Herald Scotland Ian Fraser
Alleged RBS victims cry foul as regulator appoints “toxic” consultants to probe their case
Businesspeople who claim to have been ruined by RBS’s Global Restructuring Group are refusing to co-operate with a firm hired by the Financial Conduct Authority to investigate the scandal, potentially derailing the probe into the bank’s so-called “vampire unit”.
The RBS GRG Business Action Group – which represents the interests of 379 firms that allege they were harmed or destroyed by GRG’s behaviour – said “it is not appropriate that we are being asked to work with [Promontory]”.
The group said it was concerned about the independence of the Washington-based consultancy, which was appointed as a “skilled person”, or third party investigators, for the FCA’s GRG probe in January 2014 alongside global accountancy firm Mazars. Their delayed report is due to be published in a matter of weeks.
Promontory has been accused of skewing a regulatory probe by “whitewashing” alleged wrongdoing for a financial services client. In the summer it was found to have “sanitized” a report into sanctions-busting and money laundering by London-headquartered Standard Chartered.
On 18 August Promontory entered an out-of-court settlement with the New York State Department of Financial Services. Under the deal’s terms, Promontory acknowledged failing adhere to the US regulator’s requirements for consultants in relation to its Standard Chartered work, paid a $15m fine, and agreed to a six-month ban on taking further financial regulation-related assignments for New York regulated banks.
Standard Chartered was separately fined $967m for the offences that the NYSDFS said Promontory sought to downplay.
Speaking at the 33rd Cambridge International Symposium on Economic Crime in Cambridge last month, US lawyer Montgomery Rankin said Promontory is now a “radioactive” name in the US and expressed surprise the FCA wished to keep it on as a “skilled person” on outsourced probes.
John Bamford of the RBS GRG Business Action Group wrote to Mazars on 18 September saying: “The FCA referred the group to Mazars who are acceptable. In the case of Promontory the view is that, following the ban imposed by the US authorities on this firm being involved in like investigations, it is not appropriate that we are being asked to work with them in this very important matter.”
Tony Boorman, a senior adviser at Promontory, who previously worked at the UK’s Financial Ombudsman Service, expressed disappointment at the action group’s decision. In a letter to Bamford he said: “I was sorry to learn that your colleagues had concluded that we should not meet as planned. It was a meeting that we were looking forward to.
“We have been particularly keen to reach out to both individual SMEs and their representatives to ensure their side of events are heard and understood.
“We are committed to [ensuring] our report provides a balanced and accurate picture both of the general approach that RBS took and the impact this had on the more than 200 SMEs in our sample review of cases.”
“Meeting up with your group would have been of value in putting … individual accounts in a broader context. I hope we can meet and discuss the experience of your membership in due course.”
In a report last month, Reuters said RBS chief executive Ross McEwan was “spooked” and “convinced that the regulator would take punitive action against the bank” after he had a meeting with the FCA on 8 May. The report suggested RBS was bracing itself for having to pay billions of pounds in compensation to small businesses that it allegedly ruined.
In July RBS hired PWC, Dentons and CMS Cameron McKenna to prepare itself internally for the FCA’s potentially highly critical report.
The RBS GRG Business Action Group, whose meeting with Promontory was due to have been held on 22 September, intends to sue RBS and four of its former executives in an “unlawful means conspiracy action” suit.
The former RBS defendants have all now left RBS. They are ex chairman Sir Philip Hampton, ex deputy chief executive Chris Sullivan, ex GRG head Derek Sach, and Aubrey Adams, who used to run its property arm. The action group has hired Enyo Law, alongside the QCs Lord Pannick and Andrew Hunter, to pursue its case.
In November 2013, GRG was accused by Lawrence Tomlinson, adviser to business secretary Vince Cable, of colluding with professional services firms in order to profit from the distress of business customers. An RBS-commissioned review of GRG published in April 2014 by the law firm Clifford Chance found no evidence that the bank had systemically defrauded customers.
Promontory and RBS declined to comment. An FCA spokesman said: “The FCA is aware of the settlement between Promontory and the New York State Department of Financial Services. The review of the Global Restructuring Group is ongoing. Promontory has been appointed as the skilled person with close FCA oversight.”