Pressure mounts on HBOS bankers

5 April 2013 Last updated at 12:26 ET

Pressure is growing on the three senior HBOS bankers accused of a "colossal failure" over the bank's 2008 collapse.

The Banking Standards Commission says regulators should consider barring Sir James Crosby, Andy Hornby and Lord Stevenson from future banking jobs.

One MP has also called for Sir James, described as the "architect" of HBOS's downfall, to be stripped of his title.

The bank was forced to merge with Lloyds in early 2009 and received a £20.5bn taxpayer bailout.

It was one of the most high profile casualties of the UK's banking crisis, which precipitated a wider economic downturn.

Sir James, who served as chief executive at HBOS between 2001 and 2006, earlier resigned from an advisory position he held at a London-based investment firm.

The BBC understands the board of Bridgepoint, a private equity firm, requested that Sir James stand down.

Goodwin precedent

But he retains other positions, including the post of non-executive director at Compass Group, a food services company.

Banking Standards Commission chair Andrew Tyrie says there had been "a colossal failure of leadership"

John Mann MP, who sits on the House of Commons' Treasury Committee, told the BBC that the three men should be immediately banned from working in the banking sector.

He also said Sir James should follow in the footsteps of Fred Goodwin, the former boss of Royal Bank of Scotland, who was stripped of his knighthood in 2012.

"Fred Goodwin lost his knighthood, and therefore James Crosby should lose his knighthood as well," he said.

"We need to be seen not to be rewarding bankers for failure and to hold them properly to account."

But speaking earlier to BBC, the head of the Banking Commission, Andrew Tyrie MP, refused to be drawn on whether Sir James or Lord Stevenson should lose their titles.

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Who are the HBOS three?

Andy Hornby, chief executive of HBOS from 2006

• Degree in English from Oxford University and MBA from Harvard Business School
• 1996 - 1999: Senior roles at Asda, including managing director of the George clothing brand
• 1999 - 2008: Senior roles at Halifax and later HBOS, becoming chief executive in 2006
• 2009 - 2011: Chief executive of Alliance Boots
• 2011 - Present: Chief executive of bookmakers Coral

Sir James Crosby, chief executive, HBOS chief executive from 2001 to 2006

• 1994: Joins Halifax bank as managing director of Halifax Life after 20 years in financial services
• 1999: Becomes chief executive of Halifax, and first chief executive of HBOS in 2001
• 2004: Appointed a non-executive director of the Financial Services Authority (FSA), while still head of HBOS
• 2007: Becomes deputy chairman of the FSA following resignation from HBOS in 2006
• 2009: Resigns from FSA
• 2006 - Present: takes on various roles including non-executive director of Compass Group, chairman of Mysis, a trustee of Cancer Research UK, and an advisory role at private equity firm Bridgepoint
• 2013 - asked to resign by board of Bridgepoint

Lord Stevenson, chairman of HBOS from 2001 to 2008

• Begins business career in the 1960s after leaving university
• 1979 - Present: Takes on several non-executive directorships at companies including BskyB, Pearson, Manpower and Western Union.
• 1997 - 1999: Knighted and later made a peer for life, taking a seat in the House of Lords
• 1999: Appointed chairman of Halifax, and later HBOS after its formation in 2001
• 2008: Stands down as chairman of HBOS
• Presently director of Cloaca Maxima, a consultancy, and non-executive director of Waterstone's

"That is not our jobs, we were not set up as a Banking Commission to strip people of their titles," he said.

No formal punishment

"I don't think the public are so concerned about knighthoods, what they want is reassurance that they won't get hit by this again, that people who do such damage are identified and are prevented from practising and that people should not be allowed to gamble with our money and then walk away with huge bonuses."

None of the three former bosses have been formally punished for their roles leading up to HBOS's failure, despite what the commission described as a "colossal failure of management" and a strategy dating back to 2001 that "sowed the seeds of disaster".

Lord Stevenson, who presided as chairman of HBOS throughout its 8-year existence, is currently a non-executive director at the bookseller Waterstone's.

Mr Hornby, who took over the running of HBOS in 2006, has been the chief executive of gambling company Coral since 2011.

In a statement on Friday, Coral's board expressed its full support for him.

"Coral is performing extremely well, and we are really pleased with the great job Andy is doing," a spokesman said.

In its report, the Banking Commission expressed its frustration that City regulators had "taken no steps" to consider banning the three men from further involvement in financial services.

The Chief Secretary to the Treasury, Danny Alexander, said the government would consider whether more should be done to hold those responsible for HBOS's demise to account.

"Unfortunately, the regulatory regime that was in place at the time was nowhere near tough enough," he said.

"We're just taking action this week as a government to put in place a tougher, new regulatory regime to try and make sure that some of the mistakes that were made can't happen again."

Paul Moore, a former HBOS executive turned whistleblower, said the most important thing now was for the three former bankers to "examine their consciences".

"Thirty two thousand people lost their jobs as a result of the merger between HBOS and Lloyds," he said. "That's a lot of people."

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Pressure Builds on Rutgers President - New York Times

Robert L. Barchi arrived at Rutgers University in September as a man with no time to waste.

Gov. Chris Christie had pushed through a plan to reorganize higher education in the state, and he wanted it done in less than a year. No one knew how much it would cost, but it was clear that Rutgers would have to find a way to pay for it.

As Barchi has pushed toward that goal in his first six months on the job, he has alienated faculty, state legislators and the student body. He has been accused of marginalizing needy students, shortchanging major departments and acting detached and even dismissive.

