Laws are for “little people” – the Mandelson mortgage fraud cover-up

The present furore should have disabused those of the public who still believed the law and rules such as codes of conduct apply to the powerful as they do to the ordinary person. At present we are seeing how widespread-hacking by the media and the bribing of police by the media to gain information could go on uninterrupted by politicians doing anything about and the police failing to prosecute either their own people or the media people paying the bribes. (The most telling fact about the payment of police bribes is that no policeman or woman has come forward to say they reported such an attempt to their superiors).

The story below is another graphic example of how elites can get away with murder. It was published in the magazine The Individual in July 1999 under the title of ‘Elite Mischief’  (http://individualist.org.uk/pdf/1999julindiv_em.pdf.) It deals with Peter Mandelson’s gaining of a mortgage by making a false declaration to his mortgage provider and his taking of a £373,000 loan from a fellow minister in  the Blair Government Geoffrey Robinson, a loan he failed to publicly declare as required by the Commons’ own rules.

The story exemplifies the way in those with power, wealth and influence manage to live outside the rules and laws which supposedly bind them. For elites laws and rules are for the “little people”, not them.  In this instance politicians in the Government, the Labour Party and the Commons’ committee with responsible for disciplining MPs all failed to wholeheartedly condemn Mandelson, investigate his misbehaviour properly (especially the mortgage fraud) or impose appropriate penalties. The civil servant responsible for investigating complaints about MPs, the Parliamentary Ombudsman, refused to press the most damaging parts of the complaints (the mortgage fraud and the failure to declare the Robinson loan) and the police refused to open an investigation.  To close the circle, the media also failed to press the matter of criminal charges and tellingly I could get none of the mainstream media to take up the story of the police’s refusal to investigate.

The outcome of the protection of Mandelson is that went on to twice return to the Cabinet, received a peerage and got an EU sinecure as one of Britain’s Brussels commissioners. He is now a wealthy man, having benefited from the capital gains on the property he obtained through the mortgage fraud and Robinson’s loan, the considerable salaries drawn from his return to a Cabinet position under Blair; his remuneration as an EU Commissioner and the considerable returns from his autobiography. Those are the wages of elite sin.

Robert Henderson

7 July 2011

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Elite Mischief

The report of the  Standards and Privileges Committee (henceforth “the Committee) on three  complaints laid against Peter Mandelson is best described as incongruous.  The complaints concerned irregularities involving more than £500,000 and the report’s content is damming. Two  of the three complaints were found to have substance.  Yet the Committee treated Mandelson’s serious misbehaviour  as essentially trivial and concluded smugly  “We recommend that no further action be taken”. The report  is above all a classic example of how an elite controls  matters for its own advantage.

Why is the report damning? It contains explanations  and justifications from Mandelson so improbable  that I would stake my life on the vast majority of human  beings finding them incredible. Mandelson is also shown to be  massively arrogant by the manner of his rejection of the  complaints – he really cannot understand what all the fuss is about or why his private behaviour is under scrutiny. What  if I did accept a massive loan secretly from a fellow Member  of Parliament? What if that Member did became my junior  minister? What if I did obtain a mortgage as the result of a  failure to disclose all the relevant facts to the lender? What  business is it of the public? So says Peter Benjamin Mandelson. The affair is extremely complex.

In the space  available it is impossible to cover the detail as fully as  I would wish. That being so, rather than give a blow by blow  account, I have written an impressionistic piece which is designed to give the reader a flavour of the dominant themes  – in particular, the palpable desire of all those  engaged in the investigation and judgement to mitigate Mandelson’s misbehaviour by any means possible – while  providing enough detail to allow the reader to understand the  basics of the story.

To properly understand the matter even in outline,  it is necessary to ingest a paragraph or three of  facts which would bore a chartered accountant. Sorry about that.  First the main players in the business. Apart from  Mandelson and the ex-trade minister Geoffrey Robinson, these are  the Parliamentary Commissioner for Standards in Public  Life (Elizabeth Filkin), the firm of solicitors appointed  by the Britannia Building Society to report on  Mandelson’s mortgage application (Herbert Smith Solicitors),  Mandelson’s solicitor (Stephen Wegg-Prosser of Wegg-Prosser and  Farmer – WPF) and Mandelson’s personal aide (Ben Wegg-Prosser). Robert  Sheldon was the Committee chairman. The two named  complainants in the report were the conservative MP, John Redwood,  and myself.

