Scandals involving Central Banks

Nest of Vipers, a novel dealing with MI6, insider trading involving central banks and the finance ministers of the G7 countries (now the G8) was written before the allegations below regarding real cases in central banks came to light. However insider trading is only one of the types of scandals that have hit the pillars of the international financial system. 

Central Bank Corruption in General

Non-Benevolent Central Banks

A paper by Johann Graf Lambsdorff and Michael Schinke of the Center for Globalization and Europeanization of the Economy (CeGE) in the University of Göttingen. In this discussion paper they consider the effects of central bank corruption on the economy which, they point out, can be a source of distorted central bank policy that leads to inflation; distrusting a corrupt central bank can be helpful in reducing this distortion. They also note that although giving central banks a high level of independence shields them from troublesome political interference it also provides the leeway necessary to carry out corrupt transactions.

International Monetary Fund

Nicolas Sarkozy dismay as Dominique Strauss-Kahn in sex scandal

The news that Dominique Strauss-Kahn, the head of the IMF,October 20, 2008 is being investigated in Washington over an alleged fling with a former subordinate has unsettled Mr Sarkozy, who has been working with him to form a new Bretton Woods pact on financial regulation. The Times, October 20, 2008.

 

Chelsea boss linked to $4.8bn loan scandal

The Chelsea football club owner Roman Abramovich, and his Runicom trading group, was one of the key suspects in the lingering mystery over the possible misuse of a $4.8 billion loan from the IMF to Russia. The Times, 16 August 2004.

World Bank

World Bank Spent More Than a Year Covering Up Destruction of Albanian Village

Managers at the World Bank provided false information to the agency's board of directors about a $39 million, politically-connected European "coastal cleanup" project that led to the destruction and destitution of a powerless village in Albania in 2007 — and then spent nearly two years trying to cover it up. Fox News, 9 February 2009.

 

Blowing the World Bank Whistle

Blowing the World Bank Whistle is an ongoing effort which started in 2004 with a Parliamentary Commission study into a World Bank financed project in the Republic of Armenia, and it continues on to an effort to persuade the Bank’s watchdog organisation, the Department of Institutional Integrity (INT), to instigate a full investigation into the wide-ranging and high-level fraud, corruption and embezzlement, exposed by the study.

 

World Bank President Resigns

The World Bank website contains a statement by the Executive Directors and a statement by the President of the Bank, Paul Wolfowitz about his career in the Bank and his resignation. May 17, 2007.

 

Wolfowitz's girlfriend problem

Not only did the World Bank president find his companion Shaha Ali Riza a cushy job in the State Department, but she received a security clearance - unprecedented for a foreign national in the United States. Sidney Blumenthal, Salon, April 19, 2007.

 

Wolfowitz email backfires

An attempt by the World Bank president, Paul Wolfowitz, to reach out to disaffected and angry employees backfired with a new wave of outrage at the pay rises and promotion given to his partner. Guardian, April 11, 2007.

 

Combating Corruption in the Multilateral Development Banks

Hearings held by the United States Senate Committee on Foreign Relations.

 

World Bank corruption may exceed $100 billion

Senator Richard Lugar, at a hearing on corruption at the multilateral development banks,cited experts who calculated that between $26 billion and $130 billion of the money lent by the World Bank for development projects since 1946 has been misused. May 13, 2004.

MI6 and Foreign Financial Institutions

The secret reality of spying on allies

An intriguing snippet of Treasury information, clearly not intended for wider circulation, has exposed an apparent covert British intelligence operation in 1993 against the French. The Times, February 10, 2005.

 

MI6 Spied on the Bundesbank

A former British secret agent, Richard Tomlinson, has alleged that MI6 had a spy in the Bundesbank code-named Orcada, who provided inside information on Germany's proposed interest rate movements.

Insider Trading

MPs demand probe to find Robert Preston's 'mole in the city'

Former Tory leader Michael Howard has called for the City watchdog and Alistair Darling to launch inquiries into how BBC business editor Robert Peston obtained details of confidential talks between banking chiefs, the Chancellor and Bank of England governor Mervyn King. Daily Mail, 9 October 2008.

 

Was there a mole in the Bank of England?

A review of a well-known economics book mentions allegations in a different book that Soros knew the Bank of England had decided not to defend the pound and thus was able to make a fortune and a name for himself as "the man who broke the Bank of England."

