Manx Herald Isle of Man

Gelling: KSF (IOM) collapse - like standing on a pedestrian crossing and being run down by a lorry

2009-11-15T17:54:00-05:00

Former IOM Chief Minister, Donald Gelling, and Chairman of Kaupthing Singer & Friedlander (IOM) Ltd, and his fellow Board members finally broke their silence following

Brian Mallett

2009-11-15T22:30:07-05:00

The excuses given by Aidan Doherty and other directors of KSF IoM at the recent Tywald Select Committee Hearing is totally unacceptable, because these directors failed to obtain a written assurance from the UK Government that the assets transferred to the Kaufthing Bank in London would be protected (ring-fenced)before the transfer took place.
Aidan Doherty and other directors are also guilty of contravening EU banking regulations by transferring more than 25% of KSF IoM's total assets to a single bank.

IceCrusher

2009-11-16T01:17:42-05:00

Letter to Correspondence and Enquiry Unit
HM Treasury

Dear Nick Dippie,

Thank you for your reply.

I had £XXX,000 saved in Kaupthing Bank, Isle of Man, and I believed that money to be on deposit in that nation. I have been an expat since 1992 and had been led to believe from the outset that it was imperative for an expat to hold an offshore account. For the first two years I placed my monies in the Leeds Offshore Building Society before it was bought out by the Derbyshire; I then continued to save with the Derbyshire for a further fourteen years until Kaupthing bought them out in 2007. One year later, my money was gone.

The Kaupthing Bank in the Isle of Man had an awful lot of money in it: so much liquidity, so very much desired by its UK sister branch that some 60% of the bank's total assets were moved to the UK under the guidance of the FSC - who in turn claimed that the UK's FSA had not deterred them from so doing. Many depositors shared my belief in having no idea that our money (supposedly in offshore accounts) could be moved to the UK jurisdiction in this manner - we thought that our money was in the domain of the Isle of Man, that it was secure within a highly rated bank quite apart from what was happening in the UK.

You may consider that such ignorance of financial proceedings is lamentable, but as a pilot I would counter that people put not just their money, but their very lives into an aeroplane without a passing thought to the regulation of that industry. Citizens inherently believe that proper procedures are in place to look after their best interests and passengers generally have no care or interest in whether the plane is conducting a radar positioned approach to a VORDME or self-positioning for the ILS - and who would expect them to as long as the aeroplane lands? Not everyone is an investor; most people just need to put their money somewhere safe and many like me are risk averse to do anything other than use a regular boring Building Society or a bank. When you have little interest in high finance, it is devastating to realise that the boring but safe home for your money is anything but safe, and some other entity has contrived to take your money and then goes on to ignore all pleas to put things right.

It has been said that to find the perpetrator of a foul deed then one has only to follow the money trail. The UK Government would have us believe that the Isle of Man Government, it's regulator, and the bank's directors are to blame for the loss of depositors' monies, how so? This debacle has cost the Isle of Man Government plenty and it has nothing to show for it but an outflow of deposits. The Kaupthing Bank of the Isle of Man had surplus liquidity, a solid customer base, and a very strong loan book with no toxic debt. Yet the sister bank went under administration in the UK at exactly the same time as Chancellor Darling brought into effect a power within the Anti Terrorism Crime and Security Act to freeze assets in Landsbanki Icesave; the former action retained 60% of the Isle of Man's Kaupthing branch assets within the UK bank and denied its return.

The greater part of that money was owned by ordinary retail depositors and the UK kept it. The UK representatives knew full well where that money had come from and who had put a lifetime's effort into saving it, but gave absolutely no consideration to their offshore British fellows. Darling instructed the administrators to prioritise the movement of 170,000 'Edge' customers to ING to the incalculable detriment of other creditors - especially the ordinary retail depositors of the Isle of Man. The UK Treasury Select Committee found that this action was instrumental in bringing down the Isle of Man branch, for without that 'considerable deposit' (Lord Turner) the Kaupthing branch in the Isle of Man was bound to cease trading.

Had the shoe been on the other foot and the UK branch of Kaupthing had deposited over a half billion pounds in the Isle of Man, I seriously doubt that the Government of the Isle of Man would have got away with placing such a huge sum under 'administration' to protect the economy and taxpayers of the Isle of Man whilst denying UK retail depositors their monies back and accusing them of being at fault for putting their savings in the UK in the first place. How happy would UK creditors be at seeing all Isle of Man retail customers get their money back - from the same branch - whilst they were made to wait over a year before receiving their first few crumbs? It is perverse, it is sick, it is despicable, unfair, undemocratic, dictatorial and imperially conceited. The UK Government took care of 170,000 Edge customers and 300,000 Icesave customers, but denied 10,000 Isle of Man customers their own money back. It was well within the Chancellor's self-appointed powers to authorise such a movement, but he spitefully chose to do otherwise - making fallacious comments regarding offshore savers to curry favour with the ignorant whilst attempting to 'justify' his deficient and deplorable behaviour.

The biggest beneficiary of the liquidation of Kaupthing assets in the UK is the Treasury and the FSCS - that is where the money trail leads. Without the offshore savers of the Isle of Man, that trail of money leading back to the UK coffers would be considerably smaller, yet even though the Isle of Man branch was the second largest creditor in the UK bank, it went without representation on the Creditors Committee - block voted out by the biggest.