The Committee acted on Mrs Filkin’s submission  after her investigation of the three complaints. The  first concerned a failure to declare a flight taken by Mandelson  at the expense Linda Wachner, chairwoman of a company  (Warnaco Ltd) which had interests in the UK. The other complaints  arose from Mandelson’s failure to declare loan of  £373,000 from a fellow MP, Geoffrey Robinson, in the Register  of Members’ Interests and irregularities in his application  for a mortgage of £150,000 from the Britannia  Building Society.

Mrs Filkin’s conclusions The Warnaco complaint concerned a potential conflict of interest arising from Mandelson’s position as Trade Secretary. Mrs Filkin found the complaint  unproven because she judged that the flight was “offered  to him as a personal friend rather than in his capacity as a Member of Parliament”. For reasons of space and the  fact that the complaint involved benefits involving only a few  thousand pounds, I will not spend any further time on Mrs  Filkin’s dismissal of the complaint other than to reflect  that politicians without great wealth are always  suspect if they take favours from the rich, and that the  public’s only guard against corruption in such circumstances is if  the favours are public knowledge. The rules governing the Register of Members’ Interests need amending to make the  receipt of any large benefit notifiable, regardless of the  nature of the giver.

Mrs Filkin found the other complaints proven. Of Mandelson’s failure to declare the loan from Geoffrey Robinson on the Register of Member’s  interests, she decided that Mandelson should have registered the loan  because of the possible conflict of interest when he became Trade  and Industry Secretary. The interesting thing about  this judgement is that Mrs Filkin decided that it would  have been acceptable not to declare the loan if he  had not become Trade and Industry Secretary and consequently  was subject to the Ministerial Code of Conduct. It was this latter code which necessitated the registration of the loan  on the Members’ Register of Interests. This is a dangerous precedent.

The receipt or supply of large material  benefits from one politician to another are self-evidently of public interest, for anything which can compromise  their freedom of action is a matter of public interest. That  applies as much to backbenchers as to ministers. Again, plainly  the register rules need amending. But a  declaration of interest is not enough for favours between MPs, because  both the participants to such a transaction are  directly involved in the political process, and therefore have the  opportunity to illicitly manipulate matters from the inside, unlike interests and individuals outside Parliament. There  needs to be a ban on substantial material favours  between MPs.

Of the third complaint concerning the Britannia  Building Society mortgage Mrs Filkin said this: “The  mortgage was obtained on a basis outside normal commercial practice. Mandelson’s mortgage application was incomplete  and inaccurate and therefore breached the Code of Conduct  for Members of Parliament”.

The objective facts of the Britannia mortgage

The Britannia mortgage was used (with the  Robinson loan) to fund the purchase of a property in Notting Hill, a district in the West of London. Mandelson made his mortgage application in August 1996 and completed his purchase of the Notting Hill property in October 1996.

At the time of the mortgage application for  the Notting Hill property, Mandelson owned two properties: a  house in his constituency (henceforth Hutton) and a flat in  Clerkenwell, London (henceforth Wilmington). He had  mortgages on both. Thus his application for the Britannia  mortgage was, at the least, the third time he had made a mortgage  application.

The Britannia interviewer (Mr Michael McDermott)  completed the application form for Mandelson who then  signed it. Mr McDermott was the branch manager and thus a  very experienced employee. He was consequently  unlikely to have made an  error when completing the form.

When he made the mortgage application (30/8/96)  Mandelson told the Britannia interviewer that the balance  of the purchase price for the Notting Hill flat would  be provided by his family. He also said that the purchase of the  Notting Hill property would be simultaneous with the sale  of his Wilmington flat.

Mandelson’s mortgage application form  unambiguously shows a failure to declare his the Hutton mortgage and  was thus false at the time he signed it. The application  became further invalidated by two failures to keep the  Britannia informed of changes in his circumstances, namely  his acceptance of the Robinson loan and the  failure to sell his Wilmington flat at the same time as he  purchased the Notting Hill property.

Section D of the application form contains the  questions “Do you have any hire purchase/loan agreements? (D1);  “Have you any other outstanding commitments including maintenance payments (D.3) and “Do you propose to borrow any other money upon the security of the property to assist in  the purchase of the property (D.5). Mandelson answered NO to  all questions.