 

U.S. Hedge Fund Supposedly Knew About Intervention

The newspaper Frankfurter Allgemeine Zeitung reported on 27 September 2000, rumours that a leak of information from a central bank outside the Euro zone led to Citibank, one of the leading currency traders worldwide, buying up euros in large volumes for a U.S. hedge fund company.

 

World Bank Clears Ex-Aide of Disclosing Secret Data

The World Bank said this week that an eight-month investigation found no evidence to support allegations that a former Russian representative, Leonid Grigoriev, passed confidential information to a Russian commercial bank in 1993, although it did conclude that he had established a business relationship with Inkombank. New York Times, July 8, 2000.

 

Dangerous Liaisons

The World Bank is investigating allegations that Leonid Grigoriev passed on inside information to a Russian bank, Inkombank, enabling it to make large profits in various deals. October 1999.

 

Chilean Central Bank president resigns

Carlos Massad, Chile’s Central Bank president resigned on 31 March 2003 following a string of financial scandals involving the stealing of privileged information from his office by unreliable staff.

 

The Case of the Central Banker's E-Mail

Banco Central de Chile Governor Carlos Massad is on the hot seat, thanks to a scam involving confidential messages being passed to an investor. The governor's secretary, Pamela Andrada, is said to have passed the information to Enzo Bertinelli, the general manager of Inverlink. According to some other reports Andrada and Bertinelli were lovers. Business Week, February 11, 2003.

 

Congressional investigations could damage the administrations economic efforts

Investigations into claims that Salvatore Cacciola paid to get inside information from the Brazilian Central Bank. May 2001.

 

Former president of the Brazilian central bank arrested

Francisco Lopes, a former president of the Brazilian central bank, was arrested on 26 April 1999 after refusing to testify in a probe into allegations of insider trading on the foreign exchange market.
N.B. He was later released and the charges dropped.

 

Former Brazil bank chief to testify

Francisco Lopes changed his mind about testifying.

 

Brazil: Congressional corruption probe may be resurrected

The Brazilian government may have to re-open the investigations into claims that Salvatore Cacciola blackmailed former central bank head Chico Lopes who was allegedly selling information on exchange rate and interest rate policies to bankers ahead of the local currency devaluation in 1999. May 21, 2001.

The Vatican Bank and Banco Ambrosiano

The Bank of France and the European Central Bank

Acquittal clears Trichet's path to European Bank

Jacques Chirac, the French president, will formally propose Jean-Claude Trichet as the next head of the European Central Bank this week after the governor of the Bank of France was acquitted on charges of complicity in the Crédit Lyonnais banking scandal. Guardian, June 19, 2003.

 

Jean-Claude Trichet: Banker in a bind

A review of the career of the head of the Banque de France, and heir-apparent to the president of the European Central Bank, who is one of nine defendants on trial over irregularities at Credit Lyonnais, one of France's biggest banks. BBC, 6 January 2003.

The Central Bank of Nigeria and the Fashanu Report

Tracking The Fashanu Report

Information about the claims of John Fashanu, London-based former soccer star and now a successful businessman, to have uncovered a $17 billion debt-buy-scam perpetrated on Nigeria ostensibly by the very people who should have been guarding the country's money. April 10, 2000.

 

The Real Story about John Fashanu's so-called Private Investigator

A defence of Bob Minton who was criticised in the Fashanu Report. Nigeria Today, 27 August 2000.

 

Senate Committee says Nigeria saved $5 Billion from 1988-93 debt buyback scheme

The Nigerian Senate defended the scheme, criticised in the Fashanu Report, whereby the Central Bank of Nigeria used the offshore company, Greenland Holdings in buying back debt.

Central Banks of Other Countries and other types of scandals

Ukraine probes bank bosses over suspected theft

Ukraine's interior ministry has launched an investigation into senior figures at the country's national bank over the suspected theft of millions of pounds earmarked to shore up the country's creaking economy. Daily Telegraph, 11 September 2009.

 

Gono wins Ig Nobel Prize for Mathematics

The citation said the prize was awarded "for giving people a simple, everyday way to cope with a wide range of number by printing bank notes in denominations ranging from one cent ($0.01) to one hundred trillion dollars ($100,000,000,000,000)."

