Unable to get any more money from the taxpayer, RBS stands accused of swindling large-scale property borrowers.
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claiming the bank forced them to appoint administrators for the Sittingbourne hotel on 22 June 2010 – with funding withdrawn nine days before the 1880s-built hotel was due to open after redevelopment.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.