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The bank, the regulator and the Vavasseur fraud

November 8th, 2009 (first published January 2009) (Minor edit on 20 March 2014)

No touch regulator? John Tiner was the FSA’s boss from April 2001 to July 2007

One of the FSA’s roles is supposed to be to protect consumers from being ripped off by crooks and charlatans in the financial world. But the City regulator has in recent times had no appetite for this. Ian Fraser examines the multifarious failings of “no touch” regulation.

During the laissez-faire era that has caused so much financial destruction, neither the Securities & Exchange Commission (SEC) in Washington nor the Financial Services Authority (FSA) in London’s Canary Wharf had any real interest in protecting consumers from predatory and unethical banks and financial services operations.

Taking their cue from pro-bank politicians such as Gordon Brown, who had fallen under the spell of ‘market fundamentalists’ including Federal Reserve chairman Alan Greenspan, the regulators’ preference was to ignore major frauds in the interests of so-called “financial stability”.

As the dust slowly settles on the banking and financial crisis, it is becoming increasingly clear what a flawed approach this was. Indeed its ramifications could take years, if not decades, to work themselves out. For more on this theme read my Crimes of the regulators piece, published in January 2009.

I have a personal interest in this. In September 2004, I was aware that a formal complaint was made to John Tiner (pictured above), who at the time was the FSA’s chief executive. The complaint concerned the abuse of off-balance-sheet vehicles by HBOS’s Bank of Scotland Corporate division to minimize its corporate bad debt position and deceive City investors.

Even though this was a serious and documented complaint, Tiner chose to sweep it under the carpet. The  FSA finally gave the complainant the brush off in February 2005 — three years before HBOS’s demise.

Crosby’s two step

One wonders whether the regulator’s lack of interest had anything to do with the presence on its board of Sir James Crosby, HBOS’s then chief executive.

Crosby, a nominee of chancellor Gordon Brown and H.M. Treasury to the FSA role, stepped onto the regulator’s board in January 2004 fully two and half years before he stepped down the from the bank.

Throughout the period when Crosby simultaneously played poacher and gamekeeper, there was clear scope for conflict of interest. Interestingly, HBOS was fined a total of £2.25m by the FSA in the 12 months to December 2003 (for crimes and misdemeanours including sloppy record-keeping in its PEP and ISA division and lax anti-money laundering controls) but has been fined absolutely nothing since. Strange, that.

Brown, who as I said is a close friend of Crosby’s who apparently regularly spent weekends at Crosby’s home in the Yorkshire spa town of Harrogate, ought never have allowed this situation to  arise. Apart from anything else, the Bank of Scotland had, since a few months before its merger with Halifax in 2001, been encouraging its own retail customers to “invest” millions of pounds in the Vavasseur ‘Ponzi’ scheme.

The bank’s Manchester-based head of specialist mortgages, Fraser Mackay, is alleged to have been peddling the scheme at the same time as urging customers to take out large equity-release loans on their homes on a self-cert basis to fund their ‘investments’ in the Vavasseur scheme. The loans were allegedly conditional on the money going into Vavesseur, which customers were told represented a series of offshore “custodian accounts” offering spectacular returns of up to 5% a month.

Other UK-based firms that are understood to have been involved with luring hapless investors into the fraud included St James Place Capital (60% owned by HBOS, and where James Crosby was also a director) and Scotts Private Client Services, a close affiliate company run by the Scottish chartered accountant John Dryburgh. These and several other UK-based organisations were actively promoting the Vavasseur fraud in the period 2001-02.

Their enthusiasm for Vavasseur was, to say the least, surprising. The US authorities, including the Securities & Exchange Commission (SEC) and the FBI, had already lifted the lid on Bahamas-based Vavasseur Corporation and were in the process of bringing its founder, the swindler Terry Dowdell, to justice.

Needless to say the UK investors who were duped into putting money into the scheme lost everything — and, surprise, surprise, a massive state-sponsored cover up followed.

Supposed regulators and other authorities including the FSA and Serious Fraud Office have, for the past seven years, been seeking to protect the interests of the perpetrators of the fraud against the interests of the victims, many of whom are now having to live in penury.