 

Gono funded Grace Mugabe extravagancet

Gideon Gono, now the governor of Zimbabwe's reserve bank, personally raised thousands of US dollars to fund first lady Grace Mugabe's foreign shopping sprees when he was chief executive of one of the country's largest commercial banks. 11 September 2006.

 

Ig Nobel award for Icelandic bankers

The former managers of the Icelandic commercial banks and the Central Bank of Iceland have been awarded the 2009 Ig Nobel Prize for Economics. They received their honour for their great performance over the year during which they have proved to the world how small banks are capable of rapid growth and equally rapid contraction again. They received still further recognition for proving that the same can also be true for an entire country.

 

Russia’s central bank faces reform calls amid claims of corruption and murder

The Russian Finance Ministry is meeting senior figures from the banking sector this week to discuss making reforms to the country’s central bank. The move comes as the central bank has become subject to intense scrutiny and found itself at the centre of allegations of corruption and even murder. The Times April 4, 2007.

 

Banker who fought Russian mafia is killed

Andrei Kozlov,deputy chairman of Russia's Central Bank and one of Russia's most powerful anti-corruption crusaders was assassinated in a contract killing. The Independent, 15 September 2006.

 

Bank of England deputy governor faces calls to resign - report

Sir John Gieve, deputy governor of the Bank of England, is being pressed to resign following revelations of financial mismanagement at the Home Office, where he was permanent secretary. The Independent on Sunday, 30 April 2006.

 

Brazil Central Bank Robbed of $67 Million in Bills

Brazil's central bank was robbed of 156 million reais ($67.3 million) by thieves who dug a 200 meter tunnel under the bank's office in the northeastern city of Fortaleza. Bloomberg, 8 August 2005.

 

Brazil chief banker urged to quit

Henrique Meirelles, the Governor of Brazil's Central Bank is coming under mounting pressure to resign following new allegations about his financial affairs. BBC, 6 August 2004.

 

Brazilian Bank Official Resigns Amid Reports of Tax Evasion

Luiz Augusto Candiota, the director of monetary policy at Brazil's central bank, has resigned amid accusations of tax evasion that have also focused on the bank's president. New York Times, July 29, 2004.

 

Argentina's banking scandal deepens

A congressional committee originally set up to investigate accusations that the governor, Pedro Pou, had failed to investigate cases of alleged money laundering through Argentina's financial system will also investigate the bank's directors. The BBC, 21 February, 2001.

 

Berlin steps into Bundesbank row

Bundesbank chief Ernst Welteke stepped down temporarily after it was revealed that he accepted a stay in a luxury hotel from a bank he regulates. Now the Finance Ministry wants him to resign. BBC, 8 April 2004.

 

Bank of Italy governor Antonio Fazio steps down

Antonio Fazio, who is under criminal investigation, has succumbed to months of intense pressure and handed in his resignation. Scotsman, 20 December 2005.

 

Fazio, humiliated, still fails to take the hint

The refusal of Italy's central-bank chief, Antonio Fazio, to resign over a banking scandal has led to extraordinary scenes at an international finance meeting in Washington, in which Mr Fazio was openly mocked by Giulio Tremonti, Italy's new finance minister, and then stripped of his authority to represent the country. The Economist, September 26, 2005.

 

Italy bank chief will not quit

Bank of Italy governor Antonio Fazio has no plans to resign, despite growing pressure from government ministers, a central bank spokesman has said. Mr Fazio has been accused of favouring an Italian bank in a cross-border bid battle. BBC. 5 September 2005.

 

Bank of Italy's Fazio Investigated for Aiding Fraud, Ansa Says

Antonio Fazio, Italy's central bank governor, is likely to hang on to his authority in spite of being included in a fraud investigation, according to analysts. Prosecutors have announced that Fazio had been placed under investigation on suspicion of abetting suspected fraud in bond sales by Banca 121, a unit of Banca Monte dei Paschi di Siena. Bloomberg, February 24,  2004.

 

Royal Mint boss cleared of fraud

A Royal Mint manager awarded an OBE for distinguished services has been cleared of charges of striking a secret deal with the governor of the Central Bank of Gambia of an African bank in a commission scam. BBC, 21 September 2005.

 

Royal Mint manager 'pocketed fortune' with Central Bank of Gambia contract

A Royal Mint manager allegedly struck an illicit deal with the head of the Central Bank of Gambia to share commission payments in return for a substantial re-coinage contract. Western Mail, September 13, 2005.

