This week, the banks presented their latest results. As Lloyds, Barclays and NatWest have shown once again, they are capable of generating huge profits. Again, we are invited to bask in their glory.
Politicians are especially prone to this. Memories are short and they fail to recall 2008, when the world was brought to its knees by the greed of some bankers and banks had to bail out taxpayers.
They have a serious blind spot where people with money are concerned. Often, ministers see them as possessing a mysticism, which can lead to government granting status and privileges in exchange for lending their perceived genius, and crucially, to recruiting them. Have to go through the same process that applies to others. .
Two new books bring this practice into sharp focus. One is The Pyramid of Lies by Duncan Mavin, the other is my own Too Big To Jail: Inside HSBC, the Mexican Drug Cartels and the Biggest Banking Scandal of the Century.
Maven recounts the spectacular rise and fall of Australian financier Lex Grensell and his UK firm, Grensell Capital. In 2012, David Cameron’s government wanted to boost the economy and provide a lift for small businesses. Cabinet Secretary Jeremy Heywood highlighted Greensell, who promised to “democratize finance” by offering short-term loans to small businesses to enable them to get paid on their invoices sooner, thus giving them access to their own funds. It became easier to carry on the business and do not be a hindrance, waiting for money.
In fact, Grensal Capital was built on sand. None of which belong to Haywood or Cameron. Viewing the charming Lex as a capitalist wizard, they gave him government IT and security access to the Cabinet Office and No 10. As an adviser to the Prime Minister, he was provided with a desk, a business card and a Downing Street email address. Grensell was also awarded a CBE.
Later, when Cameron left office, the now-former prime minister was hired as an adviser to Grensell Capital, which lobbied his former government colleagues to use the company. Since then, Grünsel Capital has collapsed and is now at the center of lawsuits and criminal investigations in Germany and Switzerland. In the UK, the Serious Fraud Office is investigating dealings with Greencell Capital’s steel magnate and Greencell’s biggest client Sanjeev Gupta.
Part of the problem is that despite the red flags that were raised, Lex Grinsell’s entrance into the White Hall gave him extra luster and credibility. In fact, a little due diligence prior to his appointment could have paid off for his recruitment.
In September 2010, the Executive Chairman of HSBC was Stephen Green. Green said: “I got a call out of the blue. ‘Would you like to be considered trade minister?’ To which I initially said ‘no’. It came from the Prime Minister, Jeremy Heywood, and the conversation escalated because I made the mistake of saying, ‘Not only do I not want to, but I want to be part of the business world. Can’t think of anyone who would really want to do that. This.'”
This easily forced Heywood to try harder. The two men spoke again, and Green spoke to Prime Minister Cameron. He “discussed a strategy to improve business performance and we joked about the job description and I ended up doing the job. So that’s how I got into it and of course that’s why I got into the House of Lords.” .
Had Haywood and Cameron done their due diligence, they might have discovered that Mexican and US authorities are investigating HSBC, which is notorious for facilitating the laundering of billions of dollars in drug proceeds through the Sinaloa cartel. The era of “El Chapo”. Several US inquiries into law enforcement agencies controlled by Washington were ongoing.
In 2012, HSBC admitted to acting as Chapo’s laundromat and was fined $1.9 billion, the largest fine in US history. The Americans wanted to prosecute HSBC executives criminally but were persuaded not to do so by the UK government. By this time, Greene was Lord Greene, serving as Lex Greensell in the same government of Great Britain.
Borrowing from Oscar Wilde: Once may be unlucky. Twice seems like negligence. Where the financial titans are concerned, we, and politicians in particular, must stop looking only at pound signs, look behind the hype and ask the odd questions.
Chris Blackhurst is the author of Too Big To Jail: Inside HSBC, The Mexican Drug Cartels and the Greatest Banking Scandal of the Century (Macmillan).