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FCA Scapegoat Double Down and The 'Scooby Doo Defence'
Updated: Dec 24, 2022
In August 2022 The FCA (Financial Conduct Authority) decided not to take any action against those that caused the collapse of HBOS. Actually ignoring the findings of a Bank of England and FCA report dated 2015 where they concluded "ultimate responsibility for the failure of HBOS rests with its board".
I am forced once again to ask; Is this latest decision, to inconceivably absolve bank senior executives the result of said senior executives having 'leverage' against The FCA, Government and Bank of England in respect to all of the latter's involvement in the manipulation and lowballing of LIBOR during the financial crisis, and in the subsequent perverted LIBOR/EURIBOR prosecutions?
I am confident that all of these executives will 'have the goods' so to speak, and be in a position to expose and implicate some rather senior persons. A 'Get out of jail free card' if ever there was one.
The same cannot be said for those who were victims of dishonest and perverted prosecutions in respect to LIBOR, EURIBOR etc. And that is rather by design. The authorities do not select 'scapegoats' with deep pockets and who know where the skeletons are buried. Quite the opposite.
Within three months of the inconceivable absolving of all those involved in and responsible for the HBOS collapse, The FCA did rather the opposite to one of these scapegoats, Carlo Palombo.
On 24th November 2022 The FCA issued a Final Notice against Carlo. It stated:
"For the reasons given in this Notice and pursuant to section 56 of the Act, the Authority hereby makes an order prohibiting Carlo Palombo from performing any function in relation to any regulated activity carried on by an authorised or exempt person, or exempt professional firm"
However, in the summary The FCA 'reasons' state:
"As set out in more detail in the facts and matters described below, Mr Palombo:
(1) was convicted on 26 March 2019 of one count of conspiracy to defraud relating to EURIBOR submissions made at Barclays under his supervision; and
(2) was sentenced on 1 April 2019 to 4 years’ imprisonment."
Really? The FCA claim that these are the reasons for this Final Notice?
If true, then why did they wait until 17th January 2022 to write to Carlo and advise him that they were going to issue a Final 'Prohibition' Notice?
It does not take three years AFTER these unsafe convictions to produce a notice entirely based upon them.
There is no new information or evidence that came to light since those 2019 convictions. Indeed, everything since then has rather exposed the LIBOR and Euribor convictions. It more than suggests a different 'motivation'.
And it also begs the further question: The FCA issued Carlo with a simple warning in 2015 after years of apparent investigation. Why? The FCA had conducted an investigation, had all the evidence before them but did not take any real sanction against Carlo. Is the reason because The FCA knew that Carlo had acted within the rules, as had the other LIBOR and EURIBOR traders, and that therefore The FCA had no grounds to take any action?
The FCA instead waited for the outcome of what they knew to be dishonest and perverted convictions before they had anything with which to hold against him. But let's be clear, The FCA knew Carlo's conviction and that of others were as dishonest and perverted as we all now know, but were quite happy to allow them to proceed and use the perverse convictions for their own purposes.
Just days after The FCA issued the advice of notice to Carlo, the U.S. Courts overturned the convictions of Matt Connolly and Gavin Black. Convictions that had exposed blatant dishonesty and perjury by The FCA during the proceedings. Did The FCA know this was coming and sought to issue this notice in an attempt to offset that storm that might be coming? They certainly knew there was an imminent risk that the convictions of Connolly and Black would be overturned.
This excellent article by Andy Verity of the BBC exposes the full story of that FCA dishonesty:
Andy's report reveals that:
"Statements from the UK's Financial Conduct Authority (FCA) were used by the DoJ to try to fight off allegations that the government had violated the US constitution, which threatened to collapse the case.
Under the 5th Amendment it is unlawful in US criminal proceedings to use evidence that has been compelled, such as information from a witness who risks losing their job or going to jail if they do not co-operate.
If compelled evidence is seen by investigators or witnesses, defendants can apply for a hearing, known as a "Kastigar hearing", to get the case thrown out.
That created difficulties for DoJ prosecutors. For six years, they had communicated regularly with the FCA, which made extensive use of a power to force witnesses to be interviewed on pain of going to jail.
When Connolly and Black pressed for a Kastigar hearing, the DoJ told the court: "The DoJ and these agencies [including the FCA] did not share paperwork".
They added: "What evidence the DoJ independently collected, it did not share with the FCA".
Months later, evidence emerged showing the DoJ had shared paperwork with the FCA in 2015 and also shared reports of interviews of Deutsche Bank staff in 2014 and 2016.
On 31 August 2017, the DoJ again opposed a Kastigar hearing, citing a letter written the previous day by Patrick Meaney, a senior FCA manager. Mr Meaney ran the FCA's investigation into Deutsche Bank Libor "rigging" for nearly six years, collaborating with his DoJ counterpart, Jennifer Saulino.
In paragraph 6 of the letter, Mr Meaney said: "The FCA did not share any information obtained or derived from any compelled interview, including Mr Black, with the DoJ."
