Heads roll at Hambros over Co-op bid

Norton Rose report prompts resignations; `Having stood alone for so many weeks taking all the flak, I am delighted that the true story surrounding the CWS bid is beginning to emerge. The events of this week make it perfectly clear that the advice Galileo paid so many millions of pound for, and followed every inch of the way, was inept' Andrew Regan
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The Independent Online
The axe fell at Hambros yesterday, as senior corporate financiers took responsibility for the bank's role in the pounds 1.2bn failed bid for the Co-operative Wholesale Society. Three of the bankers closest to the affair resigned after being criticised in a report by the Norton Rose firm of solicitors .

The report said there were failures in the implementation of Hambros' internal control procedures and that the conduct of the Hambros employees involved in the Co-op bid, "fell well short of the standards of good business practice".

Carrying the can for Hambros are Nigel Pantling, head of corporate finance, and Peter Large and Andrew Salmon, both of whom were directly involved in the deal. Disciplinary action is also to be taken against other Hambros employees involved in advising Andrew Regan, the entrepreneur, and his Galileo takeover vehicle in its discredited bid for the Co-op.

Mr Regan said yesterday: "Having stood alone for so many weeks taking all the flak, I am delighted that the true story surrounding the CWS bid is beginning to emerge. The events of this week make it perfectly clear that the advice Galileo paid so many millions of pounds for, and followed every inch of the way, was inept."

The report, which the bank says will not be made public, concluded: "Those at Hambros who knew that confidential information from the CWS had or might become available without proper authority failed to appreciate that it was not appropriate for them either to receive or use that information".

The investigation also found failures of implementation of Hambros' internal control procedures although the procedures themselves were not believed to be seriously deficient. It recommended changes to tighten internal controls and the introduction of new measures.

Those changes include client and transaction clearance procedures, and a strengthening of the compliance function and its relationship with the corporate finance division. Hambros said it would introduce the changes as quickly as possible and institute further reviews of its high level controls.

The Norton Rose report is the latest in a string of embarrassments the CWS bid has caused for Hambros. It has been forced to make an unreserved apology to the CWS, pay pounds 750,000 in compensation, and has now lost three of its senior executives.

The bid collapsed after a sustained counter attack through the courts by CWS and the withdrawal of financial backing for the ambitious plan.

Hambros supported its client to the bitter end, despite repeated questioning from Graham Melmoth, CWS chief executive, about the use of confidential Co-op documents. Mr Regan, his business associate, David Lyons, and former CWS retail controller, Allan Green, still face possible prosecution by the Crown Prosecution Service, which took over a private action launched by the CWS.

Hambros said yesterday it was unable to publish the report in full for legal reasons but had handed it on to the Bank of England and the Securities and Futures Authority. Rival bankers said the continuing uncertainty caused by the non-publication would further damage the bank's reputation and depress already low morale.

One said: "This is probably the end of Hambros as a serious force in corporate finance. They have been struggling for some time." Hambros has been attempting to rebuild its corporate finance operation, which continues to generate poor returns.

Attention will now shift to whether the Bank of England and the SFA will take further action, either against the three bankers who have resigned or against more senior figures at Hambros. It is understood the regulators will look at the extent to which Sir Chips Keswick, chief executive, and Lord Hambro, chairman, were aware their client was mounting a bid with allegedly stolen information.

Even after Mr Green, the CWS director, admitted in court that he had handed confidential information to Mr Regan, Lord Hambro stood by his bank's client. Hambros said that having taken legal advice and assessing the ramifications it had decided to support Mr Regan in developing his Co-op bid.

The three Hambros executives are just the latest in a string of casualties from the Co-op affair. Earlier this week Nigel Campion-Smith, a partner at Mr Regan's lawyers Travers Smith Braithwaite, resigned to save the firm further "embarrassment".

Mr Regan,yesterday closed his astonishing attack on his advisers by saying: "I always believed I could rely on my City advisers, but the unpublished Norton Rose report obviously shows that I was wrong to do so. I, and Galileo's other investors, still await an apology from those who took Galileo's money."

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