DERIVATIVES RATE FIXING: The toxic ethics of Michael Spencer

Would you hand over control of a $64trillion financial sector to this man and four untrustworthy banks?

Yesterday’s post about Iswap and its openness to broadscale derivative-rate manipulation was, more than anything else, asking questions on the ‘fit and proper people’ dimension. Given it’s a joint-venture company largely owned by four international banks – and given it answers to nobody for the veracity of its quoted rates – then in the light of Libor (Barclays) jiggery-pokery about Lehman Brothers (JP Morgan-Chase), or wobbliness (Bank of America), the criminal attitude and motive is there for all to see.

But there is also the central management role cheerfully given to Michael Spencer’s Icap group (itself a broker heavily implicated in the Libor scam). Spencer is a former Conservative Party treasurer impolitely asked to leave that job under something of a share-dealing cloud in 2010. The rest of his swashbuckling financial career seems also to have involved dark clouds, smoke and thus – at various times – the likely presence of fire and rain.

As long ago as June 2004, Mr Spencer bought £5.5m worth of shares a day after meeting his friend Stuart Rose, 16 days before the takeover approach, and 20 days before Mr Rose became chief executive.

The FSA decided that¸ on the basis of that ‘meeting’, they’d pay Spencer a little visit. This didn’t worry the blasé broker:

“I don’t dictate FSA policy but I guess it’s quite likely they will interview me,” admitted Mr Spencer at the time. “The prospect doesn’t fill me with great concern. I don’t think it will take a huge amount of time. You can only evaluate your own actions in reflection to your own standards. My conscience is 110% clear.”

Working myself for financial services clients throughout the 1990s, I can attest that Spencer’s low opinion of the FSA (and belief that it had no teeth) was entirely typical. But Michael Spencer has very high standards (according to Michael Spencer) which I suppose you’d have to have if your conscience was 10% over-leveraged. However, over the years – as I will demonstrate – his penchant for sudden purchases and sales of shares has raised a great many eyebrows.

Five years later – in January 2009 –  Icap announced a $25m (£15.5m) settlement with America’s Securities & Exchange Commission to see off charges that it displayed fake trades to encourage activity by customers. The announcement was made soon after the UK markets closed (smart move) .

“It is essential that Icap and other inter-dealer brokers refrain from engaging in conduct that discredits their privileged position in the marketplace,” Lorin Reisner, deputy director of the SEC’s division of enforcement, said at the time. The SEC charged (and proved) that brokers on ICAP’s U.S. Treasuries desks displayed thousands of fictitious flash, or “bird,” trades on computer screens between December 2004 and December 2005.

But just five months later, on July 1st 2009, the US Financial Industry Regulatory Authority (Finra) fined Icap $2.8 million and sanctioned a former broker for what it described as ‘numerous improper communications with other interdealer brokerage firms about customers’ proposed brokerage rate reductions in the wholesale credit default [CDS] market’.

Once again, I would remind Sloggers that this is the company and owner behind Iswap – an equivalent Libor for the equally secretive derivative rates process recorded on the now infamous ‘page 19909’.

Icap’s fine was split into $1.8 million for its supervisory failures — specifically, failing to detect and prevent improper inter-firm communications — and $1 million for engaging in conduct through its CDS desk manager that was designed to improperly influence other firms and their employees.

Seven months on, and Michael the Chatterbox was once more in ‘constructive talks’ (during February 2010) with the UK’s FSA. Although a couple of bad years had overstretched Spencer’s assets to the point where, well, they weren’t really assets, he kept on presenting them as such.

The Daily Telegraph reported at the time, ‘Last year, IPGL [majority-owned by Spencer and his brood]  secured a new £200m loan from HSBC to refinance. The loan, was secured against Mr Spencer’s stake in ICAP, but he used these shares as collateral without declaring it as such to HSBC.’ Naughty, naughty.

