LONDON – The Co-operative Group launched an investigation Monday into any “inappropriate behaviour” among its employees after a video emerged in which the former chairman of its bank is allegedly caught buying illegal drugs.
Britain’s largest mutual society started the review after Paul Flowers apologized “to all I have hurt or failed by my actions,” following the video released by the Mail on Sunday. The newspaper reported that Flowers was filmed buying crystal meth, cocaine and ketamine, days after a parliamentary committee grilled him on the bank’s disastrous financial performance.
“Given the serious and wide-ranging nature of recent allegations, the new executive management team has started a fact-finding process to look into any inappropriate behaviour at The Co-operative Group or The Co-operative Bank and to take action as necessary,” the group said in a statement.
West Yorkshire police are making inquiries into the case after the newspaper’s allegations, which accompanied a page one story headlined “Crystal Meth Shame of Bank Chief.”
Flowers, a Methodist minister and former local politician, has been suspended by his church and the opposition Labour Party.
“This year has been incredibly difficult, with a death in the family and the pressures of my role with the Co-operative Bank,” Flowers said in a statement. “At the lowest point in this terrible period, I did things that were stupid and wrong. I am sorry for this and I am seeking professional help.”
Flowers stunned lawmakers during the parliamentary session earlier this month after he acknowledged he was unsure how much money the bank had loaned out. Flowers told Treasury Select Committee chair Andrew Tyrie that Co-op’s total assets were about 3 billion pounds ($4.83 billion) — they actually total about 47 billion ($75.7 billion).
The revelations are certain to heap more pressure on Co-op, which has reshaped its leadership in the wake of troubles that emerged after its 2009 acquisition of the Britannia Building society. The bank has had to plug a 1.5 billion pounds ($2.4 billion) black hole in its finances and earlier this month had to agree to a rescue plan.
Though the Co-operative Group, which also has grocery stores and funeral parlours among its portfolio, will retain 30 per cent of the bank and remain its largest shareholder, it was forced to take out full page advertisements in British newspapers to underscore its commitment to retaining its values.
But the situation raises troubling issues in the wake of the banking crisis, in which the behaviour of bankers — if not their qualifications — undermined public confidence in banks, businesses that underpin the entire economy. Several big banks in Britain have faced a string of scandals — including the manipulation of the London interbank offered rate, or LIBOR, the benchmark for trillions of dollars in loans such as home mortgages.
However, unlike people who manage investments, for example, there’s no set qualification for a chairman — though such leaders are tested, interviewed and held to a fit and proper standard by authorities. Knowledge of an organization and how it works is among the critical factors authorities examine, but many organizations seek out a board with a diversity of experience — making any single test difficult to administer.
Co-op said it was launching “a root and branch review of the democratic structure of the organization” and stressed the need “to modernize to ensure that the interests of all our 7 million members are properly and directly represented in the oversight of our business activities.”