Terrorism Prevention and Investigation Measures Bill

Lord James of Blackheath Excerpts

Wednesday 5th October 2011 Lords Chamber

[Lord James of Blackheath]

My Lords, I start with the proposition that anybody who gets away with improper or criminal action in a matter such as terrorism has effectively created a precedent which is bound in time to be repeated. I am concerned that there are three instances that have occurred in the past which the Bill at present does nothing to address and which we should perhaps be aware of.

The first occurs in the systematic exploitation of quoted companies on the British Stock Exchange. As I recounted to your Lordships’ House on 1 November last year, the IRA once took effective control of five quoted companies and manipulated them entirely to its own interests until, in every case, their eventual destruction, to the great dismay of the British investing public who lost a total of some £3 billion of market value as a result. In these cases, what the IRA did was simple and very clever. It was at that time beginning to recognise that there would be an end to hostilities and that it needed to do something to look after its own separate and personal interests. It was by that time intensely a criminal organisation, resulting in exploitation and bank robbery, and it had a lot of cash coming in, so it put its money into small parcels of shares, buying into British companies quoted on the London Stock Exchange. This went completely unmonitored and unseen by the authorities at the London Stock Exchange, who must truly have been asleep on the job at the time. The result was that the IRA ended up having majority or controlling shareholdings in five quoted companies. Then it took its own money from other things and invited the companies concerned to invoice it for work that had never been performed. The result was that the profits of those companies shot up, as did the shareholdings, making an immense amount of money for the IRA on the increments of the investments it had made.

That obviously required somebody in each company prepared to work with the IRA. I do not know whether those people were rewarded financially for that. Eventually, the Bank of England became aware of this and started to introduce a number of people to take control of the companies to try to manage them out. I was one of those people. You eventually got a call from somebody with a strong Irish accent telling you that he had a need that day for a certain amount of money to be sent to pay for something for them. I got a call one morning starting, “Good morning, Chairman Boyo”, which was always the cue. You knew you were in trouble. I asked what was the problem. I was told, “We know that you have just raised an extra £20 million in borrowing from Lloyds Bank, and we need £7 million of it immediately to pay for a little matter which is being delivered to one of our ports today. Send me the £7 million immediately”.

By this time, I had already recognised that trouble was coming. Eddie George had put me in as chairman of that company, and I had a well established routine to perform. I immediately made the call I had to make, told them that the £7 million was required and that there was going to be a delivery at a certain port. When the ship eventually got there, the SAS had kindly decided to help download the cargo. Three hours later, there were two tightly sealed containers on the dockside. One contained 12 extremely angry Irishmen, and the other contained the entire collection of Semtex and other material which had been sent from a country that I will not identify. Meanwhile, the angriest person was the captain of the ship, who had to get a signature on the slip to release the payment of £7 million. The Irishmen were now so upset that they were not prepared to incriminate themselves by signing it. I had a very good day, and my £7 million was back in my company’s bank account by the end of it. That was one of the best day’s work we ever did.

The IRA ruined some companies completely. It took one company that had £5 million a year profit and in the course of two years cranked that up to £127 million a year by paying for work that was never performed. They all went bankrupt in the end, but the point is that it was a major failure by the London Stock Exchange in monitoring this, and it could easily be done again. The Mafia had an attempt at doing it on the London Stock Exchange, which was blocked in the light of the experience with the Irish. We ought to have some statutory obligation on the investing community and the Stock Exchange, in particular, to be alert to and watch for careful mismanagement of the market in order to launder terrorist money in this way. It will be tried again because it was so successful. It is a very important point.

In another respect, I would like to emphasise the importance that the banks have, which they do not fulfil fully for us because they are too frightened of data protection rules. I have a vivid memory of a day in 1989 when, in the company of a certain Dr David Kelly, we were unfolding the story of the Iraqi supergun, and we needed to know whether any other such devices were being made. We knew that the National Westminster Bank was the paymaster for the gun, so we went together to see the National Westminster Bank and asked it to make available all the details of all the people that it was paying for armament developments with Iraq. The bank refused, saying, “We absolutely cannot touch it because it would be a breach of our obligations to our customers”. Later the same day, we went to see Lloyds Bank and asked people there the same question, and Lloyds Bank immediately unfolded the whole lot to us. Remarkably, at the end, they turned to Dr Kelly and said, “While you’re here, Dr Kelly, would you like to see the details of the capacitors for the Iranian nuclear bomb as well?”. Which of those two banks behaved correctly that day? Lloyds did, but we need to clean up data protection rules to give an obligation to the banks and other financial organisations to tell what they know when they are frightened of doing so, as they are at the moment.

The last area of concern that I have is a slightly unusual one. If you have large contracts with overseas countries where there is potential for state terrorism being practised, as we did in the case of Libya, where one of my companies had very big contracts worth £600 million or £700 million each, they would always write a clause in requiring us to make a deduction from the invoices of anywhere between 1 per cent and 3 per cent for what we supposed would be a slush fund. We used to call it the WWWP fund, which stood for “whisky, women and white powder”. The fund would be about 1 per cent to 3 per cent of a total billing of about £600 million, which was quite a lot of money. We put this into a little fund, which would be kept somewhere up in the Leeds area, and everything would be fine as long as they just wanted to use the fund for fun and games when they sent across their executives or Ministers to come and have a look at what we were doing. The trouble would come when, after about a year of this, they would suddenly instruct you that you had to send the money to a bank account in Rome, and you would have to fund that bank account for about €200,000 to €250,000. In this way, these potentially terrorist-sponsoring countries would get the money under the radar of normal bank account creation. It would have been done legitimately by a British company sending its money.

I would like to think that I am wrong, but I suspect that at this present moment there are probably some four or five such accounts in the outlying districts of Rome funded to about €200,000 to €300,000, waiting for any ambitious jihadist to go and buy himself a rocket-propelled grenade launcher and a few shells to take a pot-shot at a Popemobile and its occupant at some point in time. I am sure that those funds have been set up and survive to this day. We need to have an absolute obligation on any company that is asked to set up a slush fund for a potential terrorist-sponsoring state to declare it at the outset. There needs to be a go-to number established at the Bank of England or somewhere whereby that sort of malpractice can be monitored as it unfolds.

So I have three areas of concern. We need better control of the regulatory processes of inward investment via the Stock Exchange; we need much better opening out of the dialogues with the banks, which know before anybody else much more than we do; and we need, essentially, to stop the under-the-radar slush accounting being set up for access for terrorists abroad.