In order to reduce the horrendous borrowing requirement of his IPGL, in January he had also sold a £45m stake in ICAP….just three weeks before ICAP gave a profit warning. This too earned him a City censure. He was, in fact, a desperately indebted man bending the rules of engagement to breaking point and beyond. But the sale helped reduce IPGL’s borrowings to £119m by the time the accounts were signed off on February 1 2010.

2010 was another tough year for highly-leveraged millionaires, and not long afterwards, mealy-mouthed Michael’s investment company IPGL was using shares in Numis, a stockbroking firm he chairs, as security against yet another loan. Here too, he did so without telling the firm. David Cameron was called upon to condemn this fly wheeze (as Spencer had not by then been found out by the Tories) and he refused to do so. Just as he refused to condemn Jeremy Hunt’s tax avoidance scheme of 2011, and Hunt’s failure to tell Parliament more than a sanitised version of his Newscorp dealings in 2012….Cameron having roundly condemned both practices in general only weeks earlier. As always with Cameron, he tends to generalise, but in practice, he isn’t that particular.

“Would you buy a used car from this man?” was perhaps one of the nastier 1960 Presidential campaign posters used against Richard Nixon – although it did prove remarkably percipient over time. In 2012, based on the ‘form’ presented above, you’d be ill-advised to buy a second-hand car off Michael Spencer. But to give his company the rate-setting control of a $64trillion derivatives market (in partnership with four proven dealers off the bottom of the pack) you would have to be comprehensively deranged, or as bent as a nine-bob note. Or a 24-carat Bob Diamond.

Last year, Michael Spencer was still the Conservative Party’s largest donor. Nobody can know that such a donation is to guarantee he is left alone by the authorities, but that must be the impression lots of young and floating voters are being given. Add this to Hunt Balls, Hackgate, Libor, Met Police corruption, cynical EU-turns and incompetent (but devious) NHS reform, and it is almost as if Camerlot is setting out deliberately to hand the moral high-ground to the Ed Miller Band.

The fact that the Opposition doesn’t deserve so much as a square foot of it is neither here nor there: the connections, practices, naked whoring, and extremely economical veritas of the Cameron Conservatives demonstrate how the cabal running the Party has ventured way beyond normal levels of despicable cynicism, and marched purposefully on into that bleak desert of depravity occupied by Mandelson, Blair, Whelan, Brown, Lagarde, Schauble, Geithner, Blankfein, Obama,  and others of that ilk.

It is clear that, in order to defend his power base, David Cameron the Prime Minister is prepared to turn a blind eye to anyone and anything, and excuse any action – no matter how unethical, fast and loose or despicable it might be. He will renege on any promise, reverse any categorical statement, and befriend any life no matter how low….in order to get what he wants – which is very rarely what the country needs.

Beneath that level, there are those in the Tory Party and among the new Young Right prepared to ‘explain’ any amoral sleaze and sellout rather than have what they see as a suburb of soviet Moscow in charge. Sad as I find it, Dan Hannan has joined this club in recent months: his ‘conclusion’ from all the revelations of banking depravity – that regulators make no difference and therefore should be abolished – takes no account whatsoever of the almost total erosion of commercial and professional ethics over the last three decades. The fact is that if the police and judicial systems did their job without fear or favour, there would indeed be no need for regulators….and most of the current generation of senior investment bankers would be in jail.

The jail reference evokes guffaws of hor-hor braying laughter from the Right, but it shouldn’t: yesterday, criminal conman Thomas Scrugg was sentenced to 17 years in prison for his role in defrauding people of some £34m between 2002 and 2008. This is small fry compared to the daylight robbery inflicted upon investors and bank customers during that time. What we are uncovering – as 2012 both unfolds and unravels – is the biggest, most global fraud in history. Starting with MPs’ expenses and Whitehall pension grabs, we have progressed through the bribery and casual law-breaking of Newscorp, and now onto a scam that will dwarf them all.

In the US, Federal and tax teams of seasoned finance cops are crawling all over it. Even the sleepy EU plonkers of Brussels have serious Interpol heavies on the case.

