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March 03, 2005

03/03/05 - Follow the Right Money

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Table of Contents – Mar 2005


(Poster’s Note: Cindy Hill is a lawyer and a member of the Vermont INA unit. If you have any questions or need help with media, want to contact Cindy, etc, contact Graydon Wilson, VT INA Chair at: I have tested the links in this piece. Four needed minor adjustments in order to work. Jay)


Follow The Right Money,

Cindy Ellen Hill, Esq.

It is an oft-quoted strategy of law enforcement, when faced with theft and a criminal organization, to “follow the money”. In the wake of the Northern Bank robbery of 20 December 2004, PSNI has attempted to apply this strategy, chasing burning, blowing bank notes through the streets of Northern Ireland and into the bathroom of an RUC sports club. They widely desclaimed the IRA, rounded up the usual suspects, shortly thereafter let them all go, called in retired detectives and MI-5, and pointed fingers so powerful that they disrupted the very heart of the political process in Northern Ireland.

All for naught, as PSNI is following the wrong money.

The question presented by the Northern Bank robbery is not, Where did the money go. It’s, Where did the money come from. Tracing the history of Northern Bank’s management, the inescapable answer appears: one of the world’s largest bank robberies, which managed to occur right under the noses of PSNI in the heart of a city governed by law nearly martial in its applications, was an inside job.

In the late 1990's, the Irish Parliament debated the fate of the National Irish Bank. The bank had been caught by the Irish regulatory agencies engaging in long term, widespread consumer rip-offs since its corporate inception in 1988. Committee reports from the Oireachtas refer to it as “scandal on a monumental scale” and “fraud and theft on a wide and pervasive scale”., 26 March 1998. In April 1998, Ireland created “flying squads” of accountants and inspectors to investigate Irish banks. This was primarily to try to regain public confidence in Ireland’s banks.

The scandal created opportunity for savvy buyers.

Taking advantage of the upheaval, National Australia Bank Group added National Irish Bank and its Northern Ireland affiliate, Northern Bank, to its roster of small banking entities in 1999 (this date is reported differently in different places). Northern Bank is part of the National Australia Bank Group; Northern has 95 branch offices in NI plus 13 business banking centers. It is the top Northern Ireland business bank, and sports a large offshore banking division.

Don Price, a former executive for BP oil, was named to head both Irish banks after the former Chief Executive quit when his family was kidnapped. Mr. Price took over amidst massive investigations regarding both Irish banks. He had no prior banking experience, but had been a newspaper executive after BP – a career he attributes to teaching him critical media skills and the ability to work on fast deadlines without taking the time to agonize over decisions.

In 2004, NABG was rocked with a foreign currency trading scandal. Three “rogue foreign exchange traders” in Sydney and one in London did them out of what APRA found to be A$360 million. These four traders, named and their acts described in detail at in an article by Kavaljit Singh, were not quite as “rogue” as NABG press release held (and the NABG public claim of A$180 million in losses was absurd on its face).

Investigators revealed a culture of corruption and risk taking with lax corporate controls, and clear knowledge of the trader’s actions up the chain of management. Seventy five steps of improvement were recommended including improvement of the state of their held assets. It was not the first time NABG was the site of fiscal disaster. Their ill-fated purchase of America’s Country Home mortgage division several years earlier had similarly gutted their assets.

Meanwhile, National Irish Bank was still up to its old tricks. An investigative report commissioned by the Irish government and done by Price Waterhouse Cooper revealed widespread high-level incompetency and corruption. According to the judgement, PWC “detailed a culture where management abrogated responsibility and sought to suppress bad news”. And Irish court ruled on 23 July 2004 that National Irish Bank must make amends to the tune of 64 million euros for fraudulent customer charges and tax evasion, as well as the cost of the investigation.

Price Waterhouse was ordered by the court to maintain all the documentation of the scandal for a period of three years. 1998 No. 89 COS and 1998 No. 132 COS. After that, the documentation will be destroyed. In the judgement, the court noted that 28.7 million euros had already been paid out.

That leaves 37.3 million Euros yet to be paid on the judgement as of that date. (Mr. Price avoided all personal mention in the High Court order; he also avoided all personal mention in the Moriarty Tribunal minutes.)

Again leaping into the opportune moment, NABG sought to jettison National Irish Bank and Northern Bank. In their attempt to recover from their trading scandal, National Irish and Northern were not helping improve their held assets or their reputation. Several offers were made including reasonable offers by other Irish insurance and business firms. All were rejected.

On December 14th, 2004, NABG and Danske signed an agreement for the purchase of the two banks for 1.6 million pounds – 937 million Euros. This was inexplicably less than the 1.7 million pounds – 1 billion Euros – offered by Irish Life and Permanent, Ireland’s largest life insurance group, which offer was not accepted by NAB. The agreement included warranties and indemnity provisions for risks including liabilities arising in connection with the High Court investigation.

