THERE can now be no doubt. The Bank of England not only won the long-running and costly case against the liquidators of BCCI, it wiped the floor with the opposition. And to say that the Deloitte liquidators have been used as a floor mop is no exaggeration. Mr Justice Tomlinson, in common with most m’learneds, will choose words carefully. So when he said the case was a “farce,” and that there were “myriad hopeless inconsistencies and implausibilities in the case” we can safely assume that Deloitte’s case is comprehensively rubbished.
It will cause more than the odd red face at Deloitte. Professional firms need reputations and a legal besmirching of this intensity will be carried far and wide. It will be remembered.
It is only fair to bear in mind that Deloitte was the agent of those who lost money in the collapse of BCCI. The liquidators were appointed representatives who happened to be employed by Deloitte. Strictly speaking, therefore, the firm itself may not be culpable and the estimated £100 million costs will be borne by the BCCI creditors rather than by the accountancy firm. It is possible that Deloitte will have to put its hand in its pocket for some sort of punitive damages award. But the financial impact is likely to be as nothing beside the reputational damage done.
Even so, the extent of reputational damage may be cauterised because the Deloitte liquidators did make signficant financial recoveries for the BCCI creditors. The liquidators reckon that they recovered 81 per cent of the losses — $6.1 billion.
That is a good result. A key weapon in the liquidators’ armoury was aggressive legal action and, admittedly, it seems clear that they were too agressive in the case brought against the Bank of England.
However, the liquidators were surely right to doggedly pursue recompense for the BCCI creditors whose savings were so heinously and unceremoniously looted.
Deloitte’s reputation may also be protected, to an extent, by the “there but for the grace of God” argument. Some rivals and more clients will mutter darkly, in public and under their breaths. Others will heave a huge sigh of relief that they were not caught up in the predicament themselves.
That said, the mitigating circumstances may be little more than a scanty fig leaf for Deloitte to use to partially mask its mortification. Any which way you look at it, yesterday was a big day for the Bank. Mervyn King and his Threadneedle Street colleagues played their hand both resolutely and fantastically well.
Simultaneously the Bank gave an object lesson in the importance of sticking to one’s guns. Time and again the Bank could have caved in and sought some sort of settlement. The outcome of legal actions are too often determined by fear: fear of being made to look foolish and fear of the stratospheric costs. Here the Bank showed true mettle. It is to be congratulated.
A nagging doubt hangs over why our most learned friends have got quite so hot under the collar, however.
Could it be that Mr Justice Tomlinson was riled out of the normal temperament we associate with our most learned friends because Deloitte appeared to conduct some of its case through the media? There may be a lesson here for others tempted to use publicity as a legal tactic. It also raises questions about the public accountability of our legal apparatus.
Europe’s tentacles stretch out
ANYONE who thought that Britain saying no to the euro and the its neighbours vetoing the EU Constitution marked high water mark for the European Commission’s efforts to draw more powers to itself soon saw their mistake. Every week some new directive, statutory instrument or European Court ruling extends Brussels control at nations’ expense.
Planned new powers to operate and enforce regulation of telecoms markets follow the classic pattern. First there has to be a grievance for which control from Brussels offers a plausible solution: in this case a sloping, landmined playing field.
The UK has embraced EU rules on competition, service and market abuse with fervour and alacrity, having already moved most of the way on its own. In France or Germany, let alone Greece, things are different. Deutsche Telekom escaped local loop competition by promising more investment.
BT once offered the same but was laughed at all the way to the regulator. Now BT faces intense imposed competition but cannot gain similar advantages as small fry in the German market. So the likes of BT want harmonisation as much as the Commission does.
Experience suggests, however, that Brussels regulation soon jettisons the competition model that it usually starts with. If the big beasts of the EU do not like rules of, say, the Stability and Growth Pact, they change the rules or their application to suit. In the real world, the UK would be better off resisting more EU powers and arranging matters to its own interest than slavishly following Commission bulls that are likely to be ignored elsewhere.
Running scared
LIFE assurers are so scared of being frozen out of pensions altogether by the state National Pensions Savings Scheme that most have been keeping their opinions about this disastrous folly to themselves. As soon as companies investigate the economics of them operating the scheme instead of Whitehall, however, they cannot avoid the frightening arithmetic.
Standard Life estimates that setting up the scheme would cost taxpayers £3.5 billion for the 30 years until it might break even. Much of that would be up front. Nor do many think that the £500 million budgeted for an IT system would be the final cost, if it was meant in any way to link with the other two state pensions.
Only some of this loss, however, is down to state bureaucracy. As with the original stakeholder scheme, even an efficient company could not run the contract on budget. Time to think again.
Posting profits
SO STANLEY GIBBONS is posting news that it is delivering a bulging packet of profits thanks to the internet. It may seem a little peculiar that a company involved in the delightful, but pleasingly old-fashioned, hobby of philately is booming thanks to a technology that is the essence of the new age. But of course it should only reinforce the attractions of stamp collecting. If Stanley Gibbons customers are using the net rather than the mail for their dealing, stamps will get rarer and more collectable. And more valuable.
