BREAKING: Allegations of systemic fraud in RBS

Unable to get any more money from the taxpayer, RBS stands accused of swindling large-scale property borrowers.

Hester…questions to answer

Two separate civil high court actions and one on-going criminal action are about to reveal powerful evidence of organised attempts within RBS to defraud customers. In the last of these, sources allege that some 15 RBS staff are the subjects of a surveillance operation by the City of London Police).
Last weekend, RBS boss Stephen Hester told the Daily Telegraph that it would “take a generation” to get the rotten apples out of banking. He added that the general public must view the industry’s current failings as a “very unedifying sight….there are criminals in any walk of life, not just banking”.
The case at issue, highlighted below, suggests that Mr Hester could do worse than start rooting them out of his own organisation. Says the main source involved:
“The potential implications of RBS’s behaviour in this case are huge, in that it has been actively working to defraud retail clients. The case documents outright systemic fraud within RBS, aided and abetted by well-known property agents and administrators.”
In one soon-to-be high profile case, plaintiffs allege that a hotel  redevelopment project using RBS finance of around £5m was abruptly halted when, at the last minute, RBS used the ‘opinion’ of an ‘independent’ property agent to massively undervalue the property concerned.
RBS used this to designate the hotel a distressed asset, and declare the project insolvent. Administrators then colluded to sell the property to RBS’s distressed assets division (West Register) for £1.
The major bombshell in all this is that I understand the procedure was at the time codified (ie, approved) in an internal memorandum to over 100 senior managers at the bank.
In short, it’s a scam to walk away with a £15m asset, at a cost of £1. But it’s nothing new inside the RBS axis of smoke, mirrors and fraud.
In November last year, Innes Berntsen and Chris Richardson, business partners-turned property developers, began High Court proceedings against RBS bank’s NatWest subsidiary – alleging wrongful termination of its bank facility for the development of a four-star Kent hotel. The two entrepreneurs issued a writ for £29m against NatWest, claiming the bank forced them to appoint administrators for the Sittingbourne hotel on 22 June 2010 – with funding withdrawn nine days before the 1880s-built hotel was due to open after redevelopment.
Exactly the same sting as that applied to this latest case.
Just two months ago, financial blogger Ian Fraser reported that Royal Bank of Scotland had shifted billions of pounds of commercial property debt from its banking book into its subsidiary repository, West Register. With this meaningless accountancy 3-card trick, the bank avoided declaring losses on loans decreed to have gone bad – and thus magically transmuted liabilities into assets. Such commercial real-estate shuffling appears to be central to RBS chief executive Stephen Hester’s recovery project, enabling him to flog off the assets for much-needed cash.’
The Slog has posted endlessly about the devious fantasies of Bank accounting in relation to assets and liabilities. Here we have Stephen Hester’s RBS not only involved in a morally repugnant assets declaration – but also his subsidiary using those ‘assets’ to screw the customer base. This – and the infamous ‘glitch’ – perhaps show how Hester is putting McHumpty together again.
This gives Osborne’s Treasury, the Bank of England, and Hester himself a huge problem, in that the owners of RBS have at best failed to deal with powerful evidence of systemic fraud, and at worst been complicit in turning a blind eye to it.
RBS has been fingered several times by this site over the last two years as the most dodgy, toxic, and unsaleable banking asset taken on by HMG after the 2008 disaster. If the bank’s management are pulling this kind of stunt, then it leaves the observer wondering just how desperate their circumstances really are.
Or perhaps it’s just another glitch. Stay tuned.

51 thoughts on “BREAKING: Allegations of systemic fraud in RBS

  1. Pingback: John Ward – Breaking : Allegations Of Systemic Fraud in RBS – 1 October 2012 | Lucas 2012 Infos

  2. Since RBS is a ward of the state engages in mafiosa tactics, what does that make our Government? Dave, George, answer please.

    • Sovereign governments are just the highest mafia in the land.

      Gambling? Drugs? Sure, as long as the government gets a piece of the action. Of course its a mafia. It’s control of the most lucrative businesses in exchange for a cut of the profits.

      Banking of course, is the most lucrative game in town. So of course the government wants a slice of the pie.

  3. I suspect almost all the banks (and some nations) are in desperate circumstances. Dodgy accounting and inflation is the cover that the rulers hope will allow things to stagger on until it becomes the next generation’s problem.
    Nothing is real, until the house of cards comes tumbling down.

    • I’m sorry, but the fantasy of a collapse is not on the cards. The lever that everyone forgets is inflation, coupled directly to the short term memories of the many. That will be the way that the banks and countries are rescued, and it will be deliberately engineered. Think about 10 years at 5% compound genuine inflation. Your financial assets and their (and your) debts will be substantially devalued. It has started and 5 years have already passed. Another 5 years and the problem will go away. As any politician will tell you, stealthy devaluations of assets and debts are far preferable to riots and awkward political situations. Of course this only works if the people don’t care about 5 years’ time…

      • Agreed. Deliberate inflation will get rid of debts normally. But after our five years to date, our debts are worse than when we started. They are stealing faster than governments are inflating.
        Governments need a stronger solution, but honesty is not politically acceptable.

