Pic: Daily Telegraph

SCANDALS: how the Royal Bank of Scotland and the Post Office forced SMEs into insolvency

Two of the nation’s best known financial institutions stand accused of irregularities, allegations of fraud and mismanagement that has led to hundreds of small businesses going to the wall. The Post Office and the Royal Bank of Scotland have had practices exposed which shed light on some dubious practices which have damaged their images as the friend of small businesses.

In the first case the Post Office used a computer system which incorrectly showed that hundreds of Post Office postmasters appeared to be embezzling thousands of pounds. It led to the Post Office prosecuting the postmasters who were then fired, went bust, were fined and even sent to prison in some cases. The central issue was the sheer scale of the alleged embezzling suggested something was wrong as it landed 900 postmasters in trouble and the use of the Post Office of a Horizon computer system to check the accounts of the postmasters.

Pic: Talking Retail

After investigation by journalists it emerged the postmasters were unaware managers at the Post Office could manipulate the computer data remotely meaning potential errors could happen.

A BBC Panorama programme as well as reports in Private Eye, the national press and BBC Radio 4 revealed managers knew problems with Horizon that could make money disappear. An audit by Ernst and Young showed serious problems with Horizon suggesting the idea 900 postmasters were thieves was highly dubious.

The BBC reported this week: “It then became a central issue in a civil court case brought by 550 postmasters in 2017. The Post Office agreed to pay £58m to settle the case last year. During the trial, the Post Office admitted remote access without the postmaster’s knowledge was possible. Managers claimed they had made an honest mistake when dealing with Panorama because they had not been aware that remote access to Horizon was possible. But the programme showed its evidence to Rachel Reeves MP, who had been leading an inquiry into the Post Office and Horizon for the business select committee.”

Rachel Reeves MP was chair of the Business, Energy and Industrial Strategy Select Committee said: “It is very serious that the Post Office were sitting on information that told them, and could have told the courts, and their sub postmasters, that other people could access their systems.”

The BBC reported that thousands of pages of internal Post Office documents were disclosed in the civil trial and Panorama spent months investigating previously unseen evidence.

The investigation reveals how Post Office managers ignored reports of multiple faults with the Horizon computer system. Now all 900 convictions could be overturned with the Post Office facing a billion pound bill in order to compensate the postmasters.

Ian Carrote of ICSM Credit said: “It is hard enough to run a successful local business at the best of times but to have your accounts manipulated by a third party suggesting you are a criminal – is in my opinion criminal. Some Post Offices may have seen a decline in trade with some services moved on line but they are still a vital local asset especially in small towns and villages and without this scandal far fewer would have closed.”

Pic: The Guardian

Three years ago the Royal Bank of Scotland was found to have forced hundreds of businesses to go bust by their now defunct Global Restructuring Group (GRG). The GRG would take control of an ailing business with the promise of turning it around with a system of loans and expert business consultants. Instead they forced the businesses to accept impossibly high interest rates and repayment terms and gave no expert business advice. They forced the firms into liquidation and then stripped them of their assets.

That was bad enough but last December a report by the Financial Conduct Authority announced it would take no further action despite evidence of “systemic and widespread” mistreatment of SMEs between 2008 and 2013.

The all-party parliamentary group on fair business banking and finance Kevin Hollinrake MP said: “This report is another complete whitewash and another demonstrable failure of the regulator to perform its role.”

Ian Carrotte of ICSM Credit said: “It appears that banks are a law unto themselves. Now those hit by the scandal and lost their businesses have taken legal action to claim millions of pounds from the bank after the parliamentary group published the report in full disclosing damning evidence this year. I wish them luck as the nation needs SMEs like never before.”

ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk