Specialist economic crime investigators in the City are considering a criminal enquiry into the actions of Barclays officials and government ministers, following formal complaints submitted by the Christian Peoples Alliance (CPA) party. The CPA says that shortcomings in the powers and effectiveness of the Serious Fraud Office (SFO) require the investigation into Libor and Euribor rate fixing to be a police-led investigation.
Yesterday, the SFO confirmed its own criminal inquiry into the rigging of inter-bank lending rates. However, City Police have told the CPA that their complaint has been passed to the new Head of the Economic Crime Directorate, DCS Oliver Shaw, for consideration.
Alan Craig, Leader of the Christian Peoples Alliance and a former group company chairman in industry, commented:
"The CPA wants this to be a police-led Investigation. It is the City of London Police, with their powers and expertise, that should be entering Barclays and other banks, including the Bank of England, interviewing their staff along with senior figures within Whitehall, under caution if necessary, and gathering evidence relevant to a potential prosecution by the Crown Prosecution Service. This cannot be delayed or derailed by current political posturing about dealing with systemic issues, or by using a department of Government to obfuscate matters. I believe the City Police must take the lead."
Last week, the Christian Peoples Alliance asked the Crime Directorate of the City of London Police - the lead body nationally for economic crimes - to investigate whether offences have been committed under Section 2 of the Fraud Act. In a fresh development, CPA Leader Alan Craig has made a new request to the Directorate (see letter below) to ask they consider whether government ministers and officials are also implicated in financial crimes, following the statements by Bob Diamond (on Wednesday) and George Osborne (on Thursday) to Parliament.
The CPA says the SFO is legally and politically handicapped because section 2 of the Criminal Justice Act 1987 means the SFO only have powers to compel 'persons' to answer questions and produce documents. As the Government is not a 'person', the SFO has no power to compel the Government or any Government Department to answer questions or produce documents. Mr Craig also points out that as the SFO is itself a department of Government, it risks both compromise and the ability of politicians to bring pressure to bear on the outcome.
Alan Craig added:
"Not only cannot Government investigate Government, the SFO is subject to political interference, as was demonstrated by the decision in 2006 not to proceed with an SFO investigation into the al-Yamamah deal, where there were grounds to suspect false accounting. Given that "senior figures within Whitehall" are implicated in this matter, can the public trust the SFO not to be compromised again? After all, this was a body up until a few weeks ago that the Coalition were committed to abolishing. I wonder why this has now been put on hold?
The CPA is pointing to shortcomings in the effectiveness of the SFO:
* in 2008, an official internal "Review of the Serious Fraud Office" found that the SFO had significantly lower conviction rates (61%) than elite divisions of the Crown Prosecution Office (80% for Fraud). It attributed the SFO's relatively poor performance to, among other things, failure to keep all court advocacy "in-house", failure to assign each case a single lawyer who managed it "from cradle to grave", failure to interview witnesses at an early stage, and failure to co-operate closely with the police. By comparison the Economic Crime Directorate of the City of London Police has a 75% (2007 figures) success rate.
* their failure to make surprise raids on City institutions, with city company Pinset Masons last month revealing evidence of the failure of the SFO to conduct a single raid in the last financial year using search warrants, compared to 47 in the previous year.
NOTE: Full letter to City Police below
6 July 2012
Chief Superintendant Shaw
Economic Crime Directorate
City of London Police
PO Box 36451
Dear Chief Superintendant Shaw
Alleged Libor & Euribor Rate Fixing - Barclays Bank PLC and Others
I understand that the letter of 30 June 2012 from my colleague, Stan Gain, to DCS Head has been referred to you as the current head of the Economic Crime Directorate of the City of London Police, and so I write to you.
In that letter, my colleague, Stan Gain, made a formal complaint that there was the possibility of persons unknown, but believed to have been working for Barclays Bank plc, having been in serious breach of the criminal law. Following the evidence given on Wednesday 4 July by Bob Diamond, the former Chief Executive Officer of Barclays Bank plc to the Parliamentary Treasury Select Committee, and the statements made in Parliament yesterday by George Osborne, the Chancellor of the Exchequer, it appears that there is a real possibility that other criminal acts may have been committed by others. Furthermore, that the Serious Fraud Officer [SFO] is not the appropriate body to consider these, but, instead, the relevant investigation needs to be police-led.
This is due to the SFO, under the Criminal Justice Act 1987, only having powers to compel 'persons' to answer questions and produce documents. In amplification of his views of his note of the 29 October 2008 conversation with Mr Paul Tucker, Deputy Govenor of the Bank of England, Bob Diamond was not clear as to whether the phrase 'senior figures in Whitehall' related to officials or ministers. Either way, he was clear that this reference to 'Whitehall' referred to Government figures. Then, in Parliament yesterday, George Osborne was very clear that this phrase referred to Ministers of the Crown. Whilst the SFO does have power to investigate any such (as individual 'persons'), it does not have power to investigate the Government - for the Government is not, in any way, a 'person'. Even if the SFO did have that power, it would not be appropriate for the Government to conduct a potentially criminal investigation into itself. Indeed, the only investigative body with sufficient independence, statutory power and knowledge of the criminal law to carry out that investigation is the police - and as the National Lead Force on Fraud with a 75% success rate (2007 figure) I write to you.
