Co-op affair claims Hambros victim

Peter Large, the Hambros corporate financier at the heart of the failed pounds 1.2bn takeover bid by Andrew Regan for the Co-operative Wholesale Society, has asked to stand down from the bank while his role is investigated by solicitors Norton Rose. A report on the affair, commissioned by Hambros after discussions over the weekend with the Bank of England, is now expected to be pushed through by the end of the month.

Hambros said yesterday it had "agreed to a request from Mr Peter Large to be relieved of his executive responsibilities for the time being to enable him to concentrate upon giving full attention to the inquiry being undertaken by Norton Rose".

The withdrawal of Mr Large, which Hambros denied was a suspension of the banker, was part of the continuing fall-out from the Co-op affair which saw attention turning to the role of Schroders in the attempted takeover and the liquidation of Galileo, the vehicle set up for the bid.

Schroders yesterday admitted that three of its fund managers bought shares worth pounds 11,000 in Lanica Trust on their own personal accounts last November, a month before its own smaller company funds made an investment in Mr Regan's Guernsey-based investment trust. The bank said it was entirely happy that the three had acted properly in their dealings and denied rumours circulating in the City yesterday that it had suspended a fund manager.

Imro, the investment management regulator, would not confirm whether it had started an inquiry into the dealings.

Schroders admitted the dealings in a letter to its institutional investment clients citing the "considerable amount of press coverage" of the CWS bid, some of which had mentioned Schroders as being an investor in Galileo. The bank said it deplored the use of any "illegal or improper practices'', adding it was unhappy its name had been associated with such practices in any way.

It added that: "At no time, either then or subsequently, has Schroders seen any confidential CWS documents." Last week a list of 17 companies, including Goldman Sachs, Hambros, Jupiter International, Lloyds Bank Registrars, Nomura, Price Waterhouse, Societe General, UBS and JP Morgan were named in court as having received leaked documents.

News of the dealings emerged as Galileo, the vehicle set up by Mr Regan, was put into voluntary liquidation by its shareholders, Lanica, Schroders, stockbroker Killik & Co and the fund manager, Jupiter International. According to Jason Elles, a partner of Ernst & Young, the liquidator, Galileo's creditors, mainly its professional advisers, will be repaid in full the pounds 2m they are owed. There will also be an unspecified return to Galileo's shareholders, who invested pounds 9.6m to cover the due diligence costs of the failed pounds 1.2bn bid. Individual shareholders include David Evans, the Tory MP for Welwyn Hatfield. It is thought that the pounds 600,000 invested in Galileo by Lanica Trust will not be returned.

However, the Co-operative Wholesale Society still intends to pursue Galileo for damages. A spokesman said: "The CWS intends to register its interest with Ernst & Young and will be lodging a contingency claim with them as creditors. The Galileo decision to go into insolvent liquidation is not surprising."

A spokesman for Schroders confirmed that one of the fund managers who had dealt on their own account was Andrew Brough but declined to name the other two. He said they had complied with internal rules regarding share dealings, buying their shares through the firm and then notifying directors of Schroders Investment Management once it became clear that the funds they managed were likely to make an investment. The acquisition of 115,000 shares in Lanica was approved by an independent group of Schroders directors.

At Hambros, the Norton Rose investigation is expected to focus on when details of the deal were passed on to Sir Chips Keswick, the chairman of Hambros who wrote to CWS chief executive Graham Melmoth on Monday 21 April defending the bank's relationship with Mr Regan before performing an embarrassing volte- face just one week later.