humanity – along with lust, gluttony, wrath, pride, sloth and envy.

The Seven Deadly Sins have nothing to do with ‘The City’ as they exist within all of us, as part of humanity.

The only issue being that if the governance, regulation and politics allow excess in such sins then that is the issue and, yes, that has been the issue of the last decade.

In summing up, it was the allowance of greed through corruption that has been the concern shared by all and, for that motion – This House believes that the control system has allowed the City to over-indulge in greed and corruption – I, along with many others, would probably concur.

In conclusion, a video Ian presented sums up the case, and is worth half an hour of your time if you have the interest:

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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One comment

  1. PRIVATE BANKING WHISTLEBLOWERS
    PRESS RELEASE #3
    From: David Rea and Antonius Richard de Caluwe Hemelrijk
    THE MEGA- CRIMINAL CONSPIRACY THAT WE ARE REVEALING TO YOU IS VERY SOPHISTICATED INVOLVING INTERNATIONAL PRIVATE BANKING FRAUD, ASSET HIDING, MONEY LAUNDERING, TAX EVASION + THE EUROCLEAR INTERBANK SCREEN. THE CONSPIRATORS ARE NICHOLAS BURGOYNE + ROGUE BANKERS.
    The below email was sent to Detective Chief Superintendent Steve Head who is the Head of Economic Crime Directorate, City of London Police, on October 4, 5, 9, 12, 15 and 20. As of today, he has not replied to us. Why won’t the City of London Police reply to our allegations and launch a formal investigation? Who are parties behind this fraudulent conspiracy that have the power to neutralize the regulatory + law enforcement authorities?
    Strategic Management Board – Detective Chief Superintendent Steve Head
    Role
    Detective Chief Superintendent Steve Head is the Head of Economic Crime directorate and as such has responsibility for the investigation of serious and organized economic crimes across the City of London, as well as for “Lead-Force” investigations across England and Wales.
    DCS Head also leads on police investigations of Overseas Corruption and Bribery involving British citizens and companies abroad. Additionally he has responsibility for the Force’s Hostage and Crisis-Management Negotiator cadre and for the Force’s Emergency Temporary Mortuary response.
    From: DAVID REA
    Date: Thu, Oct 4, 2012 at 10:45 AM
    Subject: FRAUD COMMITTED BY NICHOLAS BURGOYNE + PETER WALTON
    To: steve.head@cityoflondon.police.uk
    Cc: Anthony Heavenrich, Scott Mundell, Sanjay Kalpoe
    CITY OF LONDON POLICE
    Detective Chief Superintendent Steve Head is the Head of Economic Crime directorate
    Telephone: 020 7601 2222 PO Box 36451 London EC2M 4WN
    Dear Chief Superintendent Steve Head:
    We would like to make a formal complaint of fraud against Mr. Nicholas Burgoyne + Mr. Peter Walton with your department.
    >>On April 12, 2012, Mr. Nicholas Burgoyne signed the attached NCND which includes his contact details + UK passport:
    1) NCND EIG EUROLINK INVESTMENT GROUP (NB).pdf 1397K
    Recently, Mr. Burgoyne + his family secretly vacated the home address listed in this NCND + relocated to an unknown address in the UK.
    We have had his passport reviewed + there appear to be anomalies with it.
    >>On May 30, 2012, Mr. Nicholas Burgoyne fraudulently induced the payment of 25,000 euros by sending Mr. Mundell (Halston Capital) this Agreement:
    1) MUNDELL – BURGOYNE agreement.pdf (application/pdf) 79K
    >>On May 31, 2012, Mr. Mundell sent 25,000 euros to Mr. Burgoyne’s RBS bank Account Number GB55 RBOS 1600 0710 1946 02:
    1) SCOTT MUNDEL WIRE TO NB.pdf (application/pdf) 184K
    >>On June 8, 2012, Mr. Nicholas Burgoyne fraudulent induced the payment of 25,000 euros by sending Mr. Kalpoe this Agreement:
    1) KALPOE – BURGOYNE agreement.pdf (application/pdf) 288K
    >>On June 15, 2012, Mr. Burgoyne forwarded this email to us sent to him by Mr. Peter Walton (HEAD OF TRADE FINANCE at RBS):
    1) (DAVID CHEEVER) PETER WALTON RBS JUNE 15, 2012 EMAIL TO NICHOLAS BURGOYNE.docx (application/vnd.openxmlformats-officedocument.wordprocessingml.document) 17K
    This June 15, 2012 email shows:
    a) 24,590 euros of Scott Mundell (Halson) 25,000 euros being credited to Mr. Burgoyne’s RBS bank Account Number GB55 RBOS 1600 0710 1946 02. The remaining 410 euros is not accounted for anywhere.
    b) Mr. Peter Walton opened sub-accounts for us at RBS (David Rea, Eva Rea, Antonius de Caluwe) but these sub-accounts have been closed without our authorization.
    c) The monies Mr. Walton was to send to us never arrived (25M euros = Mr. Mundell, 6M USD euros = Mr. Rea, 1M USD = Mr. de Caluwe, 500K USD = Ms. Rea).
    d) The remaining monies in our RBS sub-accounts have disappeared without our authorization. Repeated requests for the accounting of these monies have been ignored.
    >>On June 18 + June 19, 2012, Mr. Kalpoe sent 25,000 euros to Mr. Burgoyne’s RBS bank Account Number GB55 RBOS 1600 0710 1946 02.
    >>On June 20, 2012, Mr. Nicholas Burgoyne gave us the attached fraudulent bank documents:
    1) Anthony MT103.pdf (application/pdf) 85K
    2) David MT103.pdf (application/pdf) 93K
    3) RBS POF Antonius.pdf (application/pdf) 29K
    4) RBS Scott.pdf (application/pdf) 31K
    These are clearly documented fraudulent activities by Mr. Burgoyne + Mr. Walton that have financially harmed us + we request your formal investigation into these activities.
    Sincerely,
    David Rea
    Antonius Richard de Caluwe Hemelrijk
    Scott Mundell
    Sanjay Kalpoe
    9 attachments — Download all attachments
    Anthony MT103.pdf
    85K View Download
    David MT103.pdf
    93K View Download
    RBS POF Antonius.pdf
    29K View Download
    RBS Scott.pdf
    31K View Download
    NCND EIG EUROLINK INVESTMENT GROUP (NB).pdf
    1397K View Download
    MUNDELL – BURGOYNE agreement.pdf
    79K View Download
    KALPOE – BURGOYNE agreement.pdf
    288K View Download
    SCOTT MUNDEL WIRE TO NB.pdf
    184K View Download
    (DAVID CHEEVER) PETER WALTON RBS JUNE 15, 2012 EMAIL TO NICHOLAS BURGOYNE.docx
    17K View Download

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