I set out my concerns in greater detail below.
In his evidence to Parliament, Bob Diamond considered there were three phases of rate fixing:-
1) 2005-2007, with some on into 2009.
This, he suggested, was due to 14 traders seeking to make gains for their own 'books'. As the FSA Final Notice to Barclays Bank of 27 June 2012 [the FSA Notice] states "The Derivative Traders were motivated by profit and sought to benefit Barclay's trading position" (Para 8). Since my understanding is that such trades are a 'zero-sum game' (ie for every pound one person gains someone else loses a pound) it appears that one man's gain is another's loss; and one man's attempted gain is another man's increased risk of loss. In particular I refer you to Paras 42 to 51 of the FSA Notice. You will appreciate the possible application of Section 2 Fraud Act 2006 to this behaviour.
Under questioning to Mr Diamond and from the FSA Notice, it appears that not only were there a number of traders involved, but also the 'Submitters' ie those people who submitted the allegedly false rates to Thomson Reuters for the British Bankers Association (for Libor) and European Banking Federation (for Euribor). It is not clear as to whether desk supervisors or those in the compliance department were part of this. It is, however, clear from Paras 52 to 98 of the FSA Notice of the extent of collusion and potential agreement between unnamed Barclays Derivative Traders, Submitters and External Traders.
You will recognize that, within those specific paragraphs there is, at the very least, prima facie evidence of an agreement by two or more individuals, presumably to deprive others or expose them to economic risk or disadvantage, and you will recognise the relevance of this with regard to the common law offence of conspiracy to defraud.
2) September 2007 to May 2009
In his evidence, Bob Diamond also stated that, in 2007 to 2009 (which overlaps to some extent with the first phase), Libor submissions were made "that took into account negative market perceptions". This echoes the Paras 13 & 14 and Section C of the FSA Notice.
From the FSA Notice it is clear that "Senior management's concerns in turn resulted in instructions being given by less senior managers at Barclay's to reduce Libor submissions" (Paras 14 and 112). You will recognize the plurality of the words "instructions being given by less senior mangers" is indicative of two or more people being in agreement to provide false information to those who had a public duty to set the Libor rates, even if this was purely to avoid negative media content and did not actually involve economic loss to anyone. This is set out more fully in Paras 102 to 124 of the FSA Notice. Moreover it appears that misleading or false information may have been agreed by two or more to be given to the FSA itself (see Para 124 to 127, especially Para 127). I will leave you to consider whether these behaviours come within the common law offence of conspiracy to defraud.
You will also note, at Para 14 of the FSA Notice that "The origins of those instructions is unclear", although Bob Diamond in his evidence stated the senior management concerned were in Group Treasury. This lack of FSA clarity on this aspect of this matter only re-emphasizes the need for a police-led investigation, with the power to interview those concerned (under caution if necessary).
3) After 29 October 2008
You will be aware of the note made by Bob Diamond of the telephone conversation of 29 October 2008 himself and between Paul Tucker of the Bank of England. The relevant part of this note reads
".......calls from a number of senior figures within Whitehall......."
And the final sentence
"Mr Tucker stated that the level of calls he was receiving from Whitehall were "senior" and that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently".
This led to 'senior management' [FSA Notice Para 176], being Jerry del Missier [Bob Diamond's evidence], giving instructions to reduce Libor submissions. The FSA accepted that this was due to a "misunderstanding or miscommunication". There are however two issues here of which, I suggest, the second is outside the jurisdiction of the SFO:
a) Even if such "senior management" was acting under a misunderstanding or miscommunication, whether a criminal offence was committed by giving such instructions to others.
b) Clearly senior figures in Whitehall were involved in discussing these matters with Mr Paul Tucker, the Deputy Governor of the Bank of England. The issue then is whether these were instructions, whether direct or by 'a nod and a wink' (the words of Andrew Tyrie, Chair of the Parliamentary Treasury Select committee) being given to Barclays to submit lower figures and, if so, who was giving them and in what capacity (ie as individuals or as members of the Government). Mr Jerry del Missier clearly understood them to be such instructions from 'senior figures within Whitehall'. Under questioning Bob Diamond was not clear as to whether the "senior figures" were officials or ministers. Regardless of which they were, they appeared to Mr del Missier to be instruments of Government. In Parliament yesterday, the Chancellor of the Exchequer, Mr George Osborne made it perfectly clear that he regarded this as ministerial involvement. Thus the issue comes as to whether these were unlawful instructions and if so, they are given by agreement between individuals, or within Government, that Barclays Libor submissions should be lowered. In view of the possible Government involvement I suggest it is outside the powers of the SFO to investigate or require disclosure of Government information.
Consequently I refer the matter to the Economic Crime Directorate of the City of London Police, such that the possibility of such a significant and far reaching breach of the criminal law may be properly investigated, and investigated independently of any branch of Government.
Leader, Christian Peoples Alliance