Sting in the tail of Manx bank crash report

A DAMNING indictment of sloppy and ineffective banking supervision on the Isle of Man in the years leading up to a bank crash is contained in a report being published tomorrow.

The Chadwick report on the Isle of Man Savings and Investment Bank, which collapsed leaving 3,000 depositors owed pounds 42m more than a decade ago, is finally being released by the Manx government.

The 500-page report, completed by John Chadwick QC in 1986, is critical of senior local treasury officials and politicians who were supposed to be supervising Manx banks.

It was in July 1982 that the Manx government treasurer, William Dawson, withdrew the SIB's licence and closed the doors of its premises opposite the island's principal high court in Douglas.

An immediate investigation began, with Mr Chadwick assisted by the accountants Michael Jordan and Timothy Beer, who were also joint bank liquidators. They found the SIB had been insolvent for 18 months prior to its closure and said quarterly returns sent to the treasury supervisors should have disclosed this fact.

Over the subsequent months the full extent of the SIB's indebtedness was unearthed, but nothing was done by the Manx authorities. There followed years of delay that have been deprecated by two judges and a commission of inquiry.

It was not until 1988 that the first arrest was made - of the man always described as the bank's beneficial owner, Victor Gray. His was the first of eight arrests made by Fraud Squad officers on the island and mainland forces. But the round-up took two more years, and it was not until 1990 that the trial began.

The criminal proceedings collapsed within weeks. First Mr Gray, 67, who was said to have suffered a complete memory loss, was deemed unfit to defend himself. Judge Thomas Field-Fisher then freed the remaining seven former bosses, lawyers and accountants with the SIB, saying the eight years of unwarranted delay had made a fair trial impossible.

In halting the criminal trial Judge Field-Fisher dropped broad hints to the Manx authorities that they should use the pounds 10m the proceedings would have cost and give official compensation.

That has still not happened. Ten years on, the savers have only ever had 27.5 per cent of their cash back from interim dividends made by the liquidators. They are not expected to get anything more than a final 1 per cent left for distribution.