LONDON, March 1: Britain's central bank lost an appeal on Monday to keep sensitive internal documents under wraps in a lawsuit seeking an almost one billion pounds ($1.87 billion) over its role in the world's biggest banking fraud.
England's Court of Appeal ruled that the Bank of England had to release up to 10 files worth of letters between the bank and its lawyers relating to the collapse of Bank of Credit and Commerce International (BCCI) in 1991.
Lawyers for Deloitte, BCCI's liquidators, want to use the letters as part of their attempts to prove that the BoE knowingly did not protect BCCI depositors when the bank fraud resulted in the collapse of BCCI with debts of more than $16 billion.
The Bank of England had argued that the letters, which cover approximately the first year following BCCI's collapse, were covered by legal privilege and should be kept under wraps but the Court dismissed that argument.
The central bank is considering petitioning the House of Lords, Britain's highest court, to see if it can appeal against the ruling. The first trial brought against the Bank of England, before a judge rather than a jury, kicked off in January and is set to last at least a year.
Former governors Eddie George, Robin Leigh-Pemberton and Gordon Richardson will step into the witness box. Sources have told Reuters that George is itching to take the stand and launch a robust defence of the BoE.
BCCI was closed in 1991 by regulators in a worldwide swoop, partly organised by the Bank of England, after it discovered the lender had disguised losses and was insolvent. Founded in 1972 by Pakistani banker Agha Hassan Abedi, BCCI grew from a small, Asian bank to an empire spanning 69 countries with $20 billion of assets.
A report the year after BCCI's collapse by Lord Bingham, now Britain's most senior judge, criticised the central bank for not spotting BCCI's criminal behaviour earlier but blamed poor communication and procedures rather than deliberate negligence.
Deloitte and law firm Lovells have battled for more than 10 years to get some 300,000 internal Bank of England papers that document its discussions about BCCI. They say many of the papers were not seen by Bingham.
If the bank loses its case and it has to pay out around 850 million pounds, which Deloitte is seeking on behalf of 6,500 UK depositors, the bill could eventually end up with the British taxpayer. -Reuters