On December 20th, Northern Bank was robbed of 26.5 million GBP in bank notes and pound sterling. This is the equivalent of 38.6 million euros, or A$50.6 million. The theft was in cash from their Belfast office. (One must first question why a bank of this size was holding 38.6 million euros in cash in any of their 112 Northern Ireland locations. That’s a lot of cash, and contrary to most European bank practices regarding quantities of cash on hand.)

The figure reported as stolen varies widely over the first several days; auditors report a very different figure from that first reported by the bank. CNN and BBC reported wildly varying figures. The initial bank figure released was 22 million GBP.

On December 22, 2004, CNN reported that “Police believe the robbers may have had inside information,” and Russian news agencies stated that Mr. Ward, the bank employee whose kidnapping had launched the heist, stated “The robbers had detailed knowledge of the bank’s security procedures...”.

Indeed, it seems their knowledge included the need for a fast 37.3 million euros in cash before the bank sale could go through.

Various news agencies reported that most of the money stolen was in Northern Bank notes, with the rest in sterling printed by other Northern Ireland banks.

This would make it extremely hard, if not impossible, to shift these funds out of the region. Northern Bank and National Australian bank immediately reported that they were uninsured and will have to cover the losses themselves.

On January 7, 2005, Don Price made his first public statement regarding the December 20th robbery. In response to questions regarding the change in figure, Price made a wildly defensive statement to the press – “I have done nothing wrong. We are the victims in this. We are not the ones responsible for the raid.”

He also stated he would not be resigning over this. In Don Price’s January 7th press statement, he also stated that Northern Bank would be shortly withdrawing all their banknotes and replacing them with notes from a different series. This notes replacement is a shell game that will cost over 5 million euros and can potentially cover a wide variety of accounting irregularities.

On the day of the robbery, market records indicate that Danske stock took a steep plunge, and their trades go through the roof at the same time in an anomalous spike. NABG stock also takes a temporary plunge – but with no related spike in trades. No one bought and sold NABG stock in the wake of the robbery.

In other words, the robbery did not appear to surprise the NABG shareholders.

On December 31st, 2004, NABG reports a single-day event of the trade of over a thousand shares of their Mexican subsidiary, traded as NABN.MX. However, none of their corporate reports publicly available mention the existence of a Mexican branch; nor does an extensive internet search for any indication of a Mexican NAB affiliate. The Mexican branch exists on one day only, December 31 2004. Their trades on that one day are an order of magnitude over their usual daily trades on the NYSE.

The NAB website, , lists three regional branches – Australia, UK/Europe, and New Zealand. The individual banks in these groups are listed. There simply is no Mexican branch.

How else, one might ask, would NABG, a banking group with a proven track record of rogue foreign currency trading, convert Northern Bank notes and other Northern Ireland banks pound sterling, into fast cash in, say, dollars or euros? And who else would know how to do it?

By mid February 2005, Danske gets the go-ahead from the EU’s monopoly review panel to buy Northern Bank and National Irish Bank. On February 28th, 2005, NABG announced that it completed its sale of the two Irish banks for A$2.5 billion, generating a profit on sale of A$1.1 billion, as agreed in early December 2004.

The CEO of the two banks, Don Price, conveniently stays on as a new Danske VP. Danske reports that the offending personnel have been removed; that they plan to cut costs by 15% on the two banks; and that bringing the two banks into their technology group will resolve such problems in the future while allowing them to tap into the great Irish economy.

The Irish Bank Officials Association expressed their profound relief at the completion of the sale, noting that the very existence and future of these two banks had been in doubt. . Mr. Price’s future, and the future of these two corporations, apparently had stood on the edge of a knife, dependent on resolving the High Court investigation and making the sale go through. Thanks to this convenient robbery, it did. And any problems Mr. Price’s banks may have been having in the Northern Ireland business community went away with it, as the IRA and Sinn Fein get buried in the process.

The IRA is widely blamed for the robbery. The same week that the purchase goes through, seven people are arrested throughout the Republic of Ireland and the press goes haywire reporting breakthroughs in a massive IRA money laundering scheme connected with the bank robbery. However, within 36 hours all 7 people arrested are released and no new arrests are made.

There are reports of a few people burning some money in two locations in Northern Ireland, and report of finding a small stash of cash in a Royal Ulster Constabulary/PSNI recreation hall in Northern Ireland.

It’s unclear that any of these notes has been physically connected to the robbery. In the announcement that Northern Bank would be withdrawing and reissuing its notes, Don Price stated that the move would not preclude anyone from spending the older banknotes. These notes are by now no doubt distributed around the world through a chain of financial maneuvers following the fake-Mexican stock trade.

