Dr. Brian Hillery, Mr. Matthew Elderfield, care for a probity test?

David Malone raised some interesting points in his Golem XIV blog last Friday: David learned his craft as a documentary maker at the BBC science department, where he worked for 9 years, ending up on Horizon. Since then he has made films for Channel 4, BBC2 and more recently BBC4. Some of his documentaries are available on YouTube.

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Jonathan Sugarman versus UniCredit – an update

by Golem XIV on NOVEMBER 16, 2012 in LATEST

WhistleblowerIRL, AKA Jonathan Sugarman continues to fight UniCredit. One rather impecunious man fighting a trillion euro bank. But Jonathan is nothing if not …well I leave you to fill in the blank.

The update comes via a very good 12th Nov. editorial in Village Magazine in Ireland, “Blowing the whistle so hard it hurts”.

"In December 2010 a risk-manager in the Irish unit of UniCredit, Italy’s largest bank, described in Village how in 2007 the Financial Regulator failed to intervene after he first alleged he falsified liquidity-ratio  figures. The risk-manager maintained he was specifically warned by senior personnel at the Irish subsidiary not to report the matter to the Financial Regulator
Jonathan Sugarman blew the whistle on the massive repeated breaches. This magazine received aggressive threats from McCann FitzGerald solicitors on behalf of UniCredit not to publish the information."

To the credit of its publisher and owner, Michael Smith, the magazine has stood by the story and refused to be cowed.  I recommend reading the whole story. You can follow any further developments at Jonathan’s blog.

One thing to keep in mind when you read the story. The Irish financial regulator, Matthew Elderfield, was recruited, fresh from his earlier success at being one of the three Heads of Department at the British regulator, the FSA who were overseeing…Northern Rock. Mr Elderfield, along with his two fellow Heads of Department, was specifically criticised in the official report into Northern Rock. His supporters, namely the people in Ireland who hired him, will say he was only in that job three months when Northern Rock imploded. What, and that makes his silence all right?! So if an aircraft inspector had only been at his job for three months it would be fine for him to say nothing about an unsafe aircraft? That would be OK would it?

That would be a double standard if one could call it any sort of standard at all.

So I have my doubts about Mr Elderfield. Which are made worse when you consider some of the people above him and the world view they seem to have.  You see there is an old guard In Ireland – as there is in most countries, mine definitely included – that has not moved on and has zero intention of ever moving on. Here for example you can watch Mr Bertie Ahern back in 2007 saying how he can’t understand why people who talk down the wonders of Ireland’s no-touch economy don’t just kill themselves.  Mr Ahern was never Elderfield’s boss. I mention Ahern simply as an example of a world-view which is still there, defended by people still in positions of power.

One such old guard is Mr Elderfield’s boss, Dr Brian Hillery.  Dr Hillery was appointed to be a Director of the Central Bank of Ireland which incorporates the Financial Regulators Office of Ireland, in May 2008. Before his appointment to be guardian of financial probity in Dublin, he was the Chairman of …UniCredit Bank Ireland at the precise time Mr Sugarman was there trying to report those financial ‘problems’ to the financial regulator (who at the time was Mr Elderfields disgeraced predecessor, Mr Patrick Neary). So definitely no conflict of interests there. Obviously.

I feel absolutely sure that Dr Hillery would be very comfortable with, and would fully support, a rigorous investigation of UniCredits’ behaviour and its attention to the law, and that the pressure brought to bear upon Village magazine when it chose to write about Unicredit and its breaches of liquidity are purely coincidental. I feel equally sure Mr Elderfield would feel fully supported in any investigation he undertook , which combined with his own proven track record of razor sharp and iron fisted regulatory zeal must make the Irish people feel warm all over. In good hands – as the priest/radio one DJ said to the boy.

Oh and it might be worth keeping in mind that  Dr Hillery was also Chairman of Independent Newspapers in Ireland. Whose papers have not covered this story with any great … regularity shall we say.

http://www.golemxiv.co.uk/2012/11/jonathan-sugarman-versus-unicredit-an-update/

http://www.youtube.com/watch?v=hfjGSfuSQpA

http://www.villagemagazine.ie/index.php/2012/11/blowing-the-whistle-so-hard-it-hurts/

 A reader's Comment:

C. Flower November 17, 2012 at 11:51 am # 

Great post, and also choice comments from the Dork from Cork. Jonathan Sugarman thought his job was risk management, when in reality it seems his employers wanted him to be rubber stamping illegal breaches of liquidity. Bank bosses knew their banks had gone over a cliff and the whole strategy was to buy time to consolidate their personal wealth and pass debt over to the public. The role of insiders like Hillery in this is essential – in part in that they give an aura of probity, respectability, and officialdom (Hillery being the son of a past President of Ireland) to a rogue operation – and also in that they tie “officialdom” and the political class into a backstream of financial benefits. Hillery is discussed further here –

http://www.politicalworld.org/showthread.php?p=292604#post292604

Blowing the whistle so hard it hurts - Village magazine's latest editorial article

Nearly all Ireland’s banks breached liquidity requirements, leading to the lack of liquidity that the government provided a guarantee against, and which ultimately emerged as the insolvency that bankrupted the country and immiserated the next generation. Failures at the Regulator and in the Central Bank contributed as much as anything to this bankruptcy. The public is entitled to know that these well-paid and cosseted functionaries have learnt lessons and are now demonstrating the most stringent and scrupulous standards. It’s interesting then to know how they treated the most important whistleblower in Irish banking history.

