BREAKING….RBS faces massive ‘rape of SMEs’ scandal.

Hester….eyes too close together?

In its ruthless drive to get back on track, RBS is fleecing its customer base with abandon.

We had the lucrative glitch in June, the legal battle to stop Libor/Yen fraud coming out in July, the systemic property-purchase fraud earlier this month…and now shocking details are emerging of a long-established mis-selling scandal whereby SMEs have been pressured into buying toxic derivatives.

The bank is, naturally, RBS. While this scandal was cooking away nicely, the man in charge was ex-Sir Freddie Goodwin – a man thought by many in British business to have been un-Sirred disgracefully, he having “done nothing wrong”. Well, the banksterism I’m about to reveal happened on Fred’s watch. And now Fred is no more, Stephen Hester seems to be steadfast in his desire to keep everything covered up.

For several years now, Welshman Colin Jones has been fighting RBS about fraud and corruption in relation to the lending of funds to him: more generally, the mis-selling of complex derivatives to SMEs. His local MP Guto Bebb has raised questions about both Colin’s case, and the scandal of mis-selling to small business, in Parliament – with specific reference to RBS.

“When the North Wales Fraud department went to RBS and asked them to place charges against a solicitor involved in the fraud, RBS refused,” Colin alleges, asking, “how can a state owned bank refuse the police the opportunity to investigate fraud?”

Search me – I don’t know. Neither did Reuters after Mr Jones contacted them about the case. But when in 2007 Colin Jones went to RBS in search of £400,000 to buy a small hotel in North Wales, the bank craftily said he could have the money if he also took out an interest rate hedged derivative swap.

This was, the salesman told him, designed to protect Colin against interest rate rises. It was nothing of the sort: rather, it was a UXB waiting to go off. RBS sold the product in order to increase their margins via a whopping commission from the swap supplier. Just as the bank has been scamming small business property purchases by, at the last minute, revaluing their asset downwards and declaring them bankrupt, so in cases like the one that has ruined Jones’s life, they were lumbering an SME with a liability well beyond the buyer’s means.

Caveat emptor doesn’t apply in this case: no hotel entrepreneur is going to understand complex rate swaps – and the salesman lied. The bank stands accused of fraud, with a mountain of evidence to potentially convict it. But this Treasury-owned organisation is simply telling every form of authority to f**k off.

Colin’s hotel was repossessed in July 2011, after a sharp drop in rates during the financial crisis pushed charges on the deal to an unaffordable £30,000 pounds per annum. RBS, however, was hedged in the other direction: it picked up a 400 grand asset, producing a valuable addition to its battered balance sheet.

“I’ve lost my house, my wife and I have separated, I lost my self respect, and I lost the respect of my local community because they don’t see what’s going on in the background. People just assume that you’ve done something wrong,” Jones told Reuters earlier this year.

Having reviewed the facts of the case, Reuters naively opined that the practice ‘could become the UK banking industry’s next big scandal. An increasing number of firms that bought the disputed insurance products are claiming compensation, and their advisers say the bill could run into billions of pounds.’

Five months on, however, Stephen Hester is still Mr Wonderful as far as the Treasury Sir Humphreys are concerned.

There is a glaringly obvious moral to this tale: a bank whose stupid, illegal and reckless practices forced we the taxpayers to bail it out is now working hand in glove with the Government to try and recapitalise itself by stealing from small business. This is, I’m afraid, why Stephen Hester felt able to tell the North Wales SFO to go forth and multiply in relation to the Jones case.

In the case of RBS, in fact, George Osborne would do well to ask Hester to stop lending to the SME sector: by doing so, baldy is hastening its decline.

Thankfully, because other major UK banks have also been doing similar things, the sheer pressure from ambulance-chasing lawyers will become too great to resist: so in the medium term, Reuters is correct. But in the meantime, Colin Jones is skint and alone.
Ultimately, we aren’t going to get any help from government and the police forces of Britain in this case, because they’re on the same side as the banker-Treasury axis of sociopathy. This is when we can be sure that the Rule of Law has broken down in Britain, and all bets are off.

