'Top Brown adviser sacked and gagged me for warning banks were taking
too many risks', says whistleblower
By Nicola Boden, Paul Waugh and Nicholas Cecil
Last updated at 4:34 PM on 10th February 2009
One of Gordon Brown's key advisers was today accused of sacking a
whistleblower who warned banks were heading for disaster years before
the financial meltdown.
Paul Moore, the bank's head of risk between 2002 and 2005, alleges he
told directors as early as 2004 that the company was in danger of
becoming out of control.
'Anyone whose eyes were not blinded by money, power and pride' would
have realised problems were mounting for HBOS and the other high street
banks, he said.
He claims his team were threatened by executives and that he was sacked
and replaced by someone with no risk experience by then boss Sir James
Crosby.
Sir James is now deputy chairman of the Financial Services Authority and
one of the Prime Minister's favourite private sector advisers.
'Sacked and gagged': Former HBOS risk chief Paul Moore (left) claims he
was dismissed by Sir James Crosby (right) after warning the bank was out
of control
'Sacked and gagged': Former HBOS risk chief Paul Moore (left) claims he
was dismissed by Sir James Crosby (right) after warning the bank was out
of control
The explosive claims emerged in a tense session of the Treasury Select
Committee, as former HBOS and RBS were grilled about their roles in the
financial crisis.
In a letter to the Committee, Mr Moore said: 'When I was head of group
risk I certainly knew that the bank was going too fast (and told them),
had a cultural indisposition to challenge (and told them) and was a
serious risk to financial stability and consumer protection (and told
them).'
He went on: 'I told the board they ought to slow down but was prevented
from having this properly minuted by the chief financial officer. I told
them that their sales culture was significantly out of balance with
their systems and controls.'
During the Committee session, both RBS and HBOS bosses insisted they
were not personally to blame for the financial crisis that took
Britain's banks to the brink.
But Mr Moore declared that 'whatever the very specific, final and direct
causes', the real underlying cause was 'a total failure of all key
aspects of governance'.
'In my view and from my personal experience at HBOS, all the other
specific failures stem from this one primary cause,' he said.
If there had been stronger risk managers who had been able to challenge
their bosses without risking their careers, the crisis would not have
happened, he claimed.
After accusing Sir James of personally sacking him, Mr Moore added: 'One
final observation I would make about the HBOS disaster is this: wasn't
it actually Sir James Crosby rather than Andy Hornby who was the
original architect of the HBOS retailing strategy?
'Sir James is still the deputy chairman of the FSA and advises the
Government on how to solve the mortgage crisis.
'Some might now also question what his "contribution to financial
services" has in fact been when this will have led to millions of people
in excessive debt, 10,000s who will lose their jobs and many more whose
balance sheets have been impacted by precipitous fall of the HBOS share
price.'
Mr Moore signed a gagging clause after he was made redundant and was
allegedly paid 'substantial' damages but decided to break his silence in
the public interest.
Former HBOS chairman Lord Stevenson denied the claims and insisted a
nine-month independent probe had concluded they were untrue.
But the ex-risk chief claims the story of the banking collapse was like
the 'Emperor's new clothes'.
'Anyone whose eyes were not blinded by money, power and pride (hubris)
who really looked carefully knew there was something wrong and that
economic growth based almost solely on excessive consumer spending,
based on excessive consumer credit, based on massively increasing
property prices which were caused by the very same excessively easy
credit could only ultimately lead to disaster,' he argued.
'But sadly, no one wanted or felt able to speak up for fear of stepping
out of line with the rest of the lemmings who were busy organising
themselves to run over the edge of the cliff behind the pied piper CEOs
and executive teams that were being paid so much to play that tune and
take them in that direction.'
He said he had probed 'numerous' actual or potential breaches of FSA
regulations and challenged 'unacceptable practices', some by very senior
executives.
He told MPs that during his time at the bank, the FSA had warned some
parts of the group were posing a high or medium-high risk to maintaining
market confidence and protecting consumers.
The FSA had also warned, for the Halifax retail part of the group, that
there was a 'risk that the balance of experience amongst senior
management could lead to a culture which is overly sales focused and
gives inadequate priority to risk issues', he added.
Former chief executive Andy Hornby denied threats were made to Mr
Moore's staff and Lord Stevenson insisted the incident had been taken
very seriously.
'The one thing I can assure, there was no denial, anything to do with
risk is taken very seriously by the board. That is a fact,' he said.
MP George Mudie said: 'You paid him undisclosed damages and put a
gagging order on him. You didn’t want anybody being blunt with you about
the risks you were running.'
Lord Stevenson said the matter was closed to the satisfaction of the
Financial Services Authority.
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Tuesday, 10 February 2009
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