Thursday 26 February 2009

‘The first thing we do, let’s kill all the lawyers!’ (W Shakespeare)

One of the reasons (one among so many) why the City and the financial services sector has managed to get itself in such a complete moral and ethical mess is due to the contemporary fashion, whether for directors, regulators or civil servants, to call in the lawyers before making even the simplest decision. As a result, the shysters have, in a relatively short time, grown from a fairly ordinary, rather grubby, hum-drum profession, much disliked historically in many quarters, (ever found an attractive lawyer in any of Dickens’ books), into the multi-multi-million pound business they have become, with a finger in every pie, an eye on every deal, and a caveat for every suggestion.

There was a time, when I was at the Fraud Squad, where the prosecution of fraud was a fairly simple operation. The cops had a huge patch in which to hunt (we weren’t too welcome in the City of London, because that was looked after by our City police colleagues.) God knows what they got up to inside the Square Mile because we were never invited to participate, but they always seemed to be able to wear very nice suits! Nevertheless, by and large, they seemed to have a fairly pragmatic working relationship with the City fathers, and whatever transgressions got committed, the City seemed to be able to sort them out for themselves.

We had an office called the Director of Public Prosecutions, a fairly decent bunch of chaps and girls by and large, who looked after our cases. They were used to us and our funny ways, and we knew exactly what sort of evidence they wanted to take cases to court, and we went out to find it. Generally speaking, we treated our clients (nice word for villains), with a degree of consideration, no kicking in of doors in the early hours, but a polite request through their solicitors to ‘come in and have a chat’!

The solicitors, for the most part, tended to be older partners of small firms based in North London or in Soho, most of whom had known their clients for years, had followed them through a wide number of their earlier criminal developments, had briefed ‘well-refreshed’ counsel to appear at their pleas and sentencing hearings, and were genuinely amazed, in so many cases, that their clients were still actively engaged in a life of crime.

We had a nice local Court down at the ‘Bailey’, where the Judges and the Court staff knew us all by name, and where, by and large, most of our old clients would plead guilty to something or other, and dutifully troop off to spend a few months R&R at Ford Open Prison, while their brief, his solicitor and the detectives went across to the Magpie and Stump for a few beers and the pub’s excellent steak and kidney pudding.

The point I’m trying to make is that the system we had all worked so hard to devise, all worked perfectly well.

Fraud wasn’t seen as fashionable, it wasn’t seen as racy and daring, it wasn’t seen as dangerous and it wasn’t seen as something about which anyone really cared very much, one way or another.

Within the space of a few months, Margaret Thatcher ended all that.

The era of the ‘Big Bang’ ushered in an atmosphere of cultural change which remodeled the face of the City of London and its practices for ever. With the breaking up of the monopoly of the Stock Exchange and the admission of foreign shareholders and practitioners, banks and their business models changed completely.

Mrs Thatcher was an interesting dichotomy. She fervently believed that a large swathe of public services could easily be taken out of public sector monopolization, and large elements of their function hived off into private ownership. She believed this would foster competition and lead to greater efficiency and less cost. She included policing among these functions, and saw no bar to large sectors of policing services being privatized, and paid for by the constituent bodies who would use their services.

She saw this could work particularly within the City and the financial sector, and so was born the era of the SROs, the Self-Regulating Organisations, which sprung up like mushrooms after a rain shower.

I was the Fraud and Investigations Director of one such agency, FIMBRA, by far the most egregious of all the agencies, and the one whose constituent members contained the largest bunch of spivs and wideboys. Its initials stood for the Financial Intermediaries and Managers Regulatory Association, but after my time, due to the regularity with which some of its members helped themselves to their client’s investment funds, and then disappeared, it became better referred to as ‘F××k It, My Broker’s Run Away.

At first, the SROs were like an alphabet soup of initials, and they created their own codes of conduct and their own rule-books, but because they were now privately-owned and run by and for the interest of their constituents, they didn’t like the idea of being ‘policed’. They insisted on being regulated, so there was no room for detectives any more, and the lawyers proliferated. They were lawyer-ridden, and no-one could make any decision without involving the learned friends because of the likelihood of civil action flowing from any decision which might have an adverse impact upon any individual practitioner, particularly those whose dishonest activities meant that they stood to lose a lot of money.

The point is that the whole era became run by the lawyers, and out of this whole lawyer-driven culture grew a public-sector response to fraud and financial crime which taught that without lawyers running every element of the process, nothing could be properly achieved.

