2009 January » Tax Research UK

Barclays and Credit Suisse under criminal investigation

Barclays, Corruption Comments Off

Jan 122009

Lloyds TSB of the UK last week became the first bank involved in the inquiry to reach a settlement with US authorities. As part of a deferred prosecution agreement, Lloyds agreed to pay $350m (€260m) after admitting that it helped Iranian and Sudanese clients access the US banking system in violation of US sanctions. Lloyds falsified business records by altering wire transfer information to hide the identity of its client, prosecutors said.

Lloyds was not the bank involved in attempts to buy tungsten, prosecutors said.

The bank made a provision in 2008 to cover £180m related to the investigations. Lloyds, along with Barclays of the UK, and Credit Suisse of Switzerland, have disclosed that they were co-operating with US prosecutors.

So now we have Barclays also under criminal suspicion.

And there are a number of other European banks under investigation too.

It looks like my belief that banking is rotten to the core has some justification.

James Purnell – a man who likes to control his image

Uncategorized 3 Responses »

Jan 122009

James Purnell MP – tipped as a future leader of the Labour Party by some – is a man who likes to control his image.

Remember this is the man who had himself airbrushed into a photo:

So I was amused to get an email from his office this morning:

Dear Sir,

It was recently drawn to my attention that you are using a copyrighted image of James Purnell MP without permission. This violates copyright law. Please remove this image from your blog.

Yours sincerely,

Thomas Hamilton-Shaw

Office of James Purnell MP

It’s true: I had. It was here. It’s gone. I can’t be bothered to fight.

But if you want a definition of pomposity, is this it?

My del.icio.us bookmarks for January 10th through January 12th

Delicious 7 Responses »

Jan 122009

These are my links for January 10th through January 12th:

FT.com / Companies / Food & Beverage – ‘Greed’ blamed for pub closures – "Private equity groups and property investors are having a “pretty disastrous” impact on the British pub industry, the founder and chairman of JD Wetherspoon has warned."
I think it was Aristotle who said that you cannot make money from money. You can make money from pubs. You can't when you turn them into a form of financial engineering. Then we all lose
Mapeley investors in row over bond issue – Times Online – Will HMRC's landlord go bust?
When you offer bonds with a 20% yield you know something is horribly wrong

It's a hedge fund in all but name – I don't give it long

And what then? Do the leases revert to HMRC?
Operation Wickenby suspect Philip Eric de Figueiredo bailed in Jersey | The Australian – How come I missed this?
Why aren't I surprised that Jersey is involved?
Op-Ed Columnist – Eight Years of Madoffs – NYTimes.com – No government is perfect – we all know that – they're made up of human beings
But Bush turned corruption into an art form
FSA fines insurer Aon £5.25m for corruption control failures | – I'll guarantee these funds went to tax havens
Any respectable business should avoid them like the plague

Looks like the FSA got something right

But maybe the fine wasn't big enough

The Tiger is dead

Ireland Comments Off

Jan 122009

The Irish Times featured an interesting article this weekend. It said:

The ESRI are estimating that 50,000 people will emigrate from Ireland this year. Here are some options for those considering the big move.

DURING THE 1980s, when Ireland was in the throes of a dreadful recession and high unemployment, the then minister for foreign affairs (the late Brian Lenihan), famously observed: “We can’t all live on a small island.” People left in droves.

And that is exactly what they’re going to do this time too, if they can. The article rated the options on where to go.

People have criticised me in the past for saying the Celtic Tiger was a myth built on the back of tax cuts and what was, fundamentally, hot money. It’s now glaringly obvious I was right. The myth has been shattered.

I hope Ireland learns the lesson.

Lloyds TSB – criminally corrupt

Banking, Corruption 2 Responses »

Jan 112009

Reuters reported this from Washington DC today:

Lloyds TSB has agreed to forfeit $350 million (£231 million) to U.S. authorities in connection with charges it faked records so clients from Iran, Sudan and elsewhere could do business with the U.S. banking system. The actions violated the International Emergency Economic Powers Act, which allows the U.S. president to block commerce with countries deemed a threat to the United States.

“Lloyds’ criminal conduct was designed to assist its clients in avoiding detection by filters employed by U.S. banks because of United States economic sanctions against Iran, Sudan and Libya,” said a fact sheet on a deferred prosecution agreement between the government and Lloyds that was filed in U.S. District Court in Washington, D.C.

The U.S. Justice Department said that, from 1995 to 2007, Lloyds’ offices in Britain and Dubai removed information such as customer names, bank names and addresses so wire transfers would not be flagged and blocked as improper by U.S. financial institutions.

“This process of ‘repairing’ or ‘stripping’ … allowed more than $350 million in transactions to be processed by U.S. correspondent banks that might have otherwise been blocked or rejected,” the department said in a statement.

Most of that was money sent from overseas and into the United States, said Matthew Friedrich, acting assistant attorney general for the criminal division.

The stripping allowed about $300 million to be sent between the United States and Libya, about $21 million between the United States and Sudan and about $20 million between Libya and the United States without scrutiny to ensure it was legal.

In response Lloyds is reported to have said

“We are committed to running our business with the highest levels of integrity and regulatory compliance across all of our operations and have undertaken a range of significant steps to further enhance our compliance programs”

Let’s not beat about the bush here. Lloyds clearly knew what it was doing in this case. It was systematically breaking the law. It did so for 12 year during which time large numbers of people in that organisation knew why they were taking the actions they did.

