Second HBOS whistleblower: Bank had a total disregard for risk


‘Sales person’: Sir James Crosby ‘focused on growing HBOS

A second HBOS whistleblower today claimed there was “a total disregard to the risk process” at the bank under the leadership of former chief executive Sir James Crosby.

Dr Bijan Khandani, a risk manager at HBOS between 2003 and 2005, told the Evening Standard his efforts to protect it against risk were thwarted by senior staff.

“I encountered a lot of resistance,” he said. “I was amazed by this culture where there was a total disregard to the risk process.”

Dr Khandani, a risk consultant at Logica, described Sir James as “a sales person” focused on growing the company.

“He would talk about the progress HBOS was making in terms of market share. Risk was not top of his priorities,” he said.

HBOS, owner of Halifax, was last year rescued by the Government in an £11.5billion bailout after its near-collapse. It is part of Lloyds Banking Group, 43 per cent owned by the taxpayer.

The claims by Dr Khandani came days after evidence from original whistleblower Paul Moore led to the resignation of Sir James as deputy chairman of the Financial Services Authority, a job he took after leaving HBOS in 2006.

Mr Moore alleged he was sacked as head of risk at HBOS in 2005 after warning that Sir James was leading the bank “to the precipice” and that expansion was “going too fast”.

Sir James said Mr Moore’s original claims had been investigated independently at the time by KPMG and had “no substance”.

But questions have been raised over Gordon Brown’s judgment in appointing Sir James to the FSA and as one of his closest financial advisers given his role in the demise of HBOS.

Although Dr Khandani never met Mr Moore, he said he was shocked when Mr Moore was replaced by Jo Dawson, who had worked on the sales side of the business and had no experience in managing risk.

Dr Khandani said there was a feeling of “shock” at the move.

HBOS declined to comment.

In another twist, Mr Moore’s barrister, Peter Hamilton, has written to the Treasury Select Committee to question whether KPMG’s report could genuinely be regarded as independent.

Hugo Duncan
13.02.09

Source: Evening Standard

3 thoughts on “Second HBOS whistleblower: Bank had a total disregard for risk

  1. Misprison, it is a crime not to report a crime. Any U.S. citizen who knows of another who has committed a crime and does not report it to the authorities, is guilty of Misprison and could be subjected to years in prison for the commission of such crime. Therefore I must hereby notify all legal authorities that Mike Hamersley a high level Government official in the bankrupt state of California at the FTB (who is nationally known as a tax shelter fighting crusader) is guilty of tax evasion and conspiracy to commit tax evasion as (he defines it); guilty of theft of honest services; conspiracy to defraud creditors; possibly perjury to the Senate and other government agencies: and violation of 7216, disclosure of confidential taxpayer information to third parties. It is indeed a rather long list.

    Hamersley testified to the Senate in 2003 that tax fraud involves devising transactions which allow for tax losses and “hiding the true facts from the IRS”. The transcripts are available for all to see. Hamersley also restated the same in his lawsuit against KPMG in 2003 (which is a public document).

    As one example of Hamersley’s fraud, Hamersley while at KPMG gave advice to a client that tens of millions of tax losses could obtain with a 20% to 30% of success upon IRS audit if the IRS discovered the true facts of the transaction. Presumably, if the IRS did not discover the true facts of the transaction, a higher chance of success upon audit by the IRS would obtain. Hamersley was advising on a series of preplanned asset and stock transfers which involved separating assets from liabilities inside a company, transferring the assets to a foreign company and selling the stock of yet another company to the client’s lawyer for a dollar, all to achieve tens of millions in tax losses and defraud the creditors of the company from which the assets were being stripped. Hamersley’s participation in all these crimes is confirmed in an email by him dated May 24, 2000 prepared by him while working as a tax expert at KPMG.

    Hamersley also further participated in hiding the true facts of the transaction from the IRS and the creditors by reviewing and approving documents prepared in June of 2000 which gave effect to the transaction back to 19999 (which based on Hamersley’s definition of tax evasion, is a classic case of backdating a fraudulent tax shelter).

    In fact, the transaction approved by Hamersley is very similar to the one he claimed in his lawsuit against KPMG involving XYZ corporation (which we all now know was Occidental Petroleum) as tax fraud.

    This of course creates an interesting conundrum for Hamersley, as it is likely he will claim his tax shelters were not fraudulent (not with standing his email which describes the possibility and chances of success upon IRS audit if the IRS discovers the true facts), however, if that is so, then his description of tax fraud to the Senate, other government officials, taxpayers whom he now confiscates income from and all the people he gave speeches to and articles he wrote for are being lied to. In which case, Hamersley is guilty of lying to the Senate and other government officials, perjury; outright theft of income from those taxpayer’s whom he is now confiscating income; theft of honest services from the FTB and those who he gave speeches to or wrote articles for on tax fraud; and most incredibly, conspiracy to defraud creditors by participating in a convoluted scheme to separate valuable assets from liabilities for profit at the creditors expense.

    Further, Hamersley by giving a so called substantial authority opinion to his client committed outright conspiracy to commit tax evasion under his own definition because his own email discusses the possibility of the IRS determining the true facts and according to Hamersley if a tax is due and owing and you lie to the IRS in any way, that is tax fraud.

  2. Dear Claudia (aka Whistlewhat, Angry Citi Investor, Angry Citi Shareholder, Thoreau, Whistlefraud, etc.–I have to admit it is difficult to keep track of all the aliases you are using to post identical comments while appearing to be different bloggers.):

    Your comments about Hamersely just don’t make any sense at all. I too am highly skeptical that your bold statements about Hamersley could be based on any reliable evidence at all. I too read Travails in Tax and personally observed Hamersley’s testimony before the Senate Finance Committee. He seems like an exceedingly honest guy to me too. Yeah, isn’t it a fact that KPMG said Hamersely had absolutely no involvement or knowledge of tax shelters in its press release to the Senate Finace Committee after Hamersley testified in October 2003? I read that KPMG press release on the PBS Frontline website. http://www.pbs.org/wgbh/pages/frontline/shows/tax/interviews/release.html
    See also Hamersley Senate Finance Committee Testimony 003 TNT 204-35 online at http://finance.senate.gov/hearings/testimony/2003test/102103mhtest.pdf

    Are you suggesting Hamersley and KPMG are in cahoots? Wow, that would be a bold strategy seeing as Hamersley sued the crap out of them. Case No. BC 297209, Los Angeles Superior Court (June 23, 2003.), also reported in Tax Notes Today full copy of complaint 2003 TNT 124-5.

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