  4. A barrel of rotten apples rather than a few bad ones would be my opinion -”.there are criminals in any walk of life, not just banking” Yes but bankers tend not to go to jail.

    FSA seriously complicit in this, as are Blair & Brown as outlined by Bill Black :

  5. Having grown up in a family business in a trade where “My word is my bond” still held good for many years, I was occasionally surprised at sharp practice by banks. It must have been 30 years ago and it was a Scottish company which got the treatment but I can’t remember the bank. The company was a long established grain merchant who had clearly been under-performing for some years.
    The bank waited until harvest time when the firm’s silos were filled with grain which had not yet been paid for. Then they put the firm into receivership, effectively seizing the grain. The farmers who had supplied it did not have a chance. The grain had gone into bulk and “lost its identity” so there was no way they could claim it. They were unsecured creditors and the bank was a secured one. It was a calculated, ruthless coup.

    After a number of cases of this sort, suppliers started to introduce a clause in their contracts to retain title until paid but that is very difficult when you cannot point to the actual goods and say “They’re mine”, which you can’t do with bulk grain which has been mixed in with supplies from many other people. I once had to reclaim goods which were in bags and drums and so could be identified but the receiver had cut off the power and the electric fork truck was low on charge. A modest tip to the driver sorted that one out!

  6. Many years ago,when I was too dumb to believe the honesty of everyone,I went to the USA and attended a so called elite college for business.The course constantly alluded to techniques to rob everyone in your respective fields,pay off the government and shift the proceeds off shore.Things have obviously not improved since 1982.

    • I think I was on the same course! In societies without ‘solidarity’, this tends to happen. The USA has a negative solidarity index in my opinion, and I lived there for many years. That said, the country has a GDP/person well above ours and it shows.

  7. steviefinn
    October 1, 2012 at 8:07 am

    A barrel of rotten apples rather than a few bad ones would be my opinion -”.there are criminals in any walk of life, not just banking” Yes but bankers tend not to go to jail.

    And there we have the problem. If these property scams were dealt with as ‘conspiracy to defraud’ and all the 100 managers that were copied and did nothing and the coterie of administrators and West Register managers etc., were all taken to court and dealt with as people at the level of the ‘Great Train Robbers’ with prison sentences to match, the outbreak of banking ethics would be amazing. However, as long as everyone talks of RBS being this and Barclays being that – nothing will happen as the cockroaches are safe under their rock. Punishing ‘a bank’ does zero to punish the fraudster who can leave that bank and join another without a stain showing on their lack of character. It is personal accountability that needs to be enforced. The litigation being taken out should name the individuals at the bank as ‘individually and severally liable’. This would then require them personally to get lawyers and make statements and have their names in the press and blogs. It would also mean damages against them personally too. To quote Voltaire: “Dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres”

    • Exactly Ian, it is pointless fining organisations, especially organisations like Network Rail, the NHS, Banks or other institutions, unless the fine is large enough to bankrupt them, of course.

      Little if anything will change unless individuals are personally held to account and nothing at all will change until government officials and ministers face real and personal consequences for failure.

      • completely agree…..I come from an age (born ’55, ex military) where my word really is my bond. No need for contracts, complete trust that people will deliver what they say, etc. This appears to be the opposite of what we have now …..

      • Yes! Yes! It is the demise of individual accountability which has become the curse of our age.

        (minor niggle: cut out that ‘severally’ perhaps; f’rinstance, a legal action against the might of a BT or the NHS may achieve only the bankruptcy of the unfortunate plaintiff who cannot match the limitless depth of the corporate pockets …. whereas if an individual culprit has to face meeting his own legal costs, that’s a very different matter …. and the punishment of a single Byng concentrates a great multitude of minds).

      • Read the essay ‘Parkinsons Law’ – as the number of ships decreases the number of admirals _increases_.

  8. ‘Last weekend, RBS boss Stephen Hester told the Daily Telegraph that it would “take a generation” to get the rotten apples out of banking.’

    Certainly if he does as little as he has up to now, that will be the case. But all top bankers could do a lot more and should. Someone should be ‘encouraging’ them, with credible threats to their careers and future wealth if necessary.

    • Surely conspiracy to defraud should be the charge with exemplary sentences and seizure of assets (as for drug dealing) being an option?

      When are we going to see Not Sir Fred charged?

    • But if it will otherwise ‘take a generation’, why not short-circuit that slow process by firing all the current ‘generation’ of high-level bankers and starting again ? Save 25 years at a stroke.

      • @Mudp: This is an attractive idea and, on the face of it, a sensible one. However, real mendacity is now so systemic that it is hard to see how suitable replacements could be found under current circumstances. Without wishing to be over pessimistic, I feel that this ship must hit the rocks in order to force the building of a new one.

