Stephen Hester, Shake me up, Judy

"I have come down" repeats Grandfather Smallweed , hooking the air towards him with all his ten fingers at once to  once, "to look after the property".(*)

 Scan credit: George P. Landow at   Victorian Web

Stephen Hester will step down from the leadership of RBS this month with a payoff thought to be in the region of £1.6m, according to Wiki, nearer to £6m if you include share options (according the The Mirror).   He earned around £1.2m a year, making £6m over his term in the seat, and took an additional £6.5m in bonuses and pension payments in 2010, after which people started to put pressure on the new government to DO something.

Only, since Stephen Hester was a Conservative donor, they didn't try very hard and as for the Lib Dems, Vince Cable decided to ignore the occasional story he heard, adopting his standard position of hazy old duffer who cannot be expected to remember anything or grasp the significance of it if he does.

At the time of the previous story which featured Hester, it was felt that I had been rather hard on a man who was not in direct control of the insurance group and anyway, was turning round a failed bank. Furthermore a man who knew the difference between right and wrong and had said so in a video interview to the Telegraph. (May be behind a paywall, depending on your usage)

"It is an extreme example of a selfish and self-serving culture which the whole banking industry is tagged with," he said, adding that it was the board's job to ensure that sort to behaviour has no "validity in the future".

It recently emerged that RBS used another special group of which Hester will no doubt claim to have come over all Vince Cable about, the Global Restructuring Group, GRG, with thanks to Felix Salmon at Reuters who has presented the story clearly.   RBS foreclosed loans because it could get more immediate value out of stripping the assets the debtors had put their lives in to.  Using the GRG group, it engineered defaults to give itself permission to help itself to the fruits of other people's labour, selling them a knock-down prices to its own subsidiary, West Register.  

Perhaps unusually in this day and age, the story seems to have bubbled under with the debtors being  unable to form a coherent pressure group. Possibly that is because it is very difficult to distinguish, from the outside, a good business being pushed under by the bank and a bad business which should be stopped before it gets any worse. When stories started emerging in July 2013, RBS and Hester coolly said they could not comment on individual cases, implying that debtors must all be unreliable complainants - and no doubt some of them are.   The Tomlinson Report draws together the method the bank used.  Lawrence Tomlinson also credits an investigation by the Sunday Times and the work of Sir Andrew Large.

Many in the banking trade have counted on this story being too convoluted to grasp  . They have forgotten that Mr Dickens already explained it in 1853.  This year was the 160th anniversary of the conclusion of Bleak House.

In the illustration above, the old payday lender Smallweed has extended rolling credit to Captain George who has used it to buy a shooting gallery. This barely makes enough to keep him and an assistant in tea and bread but earns just enough to keep paying Smallweed his interest. Probably it is a bad business but George is making his payments and trade might improve.

It then transpires George has an asset he was not aware of; he holds a letter from a late friend which can be used as a sample of handwriting to positively identify the writer of other documents and letters.  Smallweed knows to whom that sample has value and he wants to be rewarded for brokering the deal. The only trouble is, George takes advice and is certain that he does not want to be involved.

Smallweed then brings pressure on him because the loan is not secured just against George's own person but the property of his friend Mr Bagnet.  Smallweed demands full repayment, knowing full well that George has no way to do it and must therefore surrender the letter for inspection.  Which he does.

If people are capable of following the plot of Bleak House and how Smallweed manipulates George to get what he wants, they are capable of understanding what RBS was doing.    Shake me up, Judy.

........................

(*) Yes, I know Smallweed says this when he goes to Krook's house rather than George's shooting gallery, but the sentiment fits best.

Stephen Hester is a banker

Crocodile wallets

Who is Stephen Hester?

Stephen Hester is the Group Chief Executive of RBS.  The one who was narrowly persuaded to go without his bonus.

Wiki

Hester is paid an annual salary of £1.2 million by RBS.^[1] Alongside this, he took home £6.5m in bonus and pension payments in 2010.^[8] In 2012 he was offered a bonus of just under £1 million, following some considerable pressure from politicians and the public, he declined the bonus.

You may have heard of him being disgusted and depressed about the 'selfish and self-serving' behaviour of his staff during the LIBOR rigging scandal.  Apart from banking, RBS is also 75% shareholder for Direct Line  which operates several brands of insurance.  One of these is Churchill

Churchill is part of the Direct line group, separately listed from RBS.  It is headed by Paul Geddes.

Now let us go back in time, this isn't about banking.  It's about insurance.

Churchill

Founded in 1989, Churchill is now one of the UK’s leading providers of general insurance, offering car, home, travel, pet, van and motorbike insurance over the phone or online. Many of the products are award-winning.

The Accident

In December 2009 the then-thirteen year old Bethany Probert took it in her head to walk home from horse riding at about 5pm.  The accident happened  on the Abthorpe Road which runs between Silverstone (NN12) and Abthorpe.  You can see it for yourself on Streetview, which toured the road in good weather.  The road is picture-postcard England, with straights, narrows,  and shallow bends between hedges dotted with mature trees. 

Yes, she could have waited for her mum to pick her up, but showing a spark of initiative and not being a prisoner, this schoolgirl decided to do what, at any other time in history, would be regarded as normal. She started to walk home on the country road. It was after sunset but it wasn't the middle of the night. Even in December people can be reasonably expected to be moving round at 5pm.   Being a young teenager, she didn't think to dress up in a hi-vis jacket, which is not a legal requirement. She also may have been listening to music. That's legal too.

