Karris and Millers; why did that name ring a bell?
“Vulture funds?” I queried.
“Nice term, eh?” He scoffed. “They’re called this because they’re just like real vultures, picking the flesh off the bones of the dead and dying, though in this case, the carcases tend to be businesses.”
“Sounds fascinating.” Sarcasm abounded.
“Yeah. Although technically, the way his bank does it, it’s vulture ‘investing’.” He made quotation marks with his index fingers. “Special accounts set up by the big financial institutions to help firms buy up businesses that’ve either crashed as a result of the current financial malaise or are showing every sign of being about to default on loans or paying interest to debenture holders. It could also be a firm is in over its head at the bank, overdraft’s stopped and the firm suddenly becomes illiquid. So businesses and properties are bought up relatively cheap, you know, for millions instead of tens of millions, so if and when the business picks up again, the new owner is well placed to benefit from the demand for them. All the big financial institutions do it. The bank puts these firms in touch with other firms interested in acquiring them cheap. That’s why they keep such huge cash piles in their current accounts, even with interest rates currently at rock bottom, so they have the liquidity to swoop down and buy up these businesses. The cash piles these banks keep could pay off the total indebtedness of the third world.”
He paused for a moment to draw breath, then went off on a tangent.
“People like Hemsley spend all day monitoring published company accounts and interim financial performance results, as well as picking up on and tapping into City gossip about firms struggling and unable to raise enough funds to survive. He’s quite open about using insider knowledge to identify firms in trouble. He gets early tip-offs about when a particular company’s share price is about to crash and burn because of negative profit figures and he prepares the ground for the vulture fund to be put into action.”
“Using insider knowledge is illegal, isn’t it?”
“Yeah, right. You really believe that?” Clements looked amazed at my lack of financial nous. “It’s illegal all right, but every City trading floor and brokerage house uses it quite blatantly and not one trader in the City’s ever gone down for it. You know how transparent Chinese walls are? The City’d grind to a halt if it ever obeyed the law. Anyway, his job is to identify struggling firms and examine recent trends in profitability, indebtedness or dividend payments and then, if the firm has issued a profits warning or is about to go bust, some firm steps in to buy it up, usually for next to nothing. The bank gets colossal fees for this.”
“Interesting,” I muttered. I was wondering where he was going with this.
“In their wider sense, vulture funds are also used by hedge funds or private equity firms to buy up the debt of sovereign nations who’ve defaulted on their loans, like Argentina did in 2001. We covered this at King’s, in the Political Economy seminars. You obviously didn’t stay awake through them.” He smiled.
It was better than that. I’d skipped those classes. I didn’t go to any of the Economics classes as not for nothing was Economics known as the dismal science. Probably still is.
“But I digress. Hemsley asked to meet because, at the bank he works for, he said he’d come across evidence of what he initially thought were accounting malpractices. He was concerned because lots of money, sometimes running into hundreds of thousands, occasionally millions, kept turning up in the accounts of a couple of particular companies but they didn’t seem to relate to any business the bank ever did with them.”
“In what sense?”
“The bank sponsors a children’s charity, something to do with ensuring kids in the third world get a decent education. They make quite a claim for this, boasting how much they invest in the education of some of the world’s poorer children. It’s all over their corporate literature. It’s all tied up with business trying to act more socially responsible, if you can believe that crap.”
I was listening, taking it all in. I sipped some beer.
“Moneys raised for this are placed into special accounts and the profits paid to whoever is responsible for ensuring it gets to the people who invest it in wherever it’s been targeted.”
“So, what’s the problem?”
He sat up straighter and looked directly at me. “Hemsley believes the accounts used for these funds are also being used to launder money, and he thinks he’s found evidence to prove it.”
“Such as what?”
“Karris and Millers does a lot of business with a firm called Chrenora’s. Hemsley believes money from the account going towards third-world education is actually being placed into an offshore account of some bank based in the Caribbean, and they’re rerouting it through a pyramid of other firms all over the place, then it comes back to the bank, which puts it into Chrenora’s account. The accounts record it to look like a loan but, as Hemsley said, why would a merchant bank be loaning money to what’s ostensibly a holding company?”
“Why indeed?” I was puzzled.
“Also, the accounts with this firm were the exclusive preserve of his immediate superior in the department. No one else was allowed to have any dealings with this firm. Part of what Hemsley saw concerned communication between his section head and someone based in Italy with this firm.”
“Meaning what?”
“Usually, section heads just supervise, they oversee, they don’t handle accounts; that’s done by the minions on the ground floor, people like Hemsley. But this particular account has been commandeered by his section head under conditions of total secrecy. Passwords to access it are changed regularly, stuff like that.”
“Does he have any specific examples?”
“I can’t remember exact figures, but he mentioned one particular transaction where a firm called Carloggias, which is owned by Chrenora’s, was listed as having paid a few hundred thousand euros into this account, ostensibly for the children’s charity, but there was no evidence of any transaction. The money just seems to have appeared in the bank’s accounts. This apparently was one of the things he queried with his section head but was told to ignore as it was nothing.”