I offer this as a case to support asking a question of all the hacks doodling on their pads in the Conservative Party Conference Hall this week: “What in God’s name are you doing there?”

Related: How RBS is quietly dumping its debt liabilities on the taxpayer

An RBS property repossession fraud taking place on Stephen Hester’s watch

RBS cover-up of Canadian Libor manipulation fraud

37 thoughts on “BREAKING….RBS faces massive ‘rape of SMEs’ scandal.

  1. I offer this as a case to support asking a question of all the hacks doodling on their pads in the Conservative Party Conference Hall this week: “What in God’s name are you doing there?”

    I couldn’t agree more. Rather than pretending to shed light on the black hole that party politics has become they would serve us far better by illuminating the verifiable and pernicious fraud being so blatantly perpetrated by the likes of RBS – of which I have first hand experience. That they no longer feel the least inclination to serve up the truth in any meaningful way, or at all in most cases, is proof positive that the idea of an independent press has gone the same way as the idea of democracy both of which have become simply too inconvenient for TPTB.

  2. As a proverbial ‘man on the Clapham omnibus’ my solution to all these so called complex structured products/derivatives that rely on what appear to be highly complex equations is the following:

    Ensure that the ‘term sheet’ in each and every one of these products that is being sold is signed by both parties and the term sheet shows examples in at least 12-point print of:

    a) if the capital is at risk of not being returned

    b) if capital loss is possible all scenarios that this can occur must be spelt out in plain English and signed off

    c) all scenarios of the repayments/liabilities increasing increasing (with with explicit monetary amounts of what may happen) from the initial payment schedule and by how much must be spelt out again in plain English and signed off by both parties

    d) minima and maxima total repayments/liabilities (alongside the initial capital value of the SP/Derivative being sold, so the buyer can see who much ‘interest’ they mey be liable for) must be signed off by both parties.

    All the above just to ensure any embedded nasties/derivatives/ bets in the thing being sold are fully understood by the buyer who normally is very much less sophisticated than the seller in the matter of Finance even though like Mr Citron, Treasurer of Orange County, LA, who famously said that he knew things as he bet and lost over $1 B of Orange County Taxpayers money around 1990, on complex interest rate swaps

    I would further ban all assignments/hypothication/ re-hypothication to minimise counterparty risk.

    This hopefully would minimise businessmen/ treasurers etc who buy the ‘products’ can not claim after the event that they were unaware of the possibilities of catastrophic losses or that in effect the wre buying a complex betting slip.

    • Such laudable transparency, and the resulting exponential rise in naked emperors, would not only frighten the increasingly terrified horses but would be an offence against the euphoria of post coital thinking that has our gonads in a vice constructed from our own imputed guilt – allegedly.

      • The emperors, it appears, would rather be dead than be (seen to be) naked; the funeral would be real fun (anag).

  3. Pingback: John Ward – Breaking… RBS Faces Massive ‘Rape Of SMEs’ Scandal – 8 October 2012 | Lucas 2012 Infos

  4. Roll on the bloody revolution.
    Get out of the conference halls and man [and woman] the barricades.
    Stop the bleeding elite – the Etonionistas of the ruling classes – be they Tory toffs, beknighted bureaucrats or bandista bankers. What goddamned right do they think they have to “rule”. They are ALL to a man [and woman] crooks, charlatans, carpet-baggers and very nasty people working entirely in their own arrogant self-interests.
    Let the plebs and proles revolt. Bring it on. Bring it on.
    Viva La Republica.
    Come on you plebs. Arise you proles. Up an at ‘em us oiks.
    Down with the elite.