The declaration at the end of the form which  was signed by Mandelson includes this statement: “I  confirm that this form has been completed by myself or at my  dictation and that the information given is true to the best of my knowledge and belief and all material information as  explained above has been disclosed. I understand that if any answer  has been written by any other person that person shall  for that person be regarded as acting for me.”

The Robinson loan and Mrs Mandelson

Mandelson claims that when he signed the  mortgage application on 30/8/96, he believed that his mother would give  him, as a gift, the money he needed to bridge the gap between  the proceeds of the Wilmington flat and Notting  Hill. Amazingly, during his evidence to the Committee Mandelson  admitted that he had not discussed the likely amount of the  gift prior to committing himself to a mortgage. His mother’s  subsequent rapid refusal of help shows how nebulous Mandelson’s expectation of a gift was, if it existed at  all.

Mandelson first discussed the Robinson loan in  May 1996. It was not finalised until October 1996 after  Mandelson’s mother had refused to help Mandelson. Mandelson’s explanations Mr Mandelson shares a quality with Ronald Reagan,  he is terribly forgetful. The report shows that he could  not remember when he first discussed the loan with  Geoffrey Robinson. He could not remember whether he mentioned the Hutton mortgage during his interview with Mr McDermott.  He could not remember what he had done during his  previous mortgage applications. He could not even  remember in 1999 (this is my personal favourite) how much he sold  his Wilmington flat for in 1997.

Mandelson is also apparently seriously lacking  in intellect and basic general knowledge. According to the  evidence given to the Committee, he did not even understand  the meaning of such difficult questions as “Do you propose to borrow any other money on the security of the property to  assist in the purchase” because at the time of completing  the mortgage application he “would not…have  understood what ‘security of the property meant”. 1

Translated into honestspeak most of  Mandelson’s excuses and explanations amount to this: I, Peter  Mandelson, a man deemed competent to sit in a British Cabinet, am  so lacking in intellect and general knowledge that I  cannot understand what every adult of normal intelligence in Britain  is presumed by the law to understand, namely a mortgage application form, despite the fact that I had previous experience of obtaining mortgages.

Mandelson’s other excuses rest on blaming  people such as his solicitor (WPF) and pleading overwork. The  latter is special pleading; the former deserves attention. WPF  in the person of Stephen Wegg-Prosser undoubtedly had a duty to  inform the Britannia of the Robinson loan and the failure  to complete the sale of the Wilmington flat on time. The  question is why he did not do so. Wegg-Prosser accepted that  he was grossly at fault but blamed it on family problems. Should  we believe him? In other words, was there a conspiracy  between Mandelson and Wegg-Prosser to keep the fact of the  Robinson loan from the Britannia? Consider these facts and judge  for yourself.

Mandelson’s Secrecy

For a man with nothing to hide, Mandelson was remarkably reticent about his loan from Robinson. He  failed to notify Tony Blair, the DTI permanent secretary, the cabinet secretary and the parliamentary commissioner of the Robinson loan. He failed to register the loan in the  Members Register of Interests. He used the solicitor father of  his aide Ben Wegg-Prosser to draw up the legal agreement with Robinson.

Such secrecy speaks of a desire to prevent not  only the general public and his political opponents and  colleagues from knowing the truth, but an intention also to  prevent the Britannia Building Society from discovering the true state of affairs. Publicity for the loan would  have revealed the illegality of the application. Thus  Mandelson had a prime dishonest motive for silence and secrecy. If any of the other people directly involved in the loan from  Geoffrey Robinson knew of Mandelson’s failure to declare  the loan and/or his mortgage on the Hutton property,  they would on the face of things be guilty of a criminal  conspiracy to enable Mandelson to obtain a mortgage fraudulently.

Mandelson’s desire to keep the matter secret  and his apparent willingness to lie to do so is further seen in  his reply to a question put by the Evening Standard in April 1997.  The Standard reporter, Mark Honigsbaum, asked Mandelson  to explain the difference between the amount of  money borrowed to finance the purchase of the house  registered on the Land Registry and the purchase price of the  Paddington house, ie the difference between the Britannia mortgage and  the purchase price. Mandelson complained of an invasion  of privacy (a rather rum do in a politician) to a more senior reporter, Alex Renton. However, he did tell  Renton that the balance of the cost of his new house would be  paid by the sale of his Clerkenwell flat and money from  his mother (see folios 5/6). He failed to mention the fact  that the purchase price had been met wholly by a loan from  Robinson and the Britannia mortgage.