“And this worried Hemsley,” I stated.
“Yeah, it did. It led him to think there’s something suspicious going on, that the bank’s engaged in shady dealing and money could be being laundered.”
“Why’d he think that?”
“Because Carloggias doesn’t exist. I mean, it does, but only on paper. It’s a shell company. Hemsley looked into Carloggias and discovered the two people who set up the firm are both dead but the business was never disincorporated, so it still existed. The business was actually bought by another similar firm, Fettolio’s, and its only transactions are when money is paid into or out of the firm’s accounts. So, when the auditor verifies the accounts, he’s dealing with an actual business. Doing business with a shell company is what made Hemsley believe it’s a conduit for money laundering. Why else would companies based offshore be funnelling funds into such a company?”
“And this could be done through a merchant bank?” I wondered.
Clements looked at me as though I were an idiot. “Depending on the amount and where it’s come from, it could be done through a stall on the Portobello Road market.”
I wondered about this for a moment.
“Hemsley checked back the accounts for a few years and this has been going on for at least two years,” Clements said. “Chrenora’s has interests in many different markets. These firms didn’t sound like the kind of client a merchant bank would normally have. Hemsley found money ostensibly going into Chrenora’s account was being rerouted into the accounts of Carloggias and this other firm, Fettolio’s, which is also a shell company, and he was worried.”
“What does this mean, exactly?” My knowledge of accounts could be painted onto the back of a postage stamp.
“According to Hemsley, it means funds suppos
edly destined for a children’s charity are ending up going through a whole lot of different accounts before Chrenora’s actually deposits into the charity’s account. And, even then, the amount deposited is much less than is claimed. The rest Chrenora’s pays to another account in Italy, but he can’t find any details of this particular account. That’s what made him think this is money laundering.”
“Accounts have to be independently audited, though, don’t they?”
“They do,” he agreed, “but if you’re clever about it, you can get almost anything past an auditor, and a merchant bank’s a reputable institution, isn’t it, so who’d suspect them, especially if it’s done carefully? There’s also a children’s charity involved. The money Hemsley thinks is dodgy is laundered through this. No auditor looking at the accounts of a merchant bank’s going to suspect a charity, is he? That’s why only this one supervisor is involved putting the accounts for his section together. He compiles them in such a way that they make sense to the next person who sees them, the auditor. Auditors only query accounts if they’re prepared so haphazardly the figures don’t make any sense, but that’s not the case here. Plus the fees charged by auditing firms are colossal, so they’re not going to rock the boat and lose all those huge fees, are they? It’s almost the perfect cover if you’re engaging in something like money laundering.”
Laundering money was usually done for only one reason. I was interested in the story. This would need to be investigated if it was true. “And he’s sure this is money laundering?”
“What else could it be? No one rigs up a system like this, routing money through several banks and across different countries, just to make a few bob for themselves. It makes sense it’s money laundering, especially as only one person’s in charge of the accounts.”
“So why tell you about this? Why not blow the whistle, go to the financial authorities, report it there? Surely they’re the appropriate people,” I suggested. “They’ve the resources and manpower to look into any claims Hemsley makes.”
“That’s true, they have. But it’s not just that. It’s who’s involved as well.”
“Meaning what?”
“Anything as sophisticated as laundering money could only occur if the right people are involved, if you know what I’m saying. Someone in charge has to know what’s going on. You can’t just stick sums of money into a set of accounts and hope no one notices. Someone there has to know what it is and how to lose it successfully so as not to arouse suspicion. This means it can only be done by people with expert knowledge of accounts, people who compile the accounts and get them signed off. That’s what disturbed Hemsley the most; not just the fact of fraud occurring, it’s also the people involved in what he’s sure is a scam. Hemsley thinks his section head is the person involved because he has to sign off on all transactions before they can be passed on to wherever they go next, so it stands to reason he has to know what’s going on, doesn’t it? So, as Hemsley couldn’t report his suspicions to him, and there was no one else he trusted higher up the chain, he decided to contact the FCA, the Financial Conduct Authority, and spill the beans because he was convinced there was significant money laundering going on, or, at the very least, a strong suspicion of it. But so far, he’s held off doing this.”
“What’s stopping him?”
Clements sat forward and put his head closer to mine. “Someone in his section got wind of what he was planning to do and he said he was told to report to his manager’s office.” He lowered his voice. “According to him, he was taken to meet with a panel of senior figures in the bank, who poured scorn over his claims. They claimed they’d examined the bank’s accounts and found them to be in order. They agreed with the auditor’s assessment. Hemsley said they threatened him with all kinds of dire sanctions if he opened his mouth to anyone, including the sack and being blacklisted in the financial markets, meaning he’d never get another job in finance anywhere in the world if he went to the FCA. He was also told he’d be sued for violating corporate confidentiality. They of course denied his assertion about money laundering. They claimed their accounts were wholly in order and had been verified as being so, and said even a whisper of his claims could seriously harm the bank’s share price as well as its reputation in the financial community, not to mention having a knock-on effect on the Footsie 100. They told him they’d investigate his claims of financial malfeasance, so he’s kept his head down whilst deciding his next move. This was a couple of months ago. But, last week, he was really shaken up.”
