RBS executives claim they were intimidated

A Labour peer is demanding answers after two Sunday newspaper reports elevate the RBS scandal to ‘Enron-like’ proportions

BY Jack Bremer LAST UPDATED AT 12:50 ON Mon 23 Mar 2009

The scandal surrounding the Royal Bank of Scotland reached new heights on Sunday with one Lib Dem politician likening it to Britain's Enron - the US corporation brought to its knees in 2001 by systemic fraud - and speculation mounting in Westminster that the bank's auditors, Deloitte, might be sued for failing to control the reckless overspending.

There were two serious allegations in the Sunday papers: first, the Observer revealed that three of the bank's former non-executive directors may have been threatened with the sack for asking too many questions about RBS's affairs before the bank was discovered to have lost £24 billion last year; second, the Sunday Times interviewed an anonymous whistleblower who claimed that the disgraced former chief executive, Sir Fred Goodwin, wasted the bank's money on an extravagant lifestyle for himself and senior colleagues while the bank was running up its losses.

The Observer report claims that, after being briefed by former RBS insiders, Lord Foulkes of Cumnock, a senior Labour politician, has asked the City watchdog, the Financial Services Authority, to pursue the claims that senior executives who asked questions at RBS were intimidated. "If it were to transpire that executives were pressured in such a way, then that is a most serious matter indeed that needs urgent action," he said.

Foulkes is also believed to have been disturbed by the reports on Saturday that RBS misled investors over its exposure to bad debts. It was reported that more than £30bn of "toxic" sub-prime mortgages were bought for RBS by traders in 2007 without the board being informed - a claim denied by the bank.

Matthew Oakeshott, the Lib Dems' treasury spokesman in the Lords, said: "I have never come across such damaging claims of megalomania, cover-up and intimidation... Never mind Northern Rock. I am really afraid that RBS will turn out to have been another Enron."

The incorrect choice of biscuits for the executive’ tea was a disciplinary offence

The Sunday Times, meanwhile, says that an employee who recently left RBS has reported an extraordinary degree of extravagance at Sir Fred's level in the bank. Among the whistleblower's charges are that:

• £5.3m was spent on refurbishing a building in Edinburgh just to be used for entertaining. Dubbed "Sir Fred's Pleasure Dome" by staffers, "mere mortals" at RBS were not allowed to use it. The £100-a-yard carpet had to be changed, some of it twice, because Sir Fred "didn't like the shade of amber".

• An entire lobby at the bank's former HQ in Edinburgh was redecorated with £1,058-per-roll watered silk wallpaper after a cleaner accidentally made a small blemish with brass polish on the wall near Sir Fred's office.

• Fruit was flown in from Paris daily, meat had to come all the way from Yorkes Butchers in Dundee, while the incorrect choice of biscuits for the executives' afternoon tea was a disciplinary offence. (The mistaken inclusion of pink wafers on one occasion led to a stern memo headlined 'Rogue Bisuits'.)

• At the bank's expense, 24-hour security was ordered at Sir Fred's £3m Edinburgh home after children broke into the garden while he was on holiday and played on the swings.

According to the Sunday Times, Vince Cable, the Lib Dems' deputy leader, has told the FSA that the whistleblower's claims raise "fundamental questions" about whether Deloitte and RBS's non-executive directors were doing their jobs properly. · 

For further concise, balanced comment and analysis on the week's news, try The Week magazine. Subscribe today and get 6 issues completely free.