MERVYN KING had no reason to be magnanimous in victory yesterday and he was not. Instead, the Governor of the Bank of England left no one in any doubt that he wanted vengeance against those who had pursued the Bank and 22 of its staff for 12 years.
He may get it. For the tone of the remarks from Lord Justice Tomlinson indicated that he might be inclined to see some punishment, in the form of a demand to meet at least part of the Bank’s costs, delivered to Deloitte rather than the creditors whom the firm has been representing.
As liquidators of the Bank of Credit and Commerce International, Deloitte has on one measure not done a bad job. The funds that it has scooped back have far exceeded original expectations, as, it must be said, have the firm’s costs. The final dividend payment this December will take the total to 81 per cent.
But the determination with which Deloitte has continued with a court action which looked increasingly unlikely of success has seen many millions of pounds that would otherwise have gone to the creditors enriching teams of lawyers.
The Bank does not deny that it was negligent in allowing BCCI to continue taking deposits in the years leading up to its collapse in 1991. Yet negligence was not enough to bring the liquidators the damages they sought. Instead, the firm had to prove that there had been ‘misfeasance in public office’. That meant proving a conspiracy of deceit within the Bank of England. Quite why a succession of relatively high ranking individuals within the Bank would have wanted to indulge in such behaviour was never made clear but concerted dishonesty was the charge that was effectively being levelled.
Neither the former Governor, Lord George, nor Mr King could countenance such a slur on the Old Lady’s integrity. Perhaps this is the point which Deloitte failed to grasp. Accountancy firms are used to legal actions being launched against them and to them being settled out of court, with their insurers picking up the bill. Such events are so commonplace as to leave reputations relatively unmoved.
Only when the potential damage is so huge, as it was when the board of Equitable Life sued Ernst & Young, might an accounting firm fight to the potential death. When Equitable Life realised that there was no chance of E&Y settling out of court, it dropped the case.
Deloitte recently broached with the Bank the prospect of an out-of-court settlement. That appeared to show just how little, even after more than a decade, the firm had understood the Bank’s position. To have settled, even without admitting anything, would have left the Bank with an unconscionable blemish on its reputation.
What Mr King wanted to hear was what Lord Justice Tomlinson declared yesterday: “the very serious allegations of impropriety and dishonesty against (the Bank) are wholly without foundation”.
It was easier to see how such allegations might have been upheld against the Government over the Railtrack affair. There the signs of conspiracy were more than imaginary and the politicians deserved to be dragged through the courts. But for former Governors to be faced with lengthy cross examination was expensive folly.
Fast reaction
SO GLOOMILY are prospects for the high street perceived that Primark was considered lucky to have fire demolish its main warehouse. Investors pushed up the value of its parent by £130 million, presumably happier to rely on the insurers than the fickle British consumer.
Rival stocks also benefited, on the basis that they would pick up sales that the ABF subsidiary could no longer make. But while there may be some short-term benefit to other stores, it is more likely to be the supermarkets and the discounters that enjoy it rather than Marks & Spencer and Next, both of which moved up yesterday.
And Primark seems confident that it will soon have replenishment stock flowing into the new warehouse, where it has immediately transferred operations. Considering how distribution problems have dogged so many retailers, it is an impressively smooth reaction to a crisis.
Another pensions head retires GOODBYE, David Blunkett and welcome John Hutton, the fourth Secretary of State for Work and Pensions in just 14 months.
Pensions are a long-term problem in need of a long-term solution, yet those put in charge have hardly a chance to read the brief before they are out of the door. In September last year, Andrew Smith was shuffled off to be replaced by Alan Johnson. Then it was decided that the former post office worker would be more use at the Department of Trade and Industry. There he has knocked back the cause of pensions reform by agreeing a settlement with public-sector workers that has caused fury in the private sector.
In Mr Johnson’s place came the hapless David Blunkett. If in the past few days Mr Blunkett had been able to concentrate on the issue of women’s pensions as his career was visibly crumbling, then he has a remarkable ability to compartmentalise. Perhaps that is how he managed to overlook the need to consult on his portfolio of consultancies.
Now the chalice is handed to John Hutton, a former law lecturer. He spent five undisturbed years in the Department of Health. The final report of the Turner Commission on Pensions will land with him at the end of this month, so he has plenty of background reading to cram in before then if he is to be able to respond to its recommendations.
It seems unlikely that his experience as chairman of the Select Committee on Unopposed Bills will come in useful. The chance of consensus over pensions looks slender.
Time to talk ‘REGULATION is increasing rather than decreasing,’ bemoaned Deutsche Telekom as it announced plans for 33,000 employees to leave the business at a cost of €3.3 billion (£2.2 billion) — but despite the company’s need to become more competitive, the German way of doing business means that management is not about to take an axe on to the shop floor. Last year the company agreed with the unions that there would be no compulsory redundancies before 2008. In the meantime, there must be talks, and lots of them.
