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Northern Rock: Jekyll & Hyde?

by ChrisCook Mon Oct 8th, 2007 at 01:04:25 PM EST

There's been some interesting stuff dug up by Richard Murphy - of Tax Research LLP and the Tax Justice Network - and this has even found its way onto the FT blog, here:

The (un) charitable core of Northern Rock

Here are a couple of Richard's blog posts on the subject

Northern Rock - a Rotten Abuse of Charity

and the one that kicked it off....

Northern Rock - the questions needing answers

complete with DNA molecule structures and followed by a nice little thread with a few comments along the lines of:

"well, there's nothing wrong with it, and anyway everyone else is doing it, and anyway I vos only obeying zer orders..."

Top marks to Richard, who is a class act with a clear view of the underlying morality,
or lack of it, of this whole horrendous "rat's nest".

In other words that trust is not real. Northern Rock controls Holdings, but pretends not to via complex legal structures for certain purposes to try to avoid some of the risk of ownership arising from doing so, no doubt. Why else do this?

I call this three things:

a) An abuse of the charity involved, who (I stress) need not even have given their assent to be used in this way;

b) A contempt for those who take the real risk on financial markets, which is at the end of the day as this fiasco is showing, you and me and the government;

c) The construction of an arrival device to ensure that as few people as possible, almost certainly the Northern Rock directors included, know just how this deal works. I guarantee you itís a tiny number that do.

And itís this wholly artificial construction, seeking to shift liability and to avoid responsibility and abusing common sense decency with regard to the abuse of charity to achieve commercial aims that is pulling Northern Rock down.

Of course itís not alone. This type of deal is constructed every day off shore. Itís the bread and butter of international finance.

Itís why we canít trust markets. Itís why regulation is needed. Itís why ownership has to be revealed. Itís why declaring where youíre working is so important. Itís why accountants have once more to put substance over form.

The contradistinction between:

(a) the sham charitable basis to Northern Rock's "Granite" special purpose vehicles; and

(b) the great work carried out by the Northern Rock Foundation - which not only receives and distributes 5% of Northern Rock profits, but is also entitled to 15% of Northern Rock shares in the event of  a takeover;

is quite mind-boggling - Jekyll and Hyde comes close....

But what is to be done with Northern Rock now to cut the Gordian Knot - or maybe clean the Augean Stables....?

Did you reed the last issue of Private Eye? which also ran through the management bonus schemes and the failure of the regulation system?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Oct 8th, 2007 at 01:41:33 PM EST
Read not reed

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Oct 8th, 2007 at 01:41:55 PM EST
I think this is a critically important point:

Tax Research UK / Northern Rock - those in the queue were right

I have spent some time talking to people about the 'shadow' structure that Northern Rock created and which I wrote about earlier this week. My question was simple, and I needed to be sure of the answer. I'm confident that I am now.

That simple question was this:

Why did Northern Rock create such a complicated structure for its debt?

The answer is this:

So that it could put the claims of its depositors below those of the City if anything went wrong with the company.

The shadow structure (which no doubt someone thought it very amusing to call `Granite') was not a tax trick, at least as far as I can tell. Almost certainly very little profit flowed through the whole operation, which is why I am also convinced it is a flagrant abuse (but not breach) of charity law to have claimed it was set up with that purpose in mind.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Oct 8th, 2007 at 02:04:55 PM EST
Nothing surprises me about the way the city operates. Columbian drug dealers have more principles and a commitment to community than this lot.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Tue Oct 9th, 2007 at 03:06:15 PM EST
You've got That song running round my head again, now I won't get to sleep for hours.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Tue Oct 9th, 2007 at 09:14:14 PM EST
[ Parent ]
Excellent investigation!

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Fri Oct 12th, 2007 at 02:24:15 PM EST

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