Someone, of course, did go in and actually remove money from the bank. At least some – we will never know how much of this robbery occurred on paper instead of in duffel bags. It may be the case that someone was duped into performing a smaller robbery – and got the shock of his life reading the next day in the paper of the amount he was claimed to have taken.

Or it may be that the robbers had their eyes open, and gained a small percentage of the notes taken in payment for their service. But a local criminal stealing identifiable bank notes that can’t easily be moved out of the region accomplishes little for his personal or organizational ends. Small thefts in this nature make sense; big ones do not. Where’s the money going to go?

Big financial institutions move big money, and odd local bank notes are no problem for them. These bank robbers indeed had inside information – and are laughing all the way to the bank.

Robbery Data — Part 1

No one in the media seems to have made mention of the following:

:: Northern Bank has 95 branches plus 13 banking centers and a large offshore operation. Their total lending out is 3.2 billion pounds. They were just purchased by Danske, together with National Irish bank, for 967 million pounds.

:: 38 million pounds was stolen from one of their rinky-dink shopping center branch offices; and the whole operation is bought for 967 million pounds. Someone want to tell me what 38 million pounds cash was doing in that little branch office of a bank whose entire corporation together with another bank corporation is only worth 967 mill?

:: Or how it was that the Northern Bank stock took a dive by sheer coincidence after the robbery, just as the purchase price was being locked in?

And why Northern Bank is now replacing its entire series of held banknotes at a cost of over 5 million pounds, saying its being done at the request of the police, when in fact just before the robbery National Irish bank did the same thing at Danske's request to facilitate the purchase?

Robbery Data — Part 2

National Irish bank, Northern's 'sister bank', both under Don Price's management for the Irish group of National Australia Bank Group, was under intense investigation through 2003, 2004. The investigator's report issued publicly in fall 2004 stated that a "large number of senior bank personnel" at both banks were cited and fired for banking irregularities including tax fraud and overcharges that were being pocketed. National Australia announced that the price of redressing these issues was going to run 64 million pounds.

As part of that redressing-of-issues, and apparently in preparation for the Danske negotiations, National Irish Bank converts all its cash to Euros in a large-scale bank note swap. I am researching another series of smaller bank robberies in the Republic of Ireland that occurred through 2004, all of National Irish Bank branches, seemingly riding the wave ahead of the cash-changes, and also following the wake of the senior personnel firings. (all also attributed to the IRA). Still working on this.

On 14 December 2004, Danske Bank and National Australia Banking Group announced the signing of their purchase and sale agreement for Northern Bank and Irish National Bank. The purchase price announced is 1.6 billion pounds (although it's all announced in dutch kroner, and in some places in Euros, and gets rather confusing).

On 20 December, the heist occurs. Whether branch office or headquarters, I still ask the same question: what's a bank of this size doing with the equivalent of $50 mill in it?

Within 24 hours Northern Bank announces that 22 million pounds has been taken. Three days later, they announce that actually it was 26.5 million, due to a revised audit. Price's interesting first public statement is reported as "I have done nothing wrong. We are the victims in this. We are not the ones responsible for the raid." What a wierd statement!

Simultaneously, National Australia reports that it will be covering the loss itself, as it has no outside insurance.

So, it gets better.

On December 31st, National Australia Bank Group reports a one-day event of trading of about 1250 shares of their Mexican branch, listed on the stock exchange as NABN.MX. Except they have no Mexican branch listed in their corporate annual reports. And there is no listing of any other Mexican branch trades on any day prior to or after December 31st. There is simply a one-day anomalous trade of 10 times NAB's normal NYSE trade that appears, then vanishes.

On the day of the robbery, Danske's stock takes a plunge, but it's trading takes a huge spike. National Australia' stock takes a plunge that same day -- but with NO change whatsoever in trades. As if none of National Australia's major investors were taken by surprise.

The first week of January Northern Bank announces that it will be replacing its entire stock of cash with new bank notes with different serial numbers and colors -- but that they don't really have all the old serial numbers, so the bank robbers will still be able to spend their old cash. The cost of replacing the bills will be 5 million pounds.

On February 16th 2005 the EU boards cleared the Danske purchase and signed off on its abbreviated monopoly review process.

Then today/yesterday (February 28, 2005), the purchase was announced as complete -- at 967 million pounds, not 1.6 billion. That's for BOTH Northern Bank and Irish National together. The announcement by Danske stated that all the senior personnel associated with the banking irregularities had been discharged, and that they plan to reduce costs associated with these two banks by 15% over the next two years.

Don Price will maintain management over the two banks for Danske.

Robbery Data — Part 3

The High Court order was for 64 million euros total, of which the court noted 28.7 had already been paid at the time of the order. That left 37.3 million euros left to be paid.

The robbery was 26.5 million GBP -- or about 38.6 million euros.

Talk about neatly covering a gap.

Overall Table of Contents
Table of Contents – Mar 2005
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