One way in which the Canary Wharf-based FSA achieved this was by winding up Dobb White & Co — a Midlands-based accountancy firm which had become a UK lynchpin for promoting the fraudulent scheme.

In doing so, the FSA ensured that the firm’s professional indemnity policies were void, which had the advantage of letting the regulator’s friends at Lloyds of London off the hook. (By the way, the FSA’s liquidation of Dobb White & Co on December 2nd 2003 is questionable, given it was granted  in contravention of EC Regulation 1346/2000, since Dobb White could be characterized as a “collective investment undertaking”) and the lack of definitive evidence of a proper winding up petition in the High Court.

Another way in which the FSA allegedly conspired to ensure  investors in Vavasseur did not get any of their stolen funds back was through the issuance of a worldwide ‘Mareva’ injunction on 22 October 2002.

Taken together, the FSA’s actions substantially reduced investors’ chances of ever getting their cash back. The Mareva injunction enabled the FSA to freeze creditor funds in the ‘Vavasseur’ infrastructure of offshore accounts, effectively handing control of the missing funds to the US Department of Justice and SEC — neither of which were particularly inclined to return it.

Liz Watson, who lives in Bournemouth and is one of the many UK victims of the Vavasseur fraud, claims that on December 2nd, 2003, the FSA perjured itself in the High Court  by denying any knowledge of the Vavasseur money’s whereabouts and failing to disclose the existence of the Mareva injunction. She has been investigating this fraud for the past seven years and has formed the One Voice Action Group in the hope of securing full compensation for investors.

Rather than investigate and hold banks and bankers accountable, the FSA and SFO have preferred to target players lower down the food chain. These have included Dobb White & Co’s Shinder Gangar and Alan White, each of whom was sentenced to seven and a half years in jail following an eight-month jury trial in Birmingham Crown Court.

During the trial, witnesses for the prosecution were advised by counsel for the Crown that they must not, under any circumstances, mention the name ‘HBOS’ when giving their evidence.

Dobb White liquidators Baker Tilly have been claiming that they have been working hard to retrieve creditors’ cash since they were appointed in January 2004. But in six years, they have only managed to track down £6m of the UK creditors’ missing £125m . They got this from Roy Terry, a partner in Virginia-based law firm Durette Bradshaw, who is acting as Vavasseur’s receiver and trustee in the US.

Geoff Carton-Kelly, joint liquidator and joint trustee at Baker Tilly told me he believes that a further £10m to £12m might be secured for distribution to creditors “at some point in time.” He said that Baker Tilly’s fees to date on this assignment have been £1m, although other sources have claimed they are more than has been retrieved for creditors.

Watson accuses Baker Tilly of being asleep at the wheel. In a recent letter to Carton-Kelly, she wrote: “We hold major evidence that Baker Tilly have abused their power in public office, along with Durrette Bradshaw, the FSA, the Insolvency Service, and the SFO on this Case.”

Ever considerate, HBOS has sought to evict “investors” from their homes if they missed repayments on their loans. It clearly hasn’t occurred to anyone at the Edinburgh-based bank, which was subsumed into Lloyds Banking Group in the wake of its own collapse in January 2009, that the only reason these people were unable to keep up with their repayments was because it had, allegedly, defrauded them.

Watson says:

“The FSA has become an enabler, rather than an enforcer of financial crime. The FSA is turning a Nelsonian blind eye to things like money-laundering on a daily basis and is actually capitalizing from that. The FSA’s only interest is to defend itself through the use of loopholes and by neutralising complaints through its own interpretations of the Financial Services & Markets Act. In my view, however, what they’re doing is running a form of racketeering; they’re a liability to the public, undemocratic, self-serving and failing in their own remit.”

She claims that the FSA has received some £20m in fines from various banks and financial institutions for money laundering and other offences related to the Vavasseur fraud — none of which has found its way back to the consumers who were fleeced. She and her husband Craig served a claim against Halifax Bank of Scotland at the High Court in London on June 8th, 2009.

