Bank gags Guardian news paper over elaborate money switching

The Guardian
17.03.2009

Barclays gags Guardian over tax

Injunction forces news website to remove seven leaked memos showing how bank avoided hundreds of millions of pounds in tax

Barclays Bank obtained a court order early today banning the Guardian from publishing documents which showed how the bank set up companies to avoid hundreds of millions of pounds in tax.

The gagging order was granted by Mr Justice Ouseley after Barclays complained about seven documents on the Guardian’s website which had been leaked to the Liberal Democrats’ deputy leader, Vince Cable.

The internal Barclays memos – leaked by a Barclays whistleblower – showed executives from SCM, Barclays’s structured capital markets division, seeking approval for a 2007 plan to sink more than $16bn (£11.4bn) into US loans.

Tax benefits were to be generated by an elaborate circuit of Cayman islands companies, US partnerships and Luxembourg subsidiaries.

The documents had been leaked to Cable by a former employee of the bank, who wrote a long account of how the bank works.

The anonymous whistleblower wrote to Cable: “The last year has seen the global taxpayer having to rescue the global financial system. The taxpayer has already had a gun put to their head and been told to pay up or watch the financial system and life as we know it disappear into a black hole.

“It is a commonly held view that no agency in the US or the UK has the resources or the commitment to challenge SCM. SCM has huge amounts of resources, the best minds rewarded by millions of pounds. Compare this with HMRC [Her Majesty’s Revenue & Customs] recently advertising for a tax and accounting expert with the pay at £45,000.

“Through the use of lawyers and client confidentiality SCM regularly circumvents these rules, just one example of why HMRC will never, in its current state, be up to the job of combating this business.”

Barclays’s lawyers, Freshfields, worked into the early hours to force the Guardian to remove the documents from the website. They argued that the documents were the property of Barclays and could only have been leaked by someone who acquired them wrongfully and in breach of confidentiality agreements.

The Guardian’s solicitor, Geraldine Proudler, was woken by the judge at 2am and asked to argue the Guardian’s case by telephone. Around 2.31am, Mr Justice Ouseley issued an order for the documents to be removed from the Guardian’s website.

Cable said it was both “incongruous” and “offensive” that banks that rely on state support should avoid paying tax and therefore be “selling the taxpayer short”. […] the bank had relied on the government’s special liquidity scheme to provide funding for loans.

“The banks are able to organise their activities in such a way that they can run rings around the Inland Revenue,”

A Guardian spokesman said this morning that the paper would appeal against the order. “It is not right for a judge to prevent daylight from shining on the few documents ever to have emerged which graphically demonstrate what HMRC is up against.”

Full article

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