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par Evan JONES
On 25 November 2013, Lawrence Tomlinson issued a report  exposing yet another spectacular case of bank bastardry in the UK. Tomlinson had been commissioned by the British Business Minister, Vince Cable, to examine any difficulties that small business faced in escaping the debilitating aftermath of the global financial crisis (GFC), especially in the arena of credit availability.
Tomlinson’s brief report exposed a concerted strategy within the Royal Bank of Scotland to default viable business customers. Tomlinson compiled his report from evidence obtained from victimized customers and an RBS insider. It is noteworthy that the RBS, crippled by the usual excesses leading to the GFC, is at present 80 % nationalized. Notes Tomlinson : “The bank extracts maximum revenue from the business [consigned to its "turnaround" division] … to such an extent that it is the key contributing factor to the business’ financial deterioration. … rather than supporting a business, there are times when it is more profitable for a bank to stress the business. … it became very clear, very quickly that this process is systematic and institutional”. Tomlinson describes an unholy cabal of valuers, insolvency practitioners, receivers and lawyers in league with the bank to pillage the business and strip it bare. Customers are completely isolated in the process. Communication is severed, transparency is non-existent and the bank’s "internal complaints procedures" are a farce. The report has received extensive coverage in the British media and expressions of mock shock horror from the financial establishment. Tomlinson, an engineer cum successful businessman, is from the North –decidedly non-establishment. A contemporaneous much larger report, initiated by RBS and written by the decidedly establishment Sir Andrew Large, curiously overlooked the scam outlined in Tomlinson’s report.
In Australia, myriad small and medium business/family farmer borrowers would be painfully familiar with the practices described by Tomlinson. Major bank malpractice is entrenched down under. But Australia has no equivalent of Lawrence Tomlinson –because nobody in Australian politics cares to know. I have been writing on bank corruption in Australia for well over a decade, with no impact on officialdom whatsoever. Comprehensive financial sector deregulation during the 1980s turned bankers into money lenders, with little or no commitment to the viability of the enterprise of small business borrowers. Bank lenders’ interest is focused on customer assets. "Will you walk into my parlour" said the spider to the fly. Multiple publicly-owned banks, including specialist small business and rural lenders, have all been privatized, leaving the field free to the increasingly rapacious private banks. The borrowers themselves, imbued with the mythical baggage of the ethical banker, believe that they are dealing with professionals, embodying competence and integrity. They discover the truth only after they have lost every last penny –always, of course, including the family residence.
Australian (and New Zealand) banking is dominated by four banks –the privatized Commonwealth Bank of Australia, Westpac, ANZ and the National Australia Bank. The quartet’s market share has been reinforced post-GFC, courtesy of discriminatory government support. All of Australia’s Big 4 banks engage in corrupt practices. The NAB, with the largest SME and agribusiness market shares, is the most consistent predator. The NAB owns the Sioux Falls-based Great Western Bank , a relationship which has so far remained under the radar. But the NAB has exported its serial incompetence and corruption to its British subsidiaries, the Clydesdale and Yorkshire Banks, where victims have formed their own support group.
The CBA, as well as common garden variety takedowns, has a predilection for irregular large-scale ripoffs. The CBA was created by a Labor Government in 1911 to provide an alternative to the elitist private banking sector. The so-called "People’s Bank" is now run by spivs and has become the People’s Predator. Witness the CBA’s foreclosure of almost 1000 BankWest borrowers after the CBA acquired the provincial BankWest (also a privatized public bank) from the failed Halifax Bank of Scotland in December 2008. Victims were typically non-corporate developers or hoteliers. Senior management claims that the foreclosed borrowers were casualties of the GFC and that the bank did as much as it could with these hapless borrowers. Ross McEwan, recently-appointed CEO of RBS and ex-CBA senior manager, is singing from the same song sheet with respect to the casualties described in Tomlinson’s report.
The CBA takedown of the BankWest borrowers is a masterpiece of the predation genre –involving corrupted devaluations of customer assets (triggering default), usurious "penalty" interest rates, complicit and/or thieving receivers, complicit sales agents, and sale of customer assets dramatically under value. The public purse provides tax deductibility on the banks’ "losses" arising from the manufactured residual debt on the loans of its foreclosed customers.
Two examples. Sean Butler and his wife rebuilt and managed a profitable 70-room resort in Bunbury, Western Australia, valued at $20 million in 2007. BankWest had the property devalued to $14.7 million (dubious) in November 2009, then to $11.4 million (transparently fraudulent) in June 2010. Butler’s repayment capacity was assured, so the valuations are irrelevant. Butler was also rebuilding the heritage National Hotel in Fremantle (a coastal suburb of Perth), valued at $7 million in mid-2011. CBA/BankWest imposed penalty interest rates and demanded full repayment of debt to an impossible deadline. The Butler accounts were not irregular. Bank-appointed receivers plundered the businesses. (It is pertinent that at law a receiver operates under the direction of the borrower. The banks and the courts behave otherwise.) The properties were apparently sold for $9.5 million and $3.5 million respectively. BankWest has cut off all communication and Butler’s accounts remain in limbo.
Rory O’Brien was building a luxury resort development at Airlie Beach, Queensland, with its BankWest valuation at one stage at $250 million. The resort was close to completion, with $100 million presales contracted, and a reputable international firm designated as resort manager. In January 2009 (shortly after the CBA takeover) BankWest declined to turn over the debt, contrary to a previous commitment. The bank-appointed receiver discarded the pre-arranged sales and sold the resort in August 2010 to a bottom feeder for $56 million. In January 2011 CBA/BankWest sought payment from the guarantors of the manufactured residual debt. O’Brien is currently in court, having acquired a rare judgement on appeal in April 2013, in which the judges opined that O’Brien’s claims of foul play potentially has legs .