 

Gambia Central Bank Five Paraded for Trial

Five individuals formerly in the senior cadre of the Central Bank, including the ex-governor and the former manager of the bank's foreign exchange department have been put on trial in the Gambia for alleged illegal foreign exchange transactions. March 1, 2004.

 

Dodgy rumours

The governor of the Bank of Canada, David Dodge, was criticised because of a financial scandal involving the Ministry of Health that took place when he was the Minister for Health. November 2003.

 

Saddam 'took $1bn from bank'

Saddam Hussein ordered his son to take about $1bn in cash from the Iraqi Central Bank just hours before the first bombs fell on Baghdad, the United States has said. BBC, 6 May 2003.

 

The Social Contradictions of Japanese Capitalism

An article by Murray Sayle in the Atlantic Monthly, June 1998, in which he discusses Japan's financial problems, including the arrest of a high official of the Bank of Japan on a charge of bribery - the first-ever arrest in the Japanese central bank's 116-year history.

 

What Next Japan?

The fall of the central bank chief, who took responsibility for alleged wrongdoing at the bank following the arrest of an official there on bribery charges, damages the bureaucrats and boosts the power of politicians.

 

Kenya: Corruption Scandal

The Goldenberg export compensation scandal cost Kenya billions of shillings in the early 1990s. According to witnesses at the commission's hearings, as much as 60 billion Kenyan shillings (US$850 million) - a fifth of Kenya's gross domestic product - was looted from the country's Central Bank through Kamlesh Pattni's Exchange Bank.

 

Central Bank of Kenya Staff Implicated in Fraud

Managers at the Central Bank of Kenya uncovered a fraud involving some of their own staff. Detectives from CBK's Anti-Fraud Unit are tracking down CBK staffers who masterminded the scandal. A report from the Daily Nation, November 19, 1999.

 

Former Indonesian central banker jailed

A former director of the Indonesian Central Bank, Heru Supraptomo, has been jailed for three years after being found guilty of corruption. BBC, 4 April 2003.

 

Central Reserve Bank of Peru and BCCI

In 1992 the New York District Attorney claimed that in 1986 and 1987, BCCI president Abedi and number two official, Swaleh Naqvi, opened a bank account in a Swiss bank in Panama to "transmit bribes and kickbacks in the amount of a percentage of the deposits maintained by the Central Reserve Bank of Peru to the two senior officers of that bank," in a total amount of $3 million, in return for Peru maintaining large central bank deposits in BCCI.

 

Indonesia's bankchief found guilty

The head of the Indonesian central bank was convicted of stealing 904 billion rupiah (£63 million) of Bank Indonesia funds in 1999 that were meant to be given to a local bank, Bank Bali, but was used by the then president, BJ Habibie, in his failed attempt to get re-elected. The banker claims he was framed by the new president. The Guardian, 14 March 2002.

 

Court acquits Indonesian banker

The Indonesian court of appeal has overturned a corruption conviction passed on the Central Bank governor, Sjahril Sabirin. BBC, 29 August, 2002.

 

Collapse of the National Bank of Fiji

The National Bank of Fiji crisis was, to date, the biggest financial scandal in Fiji. In mid-1995 the state owned bank was running bad and doubtful debts of at least $90 million. The figure progressively rose to $220 million, or 8 percent of Fiji's GDP.

 

The Economy: Scandal at the bank

The Russian prosecutor's office has accused central bank officials of secretly putting more than $50bn into the virtually-unknown offshore accounts of a company called Fimaco, based in a tax haven off in the Channel Islands. BBC February 11, 1999.

 

Fimaco Wouldn't Die: Russia's Missing Billions

An article claiming that Russia's Central Bank and the Ministry of Finance were involved in the decision to use Fimaco, a secret to manage some of the funds the International Monetary Fund lent to Russia in 1993.

 

Russia: Central Bank Under Scrutiny For Hiding Assets

Russia’s Central Bank is under close scrutiny following allegations that it channelled some $50 billion of hard currency reserves to a tiny, offshore company Financial Management Co. (FIMACO) based in Jersey, from 1993 to 1997.

 

Cubans clamber for fabled fortune

Does the Bank of England owe descendants of a Spanish nobleman $30-billion? National Post, March 31, 2001.