HBOS whistleblower hits back at Crosby claims

By Ian Fraser

Published: Sunday Herald

Date: December 9th, 2012

Paul Moore, the whistleblower whose evidence was key to last week’s hearings of the parliamentary commission on banking, has accused his former HBOS boss Sir James Crosby of “trying to rewrite history” about Moore’s sacking from the Edinburgh-based bank.

In an interview with the Sunday Herald, Moore said Crosby’s evidence to the commission was “a total misrepresentation” and urged the questioning under oath of participants in the catastrophic £40 billion failure of the bank.

He said: “My job [at HBOS] was a role required by the regulator – [known as] ‘control function 10’, and ‘control function 11’. These are required functions within a bank, so it would have been impossible for my job to have been ‘made redundant’. I did not leave of my own accord, and the way Crosby presented it to the commission was a total misrepresentation.”

Moore’s comments are the latest episode of a long-running dispute, which also saw he and Crosby’s ex-boardroom colleagues repeatedly contradict each another’s evidence to a Treasury Select Committee in 2009.

Moore, former group head of regulatory risk at HBOS, maintains that Crosby personally fired him in November 2004 after he presented research to the bank’s audit committee and board concluding that HBOS’s “fundamentally flawed” business model meant the bank was heading for disaster.

In a gruelling and tense session of the Parliamentary Commission on Banking Standards last Monday, Crosby denied having fired Moore. Instead, he claimed that the experienced risk-analyst’s role had “become redundant” following a routine restructuring.

Crosby also told the commission – whose members include former chancellor Lord Lawson, former head of the civil service Lord Turnbull and future Archbishop of Canterbury Justin Welby – that a report commissioned by HBOS into Moore’s departure from accountancy firm KPMG was “completely independent”. Crosby told the commission: “There was no way that we in any way removed Paul because he was a source of challenge.”

Former HBOS chairman Lord Stevenson – branded “either dishonest or delusional” by Lawson the next day – made similar claims about Moore and the April 2005 KPMG report during a lengthy session on Tuesday.

Crosby stepped down as HBOS chief executive in July 2006, and was forced out as deputy chairman of the FSA following Moore’s evidence to the Treasury Select Committee in February 2009.

Moore claims that he warned HBOS’s directors during a board meeting in July 2004 that their focus on sales, combined with inadequate or perfunctory internal controls, was putting the bank at risk of collapse. In his report to the board he said HBOS was “going too fast” and had become “a serious risk to financial stability and consumer protection”. Moore claims the bank’s then finance director, Mike Ellis, ensured the warnings were not recorded in the board minutes.

Moore told the Sunday Herald: “It is absolutely untrue that I left voluntarily as part of some kind of internal reorganisation. I raised protective disclosures – blew the whistle – in the boardroom. The disclosures related to actual or potential breaches of law or regulation. The first was that the group’s focus on sales and marketing was markedly out of balance with its systems and controls and the second was that the board should reconsider its strategy for sales growth if it wished to avoid risk to customers and colleagues.

“These words were clearly expressed in the boardroom but they were not permitted to be minuted, there is corroborating evidence to prove that. Crosby then fired me, and he sent me a memo dated November 23, 2004, and it said, ‘The decision is mine and mine alone’.

“The bank [then] appointed KPMG, a firm that could not have been ‘independent’ because they were the bank’s auditors, and they failed to conduct the investigation in an independent fashion. They failed to interview key witnesses, they failed to corroborate clear evidence and they reached conclusions which were incapable of withstanding proper scrutiny.”

Moore also believes that Crosby’s failure to challenge any of the initial allegations Moore made to the select committee in February 2009 is significant. “If he disagreed with [my] allegations, he should have commented straight away, not waited three-and-half-years.

Moore has advocated an independent judicial inquiry into the reasons for the failures of banks including HBOS. He said the parliamentary commission missed a whole range of things about Crosby including “the conflicts of interest arising from Crosby’s dual roles at HBOS and the FSA.”

“I don’t think it is a forum that is appropriate to a forensic inquiry and people are not giving evidence under oath.” Moore has long argued that what is needed is an independent judicial inquiry into the reasons for the failures of banks including HBOS and RBS.

“Unless the FSA are taken out of the picture in relation to the question of accountability for the banking crisis , there will be no accountability. The way they have sought to portray Peter Cummings as some kind of rogue trader is farcical and a disgrace. They were all part-and-parcel of the same ‘incompetence’, as Crosby has described it. The FSA is not going to take on the big boys like Stevenson, Crosby and Hornby because the FSA is implicated – and of course Crosby was on the FSA’s board, so it is absolutely outrageous that HBOS was not investigated separately.”

Last week’s session contained the first apology by Crosby for his role in bringing down the bank. He told the parliamentary hearing that he was “horrified and deeply upset” and “very sorry” for its near-collapse. HBOS was rescued by Lloyds Banking Group and caused a £21bn taxpayer bailout for its new owner. “I am apologising for the fact that I played a major part in building a business that subsequently failed.”

His successor Andy Hornby, who was at the helm of HBOS when it nearly collapsed in 2008, reiterated in a separate testimony at the commission his “heartfelt apologies for what had happened at HBOS”.

KPMG declined to comment. Crosby did not respond to requests for comment.


This is how former HBOS chief executive Sir James Crosby explained the reasons for the departure the bank’s group head of regulatory risk, Paul Moore, in front of the Parliamentary Commission on Banking Standards last Monday (full video here – sequence starts at 17.06pm). The commission’s Andrew Tyrie had just said ‘in this case the constructive challenge got a bit too constructive, so you sacked him.’


“In the period post-merger, the group risk functions reported to our finance director, Mike Ellis; who was finance director and also championed the group risk functions at the centre of the organisation. And he did a very good job in terms of developing the group risk functions and their clout within the organisation.

“Towards the end of 2004, [Ellis] decided he was going to retire, and it seemed right at that stage … to give the group risk functions a higher profile, and create a role at the centre as Group Risk Director which sat on the executive board, which had not hitherto been the case.

“At the time we went through a succession planning process and decided that somebody other than Paul Moore was better qualified to head that function. We chose the person who was closest in succession, had amongst the broadest experience, and because of their experience in the business areas rather than risk, and because of their standing within the organisation, was very well placed to lead risk and give it clout.

“And at that stage we, in looking at the reorganisation and having appointed Jo Dawson to the director of risk role, decided there probably wasn’t , within that, a sensible role for Paul, and in effect he was redundant in that structure, and it was after that when Paul made a series of allegations [that] there was mounted a completely independent investigation, overseen by the FSA, and carried out by one of the firms of accountants, which concluded there was no merit in that.

“Now there was no way that we in any way removed Paul because he was a source of challenge. Paul was a very capable colleague in a particular area of risk, which was conduct of business risk, largely in the retail and insurance areas. But, when we looked at the new structure for risk, there wasn’t a role available that he was best suited to. So as is often the way in these things, we parted company on the basis of redundancy.

An edited version of this article was published in the Sunday Herald on December 9th, 2012. Image: BBC



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