  9. Trouble is, these sharks are protected by the politicians, many of whom are in banking themselves. Our PM is from a banking family. So they all protect each other, it’s all one big ‘club’. The only way to stop it is to destroy it root & branch. But who will ‘bell the cat?’
    A few mixed metaphors there, but well, you know what I mean!

  10. I also have firsthand experience of sharp practice by RBS in relation to commercial property. We complained to the ombudsman which turned out to be a complete and utter waste of time. Luckily we were able to keep our shirt and go elsewhere – to Lloyds who, although they were initially well behaved, are now trying it on too. The problem is that, due to their own financial imprudence and mismanagement, these people are increasingly desperate. I agree with all who say that, until there are credible controls, this can only get worse.

  11. This is no surprise.
    About 10 years ago there were pieces in german TV which revealed the practises of Sparkassen to train their staff how to defraud their customers via bankrupt them and take their securities for nothing.

    • The time to break up RBS was when it got into trouble in the first place. All these “bank rescues” were lunatic, or wicked.

  12. The entire financial sector has turned predator on the indigineous population (as they have run out of road elsewhere).

    The only hope for us is to minimise contact as far as possible and opt for other ways to operate avoiding the banks as far as possible

  13. As well as the suggestions above, I’d like courts to have the power to send businesses / corporations to “jail” if convicted of wrong doing, I.e. the board (or senior management) is totally replaced and an administrative board put in place for the length of the “jail” sentence. The business runs as usual, but all profits are forfeited to the public (or those defrauded, as relevant). Furthermore, no shares can be traded during the “jailing” (this forces shareholders to be more aware of their responsibilities at all times as part-owners of the business involved).

  14. I remember the Natwest playing the same scam in my home town about 30 years ago.

    Overnight they started to withdraw banking and overdraft facilities with all the unfortunate businesses who banked with them locally forcing many out of business and foreclosing on their assets/homes.

    Once a bastard always a bastard.

  15. A security camera showing someone stealing an apple can result in a conviction, however with the average juror in the US eyes glaze over when the case becomes complicated. John Edwards our former presidential candidate ran a course on how to pick dumb jurors from the pool. Bank fraud even if vigorously prosecuted it is tough to convict in our system.

    • “Bank fraud even if vigorously prosecuted it is tough to convict in our system.”

      Pretty much the same in the UK and even changing to Tribunals for complicated Frauds won’t change the conviction rate because of the point that follows.

      The degree to which Banksters are now held in contempt but remain free from prosecution brings more guarantees that they will just accelerate the ripping off whilst they can. They have to. The more money they can ripoff the more politicos and judiciary they can own, it becomes self fulfilling prophecy.

  16. If this is true, everything is lost. The banks are evidently criminal. There is little difference at the end of the day between our banks and Russia’s banks.

  17. It is only ever possible to keep this scam, sorry sorry, system going by larger and larger frauds and this is untenable for any length of time.

    When this eventually blows, as it will, then this will make the Poll Tax riots seem like an argument over the brand of fairtrade coffee at the mothers union.

    Bankers made ludicrously stupid bets and then came along Swervyn King to ensure that as he hates bankers so much that he gave them unpalatable amounts of cash to eat and the coalition bought into this nonsense based on the bed time horror stories told them by the self same Mervyn. Remember both coalition parties in opposition were opposed to QE.

    Where we are now is a type of limbo waiting for the disaster to happen while idiots pretend things are getting better, when all that has happened is the biggest financial disaster in the planet’s history has not happened yet. The Spanish banks bailout is around 60bn Euros short as the the stress testing was rigged to high heaven. There is a global conspiracy to keep this thing going and the wheels are coming off.

    The politicians/bankers game is to keep on kicking this as far as is humanly possible down the road without actually changing the benighted system as real change is anathema to them. The political banking complex is in way too deep now to turn back as serious prison time beckons if they went down that path.

    RBS is merely a symptom and not the disease itself.

  18. Pingback: Hester’s other RBS debt strategy: dump it on the taxpayers | A diary of deception and distortion

  19. Pingback: Geoffrey West – Hester’s Other RBS Debt Strategy : Dump It On The Taxpayers – 2 October 2012 | Lucas 2012 Infos

  20. Pingback: Geoffrey West – Hester’s Other RBS Debt Strategy : Dump It On The Taxpayers – 2 October 2012 « Mission Galactic Freedom

  21. Insolvency Related Fraud is rife, but seldom succesfully challenged let alone prosecuted. The “Greystones Fraud” is an exception in that the evidence of Fraud which has been gathered by the Victims is completely damning. However, with the Conspirators being extremely well connected, they have used their influence in News International and the Royal Courts of Justice to Cover-Up the Fraud through further systemnatic corruption .Read the whole sorry story at http://bloomgatefraud.blogspot.co.uk/. Chris Coomber

  22. Pingback: BREAKING….RBS faces massive ‘rape of SMEs’ scandal. | A diary of deception and distortion

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