The road doesn't have a footpath or lighting. It has hedges which  tend to lean in to the road, obliging pedestrians to walk a little further out.  The speed limit is 60 but speed, as we are often told by the better drivers, is not the point. Conditions are the point, and the conditions did not admit that 55 year old Mr Paul Moore, who was on his way to work for his 5pm shift on the far side of Silverstone, should travel faster than 40mph in his Saab 9-3.  

Unfortunately, he probably was traveling faster than that.  Seeing an on-coming vehicle, he changed his position on the road, pulling left, closer to the hedge where Bethany was walking.  Pedestrians are advised to face oncoming traffic but because of the hedges and a bend there, Bethany was on the narrow grass verge or the tarmac - it is thought she may have had one foot on each - rather than the advised side . For that particular point, she was on the correct side because of an approaching bend and a lack of a footpath (see paragraph 44 of Mr Pittaway's adjudication). 

Mr Moore did not see Bethany because he was focused on the oncoming vehicle. He hit the girl.  She was wearing dark clothing.  Had he been traveling more slowly and remained aware that the pools of shadow under hedges might contain any number of things - dogs, deer, junk, even walkers - then he might not have had the accident.

Bethany did not die but the head injuries effectively ended the independent life she might have had. She requires full-time care from her mother but she's alive and can move round.  Mr Moore didn't set out to hurt anyone, but the reality of driving is that you can, purely by miscalculation.  Eversheds summarized the court's findings; liability was established against the defendant.

Fortunately,  Mr Moore had insurance from Churchill.  The child cannot be put back as she was, but she can be cared for.

But Churchill doesn't want to pay up.  

When the case got to court in August 2012, by which time the child's condition was clearer, Churchill argued that because Bethany was a horse rider, she should have known about wearing a hi-vis jacket, even though she wasn't riding a horse at the time.  The court found that you can't expect a 13 year old girl to carry the same degree of responsibility for her action as an adult might. Besides, Mr Moore was not looking where Bethany was walking; he was focused on the oncoming vehicle. 

Churchill argued that she was negligent in listening to music, otherwise she would have heard the Saab coming.  The court replied, based on the opinions of the accident advisors, that the noise of the oncoming car would have obscured the sound of the car behind her. 

The insurers said they want to appeal.  Mr David Pittaway QC, hearing the case, wrote that he thought they were seeking to reopen the issues which have been decided.

Despite that we now read that Lord Justice Ward has granted permission that Churchill can take the case to the Court of Appeal.  Apparently, there is an argument that it might be alright to run children over if they aren't dressed as Christmas trees, psychic, and happen to be walking home in the country after sunset.

However, this post is not about about the strict legality of an insurance firm being able to go to the extent the law allows in order to avoid doing what it says on the tin: taking the financial pain away when there is a terrible accident. 

This is about Stephen Hester of RBS and Paul Geddes of Churchill, who should stop pissing about and pay out £5m as directed. It will cost them that anyway; it's just a question of whether the lawyers are allowed to gouge more of the £5m out for their fees, or if it should all be paid to the girl.

 £5m is less than Stephen Hester earned in the single year 2010.

The money, although substantial, can't be the issue. If it was, RBS  wouldn't be paying out bonuses of £1.5bn to staff in its investment arm. £5m is chicken feed in comparison.  The taxpayer owns at least 75% of RBS, and  RBS is the 65% shareholder in Direct Line.  RBS received £1bn in dividends from the flotation.  The Probert settlement has to be managed to keep Bethany and her mother the rest of their lives, since her mother has had to give up work to care for her daughter. If Geddes and Hester were told to pay it personally out of their own fortunes, they'd barely notice it.

Stephen Hester has two children as does Paul Geddes .   How might either of them might feel if their child  was smashed in to a hedge and then they had to spend three years fighting for the compensation which insurance is supposed to provide.  But then, earning a basic £1.2m a year, I expect Hester would  be able to airily wave it away and pay someone else to do the hard work of looking after the child.  If the worst came to the worst, he could sell the 350 acre estate in Oxfordshire or the ski chalet in Verbier.

Stephen Hester should ring Paul Geddes and tell them to settle before the stink does any more damage to the group ahead of the remainder of the divestment.  Geddes shouldn't even need telling. That he does, tells us something about the failure of Hester to inculcate a sense of duty and decency in his staff.  Hester will no doubt argue that under European Competition Law, he's not supposed to tell his executives what to do.  This isn't about European  Competition Law - it's about duty and decency.

 
It is the duty - already  admitted - of Churchill is to pay this claim.  Decency dictates that they pay the victim, not the lawyers.

Update 10 Feb 2013:  The Sunday Times reports:

THE boss of Royal Bank of Scotland will be handed a £780,000 bonus just weeks after the bailed-out lender was fined £390m for its role in the global interest rate rigging scandal. Stephen Hester is set to pocket the share award next month.  RBS, which is 81% owned by the government the taxpayer is adamant that Hester should receive the payment, which was granted in 2010, as he has received only one annual bonus since joining RBS in 2008. 

Ah, poor lamb. If only he'd been wearing a hi-vis jacket.

Update 14 Feb 2013.
Inform Blog reports that Lord Justice Ward has retired.