  5. In spite of the introduction of the notably inefficient Crown Prosecution Service, there appears to be a residual requirement ( or at least a surviving custom) under English law that the injured party “prefers charges” which are then taken up by the police. and CPS . This goes back to the days when people were expected to look after themselves and only went to court when the wrongs they suffered became greater than they could sort out for themselves. It was not the state but the individual who laid the evidence and brought the charges.

    So, particularly in “domestics” the authorities often still lose interest if the injured party (usually but not always the wife) withdraws the complaint.

    This is not the case in Scotland where the Procurator Fiscal alone decides whether to bring charges on behalf of the Crown. People who make statements and complaints and then withdraw them can be brought in to court and compelled to give evidence under oath . Similarly, where there has obviously been an offence and the victim has not complained, the Fiscal can still bring a case to court if he has sufficient evidence (and he can tell the police to go looking for it, if he hasn’t enough).

    No system is perfect. There are reports from Scotland that the behaviour of the Crown Office has not been what it ought to have been – but since it all disappeared into Mr Salmond’s control, few people down South either know or care.

    • Can someone please explain why Plod would ask if RBS wished to prefer charges against a solicitor/salesman who, as I understand, did them no harm, indeed gave them commission, rather than asking the complainant? I’m sorry I don’t ‘get’ this one.

  6. How about all those toxic derivatives sold to local councils, hospital boards and school trust funds? Don’t they get a shot at RBS through the legal system?

    Or do the rate payers/ school students parents or hospital patients have to make up the shortfall?

  7. Notwithstanding the stupidity of a man who want to borrow £400K to buy a business asset, and therefore must be considered to be reasonably financially literate, failing to read and understand all the documents he was signing, there is the issue of what was the situation at the time. In 2007 interest rates were actually on the rise, having been between 4.5% and 4.75% for 2 years previously. They reached a high point of 5.75% in Sept 2007. Anyone therefore borrowing money at this time would have been worried about the upside, not the downside. We were after all (with hindsight) at the height of a 15 year economic expansion boom. Subsequently rates stayed above 4% right up until the wheels fell off the entire world financial system in Oct 2008, whence they crashed to their current historically unprecedented low levels. The previous lowest BoE rate since 1800 was 2%, at various times in the 19th century and during WW2.

    It is therefore the unprecedented low interest rates that have blown up the interest rate swaps in such a violent manner. Who would (in 2007) have predicted interest rates at levels far below those even in the darkest hours of WW2? No-one, thats who.

    And let us look at the counter factual. If the financial crash had not occurred, and interest rates had actually risen (as was expected) would the borrower be complaining, as his interest rate was kept at a lower level, while others were paying far higher rates? Of course not, he’d be congratulating himself on his financial acumen.

    The point is that all this is with a massive dose of hindsight. Yes of course, looking back from now, it looks like the most ludicrous decision, borrowing £400K at the height of a boom, and signing up to an interest rate swap that would penalise you massively if rates fell. I mean what sort of idiot would do that? It must be fraud of course! Whereas in reality, no-one forced the borrower to borrow the money, he made that choice entirely of his own free will, and didn’t read the documents properly.

    • Agreed. His contract with RBS said that a suitable interest rate hedge had to be put in place. He claims that he didn’t know what this was.

      • @ Jim & Jon

        What you say is of course correct, except that it is slightly out of context.

        Being one of those who had been saying for the five years up to 2007 that this ( rising house prices and unlimited lending to anyone who asked for it ) was madness and couldn’t go on, even I had begun to think that I didn’t understand it but could I be wrong?

        Much like all the doomsayers on this and other informed Blogs have been saying that the end of the (financial) world as we know it has to happen anytime now and they have been saying it for over a year. It hasn’t happened and is anyone still taking bets that it will and when?

        Given long enough of evidence to the contrary, all of us I suspect are vulnerable to the idea that even our common sense view might be wrong. The difference here is that those at RBS *knew* what they were doing whereas the borrower just *thought* he did, reinforced by dealing with a *creditable* lender who wouldn’t if he didn’t think it viable. Is that naive? Possibly, but only from the perspective of the thieves den.