This does not suggest this was a random act. Nor does it suggest it was a mistake. Nor was it undertaken by a rogue individual. This is indicative of an organisation that knowingly set out to break the law and condoned that action on the part of a large number of employees acting on its behalf. That could only have happened with sanction at very high level.

The conclusion is obvious: this was not a system error. This is clear indication of systemic corruption within this bank.

I’ve said this before of Lloyds TSB. I’ve also said it of Barclays, RBS, HBOS and HSBC. We know they have all systemically ignored reporting their clients in the UK Crown Dependencies who have refused to exchange information with the UK tax authorities to the appropriate money laundering authorities on grounds of suspected tax evasion (the only likely justification for such non-disclsoure, to which they have, criminally turned a blind eye) and now we have further evidence of the criminal conduct of one of this group.

We really do have to sweep aside those who ran these banks and replace them with those who might understand the obligations to the societies which give them their licence to operate. It’s not much to ask, but will we get a response from the Treasury, now the biggest shareholder in this bank? I hope so, but I won’t hold my breath.

My del.icio.us bookmarks for January 9th through January 10th

Delicious Comments Off

Jan 102009

These are my links for January 9th through January 10th:

Wealth Matters – What to Do if UBS Is Outing Your Secret Account – NYTimes.com – “When you put your money in the hands of these gnomes of Zurich, you may be putting your money in the hands of God-knows-whom doing God-knows-what with it,” Mr. Blum said. “The question is, do you really want to be out in that world?”
Jack' s asking the right questions, as usual
Patricia Cornwell book reinforces Manx 'tax haven' stereotype – Isle of Man Today – Talk about having a persecution complex
Inquiry launched in PWC's auditing of Satyam's accounts – Telegraph – Should keep PWC shut up for a while
Gabon / Anti-Corruption Advocates Imprisoned On Trumped-Up Charges « Database of Press Releases related to Africa – Campaigning comes at a price
My thoughts are with these guys

Please support calls for their release
BBC NEWS | Business | Satyam scandal shocks India – India's Enron?
PWC were auditors

It really is time for change in the audit profession
FT.com / Companies / European companies – Ireland to lose 1,900 Dell jobs – The Celtic Tiger really is falling apart
You can't build an economy on low tax rates
‘Unite’s credit crunch claims wide of mark’ » News » This Is Guernsey – 1) HMRC did not make the estimate. I did
2) Prove it wrong.

3) There's not a major government anywhere that thinks you caused the credit crunch. But you sure as heck facilitated it

4) Just as you facilitate tax abuse

5) That's the consequence of the secrecy you provide – it's pernicious, deliberate and intended to undermine the rule of law in other states. If you think that's the way to win friends it's a weird way to go about it

Lessons to be learned from India

Accounting, Banking, Corruption, Ethics 3 Responses »

Jan 102009

Dennis Howlett has looked at the developing Satyam scandal in India:

There’s an old saying: ‘where there’s a will, there’s a way’ and that is certainly true in India. Earlier today, the Indian government stepped into the troubled company and disbanded the entire board of directors.

And note the government said this too:

We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders.

Action against auditors of the company has already been initiated by the ICAI,

As Dennis says:

I don’t know if this is a precedent but in the context of ongoing compliance issues, this is an excellent example of a government realizing that the risks in the current situation are too great for all stakeholders and is therefore taking decisive action. What’s more, we now know a little more about what was happening at the company. Equally, we also know that PwC is now definitely under the hammer.

More to the point: can you imagine the UK or US governments taking similar action? We often think of India as a land of great inequality and as a mildly corrupt regime. I can guarantee that in the eyes of the world, such actions, when taken appropriately and at the right time are confidence boosters.

But the Boards of the banks that failed in the UK are still in place (by and large). I know they didn’t commit fraud. But they failed spectacularly. Similar action would have been appropriate their too.

As would action against their auditors have been right.

But it didn’t happen. I think we have a lot to learn.

At number 25

Accounting, Richard Murphy 1 Response »

Jan 092009

Someone has just drawn my attention to Accountancy Age’s Financial Power List for 2009. Of this it says:

In a year that will shape the future of the global economy, we look at the names to watch in 2009

And at number 25?:

Richard Murphy, tax campaigner, Tax Research Network

The public face of tax campaigning is often criticised for his controversial approach to tax issues. Of particular importance to Murphy is a globally recognised crackdown on low-tax jurisdictions, and his efforts in highlighting the issue have arguably lifted its importance on the government’s agenda.

Looks like they can’t decide if I’m Tax Research or Tax Justice Network on this occasion, but either way I make the customary, but totally appropriate point that this reflects the work of an awful lot of other people too, not least John Christensen and Prem Sikka. And my wife too – easily one of the most important but wholly unacknowledged people in this campaign.

It would also be good if they stopped referring to tax havens as low tax jurisdictions. They’re not. They’re promoters of regulatory abuse behind a veil of secrecy – which is something quite different – and tax is just one of the areas in which they undermine democratic governments in fulfilling their mandates.

Modern finance: making dividends out of loans

Accounting 10 Responses »

Jan 092009

The NYT reports:

From the fourth quarter of 2004 through the third quarter of 2008, the companies in the S.& P. 500 – generally the largest companies in the country – reported net earnings of $2.4 trillion. They paid $900 billion in dividends, but they also repurchased $1.7 trillion in shares.

We know the profits weren’t real. Much of it was simple mark to market revaluation. In which the dividends and share repurchases were paid for out of borrowing.

No wonder leverage has shot through the roof. And now companies will fail as a result.

I know this is the US and they use different rules, but the IASB has a lot to answer for in releasing this madness on the rest of the world.