The Whistleblower: Lifting The Lid On Ireland's Banking Sector Just Before The Bust

By Jonathan Sugarman

It was me, I did it!
Imagine walking into a police station with a bloodied knife, telling the Inspector you had just murdered someone and offering to bring them to the site of the crime – what reaction would expect?
Now alter the above to reflect the equivalent of murder in the financial sector, a capital punishment crime if you'll pardon the poor pun.
Just over nine years ago, 2007, a full year before the disastrous blanket bank guarantee, Jonathan Sugarman walked into the Irish Regulator’s office and told him – ‘I’ve been breaking your law, probably the most serious law in banking; I’ve been signing off every day for billions that don’t exist, I’ve been signing off on statements verifying that the bank for which I work – Unicredit (Irl) – is sound when in fact it is dicing with disaster, breaking the liquidity requirements by many multiples, and here is the evidence.’
Jonathan walked back out that door expecting that all hell was about to break loose, that he and the bank would be called before the Regulator with God knows what about to be visited on him.
Nothing happened; it was as though he had never said a word.
BANKING – WHERE THE LAW IS MADE TO BE BROKEN
Jonathan’s problem was that he took his duties as Risk Manager seriously; his further problem was that he took the law even more seriously, the law governing liquidity requirements for banks in particular, put in place to protect depositors, shareholders and bondholders alike. When he found the breach in compliance he acted, first by going to his seniors in the bank, then to the Regulator.
Eventually, frustrated by the response and fearing that he personally would be held to account if and when the truth of what was happening emerged, he resigned.
Since then Jonathan Sugarman has battled to tell his story, battled to have those whose tolerance and/or blithe ignoring of what was happening around them led to the collapse of the banking sector in Ireland and across the globe, held to account.
SCARED AND SCARRED
He has suffered in that battle, suffered grievously, bears deep emotional and mental scars. It’s not easy being a whistleblower. It’s a lonely place, a scary place, a debilitating place, and the bigger your story, the less that people are inclined to believe you, the more isolated you become.
Jonathan’s is a big story. It takes us behind the scenes in the Irish Financial Services Centre (IFSC) in the years before the bust, into the inner sanctum of one of the biggest banks in Europe, and it reveals to us what was going, gives us an idea of just why every Irish bank, and many others that were domiciled in the IFSC, went down so fast and so spectacularly.

• Language: English
• Publisher: Jonathan Sugarman
• Release date: Nov 25, 2016
• ISBN: 9781370228485

Book preview

1.0 EXECUTIVE SUMMARY

In September 2007, barely four months into what should have been his dream job, Risk Manager at one of the Europe’s biggest banks, UniCredit (Irl), Jonathan Sugarman resigned.

Why? Why would a man who had been head-hunted from a German bank LBBW, working in an environment in which he should have been in his element, with a salary and perks well beyond the reach of ordinary mortals, swiftly and suddenly walk away from all of that?

Simple answer really – in an environment where almost everyone, but most especially those at the top, took a laissez-fair attitude to the rules and regulations that were meant to govern the world of finance, Jonathan Sugarman took his job seriously.

What he discovered in Unicredit was enough to set the alarm bells ringing in any right-minded auditor. Chief among Jonathan’s concerns was the erratic state of the bank’s liquidity situation as reflected in daily reports. This was the same summer that saw Northern Rock collapse in UK, and a year before Lehman Brothers collapsed because it ran completely dry of liquidity.

In theory, banks operate within the terms of their banking license and in accordance with regulations that ensure that banks do not take on risk levels that they cannot sustain.

The disappearance of banks like Anglo-Irish Bank, Dexia, Fortis, are a stark reminder that that the theory was hardly put into practice. We have heard nothing of the consequences visited upon the risk managers, auditors and regulators who were paid by the tax payers to monitor these banks and sanction them on time.

1.1 NOT-SO-SPLENDID ISOLATION

When Jonathan reported those major breaches of the regulations to his superiors in UniCredit, his concerns were brushed aside; compounding matters, when he then took those concerns to the authority charged with supervising the banks and bankers, Ireland’s Financial Regulator, again he was snubbed. The breaches were simply ignored.

• Baffled by this tolerance of the most senior managers in UniCredit to problems that could actually bring down the bank;

• Bemused by the reaction of the relevant authorities to what was a potentially fatal flouting of its own regulations;

• Isolated within his own working environment;

• Knowing his responsibilities as Risk Manager and knowing also the penalties for signing off on accounts that he knew to be false;

• Jonathan took the only decision he felt was left to him. He resigned.

1.2 FOLLOWING UP

Sugarman didn’t walk away from the problem; far from it. After he had left UniCredit, and digging a little deeper and a little wider, Jonathan found that far from being exceptional, what was happening in UniCredit was happening on a systemic basis right across the industry, leading very shortly afterwards to what we now know as one of the most catastrophic financial collapses in history.

Those who had been so blasé about the rules and regulations had thus contributed to the banking collapse in Ireland and elsewhere in Europe and around the globe. The subsequent misery was and is heaped on generations to come.

Determined to see that justice would be done, that those people should at least be held to account for their negligence (at best) or their wilful criminality (at worst), Jonathan went to the media, to politicians of various parties, and told his story which, at this stage, had expanded to include transgressions by other banks, bankers and financiers operating from Dublin’s Irish Financial Services Centre. The New-York Times infamously referred to the IFSC as The Wild West of European Finance.

1.3 JUSTICE DENIED…

It wasn’t just the Irish, or the Irish Financial Regulator; it was Italians, Austrians, Americans. And it was Germans – German bankers at home and abroad taking absolutely massive gambles in a rigged game, the cost of which was first borne by their own citizens but then also, by the citizens of Ireland, of Greece, of Spain and of Portugal, by citizens of countries right around the globe where German banks and German bankers left a trail of destruction behind them.

Apart for a few worthy exceptions, no-one was interested in the story Jonathan has to tell, so that over the last decade he has felt increasingly isolated and abandoned, and has suffered accordingly.

Maybe this is his opportunity, maybe it’s not. But it’s a beginning. This can stay buried for only so long.

2.0 THE STORY BEGINS

2.1 UNICREDIT

My name is Jonathan Sugarman and for a brief period in 2007 – very brief, the reason for which will shortly become clear – I was Risk Manager with Unicredit IRL, based in