Behind the scenes

Although her findings were significant, Mrs  Filkin studiously avoided the most serious and damaging issues which  were posed by Mandelson’s behaviour, namely the questions  of criminality and the relationship between MPs, both of which I asked her to consider in relation to Mandelson  and Robinson.

I had a considerable correspondence with Mrs Filkin,  yet after the publication of the report I discovered  that the committee only saw the first letter I sent to Mrs  Filkin. When I brought this to the attention of Robert  Sheldon, the chairman of the committee, he refused to either reopen the nvestigation or show the additional letters to theCommittee members. This is urther evidence of the Committee’s intention to produce a verdict favourable  to Mandelson come what may.

The Code of Conduct

In 19 July 1995 by a resolution of the Commons  a Code of Conduct for MPs was adopted. Rather like the 1936  Soviet Constitution, the code is a model of democratic  principle, regulating public duty, personal conduct, objectivity, accountability, openness, honesty and leadership.  My experience with Mrs Filkin and the committee  shows that it shares another quality with the 1936 Soviet  Constitution: it is not worth the paper it is written on.

I suggested to Mrs Filkin that Mandelson had  breached these parts of the Code:

Public Duty

Members have a duty to uphold the law and to act on all occasions in accordance with the public trust placed in them.

Personal Conduct

Members shall base their conduct on a consideration of the public interest, avoid conflict between personal and the public interest and resolve any conflict between the two, at once, in favour of the public  interest.

Members shall at all times conduct themselves in a manner which will tend to maintain and strengthen the public’s trust and confidence in the integrity of Parliament and never take any action which would bring the House of Commons, or its members generally, into disrepute.

In any activities with, or on behalf of, an organisation with which a member has a financial relationship which may not be a matter of public record such as informal meetings and functions, he or she must always bear in mind  the need to be frank with Ministers, Members and officials.

Leadership

Holders of public office should promote and support these principles [of the Code of Conduct] by leadership and example. Mandelson has clearly breached these parts of  the Code. Mrs Filkin concluded that he had done so, but only by his behaviour in obtaining a mortgage. Incredibly,  she judged that Mandelson’s failure to register a loan  eight times his salary did not breach the Code.

The Britannia Building Society

The failure of the Britannia to make a complaint  to the police goes against their normal policy. The  Daily Telegraph (26/12/98) ran this quote from a spokesman for  the Britannia, Joanne Hine: “When fraud has  been discovered in the past, then we have passed that to the police  to deal with.”

The Britannia commissioned the solicitors  Herbert Smith to produce a report on the Mandelson affair. This  report was codenamed Offenbach. It is worth noting that  the Committee Chairman had to quietly threaten the Britannia  with his powers to requisition documents before a copy of  the Offenbach report was supplied to the  Committee.

Was a crime committed?

In their report for the Britannia, the  solicitors, Herbert Smith, considered the question of mortgage  fraud which falls under Section 16 of the Theft Act 1968. This  runs:

“a person who by deception dishonestly  obtains for himself or for another any pecuniary advantage  is liable on conviction on indictment to imprisonment for a term not exceeding five years…”

The report continued by stressing that for an offence  to exist, it is not necessary for the person  deceived to have suffered a loss.

Peter Mandelson did profit from his irregular mortgage application because he obtained a mortgage unfairly.  This allowed him to gain a further pecuniary advantage  by acquiring a more expensive property, which  enabled him to make a massive capital gain he would not  otherwise have had the opportunity to make. Those facts would seem  to fall within the Theft Act’s provisions.

Herbert Smith claimed that the Britannia’s  money was never under threat from Mandelson’s failure to disclose  his financial circumstances. This is simply false.  It is true that if Mandelson kept to the terms of his agreement  with Geoffrey Robinson, that is did not put any  further charge on the property, the building society would have  been safe. But what if Mandelson did not keep to the terms of  the agreement? Suppose, for example, that he ran  into severe financial trouble and took further loans  against the property which exceeded the value of the property?

