Legal Theft

I should begin with a disclaimer.

Over the last eight years I have owned two successful and profitable businesses which had to be liquidated because the bank I was with moved the financial goal posts. In both cases, my local “relationship manager” was powerless to help mitigate a blanket decision made much further up the food chain. So the news over the last few days regarding the actions of RBS in closing down small businesses seems less remarkable to me than it will have been to many others.

The assertion is that these businesses were closed by the sudden withdrawal of agreed lending in order that RBS could acquire the assets of the businesses at prices below the market value. It is worth noting that the story has been brought to our attention by a businessman who was invited to join the Department of Business Innovation and Skills and had not, apparently, been subjected to the compulsory briefing on how state corporatism works and what truths may not be stated.

But I have to tell you that what has been revealed thus far is [In Ken's opinion -Ed] only the tip of the iceberg and all the major banks were following similar policies of preying on their customers – weakening them, killing them, then picking their bones.

For even more outrageous and scandalous examples it is worth reading some of the wonderful investigative reporting of Ian Fraser, particularly into the HBOS operation in Reading.

This was a scam run by the wonderfully named Lyndon Scourfield and involved Mediterranean yachts, suitcases of cash and East European call girls. So far, ten people have been arrested but, given the record of the Serious Fraud Office in prosecuting financial crime, I don’t suppose they are too concerned.

And, in parallel with the crimes perpetrated by the banks, it could be argued that the consequences of the actions of the asset factoring companies are even more devastating. After reading these horror stories, you will be astonished we have any small businesses left.

Furthermore, it is a strange fact that most of these crimes have been totally ignored by the main stream media. Not being a conspiracy theorist I assume that they think that the public are either uninterested in financial matters or too stupid to understand them. However it is a fact that, for every business destroyed, real people lost their jobs, homes, marriages and, in some cases, their lives.

But what has all this got to do with libertarianism?

Well, I recently wrote here about the detrimental effects of the energy cartel currently operating in the UK and my concerns regarding the unfettered power of state corporatism. The banking scandals referred to above are yet another symptom of the same problem – a sector protected by state regulation, actively conniving to make excess profits and protected, by the state, from failure.

It is increasingly clear to this libertarian how the battle lines are, and will be, drawn. On the one side we have the large corporations which collude with and feed off the state and are permitted, by government, and the uneven application of the rule of law, to feed off us. On the other side you have everybody else.

This story is important because I believe the natural affection that libertarians have for property rights and markets should not blind us to the dangers and excesses of the capitalist system currently operating in this country and we should understand that there can be no legitimate right to assets that have been stolen, however lawfully.

 

 

 

  4 comments for “Legal Theft

  1. Nov 26, 2013 at 2:14 pm

    I sympathise Ken. I once worked for a small eCommerce software firm and ended up with similar suspicions. Namely, that bankcrupcy is simply a tool used to extract value.

    The company were not awful to work for, I did the occasional unpaid overtime but they were flexible when I turned up a little late sometimes. I learned some technology working there that has kept me in work for a while, but they ended up owing me tens of thousands.

    It turned out they were smaller than they looked. I’d contracted into a firm that had no permanent employees and seemed to be just a repository for debts and contractual obligations. It owned some source code, which we worked on, but the people I worked with who really knew the code – and therefore constituted the businesses main asset – worked for a related company with a similar name. When the client “stopped paying” the business folded with debts of £1.4m, and I never saw a penny of what I was owed. It turned out that the expected revenue was from commissions and the client was not obligated to handle sales through the system. There was nothing owed to the company I worked for and the client did not owe them any money either – there was nothing for administrators to drag in.

    The twin companies went into a pre-packed administration and a third company with the same directors and staff started work as a “service provider” to the administrators, with access to the same code. All the real assets – the people – just moved over to the new firm and contractors like me were left to rot, all we got was stalling, static and a fascinating list of all the other debtors.

    The way things were set up made it seem, in my opinion, as if the directors had intended for this to happen, they intended to be bankcrupt and for me to loose what was owed. Basically they robbed me of my labor. Also, the client, who is a major household name, ended up with a copy of the source code under escrow agreements and tried to pick up some of the contractors. You have to wonder if they were also forwarned and deliberately withheld the sales opportunities so that no commission would acrue; to force the escrow contract to kick in. How the ownership of the intellectual property ever ended up with the parent company remains a mystery, but if I managed to prove the firm had any assets they would not be worth £1.4m and I would be last in line anyway.

    This led me to fantasise about what kind of institution would be able to stop this happening. I dreamt about some kind of Unjust Outcomes Insurance (UOI) so that if you end up with a bankcrupt client and broken promises then the insurance would pay for lawyers to intevene and produce a more just outcome, for example, one which did not let liars profit. There would be positive externalities, which would accrue to the insurrer but you would never get anything back except a feeling that there was a system that worked. Small businesses would be made more efficient too. At best the insurers would be able to concentrate on monitoring what the company owed and would forewarn the creditors that there was danger. Happy to explain this idea over a pint sometime.

    I wonder if such a system would have helped you and the alleged victims of RBS?

    • Nov 27, 2013 at 11:40 am

      The legislation, in 2002, which permitted pre-pack insolvencies has caused many of the problems you outline. I sometimes wonder whether the whole concept of limited liability is flawed.

      In the old Scottish free banking system the owners of a bank were jointly and severally liable for any shortfall in funds. Needless to say they didn’t take many risks.

  2. Nov 26, 2013 at 3:04 pm

    I am sceptical that abuses by big corporations can be limited by any regulatory environment or protective structure such as that suggested by Simon.

    Unfortunately I am not at all optimistic that we will see improvements in the near future although there is some hope to had from technology.

    The emergence and rapid growth of peer to peer financing, crowd funding and crypto=currencies means that there is a growing opportunity for people and companies to bypass or reduce their reliance on huge banks and financial institutions. The trans-national possibilities offered by internet based resources provides potential for the power of the state and mega corporations to be trimmed in the longer term.

  3. Guy Montrose
    Nov 27, 2013 at 2:33 pm

    Very well written Ken and exposes the banks for what they are!

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