Paragraph 5 of his letter said: "The FCA did not provide the DoJ copies of its draft or actual Warning, Decision or Final Notices in respect of Deutsche Bank to the DoJ or the Commodities Futures Trading Commission ("CFTC")".
Neither statement was true. It was not until months after Mr Meaney's letter that emails conflicting with those statements emerged in court.
They included an email chain Mr Meaney was copied into in February-March 2015, where the FCA shared a portion of its Final Notice fining Deutsche Bank for Libor rigging with the CFTC.
The email chain showed sections to be forwarded to the DoJ contained compelled testimony. They were then forwarded to Jennifer Saulino.
On 21 April 2015, Mr Meaney told Ms Saulino by email the Final Notice was riddled with compelled testimony.
"The reality is… it would be very difficult to identify parts that weren't influenced by compelled testimony and even if we could, it would be such a small part that it would make the Notice meaningless."
Shown the emails in court, an FCA official on the Deutsche Bank Libor investigation, Mike Prange, accepted the statements in Mr Meaney's August 2017 letter were "false".
The emails were available to both the FCA and the DoJ on their email records at the time the statements were put into court."
The FCA were proven to have made false representations in a desperate effort to secure these convictions. Consistent with multiple actions across a variety of cases involving The FCA where they did not allow truth and fact to get in the way of their 'desired outcomes' or narratives.
Yet another bloody nose for The FCA. However, in true FCA fashion, did they apologise for their dishonest role in these now overturned convictions?
Not so much.
And I warrant that this Final Notice against Carlo produced in November is little more than a punitive act akin to that of a petulant child that knows it is in the wrong. A dishonest double down against another scapegoat in an attempt to re-establish FCA credibility.
Further evidence I have more than suggests that The FCA and Barclays [Carlos' former employer] have dishonestly colluded this year, and unlawfully withheld significant and substantial 'personal information' from Carlo that he is entitled to by law, and with intent to compromise his position and his defence against this further punitive action and others.
If not dishonest collusion between Barclays and The FCA, then just an incredible coincidence that both chose to take identical unlawful actions independently.
Under UK GDPR (General Data Protection Regulation) it is a criminal offence to withhold information to which someone is entitled.
Furthermore, The Fraud Act 2006 includes the provision "Fraud by failing to disclose information that you have a legal obligation to disclose with intention to make financial gain and/or cause loss or risk of loss to another".
It is impossible that the disclosure of information to which Carlo is entitled would not have been significantly beneficial to him, and its concealment significantly beneficial to The FCA and Barclays.
How is this not therefore fraud?
Also present in this case is what I refer to as "The Scooby Doo Defence", whereby banks claim "If it wasn't for those pesky individuals....." seeking to represent that they were as much a victim as anyone and absolve themselves of blame, pinning it all on the individuals involved.
This defence has been rolled out time and again, BUT it is only ever possible with collusion from the relevant regulator/s and, where applicable, the relevant law enforcement agencies.
This regulatory 'collusion' is evident across the spectrum of LIBOR/EURIBOR matters, the 2014 FX investigations & findings, and multiple other cases.
Indeed, in the Premier FX case when testifying before the Treasury Select Committee, Andrew Bailey, then FCA CEO, said "The person involved in this is said to be dead", and was apparently happy to allow the dead guy to carry the whole can for this, and fail to properly explore Barclays involvement. An initial Final Notice by The FCA sought to absolve Barclays of all blame, in what appears to have been part of another 'deal to conceal [Barclays wrongdoing]' negotiated by the FCA and its head of Enforcement, Mark Steward, whereby Barclays failures or wrongdoing are concealed in return for Barclays offering to compensate victims as a 'Gesture of Goodwill' or other 'voluntary' means and without proper enforcement.
The FCA would eventually be forced by the persistent efforts of victims in pursuit of justice to take some, but minimal, enforcement against Barclays, but continued their efforts to absolve Barclays and fail to answer the key question:
"How did the multiple segregated client accounts that Barclays required Premier FX to establish in all currencies, as required by the regulatory codes when they commenced their relationship, all become 'non-segregated' by 2013?"
The FCA investigation into Premier FX rather conveniently sought not to look back far enough to discover this. Why? Because only Barclays and employees of Barclays could change the designation of these accounts. Without these accounts be re-designated as non-segregated, the fraud and/or money laundering could not have occurred.
Why did The FCA go to extraordinary lengths to limit the scope of their investigation? The result of which failed by design to establish the answer to this key question, and enabled them to treat Barclays lightly, get Barclays 'to cough up', and at the same time conceal the FCA's various failures that also enabled this fraud and money laundering to occur.
In The FCA Final Notice to Carlo in November they establish that the wrongdoing occurred between 2005-2009.
Herein lies a key issue.....
