From the web site of the London DAILY MAIL 11 February 2009:
"Revenge of the whistleblower: HBOS executive sacked and gagged for warning of disaster reveals truth to MPs
By JAMES CHAPMAN and IAN DRURY
Last updated at 12:20 AM on 11th February 2009
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One of Gordon Brown's top advisers was accused last night of sacking a whistleblower who warned that banks were heading for disaster.
Sir James Crosby, currently deputy chairman of the Financial Services Authority, was the chief executive of HBOS at the time.
The man he sacked, Paul Moore, took his revenge in evidence to a Commons committee.
He said Sir James was the 'original architect' of the strategy that led HBOS into near-collapse.
'Sacked and gagged': Former HBOS risk chief Paul Moore (left) claims he was dismissed by Sir James Crosby (right) after warning the bank was out of control
Mr Moore, who held a senior post at the bank between 2002 and 2005, said anyone 'not blinded by money, power and pride' knew there was something wrong.
He warned the HBOS board but was 'summarily dismissed' by Sir James and subjected to a ' gagging' order.
In a dramatic session of the Treasury select committee, four other former bankers expressed 'profound' apologies for the failure of their banks.
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But the ex-chiefs of HBOS and Royal Bank of Scotland were accused of arrogance after insisting they were not personally to blame for fuelling the economic crisis.
Mr Moore's claims are acutely embarrassing for the Government, which has spent months condemning ' irresponsible' bankers.
Sir James, one of the Prime Minister's favourite advisers, has led a series of reviews for Downing Street and the Treasury, including one into the housing market.
The Tories said the allegations called Mr Brown's judgment into question and demanded an urgent investigation.
Michael Fallon, the senior Tory on the committee, said that if Mr Moore's claims were true Sir James's position was 'untenable'.
HBOS was crippled by the credit crunch and had to be taken over by LloydsTSB. The 'super-bank' was then bailed out with taxpayers' cash.
Mr Moore was the bank's head of group regulatory risk, with the task of ensuring it complied with City rules. He told the committee he warned directors as early as 2004 that the company was in danger of spiralling out of control.
He said the bank was going too fast, 'had a cultural indisposition to challenge' and was a serious risk to financial stability and consumer protection.
He said: 'I told them their sales culture was significantly out of balance with their systems and controls.'
Mr Moore said he had probed 'numerous' actual or potential breaches of FSA regulations and challenged ' unacceptable practices', some by very senior executives.
As a result, he claimed, his team was threatened by executives and he was sacked and replaced by someone who had never been a risk manager'.
Mr Moore said he received substantial damages after signing a gagging clause - but had now decided to tell his story. He could do so because the committee's Parliamentary privilege protects him from any action over breaching the gag.
Mr Moore said he was sure many other regulators, auditors and bankers realised 'the emperor was naked' but failed to speak up for fear of being branded troublemakers.
He added: 'Sadly, no one wanted to speak up for fear of stepping out of line with the rest of the lemmings who were busy organising themselves to run over the edge of the cliff behind the pied piper CEOs and executive teams that were being paid so much to play that tune and take them in that direction.'
He said it was obvious that economic growth 'based almost solely on excessive consumer spending, based on excessive consumer credit, based on massively increasing property prices which were caused by the very same excessively easy credit, could only lead to disaster'.
Grilling: From left, Lord Stevenson and Andy Hornby (HBOS), Sir Fred Goodwin and Sir Tom McKillop (RBS) before the Treasury Select Committee
Mr Moore said risky bank practices had led to 'millions of people in excessive debt, tens of thousands who will lose their jobs and many more affected by the precipitous fall of the HBOS share price'.
Former HBOS chairman Lord Stevenson, one of the ex-bankers questioned by the MPs, denied Mr Moore's claims and insisted that an independent probe had concluded they were untrue.
Shadow Chancellor George Osborne said: 'Paul Moore has made very serious allegations about how his warnings about the risks being run at HBOS were dismissed by the then chief executive, James Crosby. 'Given that, as Chancellor, Gordon Brown appointed Sir James as deputy chairman of the FSA and that as Prime Minister he relies upon him as a key economic adviser, the Government need urgently to investigate the allegations and discover the truth.
'What is at issue here is Gordon Brown's judgment and the people he takes advice from.'
Liberal Democrat Treasury spokesman Vince Cable said: 'This shows there was a culture at HBOS where risks were ignored in the pursuit of ever-greater profits.
'It is deeply worrying that a whistleblower such as Paul Moore was elbowed out when he was clearly one of the few voices of reason. For too long greed and gambling ruled the City, which the bankers should be ashamed of.'
Mr Cable also claimed that Sir James had privately accepted the banks were taking risks but believed he would be fired if he changed HBOS's behaviour while other banks pressed on and made huge profits.
HBOS said last night: 'HBOS refutes these allegations, which have no substance or merit'.
Downing Street said: 'James Crosby is not a member of the Government. He is somebody who has completed a review for the Government.'
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Here's what readers have had to say so far. Why not add your thoughts below?
Failure should not be rewarded. Performance related means just that and they have not performed in the last 24 months so no rewards surely that is incentive enough for them to be more cautious and the performance pay that is paid should be tiered to targets that have been achieved. Sir Fred and the others should also be stripped of their titles.
In a way it's partly the governments fault for giving the banks too much autonomy and not keeping an eye on things. And the influence and pressure to please the city was for the banks too much, thinking they were infallible they became delusional in what they thought they could achieve. Any sane person would have been worried about all the debt they were getting into.
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