Supplementary memorandum from Tony Shearer
In his evidence to the Treasury Select Committee
on 25 February 2009 Mr Sants said that:
1. the minute prepared by FSA employees in respect
of the meeting with me and others on 14 April 2005 did not refer
to concerns as to whether Kaupthing were "fit and proper";
2. the forms that the Heads of Risk and Compliance
completed when they left Kaupthing Singer & Friedlander did
not say that they had been dismissed.
This is neither the full story, nor the answer
to the questions he was asked by members of the Select Committee.
The full answer is that my colleagues and I
gave our opinions on the qualities, experiences and competencies
of the management of Kaupthing, as well as highlighting information
that was in the public domain. One instance when we provided these
opinions was at the meeting on 14 April 2005 (and my own contemporaneous
note, a copy of which I have provided to the Select Committee,
clearly shows that I did raise the issue of Kaupthing not being
fit and proper at this meeting).
But, as Mr Sants should have been aware, there
were other contacts in April and during the summer of 2005 where
these concerns were also expressed to the FSA; for example, two
of my former colleagues have emailed Mr Fallon to tell the Committee
of their own experiences. Mr Sants may, or may not, have been
aware of these contacts as he was not himself at the FSA at the
time, and can only rely on what people have said to him. I was,
of course, there at the time.
Also the sequence of events (in addition to
the comments referred to above that we made about the Kaupthing
management), all of which was known to the FSA at the time, was:
1. the board of Singer recommended a cash offer
as they refused to countenance an offer in Kaupthing shares as
we did not trust the Kaupthing management;
2. I decided I would not stay and work with Kaupthing
and left at the end of November 2005;
3. then the Finance Director resigned and left
for the same reason;
4. then the Head of the Bank resigned and left
for the same reason; and
5. then both the Heads of Risk and Compliance
were fired, and, based on what they both told me, explained the
facts orally to the FSA.
Accordingly there were a number of warning flags
for the FSA to respond to, other than what might, or might not,
have been said in the forms completed by the Heads of Risk and
Nor Mr Sants did say that neither of the Non-Executive
directors that he placed so much reliance on asked to see either
of the Heads of Risk or Compliance to ask why they were leaving.
Nor did he refer to the results of the Arrow report into Kaupthing
Singer & Friedlander in the autumn of 2008.
For all these reasons Mr Sants' answer was at
best so incomplete as to be misleading.
Mr Sants was also asked about the protection
that the FSA gave to whistle-blowers. He did not answer this question
but chose to answer the question of whether he took whistle-blowers
The facts are that the FSA never took seriously
the opinions of any of the people from Singer & Friedlander
in 2005, 2006, 2007 or even when I wrote to him in April and May
Since my evidence he and the FSA have tried
to downplay my evidence. Hardly the actions of taking whistle-blowers
seriously, let alone encouraging them to come forward by their
treatment of them. This, as far as I can see, is also the situation
relating to the former Head of Compliance at HBoS, regardless
of whether his allegations are correct or not. Rather than protecting
him, Mr Sants and the FSA have attempted to ridicule and marginalise
5 March 2009