In their responses to Carlo's defences, The FCA write:
"....and did so after [he] became an associate director and the senior trader on the swaps desk in 2008"
To be very clear, this means Barclays had promoted Carlo to a senior role in 2008, despite being entirely aware of everything that Carlo had been doing since 2005.
To be further clear, there is zero chance that Barclays did not know every granular detail about that which Carlo and his colleagues were doing. They had access to and were monitoring his, and every trading floor employee's, every communication and every action.
If there was a problem or wrongdoing, why did they never raise this and seek to 'correct' it?
We also now know that by 2008 The FCA, Bank of England and Government were all well aware of, and/or involved in, the industrial manipulation of LIBOR and other benchmarks AKA 'Lowballing'. For those of you that have not already done so, listen to the excellent podcast series "The Lowball Tapes" produced by Andy Verity, revealing the true extent of this manipulation and dishonesty.
The dishonest prosecutions of Matt Connolly, Tom Hayes, Carlo and others were little more than a desperate smokescreen. The 'cat was out of the bag' that some kind of manipulation of LIBOR and other benchmarks had taken place. This meant that some kind of action must be seen to be taken. So, they pursued investigations and prosecutions with their 'right hand', whilst they buried any and all evidence of the lowballing behind their backs with their 'left hand'.
Dishonest and co-ordinated 'mis-direction' to protect all those involved in the lowballing.
HOWEVER, AND FURTHERMORE, I refer you to these emails obtained from a very well placed source. They prove that concerns and evidence regarding banks submitting LIBOR for reasons other than purely their 'cost of borrowing' were raised directly with the senior figures within the BBA (British Banking Association) that was responsible for the 'regulation' and 'oversight' of LIBOR, and as early as 2004 and repeated in 2005.
The person reporting this to the BBA confirms quite rightly that the cost of borrowing GBP for Barclays, Lloyds Bank, HBOS and RBS is lower than others, meaning their GBP LIBOR submissions should more likely have been persistently excluded from the LIBOR calculation for being among the lowest submitted rates. [LIBOR is calculated by removing a number of the lowest and highest submissions, and then using the 'average' of the remaining submissions]
WHEREAS, in the evidence attached to these email reports, the person includes this chart:
The chart clearly shows that instead of the GBP LIBOR submissions by RBS, Lloyds and Carlo's former employer Barclays, being excluded from the calculation because they were among the lowest, they were in fact persistently being excluded from the calculation for being among the highest.
As the person reporting points out, this therefore means these GBP LIBOR submissions cannot be properly demonstrative of their true cost of borrowing GBP, but rather some other basis entirely. They refer the BBA to their importance on the derivatives market, and the broader trading books.
As you can see from the emails, their concerns are entirely ignored in 2004, and they are forced to report them again in 2005, and to John Ewan of the BBA. Ewan would testify at Tom Hayes trial in 2015. His testimony is strewn with representations that appear to contradict his knowledge of this and other evidence. Evidence that I understand was not shared with Tom's defence team.
No action was taken and no warnings were issued.
The BBA approved of these practises. And why wouldn't they? The LIBOR rules stated that submissions could be anywhere within the range for that day, and therefore all were legitimate.
Rules that The FCA ,BBA, SFO and all involved with the various prosecutions, all sought to claim didn't exist. Simply put;
They had to conceal the existence of these rules, so as be able to prosecute individuals for conduct that was entirely permitted by them.
Indeed, in Carlo's case that is specific to EURIBOR, even the creators of the EURIBOR rules have stated that the traders that were prosecuted did not break the rules they created.
I am confident that Carlo and others will eventually achieve justice. In the meantime however, I leave you with this. In The FCA Final Notice to Carlo in November and in response to Carlo's defence that such a formal notice prohibiting him from performing any function in relation to any regulated activity, was unnecessary given that he was not working in any such area and had no intention of doing so, The FCA wrote:
"Although Mr Palombo is not currently working in financial services, the Authority is mindful that there is nothing currently in place to prevent him from doing so (and in his representations to the Authority he indicated that his future plans were uncertain)."
This is false.
For Carlo to engage in any such regulated activities he would have to apply for authorisation, at which time The FCA could reject it.
If Carlo were to carry out any regulated activity without authorisation, it would be an offence that The FCA could take enforcement action against.
There is literally no purpose or need for this Final Notice. It is nothing more than a PR exercise at a time when The FCA is facing yet more scrutiny for one failure or act of dishonesty after another, and at the expense of a cherry picked soft target who didn't break the rules.
WHEREAS, the FCA's Patrick Meaney who produced knowingly false representations in a document produced specifically for the U.S. Courts, has not only faced no action against him, he went on to secure the role of Head of the Financial Regulator in Dubai, presumably with a healthy reference provided by his former employer.
But like the HBOS executives absolved by The FCA, Meaney likely knows where certain skeletons are buried and its inconceivable that what he produced for the U.S. Court was not 'signed off' by other senior executives within The FCA.
Where are Fred, Daphne , Velma, Shaggy and Scooby when you need them?