Bondholders to accuse regulator and Co-Op of illegally withholding information from markets and investors.
WHEN ARE OUR MPs GOING TO COME CLEAN ABOUT THIS SCANDAL?
← In the Dock: Cable, Osborne, King et al.
The scandal of the CoOp name nobody in Westminster or Whitehall dare speak may be about to about to acquire other voices in the coming weeks. In a new development, a senior Cooperative holding Group director has been revealed as an equally senior player at the Prudential Regulation Authority (PRA)…..and new answers from the accused are squeezing out unpleasant truths about how information was fraudulently withheld from potential investors.
Washington Post editor Ben Bradlee had a favourite phrase to try and tie down the level of involvement in grand fraud: “What did he know, and when did he know it?” In the light of the following revelations, it would be nice to think that regulators, directors and MPs involved in the CoOp Bank scandal will now be called upon to answer some very serious charges.
We start with a simple fact: Russ Brady, a spokesman for the parent Co-Operative Group Ltd, is also an official at the regulator -the PRA. Mr Brady has been Head of Group Public Relations at the CoOp since 2009. The withholding of communications from the markets took place in 2011. Mr Brady is head of Communications at the Group.
What did he know, and when did he know it? Why is he allowed to be in a similar role at the PRA at the same time? Hold that thought.
Now let’s move on to deliberate withholding of information. The PRA CEO Andrew Bailey has been accused – on the famous Ben Bradlee basis – of knowing everything rather a long time ago about daft EU-inspired retail outlet acquisitions that might affect the Bank’s solvency. Old Bailey’s answer to the questioning (in a letter to about-to-be bailed-in bond investors) reads as follows:
“U.K. regulators decided the Co-Op Bank may need capital in 2011, and waited until there was greater visibility about the possible outcome over its intention to buy branches from Lloyds Banking Group Plc” before informing the public. They never actually got round to the informing thing.
Two problems with Bailey’s answer: as a mutual organisation, the bank’s directors had a fiduciary duty to report this large and (as it happened) foolhardy attempt to raise more capital to buy Lloyds branches – chiefly because, as Bailey admits, the Co-Op’s initial plan to buy the outlets was, the PRA decided, undercapitalised. The PRA formally told the Coop it would need to raise capital “at the end of 2011″. None of the Bank’s directors deemed this an important piece of information for investors. The bank is short of capital – despite its Group holding company having declared whopping great dividends throughout the financial crisis – and they see no legal duty to tell those who might invest in the Bank? So then, presumably Lehman Brothers saw no need to tell the markets that Friday evening five years ago it couldn’t honour commitments until the collapse became a more visible crock of sh*t outcome the following Monday?
Second problem: the PRA formally told the Bank of its need to raise capital three years ago. But it too told nobody about that. This is perhaps because Russ Brady-Coop told Russ Brady-PRA that this wouldn’t be that good an idea, and Russ Brady-PRA concurred with the view proffered by Russ Brady-Coop. But oddly, Russ Brady isn’t the man in the frame – uniquely well-sighted as he was – Andrew Bailey is. Now at last comes Mr Brady’s chance to set the record straight.
But this week, Mr Brady declined to comment. What did he know, and when did he know it?
You can go to this forum here at The Motley Fool, and read what bondholders think about all this clap-trap. But meanwhile, the silence at Westminster is nowhere near enough to wake the dead. The biggest Mammoth in the smallest downstairs loo thus far in my experience has 620 MPs crowded in there trying not the notice the hairy thing. Perhaps they’ve all suffocated in the attempt. We wish and hope, often in vain.
So let’s see if we can awaken some interest by naming names and tossing out some rumour-and-innuendo based accusations. The Minister in charge when the Coop was ‘chosen’ to buy the Lloyds detritus in 2011 was a Mr George Osborne, Chancellor of the Exchequer. The Sunday Telegraph reported in July of that year how Citigroup and JP Morgan would advise Lloyds on the process. By December 2011, the Co-op was ‘chosen’ as the preferred bidder, and entered exclusive talks to sign a deal.
