The wheels of British economic justice move at a snail’s pace. In the US, the Securities and Exchange Commission in March 2018 brought the first charges against Silicon Valley start-up Theranos founder Elizabeth Holmes.
Federal prosecutors brought the first criminal charges within a year, although court proceedings were postponed several times by Kovid.
Nevertheless, by January this year the whole business was mostly done and dusty after a jury trial. Holmes is now awaiting sentencing on four federal frauds.
Nearly two and a half years after Neil Woodford’s investment empire erupted, some 300,000 investors are still waiting for answers
Contrast this with the UK. The FCA investigation into HBOS’s near-collapse management conviction in 2008 was completed in 2015. But since then it has been tied up in a legal quarrel.
Separate inquiries about who and when HBOS / Lloyds know about the large-scale fraud at the bank’s Reading Branch are still pending.
It received fraud convictions in 2017 in a £ 245 million case.
Nearly two-and-a-half years after the explosion of Neil Woodford’s investment empire, nearly 300,000 investors are still waiting for an answer to who is responsible for the collapse and failure of regulation.
In a procedural note, the city regulator, the Financial Conduct Authority, said it had completed most of its investigative work by the end of 2021, after the Treasury Committee had requested ’45 information requirements’.
If anyone involved thinks that justice and potential compensation for their lost savings may be around the corner, there will be disappointment.
Woodford is said to be advising Acacia Research on life sciences investments. Those of us now exposed to their patient fundraiser, which is now operated by Schroders and whose assets are less than 60 per cent of the value of the property, wondered how on earth it was allowed.
Woodford Funds has questions to ask about the investment platform Hargreaves Lansdown, which disclosed nearly a quarter of its clients.
The official manager link is intended to protect the interests of the savior, but clearly less so.
No disciplinary action is yet possible due to the need for counsel to evaluate the evidence. Legal analysis is needed to determine if any regulatory action is needed.
These steps are not a ‘public process’. Beyond that, there are many hoops to pass before matters reach the regulatory decision-making committee and ultimately the court-like upper tribunal.
As we know from HBOS and other inquiries, legal hoops are exceptional and armed with the help of city law firms, the opportunities to obscure and delay are enormous.
One way around all this (used in the case of RBS) is to take control of the Commons FCA report and publish it using parliamentary privilege.
The known facts are then put into the public arena. This gives Treasury Committee chairman Mel Stride a better chance of matching up with savers.
Cleaning the house
Auditors KPMG has been involved in a number of accounting platforms ranging from Co-op Bank debacle to FIFA bribery scandal, which is difficult to track.
Its position as a Big Four audit firm remains intact because there is little competition in the sector.
Nonetheless, it is refreshing that UK chief executive John Holt has decided to make a clear breast in response to the mismanagement of collapsed construction and engineering group Carillion’s audit.
Instead of tying up the Financial Reporting Council Tribunal in a legal knot, he admits that the case against his agency, its partners and some younger staff is ‘disturbing and upsetting’.
Rather than focusing on the bad behavior of KPMG partners in others – the real job of the audit – mistakes are allowed with disastrous consequences for jobs, customers and shareholders.
Restoring KPMG’s reputation will be a long one. Identifying the magnitude of wrongdoing can help.
If Morrisons and Asda’s private-equity-backed owners are hoping to escape the grocery price wars in 2022, they will be disappointed.
Aldi, which is owned by Germany, has thrown a challenge by promising ‘no matter what, we always pay the lowest price for groceries’.
This is great for consumers but not for owners who are loaded with expensive short-term debt.
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