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Should bankers be hunted down like dogs?

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Bankers deserve everything they get
Yes, and they should go on getting it
32%
 32%  [ 12 ]
No, they should be cast into outer darkness
67%
 67%  [ 25 ]
Total Votes : 37

PDR
861098.  Mon Oct 31, 2011 8:11 am Reply with quote

gruff5 wrote:
I'm not sure about "defence" (more accurately "offence" or "commercial weaponry") contracts, Lukecash. The situations on either side of the pond are different, but there is plenty of dodgy goings on on the UK side. The biggest "defence" contract in history is the Al Yammah contract between UK and Saudi Arabia. In 2010, BAE Systems pleaded guilty to a United States court, to charges of false accounting and making misleading statements in connection with this contract. Seems to have been huge backhanders on the Saudi side as well. UK is in the top four leading arms exporters in the world. Some people here are proud of that.


You nned to be a shade careful on reporting things like this. Firstly there's the context - the contract wasn't actually a contract, it was a treaty between the Kingdom of Saudi Arabia and the government of the United Kingdom. BAe (as it then was) was contracted by the UK government to undertake most of its obligations under that treaty, but it was responsible for the terms and the administration. The treaty was formed under Saudi law and followed Saudi business practice, many elements of which LOOK (in our eyes) to be a bit strange - but that's only if you wish to impose a western culture on another country (which is a pretty arrogant and imperialist thing to do).

The Arabic trading culture is one of bringing gifts to show respect, and one in which the seller pays for large parts of the buyer's "cost of purchase" even when these costs are in the form of time and work put in by the buyer's staff. I have gone into this in some detail previously and don't feel the need to do so again (I guess you'll find it in this forum with some searching) - I'd just want to make the point that the issue is by no means as black and white as some have painted it. For example there aren't (and indeed cannot be) any "backhanders" in KSA because the Kingdom is legally a family business with a single shared bank account. WHo takes what from where within the family is the family's business (and they are pretty ruthless if a family member abuses it) - one of the things this investigation did establish was that any and all payments in respect of this treaty were made directly, through the official channels, into the one single pot (which is why the bulk of the allegations collapsed at first contact with the facts). We may not like the way the Saudis run their country, but that's more their concern than ours. They are not a democracy and do not have any concept of "public money" in the sense that we mean.

Yes, BAES (as it is now) paid an agreed small fine for some minor accounting irregularities. But this was only after the combined efforts of the US DoJ, the UK SFO and the EU Commission expended millions of pounds and man-decades of effort trying to prove a whole raft of far more serious allegations. After all that they could only find actual *evidence* of the equivilent of claiming for a single personal phone call in twenty grand's worth of expense claim. And it wasn't a matter of concealment because (if you remember) the books were kept and administered by the UK Government.

So why did BAES cop to the fine? Well there were many reasons, but it boils down to two:

1. Pressure from the UK Government to avoid the need for the treaty documents to be exposed in a court because one of the prime conditions of the treaty is that its terms must remain confidential between the governments concerned.

2. A cost-benefit analysis of the amount of effort it would take (and the damaging distractions it would cause the business) to go to court on the remaining charges. 30m was a small sum compared to the cost pf proving innocence.

Finally, it's worth observing that the reason for the DoJ investigation was started was because a certain Senator became a vociferous critic of BAES the day after the large defence contract in his own district failed to win a contract which BAES won instead. He stirred the DoJ into action, but strangely failed to be QUITE as concerned of the similar allegations against his constrituents over previous military orders for aircraft, tanks and warships...

PDR

 
suze
861100.  Mon Oct 31, 2011 8:17 am Reply with quote

PDR wrote:
1. Pressure from the UK Government to avoid the need for the treaty documents to be exposed in a court because one of the prime conditions of the treaty is that its terms must remain confidential between the governments concerned.


Is it normal for companies to plead guilty to a criminal charge if the alternative would be awkward for the government? That's not how it would happen in Corporate America, and I don't suppose the shareholders would have been delighted.

Were there difficult questions about the matter at the next AGM? Or did the board claim "national security" and refuse to accept questions on the subject?

 
PDR
861104.  Mon Oct 31, 2011 8:30 am Reply with quote

suze wrote:
PDR wrote:
1. Pressure from the UK Government to avoid the need for the treaty documents to be exposed in a court because one of the prime conditions of the treaty is that its terms must remain confidential between the governments concerned.


Is it normal for companies to plead guilty to a criminal charge if the alternative would be awkward for the government?


Where it is in the business interests of the company, certainly. As that Government constitutes a large part of said company's firm and probable orderbook for the next 25 years its desires are a matter of concern.

Quote:

That's not how it would happen in Corporate America,


I'm afraid you're wrong there. I wish I could quote you the chapter and verse, but that would break confidences (and cost me my job). Boeing, Northrop Grumman, General Dynamics etc etc have all done similar things when required.

Quote:

...and I don't suppose the shareholders would have been delighted.


Before finally agreeing the board Briefed a number of the large shareholders (all security-cleared people, mostly institutions, and enough to be a voting AGM majority) on the outline case for the plea-bargain. AIUI the group were unanimous in their view that the 30m was more than worth it to draw a line under the affair.

Quote:

Were there difficult questions about the matter at the next AGM? Or did the board claim "national security" and refuse to accept questions on the subject?


Questions were asked and answered as far as they could be in an open forum.

PDR


Last edited by PDR on Mon Oct 31, 2011 12:28 pm; edited 1 time in total

 
suze
861108.  Mon Oct 31, 2011 8:37 am Reply with quote

Fair enough. We agreed to disagree on the fundamental point some years back, but it sounds as though the way the company dealt with the matter was about as good as it could be.

