Justice delayed — and justice denied

Could the HBOS three finally get an official slap on the wrist for losing £54 billion, forcing the Government to rescue the bank and impoverishing millions of bank employees and small shareholders?

Those with long memories will remember that HBOS collapsed at the end of 2008.  We waited in vain for the Financial Services Authority to report on why the bank went bust and why it, as the regulator, had failed to spot the appalling failures in basic banking which led to it. That job was left to a parliamentary commission which had been set up for a different purpose, but decided that the HBOS scandal was far too big to ignore.

The HBOS Three Horby, Crosby and Stevenson
The HBOS Three: Andy Hornby, James Crosby and Lord Stevenson

Its report, “An Accident Waiting to Happen,” appeared 15 months ago and was the verdict the FSA should have produced. Comprehensive, decisive and damning, it criticised the regulatory failings, but squarely laid the blame at the door of the three men at the top of the bank — Lord Stevenson, the chairman, and two chief executives, James Crosby and Andy Hornby.

The FSA was abolished in April, without producing its report, but its successor, the Financial Conduct Authority, in partnership with the Bank of England’s Prudential Regulatory Authority has decided to finish the job — but, no rush, all it has done is publish terms of reference. According to the BBC it could be the end of the year — six years after the collapse — before we get the final verdict.

The FCA attributes part of the delay to the need to complete “enforcement proceedings,” although it admits these ended in September 2012 when Peter Cummings, who had been head of corporate banking, was fined £500,000 and banned from financial services for life. That decision provoked astonishment. No-one, not even Cummings himself, argued that he was blameless — his division lost £26 billion. But he was not in command and to allow his bosses to escape censure defies belief. Yet they have so far faced no sanctions.

Regulators – toothless in the face of the rich and determined

The FCA also explains that the report had to wait for the completion of “maxwellisation.” This process, named after the notorious crook Robert Maxwell, has rendered regulators toothless in the face of the rich and determined. In 1969 two inspectors from the Department of Trade & Industry produced a report which described Maxwell as “unfit to hold the stewardship of a public company.” Maxwell sued and the judge found in his favour, leaving him free to go on defrauding creditors and pensioners for years.

Since then anyone named in a regulatory report has been shown the relevant passage in advance, giving them and their lawyers the opportunity to argue for watering down or even removal of any criticism.

The FCA will look at some of the recommendations made by the parliamentary commission, including the banning of some former HBOS directors from working in financial services. That would be merely symbolic in the case of Stevenson, Crosby and Hornby. That the first two men went on to work for financial companies after the HBOS debacle with no comment from the regulator was a gross failure of supervision. But they have since resigned and Hornby works for a betting firm.

However, Mike Ellis, HBOS finance director, is chairman of the Skipton Building Society. It will be interesting to see if the FCA makes any comment about that.

Justice delayed, as the old saying has it, is justice denied. Harsh words against those who caused the failure of HBOS are the best that the two million small shareholders who lost most of their investment and the 40,000 employees who lost their jobs can hope for.


3 responses to “Justice delayed — and justice denied”

  1. nikki turner (@Spandavia) Avatar
    nikki turner (@Spandavia)

    Well said Ray, the delay into a report on the conduct of the HBOS bosses is extremely questionable. I suppose it’s better late than never but why now? Why this change of heart? Lots of rumours abound but maybe the fact the criminal trials for ‘Operation Hornet’ (the Thames Valley Police invetigation into HBOS Reading) are still on schedule for January 2015 and have not been ‘squashed’ (which could well have happened if Alex Cameron QC had been successful in having VHCC stayed on grounds of inadequate legal aid), has encouraged the regulators to act. Who knows what will come out in that wash?
    Without doubt there are too many people who know too much about HBOS for the story to be buried – they can’t all be wrong and they can’t all be silenced. As Paul Moore rightly says “the cat is out of the bag.” I would add the caveat – this cat wasn’t even house trained so it has left quite a trail to follow (in my case some 30,000 + documents).This time, the “old boys network” just won’t work – and if that is depressing for Lord Stevenson, he should consider how depressed the victims of the many and varied HBOS frauds feel after years without justice. We all deserve more than harsh words.

  2. Could it possibly be that the group action arising from the merger becomes time barred on a date between November 2014 and January 2015. They couldn’t possibly be so cynical; could they. Delay the report containing all of the facts until it is too late. NO WAY!

    Bet your bottom Dollar on it – Plenderleith told a lot of the story but this is going to be dynamite.

    1. Time statute bar … Surely doesn’t apply as the banks insist they have done nothing wrong and or no case to answer… So based on this the clock has never started…