All this has left Barchi little good will as he finds himself at the center of a Rutgers basketball scandal, with faculty and students asking why he waited for news media outrage to fire Coach Mike Rice, instead of dismissing him when he learned of his abusive behavior last fall.

Some faculty members have seized on the crisis to call for Barchi’s resignation. Others suggest that he was so focused on the merger of Rutgers and the state medical schools that he did not have enough time last fall to consider that Rice’s berating of students and throwing basketballs at their heads violated basic university values — and that the fact it was on video was a disaster waiting to explode.

“What we’re struggling with is a president who has a mission that doesn’t apparently involve active involvement in university life,” said Thomas Prusa, a professor of economics. “Maybe if the president was more tuned in he would think that we have 58,000 students, 18 to 22 years old, and what exactly is happening? He is throwing balls at students’ heads? And he’s calling them what? He was not interested in that. He was interested in how do I make this merger work.”

On Thursday, the university continued to draw fire for its handling of the Rice situation. State Senate President Stephen M. Sweeney called for the athletic director, Tim Pernetti, to resign. One of Rice’s assistants, Jimmy Martelli, resigned Thursday after ESPN reported that he too was on videos berating players and hurling basketballs at them.

As more faculty members signed a letter calling for his resignation, Barchi did not respond to requests for comment, and he canceled a long-scheduled town-hall-style meeting at the Newark campus.

The reorganization of the state’s higher education system, passed by the Legislature in June, reflected the sheer force of will of Christie, whose predecessors had tried and failed to pass similar plans.

The chief requirement was the merger of Rutgers and the three schools of the long-troubled University of Medicine and Dentistry of New Jersey, attaching two to the Rutgers campus in New Brunswick and one to Camden, by July 1, 2013. Officials argued that having a medical school would raise the prestige of Rutgers, allowing it to attract more grant money, which would make up for chronic funding problems in a state that spends less than most on public higher education.

But the plan was hard fought, with students and faculty protesting it had been done too hastily and legislators warning that no one knew how much it would cost. Trustees signed off on it only reluctantly in November.

Barchi, a physician who had been president of Thomas Jefferson University, a Philadelphia medical school, was considered an ideal person to oversee the merger.

He has put the cost of the merger at $75 million and has said that the university cannot expect help from the state in paying. In meetings with senior administrators, he has argued that the university can make up some of those costs by attracting more out of state students, who pay premium tuition.

To lure more enrollees, he wants to raise the average SAT scores of incoming students, which would also raise Rutgers’s rankings in the prestigious Association of American Universities. The university’s entry into the Big Ten athletic conference, engineered by Pernetti, was another part of that bid for prestige. That bid could have been complicated by the videos of Rice’s behavior, which Pernetti first saw last November, just as the university was finalizing terms with the Big Ten. At the time, Rice was suspended for three games and fined $50,000, a punishment that critics now view as far too soft.

On Thursday, as rumors of high-level resignations swirled on campus, some Rutgers donors stood behind the university’s leaders, reaching out to board members to voice their support.

Steven Plofker, a real estate developer and donor, said that while Rice “clearly stepped over a bunch of boundaries that are unacceptable,” Barchi and Pernetti deserved another chance.

In New Brunswick, faculty members complain that in trying to pay for the merger, Barchi froze hiring in the school of arts and sciences, the largest faculty on campus.

His first town hall meeting with students, in late February, got terrible reviews in the student newspaper, which reported that he spent most of the time discussing the merger and almost none taking questions from students, and that he dismissed concerns about student debt.

The bid for prestige has set off alarms particularly at the Newark campus, where average SAT scores are lower, but students routinely outperform predicted graduation rates. Newark has some of the programs that Rutgers needs to remain a research university — the business school and a law school among them. But faculty say Barchi wants to turn it into a satellite campus so Rutgers would not have to count its students SAT scores in the average.

Barchi has announced plans to merge the law schools in Camden and Newark under one banner. The university is also building a new business school attached to the New Brunswick campus. It is circulating plans to move many of Newark’s neuroscience programs to New Brunswick, and to eliminate the Graduate School in Newark, moving its strongest programs to a new, larger school in New Brunswick.

The reorganization law was supposed to give Newark and Camden a more equitable share of money, requiring that each get their own separate line item in the state budget. But Barchi’s administration submitted one number for Rutgers in the state budget, and inserted a provision that would void the requirement for separate funding for Newark and Camden. Officials in Camden and Newark say they were barely consulted, if at all.

“The number of things that have been done without even consulting senior leadership on campus is endlessly frustrating,” said Jack Lynch, the associate dean of Arts and Science in Newark.

Barchi’s initial strategic plan for the university designates the mission of Newark as “diversity,” the mission for New Brunswick, “research,” and Camden, “service.” That he is shortchanging Newark, faculty members say, suggests he does not care about diversity.

“To propose to defund and destabilize the most diverse campus in the country is unconscionable, especially one with the level of success of Rutgers-Newark,” said Maggie Shiffrar, dean of the Graduate School in Newark.

“I think he’s in a really tough financial bind,” she said. “He’s made it very very clear that he wants Rutgers to move up in the rankings. How do you do that when you not only have to do things that are expensive, but you’re not getting money to cover those expenses?”

The fear about diversity was fanned last month when Barchi met with a Latino faculty advisory group in New Brunswick. When a professor expressed her frustration as a “female of color” at Rutgers, he replied that he had experienced similar or worse difficulties as a white man early in his career, because departments wanted to hire minorities.

The meeting prompted about 100 faculty members to sign a letter of protest.

Nate Schweber and Steve Eder contributed reporting.

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