But in fact, Lloyds received three bids for the branches. And although the Coop wasn’t chosen until December, the PRA (Bailey told the Treasury Select Committee yesterday) “Towards the end of 2011, we made it clear to them, and I’ll use these words carefully, it was not clear to us that the Co-op Banking Group had the ability to transform itself successfully and sustainably into an organisation on a scale that would result from acquiring the asset.”
Now excuse me here, but, um, how do you let Lloyds choose somebody you may have already told they’re skint? Exactly when did the PRA tell the Coop this? Did they think it might be a good idea to tell Lloyds about this? Allegedly not: in a similar hearing last month Sir Win Bischoff, chairman of Lloyds, told MPs that the bank had only started to have doubts about the Co-op in December 2012 – a full year later.
What did Bailey know and when did he know it? Much as we need to know this, I suspect that Andrew Bailey lacks a strong motive for misleading the markets off his own back. Let us return to the name Mr George Osborne, Chancellor of the Exchequer mentioned not entirely tangentially above.
At the time, the Draper hailed the deal, declaring, “This is another step towards creating a new banking system for Britain that gives real choice to customers and supports the economy.” Viewed in that context, George’s comment there does not bode well for all his talk about turning economic corners and reducing deficits. But as he was already Chancellor at the time and desperate to get this New Labour/EU hangover problem solved, you’d think he’d, um, ask a few questions here and there. But Coop CEO Peter Marks denied in April 2013 that he was pressured into the decision to bid and sign the original deal by the Treasury…..although several sources have told me over the last eighteen months that Osborne did do exactly this, and he was not alone. A certain Minister for Business is also thought to have been up for it.
Sources close to the matter also declared similar beliefs to the Sunday Telegraph’s James Quinn, who wrote earlier this year that ‘it is thought encouraging words were shared’. So here we have the second most senior Minister of the Crown actively complicit in a deal for the Coop to buy Lloyds branches it can’t afford. What did he know, and when did he know it?
A question we might also usefully put to the Coalition’s Minister for Business, Vince Cable. See other Slogposts for some of the murky detail on political Party bondholders at the Coop bank, but meanwhile let’s try and gauge some provenance re Santa Vincento’s involvement in the fraud.
When the branches deal fell through on April 24th 2013, Vince Cable said “I think it is very disappointing. I was really hoping this would happen”. Well, ‘disappointing’ is an interesting choice of words, but if nothing else it does suggest that Vince was keen to do the deal. And just as Russ Brady had something of a conflict of interest here, so too did the Business Minister: for with hugely increased access to retail funds at low rates, Mr Cable saw the potential for a tame bank that might be able to offer cheap SME business loans at advantageous rates…and thus further enhance his standing as a shrewd thinker on UK economic affairs. It’s also possible that Vince saw an increasingly secure and profitable Labour/LibDem bank as a good move too, although I have nothing to stand up that hypothesis. But once again: what did he know, and when did he know it?
The point is, what we’re still left with is this enormous great Black Hole of time between December 2011 and April 2013 – the best part of sixteen months – during which time the following must’ve been obvious to all concerned…..apart – allegedly – from Lloyds themselves (whose branches they were) but let’s not go there:
* The Co-op Bank was undercapitalised, and yet stonking great dividends had been paid out by its holding company for several years in a row. Didn’t that strike anyone as odd? Didn’t it, you know, bush-beating to one side, suggest that maybe the holding company had been, as it were and so to speak, raping the Bank…given that Coop supermarkets were taking a hammering from Tesco and Asda?
* The PRA regulator (which shares a Communications director with the Coop) overlooked its duty to alert the authorities to a failure of fiduciary duty by the Coop Bank, aka, the fraudulent attraction of bondholder capital while offering no information to those potential future haircut customers about the pit of wobbliness into which they are about to piss money. And we are to believe, are we, that at no point during that time did anyone at the PRA, Lloyds or the Coop tell the Treasury officials, and two senior Ministers, that this duty had been eschewed?
* And we are further to believe then, that although they must have known the capital situation of the Coop – BoE director Mervyn King and George Osborne were in near-daily contact at this time, as were Osborne and Cable – it never occurred to King, Osborne and Cable that the deal was foolhardy….and more to the point, the information had been fraudulently withheld from the markets?