In the UK, investors and taxpayers are being cheated daily by cyber attacks on market data, rate fiddling, and reckless gambling. But the police clearly have no intention of intervening.

It’s time to stop snorting cynically and going “Hahaha, well what do you expect?”: it’s time instead to demand that the rule of Law in our country be upheld. What I expect is something better – and as a taxpaying British citizen, I am entitled to it.

33 thoughts on “DERIVATIVES RATE FIXING: The toxic ethics of Michael Spencer

  1. “As long ago as June 2004, Mr Spencer bought £5.5m worth of shares a day after meeting his friend Stuart Rose, 16 days before the takeover approach, and 20 days before Mr Rose became chief executive.

    “So, Stuart rose to mark Spencer.” How appropriate


  2. It’s time to stop snorting cynically and going “Hahaha, well what do you expect?”: it’s time instead to demand that the rule of Law in our country be upheld. What I expect is something better – and as a taxpaying British citizen, I am entitled to it.

    Best of luck…


  3. Dishonest practices have been a standard feature in (so to speak) The City for thousands of years. Think about the Jewish money lenders who were booted out of every country they wandered into for fast and slick dealings. Were they Tories? No. Today, they’d be called New Labour or neo-cons.

    What has changed in recent times is that governments have become directly involved in the rackets. In Britain, the last Labour Govt set about creating a racket which was always going to create a fast & loose City and a credit boom. Brown introduced CPI as the official measurement of inflation. Although it is known to only capture about half of true inflation, it allowed his obedient doggy in the BoE to run interest rates at very low levels. Along with Brown abolishing City regulation, he created a credit boom which has led to where we are today: bankrupt.

    I am in favour of anybody (from whichever political persuasion) being held to account for wrongdoings and have always advocated that. The problem I have with your ongoing analysis of this fiasco is that you always look to blame the Tory Party, yet it was Labour under Blair & Brown who presided over what we see today. They had the power to stop it, but why would they want to? …they created it. It suited New Labour as it moved further towards the Mussolini model of corporatism. That is what New Labour and the so-called ‘third way’ was really all about.


  4. The way Cameron is conducting things I think your right that he’s giving Plug the next election on a plate, either way we’re all gonna get shafted. Unfortunately there doesn’t seem to be a credible alternative.


  5. Cameron and Milliband are well matched-both equally useless and morally corrupt.
    The Labour party missed a trick when it didn’t boot out Brown and replace him with the other Milliband. I would most certainly have voted for David Milliband as PM and Darling as Chancellor (a much under-rated man in my view -and he knew how much crap we are in and would act accordingly). As it is, its UKIP for me-or even just spoiling the ballot paper.


  6. I’ve never heard of Michael Spencer, but I don’t doubt that he’s a little “iffy”. However, this post shows a slightly naive approach to the law and regulation. As a former practicing lawyer, the one thing I can say with certainty is that people don’t really seem to appreciate how the law works anymore. It has become so complicated and so vast — not to say, often contradictory in and of itself — that everyone breaks the law every day. If someone in power takes a disliking to you, I can tell you they will easily “prove” that you broke the law. This is true for securities law, tax law and traffic law, amongst many others.

    Every time you drive your car you break the law — and if the police consider it worth their while they will be able to “prove” in traffic court that you are obviously a criminal. The same applies to way too many fields these days.

    It is certainly true that many people guilty of huge crimes seem never to face justice, but this merely reflects the vagaries of enforcement. The politically connected and the financially powerful often seem immune, but not always, especially in the US (where I practiced). But the prosecutuions don’t reflect an honest attempt to get the ones you can get, but rather seem sometimes to be for more questionable motives. That’s the real tragedy of the legal system and why convictions or plea bargains do not always imply what observers wish them to. They are frequently more about revenge for something else rather than justice for a real crime. As a result, respect for the law is plummeting to levels not seen since prohibition.

    Today, a conviction for fraud or tax evasion often means little more than when Putin decides an oligarch has overstepped his position. That’s not to say the charges are inappropriate in all cases, merely to say that they were probably instigated for inappropriate reasons.


