So now we know. It’s not the popular insider, the All Souls professor or the Whitehall veteran. It’s not an Old Etonian — uniquely, they couldn’t find one for the shortlist. The winner of the Governorship stakes turned out to be the Goldman Sachs candidate, Mark Carney, currently at the Bank of Canada but formerly of the Wall Street investment firm, the ‘giant vampire squid’ whose tentacles get everywhere. And that’s just about the only jibe that anyone has found to aim at him, because his credentials are pretty outstanding.
To call him ‘the best person in the world’ for the job, as the Chancellor did, is tempting fate — remember when John Browne of BP was repeatedly labelled ‘the world’s best business leader’? The robustness of the Canadian banking system through the financial crisis had at least as much to do with Canada’s relatively restrained national character and stable economy as it had with Carney’s decision-making. But he never put a foot wrong, his reputation stands high, and his appointment to succeed Sir Mervyn King is one that should be welcomed without reservation. Like Archbishop Welby, Carney represents a new beginning in which an awful lot of baggage will be left behind.
But in that context spare a thought for the popular insider, Paul Tucker, the deputy governor whom most of the media expected to take the crown — until the moment the Chancellor spoke Carney’s name. One toxic phone call with Bob Diamond and an unhappy half-hour in front of the Treasury select committee put paid to 30 years of preparation for the role which the City and the central banking world believed would one day be Tucker’s. It’s a crushing disappointment; I hope an interesting job beckons in Basel or Washington — or even Ottawa.
Pig in a poke?
‘Leading through the perfect storm of technological and business change’ was the prescient title of a speech given in London recently by Mike Lynch, founder of Auto-nomy, the Cambridge-based software company that has run into a hurricane of a row with its US owner Hewlett-Packard. I happened to be next on the podium, so was able to observe Lynch at close quarters. The star of Britain’s digital sector, he’s as pleased with himself as you’d expect a man to be who collected half a billion from the sale of a business he started as a student. He talks fluently, yet I found it hard afterwards to recall the substance of what he said — and I sensed the audience did not warm to him. If anything, they were irked by his PowerPoint presentation, which consisted entirely of uncaptioned movie stills, including David Niven as Phileas Fogg in a hot-air balloon and Gregory Peck addressing the courtroom in To Kill a Mockingbird.
The accusation tabled by Hewlett-Packard boss Meg Whitman ten days ago is that the $11 billion paid by HP for Autonomy last year was inflated by hot air in the form of ‘serious accounting improprieties’ and ‘outright misrepresentations’ on Autonomy’s part, prompting a $6 billion write-down in HP’s books. The response from Lynch, who was ousted by HP in May, was to dismiss the attack as a smokescreen put up by Whitman to disguise HP’s own poor performance. HP, it must be said, has a record of ill-judged acquisitions and internal strife: former eBay chief Whitman took the helm shortly after the Autonomy deal was struck by her predecessor, who lasted just ten months in the job. It must also be said, however, that before the takeover some analysts were voicing doubts about the veracity of Autonomy’s accounts, notably in relation to its rates of growth and cash generation.
So everyone’s going to be addressing the courtroom. Not only are the careers of Whitman and Lynch at stake: if the findings of a PwC report and subsequent litigation go against Autonomy, it will burst a bubble of hype about Britain (and Cambridge) as a hub of digital innovation, Autonomy being head-and-shoulders our biggest success. And it will be another blow to the reputation of the City — often accused of cynically reaping fees from takeovers that fail to produce value for acquiring shareholders, while shirking adequate ‘due diligence’. No fewer than 15 banks, accountants and law firms were involved on one side or the other in this transaction, notably Barclays, Perella Weinberg and the auditors Deloitte for HP. Bank fees alone amounted to almost $70 million. How could they all have failed to notice if (repeat if) Autonomy was a pig in a poke? In the wider interests of what politicians refer to as ‘UK Plc’, I sincerely hope Dr Lynch can prove it was not.
Kweku Adoboli, the former UBS employee who has gone down for a seven-year stretch, perpetrated, at a cost of £1.4 billion, the City of London’s biggest-ever fraud — and the world’s third worst ‘rogue trading’ episode behind Jérome Kerviel of Société Générale and, back in 1996, the Sumitomo copper trader Yasuo Hamanaka. When Adoboli gave himself up last September, the arresting officer had to explain to the custody sergeant how many noughts there are in a billion — but he will surely merit a rather short entry in the bumper book of fraudsters, because in truth he was no more than a sad twenty-something who lost control of his positions and spent three years, unnoticed by his superiors, digging himself deeper and deeper into trouble.
A man who resorted to payday loans to ease his own cash flow while exposing his employer to $12 billion of unhedged risk in the vague hope that it would all come right in the end was no Bernie Madoff. His sentence reflects the scale of his deceitful dealings, but his shame is shared by several layers of incompetent UBS managers above him, who have attracted a £30 million corporate fine from the FSA. As for Adoboli, the final stroke of ill-fortune would be to find himself sharing a cell with wily old Asil Nadir, his fellow fraudster, who would no doubt take him to the cleaners at backgammon.