Business Banking Fraud

Bob Stewart Excerpts

Tuesday 9th October 2018 Westminster Hall

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I, too, congratulate my hon. Friend the Member for Hazel Grove (Mr Wragg) on securing the debate. He is a great advocate on behalf of victims.

I will start with a few words in support of banks and bankers. I have been in business for 25 years, and I could not have achieved anywhere near as much as I achieved without the support of bankers, the vast majority of whom do a good job of supporting the UK economy by offering vital support to businesses. I am sure that most people in the banking world are as shocked as we are by some of the scandals of the last 10 years.

It is critical for us all to play on a level playing field—that is the free-market economy principle. We need to adhere to some basic rules, which must be the same whether someone is a businessperson or a banker. As my hon. Friend the Member for Hazel Grove said, the key principles that we must all adhere to are that justice is blind, no one is above the law, and justice must be done and be seen to be done. Where we are is a mile away from that, because there is so much evidence not just of malpractice and mistreatment, but of fraud throughout the banking sector, particularly in RBS and in Lloyds and HBOS.

For a while, the accusation was that the people who were bringing forward these claims, such as the Turners, were conspiracy theorists—they had failed businesses that could not survive anyway, so it was something that we did not need to look into properly. Then along came the section 166 report into RBS, which clearly identified that RBS had mistreated thousands of businesses. Of course, that report nearly never came out, but when it did it was a critical moment.

It is the same with Lloyds and HBOS: but for the persistence of one or two individuals, the case would never have come to trial and those people would never have been convicted. They are not isolated cases; there was widespread abuse.

[Bob Stewart (Beckenham) (Con)]

I am quite concerned, because I have looked through the banking code of conduct and it seems to mention only banks. Is there any personal responsibility in it, so that the people who make the decisions can be brought to account for them?

[Kevin Hollinrake]

My hon. Friend makes a good point, which I will come to. Interestingly, our campaign, which is supported by so many of the hon. Members present, is also supported by some interesting people. Gordon Brown, the former Prime Minister, has said that he fears another crash because the bankers have no fear of imprisonment—the personal accountability that my hon. Friend referred to. Andrew Bailey of the Financial Conduct Authority expressed real concern in a recent newspaper article that no one

“has been banned as a consequence of the financial crisis.”

My hon. Friend is absolutely right, because the problem goes beyond mistreatment. We have seen evidence of forged signatures, manipulated valuations, manufactured covenant defaults, asset acquisition opportunities being sought out, and conflicts of interest almost everywhere we look. That includes the case of Julia Davey, who is present today.

Julia Davey is one of the most successful businesspeople in the UK, but Lloyds and KPMG forced her into the business support unit. David Crawshaw of KPMG was the independent reviewer of the business, the consultant advising the business and the administrator to the business. How can that be right? That multimillion-pound business was taken down by a £100,000 utility bill, when there were ample moneys in the bank. That money was used to pay the advisers, not the debt. It is outrageous.

The banks’ default position has been denial all the way. When Lawrence Tomlinson first established that there was abuse, they tried to withdraw the funding for his business to keep him quiet, which is a disgrace. Throughout the section 166 report, there is clear evidence of malpractice that goes beyond simple mistreatment and into fraud. The same is true for Lloyds and HBOS. The regulators’ attention was drawn to the fact that the abuse was going on thousands of times, but there has still been no action.

The FCA still says that the banks must be trusted to run their own internal redress schemes for the abuses. At Lloyds, the Griggs review is an internal scheme with no independent verification of the settlement that is made. At RBS, the situation with Sir William Blackburne’s review is similar. I do not dispute the fact that they are honourable people, but how can justice be seen to be done if these matters are decided internally? It cannot be right. What if those people, who are working internally for those banks, find evidence of fraud in their investigations? Would they put it in the shredder or would they hand it to the police? I will leave that for those in the Chamber to decide.

We need action. We need regional fraud squads and a twin-track approach, so that the Serious Fraud Office works with the Financial Conduct Authority, as happens in the US. There has to be criminal liability for the failure to prevent economic crime, as we have for the failure to prevent bribery and tax evasion. We need to introduce conduct of business rules to SME banking, so that regulators have a basis on which to judge a claim. We need our financial services tribunal and a public inquiry. There are 12 separate inquiries and counting into various parts of the banking system—a piecemeal approach to a systemic problem. We need cultural change. We need to restore faith in the system. Justice must be blind. No one is above the law. Justice must be done, and justice must be seen to be done.

--- Later in debate ---

[Bob Stewart (Beckenham) (Con)]

I think I have spoken in all four debates on this subject, and I am beginning to feel like my colleagues: we are voices crying in the blooming wilderness. We have asked for something to happen, and nothing is happening. It is wrong. It is scandalous that decent people have been so incredibly robbed by banks. I cannot understand why we have not been able to get a grip on this matter and sort it out. It is wrong, and we are meant to be the people who sort these sorts of problems out.

