Surprise as bank's board escapes serious criticism

Comment: The narrow view taken of a bank director's duties lets them escape censure, writes John McManus

While the High Court inspectors will win plaudits for their humane view of the culpability of NIB's rank-and-file employees, their almost total exoneration of the bank's board will have surprised many.

The very narrow view taken by Mr Tom Grace and former Supreme Court judge Mr Justice Blaney of a bank director's duties means they escape any serious criticism.

The only complaint is levelled against the audit sub-committee of the board which failed to press management on the issue of the contingent liability that might arise because of the DIRT problem. Although it is not apparent from the report, this criticism is given some wider relevance because the chairman of the bank at the time, Mr Alex Spain, also chaired the audit committee. But there is no suggestion by the inspectors that the main board should have known what was going on at the bank and done something to stop it.

This is in marked contrast to the inspectors' attitude to the bank's most senior executive directors, who it should be noted all sat on the board.

Although the inspectors could not find a smoking gun that showed Mr Jim Lacey, or his successor Mr Barry Seymour, had direct knowledge of the tax evasion connected to the sale of Clerical Medical International bonds, they conclude peremptorily that Mr Lacey "knew or ought to have known how the product was being promoted". A broadly similar conclusion is reached about Mr Seymour and Mr Halpin, who took over as chief operating officer on Mr Seymour's departure.

There is, however, no shortage of evidence to show that the Mr Nigel D'Arcy and his staff at financial advice and services were fully aware that they were helping CMI customers evade tax.

The inspectors also have Mr Lacey and his colleagues bang to rights on DIRT avoidance. The paper trail leads to the desk of the chief executive via most of the senior management. It is clear that a collective blind eye was turned to issue and it seems likely that the careers of several former NIB employees still working in the financial services industry will be blighted as a consequence.

To put this in perspective it should be considered that if a similar investigation was conducted by High Court inspectors at the other big banks a similar list of names would emerge.