White lies?

Alan Steel, founder and chairman of Linlithgow-based Alan Steel Asset Management who exposed similarly shabby behaviour by the FSA during the Equitable Life scandal, says:

“The guys at the top of the FSA should get the bullet. There’s 3,500 people at Canary Wharf just farting about. They make the lives of people like us very difficult but what they’ve allowed through at the top of banking and finance has been extraordinary. They were asleep at the wheel, allowing millions of people to get ripped off. They haven’t a clue about the real world.”

Basically, it seems the during the years of “regulatory capture”, the FSA became so obsessed with propping up fraudulent institutions that its understanding of things like truth and justice became warped.

And remember what happened on 16th September 2008? On that day, the FSA stepped in to reassure depositors and investors that HBOS was a sound bank. The FSA issued a statement saying: “We can confirm that, as HBOS already stated, HBOS has a strong capital base and continues to fund satisfactorily.”

At the time HBOS, led by chairman Lord Stevenson of Coddenham and chief executive Andy Hornby, was almost certainly trading whilst insolvent and had been doing so for several months. It was hours away from bankruptcy.  As a result of its recklessness, the incompetence of its board and the fact it was probably corrupt from top the bottom, the bank’s capital was shot to pieces and it was struggling to fund itself at all, let alone “satisfactorily”.

HBOS would have gone bust had it not been rescued by Lloyds TSB two days later. Hornby was apparently so desperate to do that deal, he was “in a state of high anxiety” and willing to accept even a few sous from the Lloyds TSB board led by chairman Sir Victor Blank and chief executive Eric Daniels.

It’s also worth remembering HBOS’s board misled its own investors at a general meeting held in Edinburgh on June 26th, 2008, four months before the bank’s implosion, At that time Hornby reassured investors that a planned £4bn rights issue would make HBOS “really strong versus all peer groups on a UK and European scale and therefore be in a position to take appropriate market share”. HBOS got the money from its underwriters but was officially bust three months later.

Now that the FSA is investigating the truthfulness of such claims, as well as the HBOS Reading situation, one can only hope the regulator has re-ordered its priorities. If it remains more preoccupied with propping up fraudulent, kleptocratic institutions than with protecting their customers, the FSA should be quietly put out of its misery.

Short URL: http://www.ianfraser.org/?p=732

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14 Comments for “The bank, the regulator and the Vavasseur fraud”

  1. This comment resubmitted by One Voice on 8th November 2009

    Excellent piece, Ian. Bravo. The Vavasseur creditors are indebted to you for standing up and speaking out the well-documented Truth. Recent lengthy conversations with both Ken Beasley (the Official Receiver in the ‘Public Interest unit’) and his boss, Paul Cropper, have yielded an undertaking from them to let me have an alleged copy of the Court Order for the Liquidation of Dobb White — unlawful though this document appears to be. Nothing forthcoming yet, after several weeks of waiting ever since Ken Beasley made the same offer to me. Little notice has been taken by either of them of the fact that it is against EU Law to liquidate an “unauthorised collective investment scheme”. Instead, they’re suggesting that “it came under UK Law” – but why would THAT be? We are members of the EU aren’t we?

    Similarly, alarm bells are being set off as one of the members of the “Creditors’ Committee” (so-called) for the unlawful insolvency of Dobb White & Co, has said that “he has no interest in the truth of Dobb White being scapegoated nor where the creditors money has REALLY gone! This person prefers, instead, to blindly follow the force-fed format and adopt an unthinking approach: just how the Authorities like it.

    It must also be explained that the Creditors’ Committee was GAGGED by Roy Terry (a core villain in the whole Vavasseur plot) and prevented from reporting back to the creditiors! They had to sign “secrecy and confidentiality agreements”, in breach of the 1986 Insolvency Act regarding the function and purpose of a committee! So what use are they to anyone? You may well ask.

