Bank scandal? Plus ça change
WHY is it all so different in this country? Abroad, when financial scandal hits home, there tends to be criminal investigations, trials, and ultimately imprisonment if an offender is found to have broken the law. We do things differently here.
The rage that has been palpable this week on publication of the Anglo tapes is rooted in a sense of impotence. The tapes appear to show that executives within Anglo Irish Bank had barely concealed contempt for the regulator charged with policing the industry.
The laughter in the bunker that is heard on the tapes suggests a relatively relaxed attitude to the impending doom as the bank collapsed around their ears. What shocks many people is that these executives appear to be fortified in the knowledge that come what may, their own futures will be relatively secure.
Issues such as investigation and prosecution simply don’t arise. There is no question of financial penalties, nothing that would impinge on the obscene pensions they have set up for themselves. The law, it would seem, is for the little people.
As events were to show, this belief was rooted in reality. Three of the bank’s top executives are currently before the courts on criminal charges, but none of those on the tapes, including chief executive David Drumm, have been charged with anything.
Presumably that is because no case can be made that they have acted outside the law.
But what really emerges is that this is just one more example of the impunity that applies to the masters of the universe who are engaged in high finance of one sort or another.
In all likelihood, the Anglo executives were aware of the recent history of banking scandals in this country, and how those scandals were dealt with.
Repeatedly banking scandals have involved politicians and the wider public getting angry, shouting abuse at the bankers, and then everybody goes home. When the noise dies down, the money men simply go back to making money.
Reel back nearly 30 years to hear one politician speak for a large swathe of the public about how AIB had to be bailed out after its insurance subsidiary ICI got into serious trouble.
“It would be an absurdity, an unacceptable injustice, and totally ridiculous if the general public, the great majority of whom have never benefited one iota from banking profits and many of whom have had very unhappy experiences at the hands of bankers, were asked to step in and take up an additional burden because of someone else’s mistakes — mistakes made in this very specially privileged sector of our economy.”
That was Charlie Haughey on Mar 27, 1985, when he was leader of the opposition.
The State did intervene on that occasion, bailing out AIB to ensure its survival. None of the top executives at the bank lost their jobs. None of the executives at ICI were prosecuted. Within a few years, the bank was back making serious bucks, having been helped on its way by the citizens.
Within a few more years, the bank was one of the leading lights in the criminal enterprise of facilitating tax dodging through bogus non-resident offshore accounts.
The system became a large element of business for the banks in general, and AIB in particular. At one stage, the bank’s internal auditor Tony Spollen estimated AIB had a possible liability of £100m in unpaid tax.
When the scam was uncovered in 1998, an inquiry was ordered and the body politic investigated through the Oireachtas Public Accounts Committee. There was much breast beating, and finger pointing and anger, and ultimately a report was published.
The banks had to pay fines, which were just a small dent in soaring profits. Nobody was prosecuted, nobody held responsible. The only person to suffer in the affair was, as usual, the whistleblower, in this case the AIB auditor Spollen.
The PAC report contained a line that will in all likelihood be repeated whenever a banking inquiry reports on the most recent scandal.
“There was a particularly close and inappropriate relationship between banking and the State and its agencies… [which] were perhaps too mindful of the concerns of the banks and too attentive to their pleas and lobbying.”
One Irish banker has gone to prison in recent history. Patrick Gallagher, who ran a private bank in conjunction with his construction business, was prosecuted for illegalities was sentenced to two years in prison in 1992 in Northern Ireland.
His crimes north of the border were relatively minor, but in the Republic hundreds of investors had lost their life savings in Gallagher’s bank. The liquidator of his company identified 79 breaches of law in his operation in the Republic, yet he was not even charged here.
This is the history of banking scandals in this country. Savers, depositors, taxpayers, citizens; all of these categories of people who are wholly innocent of any wrongdoing, lose money, jobs, and often provision made for their futures. The executives, who have usually acted recklessly, are allowed to carry on with impunity.
The standard of evidence required to prosecute white-collar crime remains extremely high. This cannot be a coincidence, and is surely connected to what the PAC inquiry identified as the close relationship between bankers and state officials and politicians.
That closeness was a key feature of the banking collapse.
Those who represent the banks retain major lobbying power in ensuring that laws are shaped in a manner that best suits bankers rather than the State or customers.
As a result prosecutions are rare and investigations by law enforcement agencies extremely complex.
None of this is an accident. It is how the system has been designed. There is no real political will to change, even when somebody like Matthew Elderfield points out, as he did in recent days, that the law in dealing with white collar crime remains deficient.
Instead when something like the Anglo tapes arises, politicians get angry in order to keep pace with their voters. Then, after a while, everybody moves on, and very little changes. That is how it has always been and how it will remain unless and until reform is driven from the bottom up.
