Deloitte Drops BCCI Case against Bank of England

The Bank of Credit and Commerce International folded in one of the most spectacular collapses the financial world ever saw. On July 5, 1991, the Bank of England closed it down following an auditors’ report that said the bank was involved in “widespread fraud and manipulation.” Earlier this week, the liquidators, Deloitte, withdrew the case against the Bank of England, bringing the whole sorry mess to an end (almost). Deloitte, however, could have ended all of this back in January.

The liquidators have been quite successful in recovering funds for creditors. Estimates are that they have recovered about 81 cents on the dollar. Price Waterhouse and Ernst & Young, BCCI’s auditors, coughed up $175 million to settle. A further $400 million claim came in 1999 against the Emir of Abu Dhabi, a major shareholder. But in taking on the Bank of England, they appear to have overstepped their brief.

Part of the problem was whether the Bank of England could, as a point of law, be sued. In its 300 year history, no case had ever been brought against it. In withdrawing the claim, Deloitte said, “The case has continued far longer than anticipated, with far greater costs than expected, and it could continue for several years to come. If the case were to continue, it could last for several more years allowing for appeals and involve further enormous costs.” It had already spent about £38 million in pursuing the case.

However, after 12 years of fighting, Deloitte’s lawyers got the case before a judge, suing the Bank and 22 of its officers and staff. Yet, there seemed to be a missing detail – evidence. The judge in the case, Mr. Justice Tomlinson said to 73-year-old Peter Cooke (not Dudley Moore’s ex-partner but rather a former Bank regulator) that he had “no doubt that the very serious allegations of impropriety and dishonesty against you are wholly without foundation,” adding that his words applied to the other officials at the Bank involved in the case. But most damning, he also told the court, “I would just like to say this, that it has been a matter of surprise to me for about a year now that the action [is] being pursued.” He further suggested that the case was not about justice but about forcing a financial settlement.

The Bank of England, however, is not about to let the matter die. Deloitte owes the bank damages. According to lawyers for the BoE, the amount is at least £70million. Dicken’s Bleak House was about a never-ending case, Jarndyce v. Jarndyce, in which legal costs ate up an entire estate in dispute. Deloitte should settle with the Bank before the 81 cents on the dollar it has won erodes to nothing.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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