So, in a very short time the investigation and prosecution of fraud was taken over by government lawyers through their new playgroup called the Serious Fraud Office. Their legal colleagues in the financial sector, who hitherto wouldn’t touch fraud cases with two barge poles for fear of being tainted by their association with the criminal fraternity, now all suddenly piled in to develop ‘financial crime practices’ as more and more it was believed that their traditional commercial clients would come under the spotlight. These lawyers rubbed their hands with glee at the thought of the cornucopia of fees which would cascade from their clients’ pockets if they were charged with city frauds, and set out their shingles offering fraud defence practices.

The lawyers lost no time adopting all their usual time-wasting and process-delaying tactics; indictments grew longer and longer; documentary evidence became measured not by lever-arch files, but by the room-full; cases dragged on and on, jurors were subjected to cruel and unusual punishments by being required to submit themselves to months of dubious legal tactics, and all the while, the bills and the fees grew bigger and bigger, and the lawyers got fatter and fatter. It got so incestuous that conferences with cocktail parties were held where lawyers from the SFO and the regulators rubbed shoulders with their colleagues from the City law firms, and everyone had a wonderful time getting richer and richer, because by now the public purse was being invoked, and even the fattest cats were being granted legal aid.

Within a couple of years, the entire fraud case sector had ground to a halt in terms of investigations being completed, cases coming to trial, trials being expedited, hearings being shortened, convictions being obtained. With a few exceptions, none of this occurred, and the whole ghastly mess eventually began to subside into a morass of petty squabbles, and the shrinking of the reputation of the SFO, as more and more cases were either dropped, abandoned or the defendants were finally acquitted.

Unsuitable cases were pursued, Chief Officers of police would lay-off even the most meaningless fraud cases on the SFO because it would otherwise mean eating into the decreasing policing budgets; morale at the SFO plummeted, and fraud statistics grew exponentially, and all the while, the financial practitioners plundered the treasury.

So, now, when we have finally woken up to the dreadful realization that the last 10 years of city and financial regulation has been nothing but a bad dream, that the fat cat bankers with their swollen pension funds have stolen every last asset worth nicking and there is a desperate need to rebuild a regime which will begin to take the fight back to the looters, what do we get offered?

Headlines that read ‘Top lawyers back call for single regulator to tackle city fraud’.

‘…There are suggestions by former senior lawyers that the role of the SFO should be merged with the FSA...’

Oh God, yet another amalgamation of civil servants, even more ‘jobs for the people-like-us’, an increase in the ‘safe-pair-of-hands’ mentality which will do nothing to make any difference to the conviction rate.

How can I tell? It’s very simple, even dear old Monty Raphael from Peters and Peters, the doyen of the fraud defence magic circle, is reported to be calling for even more changes in the prosecution policy regime.

Monty and his close mates have made a very good living from defending fraudsters from within the extant regime and now he is demanding an end to ‘…Balkanisation’ and the development of a coherent anti-fraud prosecution strategy that is intelligently resourced, intelligently focused and proves a real deterrent to fraudsters…’

When the fox starts demanding that the farmer increase the quality of the fences to prevent his hens escaping, it is a sign that even the fox is getting fed up with eating chicken!

What a future conservative government needs to do is to focus on re-energising the one single agency which will have the will to go after criminal fraudsters, the criminally reckless fat cats and the pension looters and that is through a properly funded, trained, motivated and resourced detective force, and not one that comes from within the Square Mile, because they are too close to the City fathers.

We need a dynamic department based at New Scotland Yard, staffed with cynical career detectives who can most closely resemble Oliver Cromwell’s ‘…russet-coated captain, with fire in his belly, that knows what he fights for and loves what he knows…’

Such men and women are needed now more than ever, because it is detective skills, cunning and courage that we need, not lawyer’s slippery words and dubious judgment calls. We need someone to take the fight to the enemy, hard detectives who will not be frightened to make some difficult decisions, secure in the knowledge that if they act in good faith, the Commissioner will support them.

We need, what my old friend Detective Chief Inspector Cliff Knuckey used to call, ‘…the heady aroma of splintered wood first thing in the morning…’ and we need a constituency of dishonest bankers, financial advisers and money jugglers to lie awake in the early hours wondering if the sounds outside the house are a precursor to the Fraud Squad making an unannounced visit!

The last thing we need, right now, is any more bloody lawyers, and we have to take Shakespeare’s words metaphorically to heart! Let the lawyers stay on their side of the court where they belong and let’s get back to dealing with criminals in the way which works best. If George Osborne can achieve this, then he will have put the pieces of the equation back where they rightly belong, where the cops catch the bad guys, and the shysters defend them, and we can all get back down to the Old Bailey again.

Maybe the Magpie and Stump might be prevailed on to put steak and kidney pudding back on the menu!

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