        Besides which, anytime you can dictate terms to the lender as a would be borrower you would have to be in such a strong position you wouldn’t need to borrow in the first place.

        I lost all my trust of the Banks in 2008, prior to that I had a view I’d been taught to hold for decades, lucky are those who’d been better bred.

      • RBS did not ‘know’ what was coming, because it hadn’t happened. Unless they have invented a time machine, they only had educated guesses, not actual knowledge. And anyone who is purported to be in business and prepared to borrow £400K had better know what he’s doing as well, otherwise he’ll get very badly burnt, as occurred. This is not a case of a little old lady being mis-sold a financial product, or Mr Average being screwed over his mortgage, its a man who wished to run a business and profit from his borrowings. A man who should have gone into it eyes wide open.

        And it is not the role of a business to second guess the welfare of its customers. If someone walks into Tesco and buys a 50″ plasma TV on his credit card, do they ask him if he can afford the repayments? Or if his job is secure in the event of an economic downturn? Of course not, and it would be wrong to do so. One is free to overspend and bankrupt oneself if one so desires. And similarly with regard to the banks, and particularly business lending. Its not for the naive. Too many people seem to think they can take risks with other peoples money, take the rewards if all goes well, but expect others to pick up the pieces if it goes t*ts up.

    • But anyone in economics especially the banks knew what was coming,playing with loaded dice is fraud,they should not have used this mechanism to look after their own back pockets

    • In the good old (‘honourable’) days, the Bank would offer you Base +2% or whatever, on a long term loan. There was no need to introduce a seductive commission-based chocolate covered pill to entrap the victim.
      If, after a few years, the interest rate got too heavy, the Bank were all too happy to negotiate a new deal, with new collateral.

      I certainly saw that the Western economies had floated out to very deep water by 2005,6,7 and if the laws of physics applied, we were heading for the bottom. But I still assumed they would raise interest rates to protect the savers, and encourage them to keep their money in the banks. I suspected the Govt./BofE might print money and effectively deposit it at the banks to improve their ratios.
      So I fixed at 6% …. no bleedin’ hedge for me.
      It took me til 2011 to get out.

      These swaps were an out and out con, and were deigned to be. I suspect most of the Bankers didn’t see 0.5% BBR coming -ever. Certainly RBS Bos/Halifax, Barclays, and probably Lloyds didn’t. (Lloyd’s may have been clean, but they showed how dumb they were when they took on BoS) They set these up for fat commission, and because there was no competition in banking and they could insist on anything.
      The Regulator was as much at fault; he must have known the Bankers were a mafia in themselves.

      • “These swaps were an out and out con, and were deigned to be. I suspect most of the Bankers didn’t see 0.5% BBR coming -ever.”

        Except that against all perceived wisdom they appear. So perhaps they did see it coming because they planned it because they had TPTB in their pockets.

        Yeah, I know conspiracy theory and we all know what happens to those who believe in them. Ridicule etc.

  8. Who would ultimately pay any mega fines and compensation for the insolvent RBS? Sounds a little like the tax payer punishing themselves. Perhaps jail time for the crooks but where do you start and where does it end? Goodwin? Hester? Osborn? The board? The salesman?

  9. This is not a good example of a bank screwing a punter. The problem with most people taking out very large mortgages, is not that they neither read nor understand the fine print, but that they think circumstances currently prevailing are likely to continue. They do not look at the historical context, like for example the relationship between the average house price and average annual income and how it can change quite drastically over the course of a long term loan. They cannot therefore work out whether or not house prices are cheap or expensive. Taking out a large loan is always a risk, but the timing of when you take it out makes an enormous difference, dependent on whether the house or asset is cheap or expensive in as close to real terms as you can measure.