Such a scenario is plausible. Mandelson has  shown himself to be, secretive, very reckless and spendthrift. The  Commons report also shows how slender his means were  in 1996 – he had to borrow money from his mother to tide him  over the period when he had to pay not only the Notting Hill mortgage but also the mortgages on Hutton and Wilmington. A  situation could have easily arisen whereby Mandelson had taken loans to the value of less than the value of the  house at the time the loans were granted, but which exceeded the  value of the property when the loans were called in. The  most likely cause of such a situation would be a collapse in property  values similar to that which occurred in the early  nineties.

It is true that in such circumstances the Britannia  might still be able to exercise first call on the property eventually. But they would at best have to go  through a great deal of legal aggravation to make good their claim.  At worst, they might not be able to sustain a  claim if other loans taken by Mandelson had been given on the  same basis as that give by the Britannia.

The police

I submitted a complaint to the Metropolitan Police asking them to investigate Mandelson for gaining a pecuniary advantage by the use of false statements and  embezzlement and for possibly engaging in a conspiracy to  obtain a pecuniary advantage and embezzlement. I received this  reply from Chief Supt Paul Scotney: “After careful  consideration of all the facts outlined in your two letters, I have  decided not to commit police resources to investigate this matter.”

Wonderful isn’t it? Pure insolence of office. Police officers have an obligation to  investigate where they have reasonable grounds for believing that a  crime has been committed. Patently they did in this case because  of irregularities in Mandelson’s mortgage  application. Failure to investigate amounts to a perversion of the course  of justice.

Elite misbehaviour

What does all this show? It is classic elite  behaviour in an ostensible democracy. A member of the elite was  caught publicly in circumstances which were too serious  and outlandish for the elite to simply ignore.  Thus a charade was performed whereby an “investigation”  took place with a predetermined outcome, namely that no  meaningful punishment would be meted out to the errant member of the elite regardless of the evidence offered. The purpose  of the charade was to allow the elite to make a pretence that justice had been done.

The Code of Conduct for MPs demonstrates  beautifully the ease with which the elite can control things. The  introduction of this code was a major constitutional change. Before  then, there was precious little by way of formal restraints  on MPs’ behaviour beyond the election rules of the Representation of the People Act and the  rather toothlessregister of interests. Most extraordinary was  the fact that an MP’s behaviour towards his constituents was  unrestrained by anything other than convention, which were  mostly the product of the Commons of the eighteenth and  early nineteenth centuries which developed conventions in  keeping with the aristocratic flavour of its membership which took  Burke’s dictum that a member is not a delegate as its watchword.

Once the Code of Conduct was accepted by the  Resolution of 24/6/96, in theory the game changed. MPs became obligated formally and the old conventions were superseded where the Code of Conduct impinged upon them. Yet for all the practical effect it had in  the Mandelson case, it might as well not exist. As  things stand, it is simply a propaganda tool for the ruling elite.

Only the House of Commons can meaningfully enforce  the Code. The Code gives the appearance of an attempt to maintain  public probity but that is all it is, the appearance. Elites in an ostensible democracy have to make  a public playof honest dealing with members of the elite, but  it is just that, a play. The reality is that elites  ensure that justice is not done by controlling the bodies which  make judgements of members of the elite. The people who investigated  and udged Mandelson were a committee which had a majority of embers from Mandelson’s own party and a public servant whose appointment depended on the very politicians  she was due to judge. Just to add spice to this elite sauce, Elizabeth Filkin was a non-excutive director of the Britannia until a few weeks before her appointment as Commissioner  for Standards. Strangely, she did not feel that  this disqualified her from investigating Mandelson. I asked to  appear before the Committee. The request was refused. All  very cosy, all very elite controlled.

Throughout this affair every person involved in the investigation has behaved to benefit Mandelson  and mitigate his offence. Elizabeth Filkin refused to  investigate the most damaging charges against Mandelson, those of  criminality and of being under the influence of Robinson  because of the loan. She refused to investigate Robinson at all. The  Britannia’s solicitors, Herbert Smith, put the best possible gloss on everything Mandelson did or failed to do. The Committee concluded against all the evidence that Mandelson’s misbehaviour was trivial.

This affair raises the vital questions of  equality before the law and democratic control. Both have been negated comprehensively. The general public have been treated as impotent fools. We have not a democracy but an elective oligarchy, which is as effective at  maintaining control as any formal aristocracy.

1 Mniutes of  Report para 51