HBOS Fraud Trial: Effective Deterrent?
Financial crime can be, and it is
argued here is, more damaging to the
public than almost anything else. Whilst large-scale crimes are, by definition,
shocking in their very nature – environmental crimes or terrorism, to name but
two – the interconnectedness of the modern world means that financial crime has
the potential to affect vast swathes
of the global population. We have just seen evidence of this in 2007/08, and
those who need to be convinced of the long-term
effect of such crimes need not look any further than the sensational
world-balance that we witness today – Brexit; Donald Trump’s Presidency; the
increase of nationalism throughout the European bloc – are all just some
regional examples of the effects of financial crime in the long-term.
So, with that in mind, the near-50
years sentence given out to the guilty financiers in this case seems awfully
positive and in-line with a renewed understanding as to what constitutes crime, irrespective of who commits it.
Essentially, the scheme, which was built upon intimidation and a sense of invincibility,
forced small business owners into the hands of the HBOS Corporate Division,
housed in Reading, and who were then classified as ‘high risk’, irrespective of
whether they had performed poorly or not[1]. Then, the head of that
Division, Lynden Scourfield, would require that those businesses would have to
appoint his desired recovery consultants, Quayside Corporate Services (QCS) in
order to retain the assistance of the bank – which at this time was of real
importance owing to them being designated as ‘high risk’. However, QCS was
controlled by Michael Bancroft and David Mills, both of whom were in cahoots
with Scourfield. QCS would then submit inflated business cases for additional
finance – often against the wishes of the business owners – and that increased
finance availability would then be extended by Scourfield who would siphon off
the profits and share them with the controlling members of QCS. If the small
businesses failed, which was often the case, then QCS would strip their assets
or buy the companies for a nominal value[2].
Whilst this conduct is appalling,
and those who committed such acts are rightly imprisoned for their crimes, there are other elements to the
story which may allude to a differing set of values. For example, this conscious and considered crime, when aligned to the damage it caused to families,
and indeed communities, by attacking what stands as the central hub for most
economies (the support for small business), is perhaps worth a lot more than
the headline sentence of 11 years and 3 months for Scourfield. Also, the length
of time it took to a) take any notice of the complaints of the victims and then
b) to bring the case to a conclusion, signals a different attitude to
prosecuting financial crime. Furthermore, the failings of other parties has
been noted but not acted upon. The BBC note that the Board of HBOS, its
successor Lloyd’s Banking Group, the Financial Services Authority (now
defunct), the Serious Fraud Office, and even the Treasury, were all alerted to
the fraud but still failed to act[3]. Furthermore, the case was
even discussed in Parliament in 2009[4], but it was not initially
investigated formally until 2010 and even then took six years to come to a
conclusion. This is indicative of an understanding that is well known within
the upper echelons of the financial world – there is very little appetite to
punish the rich and influential. There is also very little appetite to hold
those who are tasked with safeguarding vulnerable parties from the worst
transgressions of the financial elite responsible for their failures. Perhaps
what this case shows us is that if you want to commit such crimes, then you
must do it in a more sophisticated way – it is arguable that the brashness of
the HBOS-linked financiers was their downfall.
Ultimately the sentencing is a step
forward, but a very small one. It is welcomed, but now we must ask ‘does it
deter others?’, ‘have regulators been admonished enough for their failures?’,
and ‘does this incident bring the punishment of financial crime closer to that
of more “conventional” crimes?’. Arguably, the answers to all of these
questions are the same. But, if we are to reduce the appetite for partaking in
such callous and destructive finance in the future, we must attempt to show,
whenever possible, a causal link between predatory and destructive finance and
the real-world effect of their actions – only then can we attempt to bring the
punishments of financial crime in line with more conventional crimes and
approach the task of punishing offenders with an equality that is surely
deserved.
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