“Why’s that?” I drained my beer glass.
“A friend of his who works elsewhere in the City introduced him to Josh Bryant, who’s a freelance investigative reporter and well-connected in the City, lots of good sources there. He’s a specialist in political and financial stuff concerning the City. Hemsley tells Bryant his suspicions about what’s been going on at the bank. This guy’s interested so he starts asking questions, talking to his sources and looking at some of the transactions the bank engaged in. He was investigating one particular transaction involving a sizeable sum of money between Chrenora’s and this children’s charity and hinted to Hemsley he’d found something, but then, last Friday, Bryant gets whacked around the head and dies. Police don’t think it was a robbery either as his wallet was still in his jacket pocket. Hemsley’s shitting himself thinking he’s gonna be next. He says his section head keeps looking at him funny, as if to say you’re next if you don’t keep quiet, so he’s sitting tight at the moment, ’cause he’s convinced this was something to do with the bank.”
He paused for a moment to sip his beer.
“I knew Bryant vaguely; we published one of his articles not too long back,” he said. “This guy’s been an investigative reporter for years, freelance for the last few, and never once been in any trouble with anyone. He’s a known leftie but he’s got a reputation a mile long for being fair and honest, and yet when he starts asking questions about Karris and Millers, he gets himself killed. That’s why Hemsley came to see me and tell me what’s going on.”
Karris and Millers. I recognised the name of the bank. Something clicked in my head but I couldn’t immediately think why the name was resonating with me.
“Hemsley said he’d seen some of the investigative stuff we’d done over the past few years and thought we could do something similar here. But it’s not just that. There’s also a political aspect to this. He knows what kind of stuff the Focus has done and whilst, ordinarily, he’s got as much interest in what the Focus publishes as he has in catching the clap, he wants us to publicise what he’s found.”
“What’s the political aspect?” I was curious.
“I mentioned just now Hemsley thinks his immediate superior in his section is involved. His section head’s someone called Roger Bradley, whose father just happens to be . . .”
He paused and looked at me as if expecting me to finish his sentence.
I waited a few moments. Then it dawned on me who he might be referring to.
“You mean . . .”
“Yeah, him, whose father is Gerald Bradley, who just happens to be a Treasury minister in the Coalition Government,” Clements continued. “He’s not a Secretary of State, not in the Cabinet. He’s one rank below the current Secretary to the Treasury, who’s the next one down in seniority from the Chancellor of the Exchequer. In other words he’s up there with the great and the good of the political elite, a fully paid-up member of the establishment.”
My eyes opened wide in surprise. I knew the name. He was Liberal Democrat and, because of his financial expertise gained from many years working in the City, had been given a senior Government post when the Coalition had come into existence in 2010. He was seen as a safe pair of hands and a model of virtuous financial rectitude. In a Government consisting largely of economic simpletons, his expertise was something to cherish. No wonder he’d been handed such an important post in Government.
“Hemsley sought me out because he wanted me to print that a Government
minister’s son is a crook. He thinks I just have to hear a few things and then publish them. I wish it were that simple, I really do, but, sadly for us hacks, there’s trifling little things like libel laws and the likelihood of being sued to consider.”
“A Government minister’s son,” I stated after considering what had been said for a few moments. “Is there any evidence the father’s involved anywhere in this, or even that Roger Bradley’s definitely involved?”
“I don’t know. Hemsley didn’t mention the dad, just his suspicion about Roger Bradley, but can you imagine the shockwaves if this ever got into the press: the son of a Government minister implicated in financial scamming? The shit’d really hit the fan if this ever got into the public domain. Another banker involved in a scandal? There’d certainly be political fallout, that’s for sure.”
I’d been told a lot in the past thirty minutes. There was plenty to consider.
“I’m making some inquiries with a few people I know who have expertise in the sordid world of City finance. Discreetly, of course.” He grinned. “I don’t wanna end up like Bryant. I just thought I’d give you the heads-up in case there’s any truth in what Hemsley’s claiming, because a Minister of the Crown could be involved and that’d bring in your lot.”
I considered everything Clements had said. Quite a story. I was still concerned, though, about his knowing salient details pertaining to the trial of Simon Addley.
“And Hemsley’s sure about all this, is he?” I asked.
“Yeah, he is. He said he’d been checking the evidence against what he’s seen and he’s convinced there’s laundering going on under the bank’s nose. The level of secrecy involved and the amounts involved, dealing with companies existing only on paper? It all convinced him something was going on.”
“Like what?”
“He mentioned meetings between Bradley and some Italian guy. Apparently, they never get listed on the official record of what happens that day, and every meeting on behalf of the bank has to be logged. But anything involving laundering money has to have a sinister sub-current, doesn’t it?”
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