    They are obviously there for somebody’s purpose, but it certainly is NOT the creditors’. Roy Terry, himself, was even on the creditors committee back in summer 2004! All the rules have been broken, to fit the agenda of bloated HBOS and its supporters at the FSA / SFO / DOJ / SEC — all of whom are traitors to the creditors. Such injustices and anomalies have been prevalent throughout the Vavasseur debacle. The creditors’ voice has been ‘lost’ in a clatter of officialdom and lies.

  2. We have had this same scenario in the legal services industry, and also several other ‘self regulatory professions’ for many years, where regulators have rather protected the guilty than defended the consumer’s interests.

    What I suppose the financial crisis around the world shows to the many, is that current regulator models simply do not work, and will never work while those regulators are composed of elements of their professions, or have far too much power with politicians.

    A truly independent regulatory model for not only financial services, but many other sectors of professional services must now be considered and implemented in the light of current events such as those which have shown the SEC and the FSA to be rather impotent, to say the least.

  3. [...] FSA investigation that Pearson described was presumably done at a time when, as a result of “regulatory capture“, the FSA was still very lenient towards the bankers. If Sants is serious about restoring the [...]

  4. PERJURY/CONSPIRACY TO PERVERT THE COURSE OF JUSTICE BY BoS, AND MATTERS INCIDENTAL THERETO:

    The comments above have covered much of what I was going to say, even congratulating you Ian Fraser on your diligence and courage in taking your ongoing stance, when others in the media are apparently too mesmerised by the power of the Global Financial Engineering Goliaths [see CBR.me] or concerns over being sued or upsetting their paymasters of one kind or another!!

    However there is some continuing interest e.g. BBC Radio 4′s excellent “Thinking Allowed” programme on white collar crime broadcast yesterday, November 11th, 2009. Here’s the link. Of particular interest, Laurie Taylor said (at 22 minutes from the start of the programme):

    “….one choice for the FSA is whether or not to have anything to do with the alleged white-collar crime. Responsibilty for the investigation and prosecution of financial and corporate crime is bewilderingly divided between the police, the FSA, the Department of Business Innovation and Skills, the Office of Fair Trading, HMRC, the National Fraud Authority and the Serious Fraud Office.

    “I went to the City of London to ask the former director of the SFO, Robert Wardle, if this regiment of regulators created any confusion….”

    Wardle responded by saying that a lot of fraud never even gets investigated let alone prosecuted due to lack of resources.

    Surely having the above seven bodies for the investigation and prosecution of frauds cannot be a coldly calculated strategy to protect the perpetrators of frauds by ensuring that the casualties of frauds are passed from pillar to post and eventually give up can it? What other explanation can there possibly be? Please tell me if you can offer another explanation…..that’s printable!!

    Incidentally, BoS’s decline into fraudulence began in 1990 when BoS, from their affidavit on the Casualties of Bad Regulation website. BoS “….put together a management team….”. This ‘Bank of Scotland management team’: comprised BoS, their auditors Ernst & Young and E&Y audit client and BoS-favoured management company Nursing & Care Associates – to con BoS customers into appointing Nursing & Care Associates.

    Then ‘TROJAN HORSE’ N&C brought in its auditors, E&Y, and created, ‘using’ the Royal Courts of Justice to issue a ‘Court Appointed Receivership’…..as the way of the parties converting these BoS customers into professional fee fodder and seizing their assets.

    Additionally, BoS then took bank charges/interest in one case for 12 years … until the original £7m equity in that case alone had completely gone! This is extraordinarily similar to the more recent BoS Reading / Lyden Scourfield / Quayside cases.

    Given the clear commonalities between these and other cases, I suspect all victims of BoS frauds over the past 20 years ought to join forces to demand a full public inquiry. I say this, particularly since watching Paul Moore, the BoS whistleblower, on Channel 4 news – again, Ian Fraser provides the clip here.

    The public interest arises from the fact Lloyds Banking Group needs to replenish its own capital to the tune of about £22bn just so they can trading, having taken on some £260bn of toxic assets they didn’t seem to know existed with their HBOS acquisition!

    Or maybe Lloyds was aware of this toxic legacy and chose to keep Flash Gordon in the dark about it when asking him to act as midwife in the rescue of HBoS?? Surely they wouldn’t deceive ‘their Gordy’ would they?? Come on Mr Brown, Mr Darling and Mr Straw….why not use this worthy medium to make contact in the first instance to begin answering the questions that you are eventually going to have to answer?

