The first time I was ever commissioned by the Daily Mail, the voice on the phone said: ‘You used to be a banker, you must know all about fraud. Everyone else is saying the SFO is rubbish, so we want a piece that says “We support the fraud fighters”.’ Not my field, I said, and possibly not my opinion. ‘Are you a journalist or aren’t you?’ barked the voice. ‘A thousand words by teatime.’ I wrote the piece and the BBC rang twice the next day to interview me as a City fraud expert. It was a lesson in how the media stays half a day ahead of its consumers in terms of specialist knowledge — and in the thanklessness of the task of the Serious Fraud Office, which then as now stood accused of failing to nail widespread financial wrongdoing, despite ‘heavy-handed’ methods, and of achieving shamefully low conviction rates.
The headline story (this was June 1993) was that of Asil Nadir, whose Polly Peck conglomerate had collapsed and who had fled to his native Cyprus shortly after the SFO brought 66 charges against him. Seventeen years later, he returned to be convicted of multi-million-pound theft: justice was done, the SFO’s dogged modus operandi vindicated. Can the same be said of its seven-year investigation into Libor interest-rate rigging, which closed last week?
To recap, 11 major banks have been fined more than $9 billion between them by regulators for submitting false reports of their borrowing costs in the London interbank market that were used to fix benchmark rates affecting many areas of financial activity. During the 2008 crisis, this was sometimes done to make banks look more credit--worthy than they really were; more often, it was done to boost traders’ profits or cap losses.
The participation of so many banks might suggest that the entire market was corrupt; but the SFO, tasked with identifying individual criminal acts, brought charges in the end only against 13 individuals for Libor dealings and another 11 for manipulating equivalent euro rates. Tom Hayes, a former trader at UBS and Citibank, was convicted of conspiracy to defraud and is serving 11 years — which, though reduced from an original 14, many observers feel is harsh. Six money brokers accused of conspiring with him were separately acquitted. In a third Libor trial, four Barclays traders were convicted, two acquitted. In the ‘Euribor’ trials, one Deutsche Bank employee and three more from Barclays were convicted; three were acquitted and four (from Deutsche and Société Générale) ‘declined to appear’, extradition having been refused by French and German courts.
Hunting a protected species
So that’s nine behind bars, none of them senior managers, for a scandal that appears to have been endemic throughout the banking world over several years. Justice? I revert to my defence of the SFO’s pursuit of Nadir, in which I paraphrased the argument of its then director George Staple that in such complex cases, ‘even a single conviction… may fulfil the objective of the investigation if it goes to the heart of the wrong-doing’, while ‘a certain heavy-handedness of approach is justified as a deterrent to other potential fraudsters’.
I would argue that’s still true today: traders know that their emails, texts and taped conversations are all stored in the ether to be used in evidence against them if they fall back into bad habits. Bosses may get off scot-free and banks shrug off regulatory fines, but the boys on the trading floor know that one of them could be the next Tom Hayes. It’s hit-and-miss justice, but it reflects the fact that the budget-strapped SFO is (as I wrote back then) ‘hunting an extremely well-protected species in difficult terrain’. If the Libor file is closed, what matters is that it should not be forgotten.
Equitation and egotism often go together: a handsome horse, whether flesh or bronze, confers on its rider an aura of superior power. Or so it certainly seems with Neil Woodford, the fallen-star fund manager who had lately, we learn from a merciless profile in the FT, been spending so much time with his thoroughbreds on his Cotswold ranch that his company installed special phones to enable him to issue trading instructions from the saddle. This cameo emerged at the same time as news that holders of Woodford’s Income Focus fund have been blocked from accessing their savings alongside those who had the misfortune to buy into his larger but now defunct Equity Income fund. There is no indication as to when (or at how many pence in the pound) these diminished funds might now be liquidated.
Such decisions are in the hands of Link Fund Solutions, the administrator in charge of the unwinding process, rather than Woodford himself. But here’s the question to be answered: how long after he knew in his heart that his dangerously illiquid investment strategy was doomed did he continue charging his investors £65,000 a day in fees? Meanwhile, everything we continue to learn about him and his team makes a portrait of hubris personified.
Is there any escape from the endless Brexit nightmare? One option recommended by friends is The World, a floating block (or ‘residential yacht’) of 165 apartments which continuously circumnavigates the globe and is currently docked at Xiamen in south-east China. It’s a democracy: residents determining the itinerary by vote. It must be a pretty good tax wheeze if you live on it all year round, and since its apartments are priced in dollars, from $1 million for a studio to $15 million for a penthouse, it offers a hedge against a falling pound. And here’s this week’s restaurant tip: I’m told the best place to eat aboard is called Portraits. The risk, of course, is that you disembark after a dreamy year at sea to find MPs still at each others’ throats and the bloody B-word unresolved.