    Most people with £400K mortgages, don’t seem to have ever considered the possibility that mortgage rates could change to what everyone was paying in 1980 which was around 15%. They also don’t seem to realise that they are also expected to pay the £400,000 back too.

    £30,000 pounds per annum on £400,000 seems quite cheap to me.

    Tony

    • Tony maybe you should get out and see the food banks,you are right the real value of everything is lost in smoke and mirrors £30,000 is 2 tears income for 70% of the population,who economically can no longer carry the unfairness of the in-balance in the economy,34% tax subsidy for the rich receive , in billions that would force the economy to start again,even if it was solely used to back the rich back the debt the poor owe.but it would not be long before we would be back in this situ unless real rebalancing takes place.

      • We are rapidly going down the pan, and it is likely to get very much worse. Things were very much better in the 1950′s. We even got free school milk, and school dinners were actually very nutritious and cost half a crown a week (6d a day). According to a BBC report I have just seen, there are 250 food banks in the UK that fed 133,000 people. This is a tiny fraction from a population of 60 Million.

        Poverty in the USA would seem to be far worse. “The nation’s leading domestic hunger-relief charity. Feeding America’s helps provide food to over 37 million Americans each year.” Most Americans have absolutely no idea, until it happens to them. Such things are rarely if ever portrayed in the US media.

        Tony

  10. Well I suppose one benefit of this fiasco of the Welsh mini-hotel is that nobody, but nobody, can claim henceforth to be a ‘little old hotel keeper’ and thus play the naivete card in relation to bank transactions. The moment any kind of derivative pops up in the paperwork, we normal people are extremely wary, and for very good reason. Wary enough to walk. No longer do we believe that banks are normal, straightforward business operations with a minimalist kindly streak. Nobody on the planet would swallow that one again, from RBS or any others of the robber brotherhood. (What is the collective noun for sharks? – I gather it’s ‘a shiver’, how appropriate!) Of course banks (a) have had their fingers burnt, 3rd degree up to their armpits and (b) no longer need our interest, QE having sorted that issue. So we have been thoroughly warned. As an SME, you borrow from banks at your peril. They will destroy you. And all of us should beware of derivatives.

  11. The man trusted his bankers, & trusted that there would be no more boom & bust as did millions of others, because the markets would regulate themselves. He failed to do his research on complex derivatives & didn’t hire a lawyer to translate the contract & unbellevably trusted a salesman. In retrospect all mistakes that I am sure the majority would or could have made given the then prevailing attitude, that the only way was up

    So before asking for any kind of bank loan be advised. Get yourself a degree in economics, also one in it’s history might be handy. Try to spend a lot of time with an investment banker to learn all about hedges, CDO’s CDS’s EFT’s etc & either use the service’s of a lawyer or get a law degree.

    Be advised though, the banks have & had all this knowledge but judging by their behaviour didn’t foresee the crash either, but unlike Mr. Jones got bailed out for their presumed stupidity.

    http://www.thisismoney.co.uk/money/saving/article-2201063/Revealed-The-bonus-list-encourages-pressure-cooker-sales-culture-Lloyds.html#ixzz26ZaeBZSd

    • Yes, it was nothing. A power outage caused it. My suspicious mind caused me to look into it, but it was just a couple of servers on not-very-critical systems. No big deal this time.

  12. Pingback: Borisito Johnsonini & the Earls Court project: | A diary of deception and distortion

  13. I audited RBS for a number of years before the financial crisis and I am not at all surprised by what has happened to them. Their corporate culture was incredibly toxic and arrogant.

  14. Pingback: SME MIS-SELLING: 10% of all SME loans fraudulent, RBS has 28% of market, other banks admitting guilt…. | A diary of deception and distortion

  15. Pingback: John Ward – SME Mis-Selling : 10% Of All SME Loans Fraudulent, RBS Has 28% Of Market, Other Banks Admitting Guilt… But Downing Street Is Silent – 22 October 2012 | Lucas 2012 Infos

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