City broker supported firm in SFO probe

Fiske & Co has admitted it supplied references for a company at the centre of an alleged 'penny shares' scam, write Severin Carrell and Jim Budd

Fiske & Co, the stock market-listed stockbroking firm, has admitted writing references for an unlicensed, offshore "penny shares" company that is under investigation for alleged deception by the Serious Fraud Office.

The Independent on Sunday has learnt that Fiske sent letters to the offshore banking divisions of Lloyds TSB and the Royal Bank of Scotland to help their clients, Stanley Riebeck Corporation, persuade both banks to open new accounts in Jersey late last year.

In a series of raids in London, Gloucestershire, Barcelona and Grenada last month, the SFO searched 13 homes and business addresses linked to Stanley Riebeck Corporation and five other closely related companies. The six firms are suspected of involvement in a multi-million pound scam involving the sale to private investors of "penny shares" in listed British companies, millions of which were bought for Stanley Riebeck by Fiske and other stockbrokers. There is no suggestion of wrong-doing by Fiske, which is due to publish its interim results this week.

Meanwhile, it has also emerged that the Grenadan government has taken control of Salisbury Merchant Bank, a privately owned bank on the island at the centre of the share-dealing operation. On the day of the raids, Anthony Boatswain, the island's finance minister, appointed accountants PricewaterhouseCoopers to freeze the bank's assets, and those of its subsidiaries such as Stanley Riebeck and an associated firm, Dolphin Trust Company.

Clive Harrison, Fiske's chief executive, said his firm was contacted by PwC officials in Grenada two days after the SFO raids on 23 and 24 July, and told not to take any further instructions from Stanley Riebeck or its executives.

"Recent developments are of considerable concern to us," he said. "We shall be very guided by what happens in the near future from the various authorities."

Fiske's references were requested after Lloyds TSB executives in Jersey wrote to Raun Austin, a businessman who is understood to be a senior Stanley Riebeck executive, in October last year.

The bank said it was worried about the nature of Riebeck's business and was "minded" to close its two accounts in Jersey and to refuse to open a third, which was expected to have a turnover of £12m. The bank was concerned that it "could suffer severe damage to its reputation and possible litigation" if Riebeck's clients discovered that the bank held its accounts.

Soon after this letter was sent, Stanley Riebeck is thought to have approached other banks in the Channel Islands about opening new accounts, including Royal Bank of Scotland International. It is understood that RBS International declined to do so.

Fiske's references said it had dealt with Mr Austin for six years "in his capacity as a licensed dealer" with other sharedealing companies. It insisted that none of Stanley Riebeck's trades had ever been questioned by a regulator, nor did Fiske have any concerns about the conduct of Riebeck's account. In fact, though Mr Austin had worked for a share-trading company, Danesfield Securities, the Financial Services Authority said he had never been a licensed trader.

Mr Harrison said last week that Stanley Riebeck's business dealings with Fiske had been satisfactory, and Fiske had not been told why Lloyds TSB needed a reference. He claimed it was "remiss" of the bank to fail to warn Fiske of its concerns.

"The request from them was rather a bland one," he said. "If they'd specific concerns, I think personally they'd a duty to tell us ... It could have been done on a purely confidential basis, so I'm a bit surprised." Mr Harrison said Fiske regarded the bank's request for a reference as routine. "We were asked actually what we thought was quite a straightforward question ... Was their account being conducted correctly? To which the answer was yes."

Lloyds TSB declined to comment.