Top City financier blackballed by the FSA for 'reckless disregard' to risk

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The Independent Online

Sir Michael Richardson, one of the City's oldest and best known practitioners, has been banned for life from working in financial services after writing letters on NatWest headed paper that could have been used for money laundering.

Sir Michael, 76, was a close friend of Lady Thatcher as an adviser to the Government on most of its early privatisations. His career began at the stockbroker Panmure Gordon and included a stint at Cazenove before he became chairman in 1990 of the broker Smith New Court. His reputation was tarnished by an association with the late Robert Maxwell, having advised on the flotation of the Mirror Group.

Sir Michael's misdemeanour was writing five letters between October 1998 and August 1999 as vice chairman of Hawkpoint Partners, the corporate finance subsidiary of National Westminster Bank. The correspondence said $350m (£240m) was available to an acquaintance, dubbed "Mr A", a contact widely thought to be Alan Shephard, a discharged bankrupt. The letters, on Hawkpoint paper with the footnote "A member of the NatWest Group", were written to Mr Shephard at his request, and according to his dictation.

The Financial Services Authority, under Securities and Futures Authority rules, yesterday confirmed it had banned Sir Michael from any job requiring SFA registration and had required him to pay £85,000 in costs. The move follows an appeal by Sir Michael against an SFA investigation mounted last July, which concluded he was not "fit and proper" to be SFA-registered. The appeal was heard by an independent tribunal chaired by Lord Bridges, the former Law Lord.

The FSA said the letters to Mr A were typical of those used in money laundering or "advance fee fraud", where individuals offer huge loans upon receipt of an upfront fee, showing letters of reference from reputable banks to demonstrate that they can raise the funds. Sir Michael had failed to appreciate, or ignored, the risks in writing the letters, and did not verify what he had been asked to write.

"Sir Michael's complete lack of care [is] serious enough for expulsion, regardless of who [the letters] were written for. There is no suggestion that Sir Michael deliberately sought to facilitate criminal activity," the FSA said.

In its strongly worded judgment, the tribunal said Sir Michael "acted in reckless disregard of information in his own files which should have alerted him that there could be above-average risks associated with dealing with his acquaintance."

The "primary vice" of Sir Michael's letters was that "they provided ... a wholly spurious cloak of respectability derived from the imprimatur of such a respectable financial institution as the NatWest Group."

The tribunal concluded: "The catalogue of omissions of normal prudence and, despite [Sir Michael's] long experience, his seeming lack of appreciation of what he had failed to do, drives us to the conclusion that his conduct went far beyond mere errors of judgement."

Sir Michael's files contained correspondence from American lawyers seeking reimbursement from advance fees paid in transactions that were related to three letters he had written prior to June 1999.

In July 1999, a senior NatWest manager visited Sir Michael personally to tell him that the bank "wanted nothing to do with Mr A", after Sir Michael proposed that NatWest do business with him.

The manager is thought to be Christopher Fitzgerald, then NatWest's general counsel. He has since been appointed chairman designate of the FSA's regulatory decisions committee. He told Sir Michael that criminal proceedings had been brought against Mr Shephard in the USA concerning his advance fee loan activity. Sir Michael then contacted Mr Shephard, who faxed details of the proceedings, which dated back 17 years and had been settled by a criminal penalty.

Sir Michael did not mention the letters to Hawkpoint or NatWest, which learnt of them through a tip-off in August 1999. Sir Michael resigned from Hawkpoint the following month.

Sir Michael yesterday pointed to FSA comments that there was no suggestion of "dishonesty, lack of integrity or personal gain" on his part.

"I should not have done what I did although the circumstances are not as black and white as [the FSA] statement suggests," he said. "A lifetime ban is extreme. I am happy to be judged by the view taken of 50 years of decent hard work in the world of corporate finance, rather than the FSA's very harsh view of a small error at the end of my career."

A friend of Sir Michael said NatWest should have asked him to resign as soon as they became concerned. "The letters were written on Hawkpoint paper. No one would have been daft enough to think that Hawkpoint was itself guaranteeing the funds ­ it is a corporate finance house, not a lender," the friend said. "But we are not taking issue with the facts of the matter."