Now where do offshore savers stand? We have no representation in the Isle of Man, and no MP in the UK wants even to answer our letters, let alone take up our cause. It has suited the UK Government to maintain the story of offshore tax dodgers, there being a surfeit of ignoramuses who find no fault with this ancient detraction from the truth and whose green eyes see nothing wrong in the covert theft of our hard earned savings. This UK Government pays nothing more than lip service to our plight and knows no better than the populace it pretends to lead; there is no upstanding steward of righteousness in this Government, just spin and tripe served up thick and slimy by two masters of this deceitful art.

If you hold the Isle of Man Government and it's regulator to be at fault, can depositors use that assertion against them? Will the UK Government stand beside British offshore citizens in a Court of Law and hold that they were duped and misled by charlatans of the Isle of Man who misplaced their money and cost them their life savings? If depositors had the assurance that their UK Government would do more than make mouth music of their misfortune and would otherwise be prepared to state categorically that the Isle of Man Kaupthing bank failure was completely independent of any action instigated by the UK Government and such a huge loss of private savings was entirely the fault of the Isle of Man Government, its regulator, and bank officials who brought this financial catastrophe upon retail savers - would the UK Government make such a public statement?

Sincerely,
xxxxxxxxxxxx

Laurence

2009-11-16T04:42:19-05:00

A highly detailed and well-written report. The Manx Herald is a real credit to the Island and in respect of reporting of local issues that are of genuine importance, puts the rest of the island's press to shame. If the Herald has not yet been adopted by the Manx people as a national Manx institution, it certainly deserves to be.

Jim for Justice

2009-11-16T05:25:01-05:00

So Donald Gelling, who has lost nothing & is still being employed as a powerless director along with 2 others, states that it was " like standing on a pedestrian crossing and being run down by a lorry."

The only people who feel like pedestrians standing on a pedestrian crossing & being knocked down by a lorry are the dispossessed depositors.

If the directors are so blameless why did they not make a statement to depositors after the bank collapsed, explaining what had happened and offering their profuse apology & determination to see that depositors got back every penny they had lost?
And if blameless why did they need to have an advocate present with them when they gave evidence?

Are there any depositors who consider these men are the right people to remain in their employment at the expense of depositors to help the liquidator recover the assets of the bank? I doubt it.

Jim
http://ksfiom-blog.blogspot.com

IceCrusher

2009-11-17T07:58:40-05:00

Aidan Docherty said that "...he also wanted to make it clear the amount moved from the ‘mother’ bank in Iceland to the ‘sister’ bank in London was only £360m – substantially less than the amount being alleged in some quarters – and this had, as far as they were concerned, totally removed their exposure to Kaupthing (Hf)."

Yet even the last Directors report on the Balance Sheet of KSFIoM sums to ~£557M. Maybe they did move 'only' £360M (only!)but that means they had already stashed another couple of hundred million of depositors money in the UK bank! Is this being economical with the real situation?

steve servaes

2009-11-17T08:20:04-05:00

Yes - Icecrusher is right. How come Docherty couldn't tell the liquidator provisionally at the outset what the correct position was?

Duke

2009-11-17T16:50:53-05:00

We would like to know why The Derbyshire Building Society and it's depositors was only touched upon.

The staff at the Derbyshire mainly Phil O'Shea who was a Director at the time and is now a Director of Close Wealth and Management (IoM) and Hillary Holdaway at The Derbyshire Building Society, took deposits after the sale of The Derbyshire was agreed and existing customers notified but failed to disclose the sale to new customers.

They took money under false pretences, giving out paperwork stating that it was a one year fixed rate bond with The Derbyshire and knowing full well that they could not honour that agreement, and that their deposits would soon be with another company.

When asked by one customer on the 14th Nov 2007 the direct question " has The Derbyshire any plans to sell out in the near future" Hillary Holdaway replied NO. But we understand that only 5 days later letters went out to existing customers to notify them of the sale to KSF IOM.

Basically we were conned out of our deposit which we understood would be with a wholly owned British Company, on the British Isles with a 100% BRITISH GUARANTEE, by lies. It was in a one year fixed rate bond, no access until maturity.

They should have been honest with us, under the banking code it clearly states that customers should be treated fairly and to make sure the information they are given is correct and not misleading.

Theses people should be brought to court to answer questions. Why did the Derbyshire continue to take on new business when they knew full well that they could not honour that contact? We could not break it, but it was okay for them to.

I would also like the court to find out if the former Director of the Derbyshire, Fiona M Passey whom we understand also had money with KSF, when her deposit was removed?

Why did Tony Brown, refuse financial help from the UK Treasury Select Committee when it was offered back in Feb 2009? He admitted on behalf of the Isle of Man full responsibility and said that they (the IoM) would sort it out themselves. I understand from speaking with an UK MP recently that the offer of financial help to the IoM was "still on the table", why can't this be accepted by the IoM and save these depositors and the IoM's reputation?

After all, it is not our fault that we trusted the Isle of Man with our money, we were give a 100% guarantee by The Derbyshire followed by the KSF IoM leter backed by the FSC who also said that they had a 100% Guarantee in place and that our money would be as safe as it was with The Derbyshire.

All the paperwork that came from the KSF IoM did not inform customers where the base of the KSF bank was. Surely that is against the law. Why hasen't the FSC picked up on that? Surely customers should be given all the facts. Was the origin of the KSF bank deliberatly omitted or was it just another mistake?

Will the court ever get to the bottom of how much really was transfered to the UK. And where is the rest?

So much for "Transparency".