  7. ‘Toxic ethics’?You can thank Big Bang(1986) for that.The City had always had its fair share of crooks,particularly in Lloyds,but the end of fixed commissions on the old LSE,and the huge expansion of money brokers,which rapidly became a cartel,was bound to be an opportunity for someone,who was unconvinced by ‘my word is my bond’.Regrettably,the son of the manse, the dour one eyed Garry,worshipped these people,even though they were financing his opponents.The electorate ,who are also the shareholders in the enterprise,get the leaders they deserve.


  8. Stuar Rose has got a big massive cheek having a go at people for not wanting to do workfare, because he has given the impression to the Daily Dacre that his first job was shelfstacking and sweeping floors, and thats nonsense, he’s forgotten the job he had with the BBC.
    Anyway, I remember my experience of working as a part time skivvy under a trainee manager at Tescos. I was paid peanuts for working my butt off, it was really hard work and I didnt get paid much for it, but I wouldnt have minded that so much as the extra burden of having to keep well away from the creepy trainee manager and the manager, who never missed an opportunity of saying tomething really creepy or nasty to me, to make sure I knew my place. I hated working there, I had had a job in a shoe shop before that, the manager was really nice, he was fatherly to the youngsters like me, never said anything creepy and made sure all the staff got their tea breaks, so I knew what a good manager was, but I got made redundant thats why I ended up at Tescos. In the end I told them to stuff their job, as I couldnt stant their creepy smirky innuendos any more.
    If I was a gambling person I would bet that Stuart Rose never was a skivvy, I dont believe him, I know the creepy trainee manager at Tescos never did any skivvying, he gave all the manual jobs to other people on peanut wages like me!


  9. I know, but that crafty smug pig Stuart Rose reminded me of all that, sorry, I got carried away, its the sheer hypocracy that really gets to me, these clowns have never done a proper days work in their lives, but they are so fast to stamp down on the minions they are ripping off with their bank scams, its evil.


  10. The attack on the Euro has stalled and they are stuck in WWI style trenches.So what happens next I wonder for the Anglo/Americanos v the Euro. It seems the only way for the USD/Sterling to survive is to go all out against the Euro but they are running out of ammunition. Now the Euro is a mess and was patheticly moved from Beta to v1 in haste, so lets see what happens to Frau merkel and Deutshe Bank now that the German folk are starting to call them out…


  11. Again.The illusion of choice between what are actually just
    wings of the same party.TPTB party.
    Psychopathic hogs at the trough.
    Hang or goal them all.
    Lets follow the Icelandic path.


  12. JW just to be clear what is going on in the US is the same if not worse than the UK. Nobody of power is being brought to justice. Meanwhile organizers of occupy etc are treated to nightly raids by swat teams and thrown into dark holes all on the pretense they might be anarchists. The message is loud and clear protest and we will come after you. First in the street with the riot police and if that does not scare you, later in the middle of the night in your homes.

    I honestly do not know what we can do at this point. We are under attack on multiple fronts and the looting at the top and players involved (both sides) and their chums have no fear. they own the legal system, they control the media, they own the police and army, they own the methods used to loot.

    I appreciate what you do JW, but the people are awake. they are awake in huge enough numbers i see all over the place including comments on msm sites. protesting does not work, voting does not work, trying to get fresh faces in power is to slow, and up against a system designed in multiple ways to prevent and weaken that.

    meanwhile we are getting poorer and our options getting fewer I am asking all what can we do? We do not have long to set this right, already the rubicon has been crossed. what can we do, we need a powerful game changer or we are really screwed.


  13. You hold that “In the UK, investors and taxpayers are being cheated daily by rate fiddling and reckless gambling”

    Interesting do you have some interesting anecdote about how it has affected you?

    Could not fiddling and gambling be components of economic growth?

    As I far as I am concerned our problems go way beyond some fiddling with a Libor rate, where it is almost impossible to figure out who besides some other players at that casino lost out.