 
Willie
861167.  Mon Oct 31, 2011 11:35 am Reply with quote

PDR wrote:
Yes, BAES (as it is now) paid an agreed small fine for some minor accounting irregularities

2. A cost-benefit analysis of the amount of effort it would take (and the damaging distractions it would cause the business) to go to court on the remaining charges. 30m was a small sum compared to the cost pf proving innocence.

PDR


The 30 million only the fine payable in the UK (and that is under review after successful injunctions against the Serious Fraud Office for accepting the deal).

The US fine is $400 million and is one of the largest fines the US DOJ have ever given out, not exactly a small sum in anybody's book.

As to the last part of your post, saying 'other people do it' is not a defence.

 
PDR
861188.  Mon Oct 31, 2011 12:36 pm Reply with quote

Willie wrote:
The 30 million only the fine payable in the UK (and that is under review after successful injunctions against the Serious Fraud Office for accepting the deal).


The current advice on the legal position is that the deal cannot be revoked because the level of disclosure involved in agreeing it violated the right to a fair trial, but we shall have to see. The company's position is that if the deal IS revoked then the guilty plea will be withdrawn and the SFO will have to prove their case - something they couldn't be sure they could do even WITH full disclosure (which is why they offered the deal - for them the conviction was the primary aspiration, not the fine).

Quote:

The US fine is $400 million and is one of the largest fines the US DOJ have ever given out, not exactly a small sum in anybody's book.


...and it is also under review because...

Quote:

As to the last part of your post, saying 'other people do it' is not a defence.


...the failure to investigate all allegations equally probably amounts to an abuse of process and corrupt behaviour on the part of the DoJ. But whilst 150m isn't peanuts, it's still not much more than a light snack for our US business.

PDR

 
Willie
861189.  Mon Oct 31, 2011 12:41 pm Reply with quote

PDR wrote:


...the failure to investigate all allegations equally probably amounts to an abuse of process and corrupt behaviour on the part of the DoJ. But whilst 150m isn't peanuts, it's still not much more than a light snack for our US business.

PDR


You wouldn't get any disagreement out of me there, but as US politics isn't really famous for being non-partisan it really doesn't surprise me.

 
PDR
861194.  Mon Oct 31, 2011 1:05 pm Reply with quote

I might also add that part of the reason for accepting the plea-bargain was because to defend the case would have required disclosure of information in a US court which was regarded as nationally secret by the UK Government and/or the KSA, which the company was not at liberty to do.

PDR

 
suze
861208.  Mon Oct 31, 2011 2:09 pm Reply with quote

One does have to wonder why the auditors did not identify those "minor accounting irregularities" and qualify the accounts accordingly. Minor it may have been, but it still involves what to most of us is a very large sum of money.

There are two possible explanations. Either the auditors failed to spot them - in which case they aren't very good auditors - or they did. If they did, they either chose to pretend that they hadn't - in which case they aren't very good auditors - or they were told by person or persons unknown to pretend that they hadn't.

I really don't want to believe the last notion when it comes to a Premier League accountancy firm, and I just don't believe the alternative suggestion that those firms are clueless.

So is there is a third explanation? There were no accounting irregularities, and the charge (and an agreement that the charge would be admitted) was dreamt up as a way to make the matter go away. I don't particularly like that either, but it's probably preferable to the other two.

 
PDR
861250.  Mon Oct 31, 2011 6:47 pm Reply with quote

I can't really comment, but "accounting irregularities" can mean almost anything. If one of the hotel receipts from my expenses happens to be made out in the wrong company name* and no one spots it then subsequent VAT accounts are technically fraudulent - this would be an "accounting irregularity".

Similarly if your customer chooses to authorise payment vouchers that pass through your contract to their treaty partner for purposes other than the accounting codes they nominated the "error" might lie with the customer, but the "accounting irregularity" would remain in *your* accounts.

I have no idea how the auditing process covers some of the (perfectly legitimate, but sensitive and often classified) stuff that we do. It's an interesting question which I'll try to remember to discuss with our project accountant when I next have a beer with him.

PDR

*This happened recently, because after the Harrier closedown I moved to a different business unit within the same division, but Marriott used my profile data rather than the booking data. The company name differs only in having an extra word in it. A technical violation with no intended or actual fraud...

 
suze
861254.  Mon Oct 31, 2011 6:56 pm Reply with quote

Thanks PDR.

I was rather expecting a response which was a discreet nod towards "You may think that; I could not possibly comment", and that is pretty much what I got. I'm aware that you cannot possibly comment on the previous statement, and I do not ask you to.

At which point I pronounce myself more or less satisfied, and shall move away from the subject.

 
Willie
861433.  Tue Nov 01, 2011 4:50 pm Reply with quote

It seems like we are now in a recovery phase that is going to be harder and will take longer than the recovery after the Great Depression.

All those executives who are happily awarding themselves 50% pay rises due to their wonderful work in minimising the pain seem to be doing a piss poor job and are just fleecing their companies for all they can while they have the chance.

 
Efros
861435.  Tue Nov 01, 2011 4:52 pm Reply with quote

How long before someone suggests having a World War to sort it all out?

 
CB27
861437.  Tue Nov 01, 2011 4:57 pm Reply with quote

I think Merkel was suggesting it the other day.

 
soup
861487.  Wed Nov 02, 2011 3:58 am Reply with quote

CB27 wrote:
I think Merkel was suggesting it the other day.


Didn't she just come across as similar to some heavies proposing a protection 'scheme' "be a pity if this nice shop of yours was smashed up".

her actual words were :-
"Nobody should take for granted another 50 years of peace and prosperity in Europe ... that's why I say: If the euro fails, Europe fails".

Seems like a bit of a veiled threat to me. As in rescue the euro or we will end this 50 years of peace.

 

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