Now we must add Mervyn King to the Bradlee beat: what did he know, and when did he know it?
This site and many other investigators far more influential than I have been banging this drum now for nearly five months. To conclude here – because this is admittedly a case involving so much fraud, sleaze, cowardice and arse-covering, even I keep forgetting bits of it – what we are looking at is this:
1. Legislators supposedly answerable to us refusing en masse to acknowledge a massive fraud in which all three Parties, the Treasury, two senior Cabinet Ministers, the Coop holding Board, the regulator and others as yet undiscovered beneath various stones have conspired to mislead both the markets and the electorate.
2. An obvious conflict of interest between sponsored MPs, depositor political Parties, the regulator and the Coop in terms of any credible ability to handle this matter objectively and through the proper channels.
3. Government, bureaucratic and political complicity in a conspiracy to foist the cost of illegal company practices and impractical acquisition onto cynically redefined bondholders in a mutualised Bank….people who are, mainly, old and poor supporters of the Labour Party upon which they rely to be their Friend in Tough Times. This would represent a bailin every bit as criminal as the one imposed on the Cypriot banking system.
4. A looming Constitutional crisis in which the General Election of 2015 would see two bankrupt political Parties being rescued illegally by the State were it not for this bailin carve-up….designed to save political face, and devised entirely by those who stand to benefit from it. Effectively, old and defenceless citizens of the United Kingdom will be sacrificed on the altar of Westminster credibility if the deal goes ahead. One can only assume that, on that altar, the cross will be suitably positioned upside-down, so as to point directly down at the inspiration behind the bailin.
To critics in recent days of my decision to largely desist from such investigations as the one above: I started this series of Coop bailin articles before taking that decision – so I feel a moral obligation to finish the job. Plus, if I’m honest, because I think this scam easily the most hypocritically depraved financial/political fraud I have ever come across in the UK. Just as this shower sacrifice the lives of innocent paedophilia victims – the better to protect their spotty buttocks from the headmaster’s cane – so too they would condemn the truly deserving poor to penury in old age, after a life spent trying to be an honest citizen.
However, let me just apprise my armchair critics of a few facts. The cost of this series to me in personal time, phone calls, travel and hours I’d far rather have passed in bars, on beaches and on willing ladies has been in the region of £1,300. (Not included in that is the ten years of tooth-grinding while asleep that led to my need for dental implants of around £6,000 purely so I can continue to chew the things I eat).
In that time I’ve been paid no salary, nor ever made a penny from monetising The Slog. And as I posted last weekend – to further jibes from the same quarters – pretty much none of the injustices I’ve highlighted have been addressed by the laughably-titled “authorities”….let alone settled in favour of the victims.
And as I am outgunned for resources by the MSM and monetised sites, the chances of me securing a genuine mainstream exclusive get less with every years that passes.
So in that cold context, what I’d like to ask of these self-styled Judges now is a few simple things. First, if you want to write to me at firstname.lastname@example.org and get my bank details in return for a large donation to The Slog, I’d be delighted to hear from you. Second, if you can manage to rise from your massage position on the DFS sofa, I think it would be really nice if you ventured outside, contacted as many local Masters of the Universe as you can, and enquired as to WTF they’re doing to stop this Coop bailin going ahead. And finally, you could copy this quasi-valedictory piece to every friend, neighbour, journalist, MP, relevant website, and Chief Inspector you can bring to mind before another hard day’s Trolling takes its toll.
I would very much like this Coop case-history to be the one that bursts the dam of disinformation constructed over the years by the Western Establishments. But d’yer know what? I don’t suffer such delusions of grandeur. I’m 65 years old, and I reckon that – when it comes to this investigative blogging lark – I’ve put into what I think of as ‘decent’ society a lot more than I took out. It’s time for those with fewer years under the belt and more fire in the belly to take up the baton. So if you want that role, feel free: the internet is a vast space and getting bigger all the time. Tomorrow belongs to you.
But do remember before you set off along the path of blood, toil, tears and sweat: it’s all bollocks, and that’s official.