    No our real problems is that when things get risky, and we need the risky risk-takers to get going, we are not letting them… because they are “so risky” What a wimpy society we are becoming.


  14. But the “risk-takers” have never taken any bloody risk at all, have they? “We the people” ended up having taken the risk because we underwrote it (not that we knew at the time)-but when the going was good we didn’t get any of the colossal profits, did we?


  15. Hey, their sorry, ok, now let us move on!

    Jail and fines much higher than any scam the banks et al perpetrate should make these people(scum) think twice. Human nature dictates, so why not use it. Oh I forgot, it’s the ones in charge that are doing the scamming.

    We are on the threshold of a new DARK AGE!


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  17. Winston: I fully agree. I made almost exactly the same point on a different Slog discussion last night. A Slogger by the name of “BT” responded with the question …..” Do tell “, as in explain.

    I would be grateful if you could elaborate on your above comment for the benefit of other Sloggers as your use of English is far more eloquent than my own…


  18. JW, your bleak and pessimistic view of the financial state of affairs in the UK is totally spot on, and I share it completely, as I think do most of your readers. However (you knew there was a “however” coming, didn’t you) I do have to just – well, raise my eyebrows a little – at this statement of yours: “In the US, Federal and tax teams of seasoned finance cops are crawling all over it”. You might have heard of the latest scandal from over the pond – PFGBest – or MF Global take 2. That’s where large amounts of supposedly client-segregated funds are being nicked. If you have time, and it’s well worth it, the first half dozen or so posts on the excellent Ann Barnhardt’s blog ( will put you right on that one!


  19. Cant help but agree with you John…..I think there will be a backlash in many respects the start of which we might be seeing now……the biggest joke is that we are continuing to try to export our brand of government to the likes of Syria, Libya, Egypt and pretty much anyone else who is willing to listen…..its all beginning to sound a bit hollow…..we are wide open to ridicule on so many levels……
    There will have to be some changes no doubt…. i just hope that the ‘organs of government’ are up to the challenge……the current government (any any likely contender) is the biggest obstacle……its actually an opportunity for the judiciary and for uk plc if we want to continue to lead from the front in this field?

    Of course it would be much better if there were someone there setting the direction…..leadership is not a word in DC’s vocabulary unfortunately


  20. Totally agree that the Rule of Law has been undermined and is used by the state as a weapon against detractors from desired opinion or those who try to uphold the basic law under which we are supposed to be governed, in order to set an example to those who would try to do likewise.

    The law has been turned into ‘the hammer of the state’ rather than the provision of justice to the wronged. The state see’s itself as the purveyor of the right to a managed life and those who disagree (and desire freedom and self determination) will be shown the error of their ways for such ‘criminal’ actions as putting out their rubbish bins out for collection too early.

    Those in authority have corrupted the law for their own ends.

    The many faceted rule of law has been undermined by the political ‘born to rule’ self declared ‘elite’. First the House of Lords, then the Monarch, then the judiciary and finally the police. All defences and safeguards are detroyed and are without any doubt, politically manipulated.

    The safeguards which protected the people against tyranny have been expunged. The answer will not be pretty.


  21. I often see people say that people get the ‘leaders they deserve’ but do not hold with this opinion. We get the leaders we are ‘offered’. By manipulation and scullduggery any option away from the ‘annointed’ is ridiculed or displayed as ‘unelectable’. The ‘two party system is unbreakable’ until people stop voting for the ‘choice offered’ as the only possible leadership.

    There can only be one alternative to peaceful (via the ballot box) change when those with the power to change things only cement themselves deeper in place and ally themselves againt those they govern.


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  29. I dont know much, its true im not part of the intellectual elite whatever that is, but a few years back i got the impression that companies were pretty much running the show not elected representatives, now people ask me ‘are companies running or trying to run everything?’
    Well go figure this and i know everyone has a different take on things but does the idea of a company running care for mentally ill people sound right to you! Especially one with a dodgy track record in property management? Like how the harry ben f*ck dud they get the contract?


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