One part of National Westminster is particularly to blame. One of my constituents, Dean D’Eye, started an association with that bank’s Romford lending branch in 2000. For eight years, it was all great. That association worked well, and both the bank and the business were profiting, but just after the banking crisis 10 years ago, the destruction of Mr D’Eye’s investment and property development business began. At that time, his company was worth about £11 million and had a debt of about £5.8 million. All his interest payments for debts were on time, and he had a gearing ratio of 60%, which was pretty good.

However, in September 2008, Mr D’Eye began to be inundated with requests for information, which took up a great deal of his team’s time and stopped them doing business. Then, in December, the National Westminster bank suddenly robbed £139,000 from the company’s business accounts, without any reference to Mr D’Eye and despite letters from the bank saying that money could be used by the company. In early 2009, the demands for more information continued, and Mr D’Eye’s group was placed under the watch of that wonderful organisation called the Global Restructuring Group. The situation then grew rapidly worse: suddenly, in April 2009, the bank appointed administrators, who appeared to investigate the business. On 28 May 2009, NatWest formally cancelled Dean D’Eye’s overdraft. Considering the size of the businesses, that overdraft was pretty small, at £40,000.

Within a week, on 1 June, all Dean D’Eye’s loans were called in. By 10.17 am on 5 June, administrators had full control of his companies and were effectively running those businesses from his offices. That decision meant the group lost its cash flow, which in turn created a default with the Dunbar bank, owned by the Zurich insurance group. Dunbar bank has a pretty bad reputation, and is often more ruthless than anyone else.

My constituents, the D’Eye family, have lost their family home, and Mr D’Eye has lost his father’s house as well. Mr D’Eye continues to hope that he can get litigation funding to take NatWest to court for the way it has ruined his business. Who can blame him? A generation ago, banks usually encouraged and supported their customers, giving them a fair shake. How tragic is it that that is no longer the case for so many people?

[Kevin Hollinrake]

My hon. Friend is making an excellent speech. He said earlier in his remarks that Mr D’Eye was not behind on his payments when the bank first took action. My hon. Friend may be aware that Australia has brought forward a royal commission because of similar abuses there, and one of the changes that has come out of that process is that a bank cannot take action against a business if that business is not behind on its payments. Does that not underline the need for a full public inquiry?

[Bob Stewart]

I thank my hon. Friend for that very good point. Of course it does. We need to get on and sort this matter out.

In the 18th century, highwaymen used to stop coaches, get people outside them and say, “Stand and deliver. Your money or your life.” Those guys had a choice. Now, the 21st century equivalent of highwaymen—some in the banks—shout, “Your money or your lifestyles”, and they take both. Thank you, Mr Robertson.

[Mr Laurence Robertson (in the Chair)]

I am grateful to hon. Members for their self-restraint and to Opposition Front Benchers for offering to make slightly shorter speeches.

--- Later in debate ---

[The Economic Secretary to the Treasury (John Glen)]

It is a pleasure to serve under your chairmanship, Mr Robertson. This has been the fourth such debate since I was appointed on 9 January. In each of those debates we have had a number of passionate contributions from Members across the Chamber. Today has been the same. We have had 10 speeches, each of which has contained compelling evidence of a situation where banks have failed small businesses. We must be honest and true to the reality of the experiences of the many people who have come to the House today to challenge me, as the Government’s representative in this area, over what can be done to achieve proper redress.

I pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for his campaigning on the matter and to my hon. Friend the Member for Hazel Grove (Mr Wragg), who set out powerfully the case that justice needs to be blind, that it needs to be done and that it needs to be seen to be done.

My deliberations will reach a conclusion imminently; I have not been putting the matter off. As has been discussed, a series of pieces of work are being undertaken, two of which will report in the next few weeks, and I will then make a judgment about the best way forward. Financial sector fraud has had a severe impact on SMEs—we heard today about several individual cases in which lives have been destroyed and families ruined. This is not a subject that I treat lightly; I have been very focused on it over the past nine months.

[Bob Stewart]

The Minister is a decent and honourable man. Will he please, please concentrate very hard on getting redress for the people who have lost so much money and so much of their lifestyle?

[John Glen]

I am very grateful to my hon. and gallant Friend for his contributions, which I shall address in a moment. I will also set out some of the changes that have taken place, but let me say from the outset that the cases that have been raised today all demonstrate that, whatever mechanisms we have implemented—from the tripartite regulation of banks and the financial system to the redress schemes of recent years—the banks need to deal with the very real legacy of this issue. Simon Walker’s review for UK Finance must listen to what has been said today about that legacy, which will not go away unless the banks face up to and take responsibility for what happened in the past.

Tackling fraud is a Government priority. I want to reflect on a new theme raised today: access to justice and the mechanisms by which it is delivered. The decision to investigate a crime rests solely with law enforcement; I cannot make it myself. Like any Member of Parliament, I can refer a crime to the relevant chief constable, but they will take account of available resources and the likely eventual outcome. It is the chief officer of the local force who is ultimately responsible for such operational decisions, and it is the responsibility of police and crime commissioners to set the budget for local forces, which the chief officer must take into account. Forces can apply for special grant funding to help meet the cost of unexpected events, but I know from conversations with my hon. Friend the Member for Thirsk and Malton that there is sometimes a gap between the costs covered and the actual costs accrued. These are real matters that need to be addressed.