The biggest mis-selling scandal to break this month was not the one which involved banks forcing small business borrowers to buy expensive interest-rate hedging contracts, under threat of not lending to them at all if they refused. The FSA hasn’t got to the bottom of that one yet: in terms of identifiable victims it could be at least as damaging to the reputation of the banks as the Libor scam. But it is dwarfed by goings-on in the pharmaceuticals giant GlaxoSmithKline, which has been fined $3 billion by the US Department of Justice for a set of offences that deserved much bigger headlines than they got in a week which was unusually good for burying bad news.
The DoJ found that GSK had promoted antidepressants intended only for adults as being effective for children, when trials had shown they were not. This was done partly by publishing misleading material in a medical journal, while a radio host was also paid to hype one of the drugs, Wellbutrin, as a wonder pill that could also promote multiple orgasms and weight loss. Similarly an asthma treatment, Advair, approved only for treating severe cases, was pushed as being suitable for milder cases as well, with the suggestion that ‘mild’ asthma was a medical myth. Lavish hospitality, including trips to Hawaii and the Caribbean, was routinely offered to doctors and psychiatrists who agreed to write more prescriptions.
GSK’s chief executive, Sir Andrew Witty, who has been in post since 2008, passed the buck to his hard-driving predecessor Jean-Pierre Garnier by saying that these wrongdoings ‘originate in a different era’ and ‘we have learnt from the mistakes’. But this is just the latest in a long series of DoJ findings against drug manufacturers for misleading or bribing their customers: Pfizer, Abbott, Eli Lilly, Merck and the Anglo-Swedish combine AstraZeneca have between them paid $6.7 billion of fines in recent years.
In a highly regulated industry in which patients’ lives are ultimately at stake, that’s a pretty remarkable record. It may reflect heightened zeal on the part of American investigators, but it also suggests a deep corruption of corporate culture, as well as a susceptibility of medical practitioners to be corrupted, that really makes you wonder where the rot stops. This is hardly a plea in mitigation, but one reason behind it is the $3 trillion scale of the US healthcare sector, accounting for 15 per cent of US economic output: as the notorious Willie Sutton is supposed to have replied when asked why he robbed so many banks, ‘That’s where the money is.’
The good steward
Ed Miliband’s speech about banking reform on Monday wasn’t all bad: I liked his use of the word ‘stewardship’, which I assume he borrowed from these pages. It was the theme of a sermon preached by the Revd ‘Budge’ Firth at the 1955 annual service of Barclays Bank (those were the days) and reprinted in our Christmas 2009 issue: ‘You, the bankers, are stewards in the clearest possible sense, for you look after the public’s money, and… one sign of your stewardship is the unquestioning trust reposed in you by your clients,’ boomed Firth in what I imagine were more resonant tones than those of the nasally challenged Labour leader.
But Miliband’s analysis of why that unquestioning trust has been lost is worth reading, and he rightly identifies the need for a new wave of enlightened competitors to shake up high-street banking: he may have picked that up from this column too. Though he was playing to his Co-op audience, he was also right that it would be good to have a thriving mutual sector again. He’s wrong to propose a ‘British Investment Bank to help our small businesses’ because he doesn’t understand why no state-funded institution could seriously embark on a building a portfolio of credit risks that commercial banks won’t touch. But he’s right that a return to ‘stewardship banking’ might also herald a return of the word ‘banker’ to being ‘a compliment rather than a term of abuse’ — or, he might have added, of rhyming slang.
Et tu, Brute?
In Agatha Christie’s Murder on the Orient Express, everyone from the train conductor to the Swedish missionary and the Russian princess turns out to have had a hand on the dagger that killed Mr Ratchett. That’s also the way it’s beginning to look in the case of the demise of Bob Diamond. Everyone in authority wanted him to go; his fellow directors put up only the briefest show in his defence, and have now slashed his contractual payoff. Even his predecessor and former boss Martin Taylor, whose one substantive achievement during an unhappy tenure at Barclays was to have given Diamond the green light to create Barclays Capital, has come out against him with a sharp-edged piece in the FT implying he picked Bob out as a wrong ’un long ago and regretted having fallen for ‘the myth of his indispensability’. But the most pungent plot twist comes from New York, where Wall Street sources report that, just ahead of Diamond’s sudden resignation, his own senior traders started planning a mass stabbing of their own.
As I mentioned last week, Diamond’s best-ever deal was his bargain acquisition of the remains of the bankrupt Lehman Brothers in 2008; but one legacy of that deal was smouldering resentment among former Lehman men who felt they had not had enough bunce out of it for themselves. According to the CNBC news service, they were so enraged by Diamond’s attempt to distance himself from the Libor scandal that they got together last Monday to organise a coup against him. If the Bank of England had not pushed him first, said one, ‘We were looking at a bloodbath.’ History may tell us it was news of this Shakespearian turn of fate, an uprising among his own henchmen, that finally persuaded Bob the game was up, and not the message from the Governor or the wider chorus of disapproval from a City establishment that was still, as Taylor had been, partially blinded by his aura. I can’t wait to see the cinema version of all this: in fact, I’ll offer to script it.