    Or shall we alert Vince Cable and George Osborne to ensure this matter becomes an election issue? Wit the HBOS black hole now extending to £260 billion or more it would seem apposite. Even typing ‘billion’ makes me gasp – surely that’s million Alan?? No, Paul Moore said “£260 billion” didn’t he!

    At the very least, isn’t it time for a public education programme to inform voters that widespread fraud and mismanagement at BoS is costing us all £260 billion — and how much taxpayers are liable for to sort this out. If that can’t catch the attention of the voters what can?

    Do we agree that the damage done to our nation by bad regulation of banks and accountancy organizations, who cannot be separated from all this, could now become a major election issue. Whoever becomes the next chancellor ought to look back to 1994, when Alistair Darling, then in oppositio, said to us: “Thank you for your letter of 27 February. We are in fact finalising a consultation document on the reform of the regulation of banks….” – and make sure that, this time, proper action gets taken to make these organizations servants of the public rather than its masters/sources of our ruination!?

    The answer is we need one single, properly resourced, regulator and prosecutor, rather than the present mishmash of seven or eight which have become past masters at buck passing and therefore allowing major frauds to slip through the net!

    Wouldn’t that be more likely to induce fear among bankers contemplating stealing from their own customers? That fear must be an integral part of regulation was first mooted in December 1993 in this recording (track no 9).

    Why was ‘FEAR IN REGULATION and ENFORCEMENT’ kicked into the long grass by Alistair Darling when he became Chancellor? Did the bankers’ get to him? Is it because he expects to be given lucrative roles on bank boards when he finally demits office?

    The day is coming when we will receive the justice we’ve fought for years to secure!!

    Alan Edwards

    alanedwards4@Hotmail.com

  5. [...] made me think of the way in which the English Courts have conspired to cover up the complicity of certain leading high-street banks in the Vavasseur ‘Ponzi’ fraud. [...]

  6. [...] was sent by the Treasury to Mrs Elizabeth Watson on this subject. As Mrs Watson is a victim of the HBOS/Vavasseur fraud and not HBOS Reading fraud and as she did not write to the Treasury on this matter, she assumed the [...]

  7. The more I read about HBOS the more i am astounded at the deceit, the dishonesty and the ducking and diving to defraud its own customers — that means us. It’s incredible. Aided and abetted by guess who, the policticians (expenses come to mind) and Government ministers banks became a unit with free rein to rob the public blind. They are no better than a well-trained bunch of pickpockets and thieves … There was zero accountability … no scruples … no social hearts … these guys are dangerous … I just hope, hope, hope some go to jail.

    The banks were aided and abetted by politicians their lawyers too (Rory McAlpine, of Denton Wilde Sapte springs to mind).

    They developed a system which masquerades as business but is actually high-rolling theft and pretended they had the law behind them. In reality, much of what these guys get up to is illegal, if not CRIMINAL.

    Billy Bragg is spot on with his NoBonus4RBS campaign. We should have him in politics ASAP to help clean up politics and the banks, and the professional services firms.

    Billy we’re with you all the way.

  8. [...] May 2001 Fraser Mackay, head of specialist mortgages in Bank of Scotland’s Manchester branch, is actively encouraging clients to take out mortgages and equity-release loans with Bank of Scotland on condition they “invest” the money in the Vavasseur Corporation’s “Ponzi” scheme. Other firms persuading customers to channel funds into the fraud include St James Place Capital (60% owned by Halifax) and Scotts Private Client Services, managed by accountant John Dryburgh. After  clients lose $250m (because Vavasseur is a fraudulent scheme), the bank seeks to repossess their homes. Shin Gangar and Alan White of accountancy firm Dobb White & Co are later convicted and jailed for seven and a half years each for peddling the fraud.  Their trial is considered by some to form part of an elaborate cover-up in which the FSA, Dobb White’s liquidators Baker Tilly and other regulatory bodies were complicit. BoS has so far got off Scot-free for its role in promoting the fraud. See: The bank, the regulator and the Vavasseur fraud [...]