In December 2010 a risk-manager in the Irish unit of UniCredit, Italy’s largest bank, described in Villagehow in 2007 the Financial Regulator failed to intervene after he first alleged he falsified liquidity-ratio  figures. The risk-manager maintained he was specifically warned by senior personnel at the Irish subsidiary not to report the matter to the Financial Regulator, even though sound banking depends on maintenance of these ‘liquidity ratios’ which are crucial to the ability of the company to deal with losses of confidence. The liquidity ratio should be no less than 90 per cent. At UniCredit it was calculated at an extraordinary 50 per cent. A ratio of 89 per cent would in normal circumstances be deemed problematic. In banking terms this is like paying with a two-euro note.

Jonathan Sugarman blew the whistle on the massive repeated breaches. This magazine received aggressive threats from McCann FitzGerald solicitors on behalf of UniCredit not to publish the information.

The new ‘poster-boy’ regulator, Matthew Elderfield,  stated in response to questions from the Sunday Business Post, and the Süddeutsche Zeitung, a respected German newspaper, about statements made in the Seanad by David Norris which backed up Sugarman’s account, that “our records do not match the description of events given by Senator Norris nor did we receive what might be described as a ‘whistleblower’ letter.  We can, however, confirm that an overnight liquidity breach was reported by an institution around the time in question. The matter was followed up with the institution and rectified to the satisfaction of the Financial Regulator at the time”.

For someone in whom so much public good-will has been invested, this is remarkably disingenuous, though certainly true. The Regulator’s records presumably do not match Senator Norris’s because its agents didn’t look hard enough or take a proper record; and the Regulator did not receive a whistleblower letter as the letter came from UniCredit itself, which limited its declaration to one overnight breach. Notably, nothing the Regulator said undermined the credibility of the risk-manager.

Largely as a result of the story in Village which named the bank, the Central Bank said it would conduct a review of the case and invited parties with information to share it: “if any party has specific information  they wish to draw to our attention in this matter it will be treated on a confidential basis”. Things dragged out but in February 2012 the risk-manager attended a meeting with the office of the regulator.  Scandalously the bank’s offer of ‘confidentiality’ was revealed under pressure to be spurious when it insisted that it wouldn’t be enough to shield Sugarman against self-incrimination in the event his own actions constituted criminal activity.  The Central Bank insisted it must forward information to the DPP if there were evidence of a crime. This highlights the need for whistleblower legislation to protect insiders who tell their truth – and particularly that legislation should be retrospective, so it would embrace cases like Mr Sugarman’s.

In June, the Central bank informed Mr Sugarman, without giving reasons, that the matter was closed and only after Mark Keenan raised the affair anew in the Irish Independent in September, did the Central Bank finally furnished minutes of the meeting it had had with Mr Sugarman. This was six months after the original meeting.  For some reason Mr Keenan is no longer writing on these issues in the Irish Independent.

Matthew Elderfield and his office are doing no favours to EU banking regulators, or to the world’s banking and economic system, in being   disingenuous about liquidity breaches at the elusive UniCredit. If there is a desire not to frighten the horses just while our bailout is under review, it is misplaced.  The lesson of recent history for this country is scrupulousness and openness.

There is a general official view that Ireland’s ethical delinquencies are in the past. Deviant planning stopped when the tribunals started; and bad banking regulation stopped with the demise of Pat Neary. In fact this is not so with planning as we have seen with the kicking to touch of John Gormley’s reviews of planning in six counties. Scrutiny of what happened in banking has been limited to two innocuous reports by Patrick Honohan, Peter Nyberg and Klaus Regling. These notably failed to attribute blame or to deal with how liquidity ratios were breached all over financial Dublin with no comment from the usual over-paid auditors, and no sanction.

Inconveniently for a country that has started to see corruption and regulation in black (then) and white (now) terms, the general view may not reflect the reality. Without proper scrutiny we cannot be sure either way.

Like bad planning, bank under-regulation was a manifestation of this country’s ineradicable tendency to pander to vested interests and to the short term. It is time we got to the bottom of what happened in Irish banking.  Scrupulous investigation of Mr Sugarman’s allegations would be a symbolic good start.

http://www.villagemagazine.ie/index.php/2012/11/blowing-the-whistle-so-hard-it-hurts/