Cornucopia
Page 43
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In his Knightsbridge home, Michael Fitzwilliams slept in an armchair before the TV. He had spent the best part of the previous twenty four hours trying to save his bank. Over the course of nearly a century his family had built the institution from an almost insignificant provincial Irish savings bank to a worldwide multinational banking corporation.
The bank, known as the Irish Union Bank at its outset, had survived the Troubles and the Second World War. In 2000, Michael Fitzwilliams succeeded his uncle David Castlemain as the bank’s CEO, who was lost with his yacht in a hurricane off the coast of Cuba. Over the fifteen years that followed, Fitzwilliams successfully guided the bank through a series of financial crises: the dotcom crash, the Lehman Brothers collapse and the UK banking debacle. Now, suddenly, in the space of twenty four hours, all his work had come to nothing. Almost inexplicably he had lost control of the family bank.
What seemed certain however, was that Kennedy had a lot to answer for, as it was he who had engineered the tie with the Russians.
Fitzwilliams woke with a start. It was a new day. Theoretically at fifty five he still had many good days and years ahead of him, but doing what? It would take some time to untangle himself from INI, but first was his so called compensation package. He had at least ensured the promises made the previous day were put down in black and white and signed by the chairman of City & Colonial, approved by the Governor of the Bank of England and the Chancellor; the result of hours of negotiation, a rearguard action to avoid the humiliation of finding himself in his socks on the steps of Her Majesty’s Treasury on Whitehall late on a Sunday evening.
In the space of a few days the bank had taken two devastating hits. First, the Russian oil giant, Yakutneft, had violated covenants on a five hundred million dollar bond by defaulting on its payment. That in itself could have been resolved by renegotiating the conditions of the loan, the trouble was that Yakutneft was not alone. Second, the InterBank Corporation, the Russian arm of the INI Banking Corporation’s holding, was shaken by the seizure of Sergei Tarasov’s interests by the Russian Ministry of Finance amidst accusations of fraud and corruption.
InterBank’s situation had been fragilised when it was forced to convert part of its dollar receipts into roubles to support Russia’s troubled currency. Then, when the Minister of Finance decreed the bank participate in a bond issue to compensate for the state’s shrinking revenues, Tarasov refused, pointing to the losses engendered by Yakutneft’s default.
His enemies retaliated by citing his considerable offshore assets, which he was summed to repatriate. His refusal was not only seen as unpatriotic, it was nothing short of treason. The FSB responded by accusing Tarasov of tax evasion and misappropriation of the bank’s funds for his personal gain.
In London the Financial Services Authority had been closely monitoring the situation after being informed of the Yakutneft default by INI’s compliance officer, a standard procedure, in accordance with statutory regulations.
Earlier the same week, at a Kremlin reception for the Orthodox New Year, the British ambassador was discretely informed of the risks Tarasov faced relative to accusations being formulated by the Ministry of Finance. Late that same evening a coded dispatch was sent by the British Embassy in Moscow to the Foreign Office in London and the following morning, the Minister of Foreign Affairs personally informed the Chancellor of the news, who in turn passed it on to the FSA in the City.
Events were accelerated when the Chancellor was handed an urgent dispatch at breakfast time the following Saturday morning, informing him charges against Tarasov had been formalised in Moscow.
The immediate risk was of a chain reaction and major losses in the City. INI had become too big to fail and the Chancellor deemed an intervention by the Bank of England necessary. After a series of rapid discussions with the Economic Secretary of the Treasury and Bank of England officials, a merger with a larger group was seen as a solution, thus avoiding the risk of a serious banking crisis at a critical moment in the political calender.
With a general election only five months off, the Chancellor consulted the Prime Minister, who instructed him to take prompt pre-emptive measures. A shotgun marriage dressed up as a City deal was decided in the best interests of Her Majesty’s Government and the City.
Sir Alec Hainsworth, CEO of the City & Colonial Banking Corporation, was summoned to the Chancellery for an urgent meeting later that morning and before Fitzwilliams could have his say the INI Banking Corporation was sacrificed on the altar of political expediency.
Fitzwilliams reran the film of the last twenty four hours over and over in his mind. The question posed by the Governor of the Bank of England as to how Fitzwilliams had allowed the bank to overextend loans to the Russian oil and gas industry, returned with unfailing regularity. INI led a series of banking pools that had provide extensive loans to Gazprom, Rosneft, and above all Yakutneft through the intermediary of Tarasov’s InterBank Corporation, which managed the loans in Moscow.
There was nothing questionable about the loans, neither in the manner in which they were structured, nor in the way they were managed, after all that was a City bank’s business, its stock in trade. But the total of the sums raised was prodigious. INI had bet big on Russia, but not only on gas and oil, the bank had also extended important loans to Russian promoters for prime residential and commercial real estate developments in Moscow and Saint Petersburg.
During the first four years the joint venture had prospered and profits soared. But the bankers had not counted on the ambitions of Vladimir Putin, whose visions of a Greater Russia belonged to another age.
Wild thoughts started to flow through Fitzwilliams’ mind. Where was Tarasov? Why he had fallen foul of the Kremlin? Had he used Kennedy’s naivety to infiltrate the bank? Was Howard, or perhaps Barton, his agent? Why had he himself been blind to their machinations?
In retrospective who could have imagined the collapse of oil? Putin’s Russia had surfed the energy boom, apart from a brief hiatus during the crisis that followed the collapse of Lehman Brothers, it seemed as though nothing could stop its progression. Putin’s Russia had been the darling of Western energy consumers and markets, supplying oil at one hundred and fifteen dollars or more a barrel.
During those breathless years Russian oligarchs had dazzled the world with their yachts and extravagant living styles, even the less rich entrepreneurs from Moscow and Saint Petersburg could be seen lavishing their dollars on high living in St Moritz, Megève and on the French Riviera. They had bolstered London’s prime property boom, invading the capital, earning it the sobriquet of Little Russia. As many as two hundred and fifty thousand Russians lived in London, though of course not all were billionaire oligarchs, but their love of luxury and high living projected an aura of wealth.
To Fitzwilliams’ mind it was the bloody events in Kiev’s Maidan Nezalezhnosti, Independence Square, that had started it all, antagonising Putin and casting a shadow on his Winter Olympic extravaganza in Sochi.
Then came the invasion and annexation of the Crimea followed by sanctions, which at first seemed like nothing more than a face saving display by Europe, but slowly they began to bite. To pile on the bad news the first signs of an oil glut appeared in August and prices began to slide, slowly at first, then as the year end neared they collapsed into a withering spiral.
A FUGITIVE
As London’s High Court of Justice considered the Russian Ministry of Finance’s demand for the arrest of Tarasov, on charges of fraud and embezzlement, his lawyers protested, informing the surprised court that Tarasov was an Irish citizen and the Russian demand had no legal bearing.
At the same time Moscow’s attempt to seize his overseas assets was met with a wall since it had no power in the offshore jurisdictions where most of the oligarchs investments were held via a cascade of screen companies, which did nothing to reduce the threat of physical harm to him or his family, part of a real and well defined pattern of retortion against businessmen d
ecreed as enemies of the Kremlin.