Wallace Smith liquidator sends 500m pounds writs to banks

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The Independent Online
WRITS demanding nearly pounds 500m from Royal Bank of Scotland and National Westminster have been issued by the liquidator of the Wallace Smith Trust, the bank that collapsed last year.

The money claimed is more than the loan book of Wallace Smith, which stood at pounds 371m when the Bank of England called in the liquidators in April last year.

Tim Hayward and Bill Ratford of the accountants KPMG Peat Marwick are claiming that non- transferable bankers' payments - the equivalent of crossed cheques - made out to Wallace Smith Trust were in fact paid into the account of its sister company, the futures broker Wallace Smith Holdings, where Peat was also appointed liquidator last year.

Royal Bank of Scotland yesterday admitted that it had been sued for pounds 418m. It is vigorously resisting the claim, and has pointed out that even if it was liable, there are monies that were in accounts of Wallace Smith Trust that might have been due to Wallace Smith Holdings and should be set against this amount.

NatWest revealed that there was a claim against it from the liquidator of a former customer, demanding pounds 71m and interest. The former customer is understood to be Wallace Smith Trust.

Neither bank has made a provision in its accounts for the claims.

Peat is also suing Coopers & Lybrand because of audits of Wallace Smith conducted by Deloitte Haskins & Sells, the accountancy firm that merged into Coopers.

The companies' failures led to an investigation by the Serious Fraud Office and the arrest of the groups' former chairman, Wallace Duncan Smith. The 58-year-old Canadian, who was a prominent member of the Bruges group, the anti-Common Market lobbyists, had been charged with fraud offences involving pounds 97m. Earlier this year he successfully challenged the SFO's powers to question him without a right to silence.

Wallace Smith Trust was a specialist in the inter-bank markets, taking deposits from one bank and lending to another in the hope of making a profit on the margin. At the time of its collapse, it had shareholders' funds of just pounds 13m and was estimated by its liquidator to have a shortfall of pounds 100m between its assets and its liabilities.