  9. Even worse is that the Bank of Scotland and their group actually FUND-RAISED the Vavasseur fraud, using the ‘Vavasseur’ infrastructure and set up of offshore companies as collecting points, exclusively for their own profits: through misappropriation of funds which entailed:- to gather as much “collateral” as they could, unscrupulously procured from equity release on PEOPLE’S FAMILY HOMES, pensions, savings and the like. Most have now moved into rented accommodation as HBOS “went in for the kill” and issued FRAUDULENT MORTGAGE POSSESSION CLAIMS (as in our own case) EVEN WHEN WE HAD NO MORTGAGE (only a Term Loan “business facility secured on our property, when the facility was never even drawn by us) – and abusing the court process who are aiding and abetting this criminal bank to defraud its customers.

    This true story sounds so incredible that it has so far taken eight long years to even begin to penetrate the depths of corruption that exist in this excuse for a “bank” — which is protected by both the useless and crime-dependent FSA as well as HMCS where our Judges and officers of the court have been also widely corrupted and ‘nobbled’ by the Banks that the Law is tossed over their shoulder and evidence no longer even counts. They have one Agenda only: State Terror through the Scottish Financial Mafia (government, banks, courts).

    Don’t believe this? Then answer me how come a ‘strike out application’ (which we issued recently) on a fraudulent mortgage possession claim could possibly fail when no evidence exists (or has ever existed) of a Mortgage agreement Yes, but it did fail and was unlawfully dismissed … and the bent Judge actually ASKED, invited, and encouraged the bank’s “barrister” to claim costs, even though the case and evidence had not even been heard or heeded, and even though he had not submitted these ‘costs’ to the court 24 hours prior, as required by the Court Rules!

    The biased and ill-behaved judge said “how much do you want ?” and the corrupt barrister replied “oh – about a £1,000″ — for one hour’s attendance. Does that sound a bit too much like a pre-meditated corporate bullying session? Indeed: it involves the worst form of organised crime, between criminals who disregard the law and who are masquerading as court and legal ‘officials’. And all of US are allowing this outrageous state of affairs to persist — count me out. I’ve had enough of this criminality in our courts and intend to expose the corruption therein. Care to join me?

  10. [...] To read about the FSA’s involvement in covering up the HBOS / Vavasseur fraud click here [...]

  11. [...] are strong parallels with the FSA’s serial failings in its handling of the Vavasseur fraud [...]

  12. Interesting article, Ian.

    ‘Money’ = ‘Credit’ (check any ledger, Bank Statement, etc) … and the primary/generalised definition of ‘credit’ is what?

    The dictionary says: “Faith placed in something”. So ‘money’ = ‘faith’ = ‘belief’ = ‘imagination’ = CONCEPT. (Any RELIGION = “Faith placed in something”)

    So … is this what it’s all about then? Religions? If not, what is the ‘source of money’?

    According to the Bank of England’s First Quarterly Bulletin for 2008, Page 103 (PDF Page 105), bottom-left paragraph:

    “Subject only but crucially to confidence in their soundness, banks extend credit by simply increasing the borrowing customer’s current account, which can be paid away to wherever the borrower wants by the bank ‘writing a cheque on itself’. That is, banks extend credit by creating money.”

    A source link to that bulletin is:

    http://www.bankofengland.co.uk/publications/quarterlybulletin/qb0801.pdf

    Take your thinking from there: Money is created out of thin air.

    (Religions also come out of thin air, of course)

    I have a banknote. It says on it “I PROMISE TO PAY THE BEARER ON DEMAND THE SUM OF £20″. Has anyone ever seen “A SUM OF £20″ … or have you only ever seem bits of paper PROMISING it?

    ‘Money’ = The pot of gold at the end of the rainbow.

  13. [...] UK banks were actually solvent or taking outrageous risks, got sidelined or ignored. And its shocking inability to protect consumers from the more rapacious financial firms earned it the nickname the [...]

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