HSBC tax files return to spook CEO Gulliver
LONDON • Fresh details showing how HSBC Holdings Plc. helped wealthy clients avoid taxes have come to haunt chief executive officer Stuart Gulliver.
It’s about eight years since computer technician Herve Falciani took five disks of confidential information from Europe’s largest bank, sparking investigations worldwide. A report from the Washington-based International Consortium of Investigative Journalists on Sunday revealed the depth of HSBC’s handling of secret accounts for an array of criminals.
“Gulliver must be absolutely squirming,” Christopher Wheeler, an analyst at Atlantic Equities in London, said in an interview. “I suspect he doesn’t feel they’re bang to rights, but would love to put it away because we were talking about this two or three years ago.”
Mr. Gulliver’s efforts to clean up the bank by spending billions on compliance and internal controls in the wake of scandals are being overshadowed by the revelations, which have spurred a political outcry. HSBC’s private-banking arm profited for years by handling secret accounts for clients, from arms dealers to drug cartels, according to the report.
“This seems like flagrant breaching, breaking of the rules, which could attract criminal liability,” Chuka Umunna, the British Labour Party’s business spokesman, said in an interview with Bloomberg Television. “It isn’t to do as much with regulation, as people frankly breaking the law, that’s what tax evasion is.”
The U.K. parliament is to hold hearings to consider whether HSBC facilitated tax evasion, Margaret Hodge, chair of Britain’s Public Accounts Committee, said in a speech in London late on Monday.
The bank shouldn’t be “allowed to escape responsibility for their role in cheating the British government out of millions of pounds of tax,” Ms. Hodge said. “We will require HSBC to give evidence — and we will order them if necessary.”
The bank’s former and current managers face an international arrest warrant if the bank doesn’t co-operate effectively with the tax probe, Belgian prosecutors said Monday.
The report refers to HSBC’s private banking arm as of 2007, when Mr. Gulliver was head of the bank’s securities unit and former CEO Stephen Green was chairman. Mr. Gulliver became CEO in 2011. HSBC has increased compliance staff to 6,000 from 1,500 over four years and is spending an additional US$500 million to US$1 billion, the bank said in August.
HSBC, in a written response to the report, said its compliance efforts had been insufficient and that the bank had undergone “a radical transformation” since 2007 and now enforced far more strin- gent reporting requirements.
“Past scandals pour smoke on the investment case and leave the outcome a little bit opaque for shareholders,” said Chris White, who helps to oversee about £3.2 billion including HSBC shares at Premier Asset Management Plc. “The shares are fundamentally quite cheap, but there remains uncertainty about the regulatory outlook and the fines which will be coming its way.”
HSBC said it would cooperate with the authorities on both occasions.
“From a credibility perspective the reports don’t particularly help the company,” Gary Greenwood, an analyst at Shore Capital said. “From an investment case perspective, it’s a question of if there is litigation on the back of this from the tax authorities” and how clients feel about the disclosure, he said.