MP calls for fraud squad probe into RBS Dash for Cash scandal
Daily Record, 12.10.16
A LABOUR MP yesterday called on the Serious Fraud Office to launch an urgent investigation into RBS in the wake of the Dash for Cash scandal.
John Mann said the leaked documents, which show the taxpayer-owned bank secretly tried to profit from failing businesses, “raises the distinct possibility that its practices have passed from bad practice to malpractice.”
RBS is facing a multi-billion pound lawsuit as a result of the revelations and could now face separate probes on both sides of the border.
As well as a potential SFO investigation journalist Ian Fraser believes there may now be grounds for the Crown Office to take a fresh look at the bank.
In May, after a complex investigation into a 2008 rights issue, it concluded there was insufficient evidence of criminal conduct at the bank.
But last night a Crown Office spokesman said: “If any further evidence comes to light which is relevant to this enquiry it will be considered by the Crown and we reserve the right to make further enquiry, if considered appropriate.”
Fraser, author of Shredded: Inside RBS: The Bank that Broke Britain, believes the explosive documents could prove to be a game changer.
Yesterday it also emerged Mann has written a letter to Mark Thompson, Chief Operating Officer at the Serious Fraud Office.
The MP for Bassetlaw wrote: “The release today of the investigation into RBS carried out by BuzzFeed and BBC Newsnight, following a cache of documents being handed over by a whistleblower, raises the distinct possibility that its practices have passed from bad practice to malpractice. It appears that customers were deliberately deceived and pushed into the bank’s troubled unit known as the Global Restructuring Group (GRG), and the case can now be made that some small businesses, once in the group, were defrauded by RBS.
“It is therefore imperative that the Serious Fraud Office opens an urgent investigation to ascertain whether the threshold of criminality has been breached by RBS’ outrageous behaviour towards small businesses.”
Yesterday we told how staff at the bank could boost their bonuses by finding firms which could be squeezed in what it called a “dash for cash”.
As the scandal broke RBS said it had let some small business customers down in the past but denied it deliberately caused them to fail.
But on Monday RGL Management Ltd confirmed it will launch a group representative action against RBS early next year on behalf of more than 1,000 businesses.
The total claim is expected to run into billions.
The documents, passed by a whistleblower to BBC Newsnight and BuzzFeed News, back up controversial allegations in a report three years ago by the government’s then entrepreneur in residence Lawrence Tomlinson.
He accused the bank of deliberately putting viable businesses on a path to destruction while aiming to pick up their assets on the cheap.
The leaked documents show the bank’s efforts to make money out of struggling businesses were ramped up after the 2008 financial crisis.
More than 12,000 companies were pushed into the bank’s controversial “turnaround” division – the so-called Global Restructuring Group (GRG) – in the wake of the crash.
And customers could be put into the division simply for falling out with the bank.
Between 2007 and 2012, the value of loans to customers in the GRG increased five-fold to more than £65bn.
Many of the small business owners affected say they have not only lost their businesses but also experienced family break-ups.
Others have suffered deteriorating physical and mental health due to the stress of their treatment, while some have even been bankrupted or made homeless.
The documents confirm that bank staff were rewarded with higher bonuses based on fees collected for “restructuring” business customers’ debts.
This involved cutting the size of their loans and getting cash or other assets from the customer.
Staff were asked to search for companies that could be restructured, or have their interest rates bumped up.
The documents also show that where business customers had not defaulted on their loans, bank staff could find a way to “provoke a default”.
Many business owners complained that unrealistically low valuations were used to claim they had breached their borrowing limits and force them into the GRG.
From there the bank sought to squeeze cash from the businesses through higher interest and fees, pressuring customers to sell assets to pay down loans, taking an equity stake in their businesses, or by pushing the business into administration.
Jon Pain, RBS’ Chief Conduct & Regulatory Affairs Officer, said: “RBS has been very clear that GRG’s role was to protect the bank’s position, where possible by working with distressed businesses to return them to financial health.
“In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down.
“We have already acknowledged that, in some areas, we could, and should, have done better for SME customers.”
The bank insisted that a detailed review of millions of pages of documents had found no evidence that “the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail.”
The headline claim in the litigation will be that RBS, through GRG, systematically sought to defraud its customers for its own commercial purposes.
James Hayward, CEO of RGL Management Ltd, said: “Many of the victims of GRG have claims that are time-barred.
“But those claims can be resurrected by virtue of RBS’s concealment of the true nature of GRG’s activities.
“It will be forcefully argued that insufficient knowledge was publicly available as to the truth of what happened until the 2013 publication of the Tomlinson report.
“Consequently, limitation ought not to run against these claims until 6 years have expired from November 2013.”
And Hayward is optimistic of success.
He added: “The allegations that will unfold in this litigation will be disturbing for the Bank and will continue to cast a shadow over its attempts at reconciliation with its customer base.
“Further, its major shareholder will have views on whether spending further taxpayer money on defending litigation over the activities of the Bank in the darkest days of the banking crisis is a sensible course of action.
“The litigation will obtain redress for a substantial body of RBS’s former customers who have been deprived, in most cases, of everything they owned at the hands of a bank they thought was there to help them succeed.”
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