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Update of May 7, 2001: Yes, it's confirmed (on May 4): Bank of Scotland has a deal to merge with Halifax, for $14.8 billion, to form the U.K.'s fourth largest bank, behind HSBC, Royal Bank of Scotland and Barclays. Presumably, the Office of Fair Trading and other agencies will get involved: and we'll be there...  Click here to see ICP's current Bank Beat

Update of April 30, 2001: Ah, Bank of Scotland's latest engagement, with Yorkshire-based Halifax. News of the talks, and the proposed $37 billion merger, leaked on April 25; emergency board meetings scheduled for April 29 were put off. There are rumored to be other bidders, waiting in the wings: Barclays, National Bank of Australia, perhaps HSBC. Bank of Scotland has been bungling for the last two years: first, an ill-fated proposed joint venture with televangelist Pat Robertson; then, Bank of Scotland was spurned by NatWest, then Abbey National. Will this Halifax proposal work any better?

   For ICP's periodic reports in 2000 on Bank of Scotland, NatWest, Royal Bank of Scotland (and on Pat Robertson, with whom Bank of Scotland tried an ill-fated joint venture in 1999), see Inner City Press’ Bank Beat -- click here to view the current Reports; archive links at at the bottom.

December 31, 1999 (This series ran March 10 - Dec. 31, 1999)

    At the close of 1999, NatWest’s chairman David Rowland reiterated NatWest’s view that both Scottish banks’ bids are inadequate, and Royal Bank of Scotland apologized for an inaccurate measure of CGU holdings in NatWest that RBS included in its offer document. Oops!

Again, click here, now and in the future, for ICP’s ongoing Bank Beat.

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December 20, 1999

   On Dec. 16, U.K. Trade Secretary Stephen Byers cleared Royal Bank of Scotland’s bid for NatWest from competitive concerns. London’s Sunday Business of Dec. 19 reports that Royal Bank of Scotland will this week re-open talks with NatWest, looking to have a new (and presumably larger) friendly bid accepted by NatWest. A Reuters poll of analysts now sets the odds as follows: Royal Bank of Scotland winning NatWest: 50.3%; Bank of Scotland winning NatWest: 28.4%; NatWest remaining independent: 18.2%.

  On the Bank of Scotland (and NatWest) Watch, for or with more information, contact us.

* * *

December 13, 1999

   Bank of Scotland’s pitch, as clarified on December 8: BofS would close or relocate up to 90% of NatWest’s branches, and bring down NatWest’s current “staff cost per employee” (41,000 pounds) to its own low level (25,000 pounds). These detailed cost-cutting projections are more graphic than U.S. acquirers use (in the U.S., the cost-per-employee is usually obscured in an overall savings projection).

   Meanwhile, Banco Santander Central Hispano has applied to the Federal Reserve Bank of New York to up its stake in Royal Bank of Scotland (see FRBNY’s Weekly Bulletin of Dec. 6, at 2).

* * *

December 6, 1999

    The two bids are on the table, and speculation mounts that the Scottish bank that does not win NatWest will become a takeover target itself. In the press, the battle is being personalized, as one between BoS’ Peter Burt and Royal Bank of Scotland’s Sir George Mathewson. Burt played into this last week, saying “Royal do not have the solid quality of management that we have. The bank even had to go outside to find Fred Goodwin” (Mathewson’s number two, a/k/a “Fred the Shred,” for presiding over massive lay off campaigns). The finance union UNIFI has expressed concern over all three plans (that is, including NatWest’s own plan to remain independent by itself initiative lay offs). BoS’ absurd dalliance with televangelist Pat Robertson continues as a strand through this story (although the U.S. paper, American Banker, erroneously attributed the snafu to Royal Bank in a Nov. 30 article, corrected on Dec. 1). Over the weekend, the Observer reported that Lloyds TSB is seeking a friendly merger with Abbey National. The chess game toward consolidation continues...

November 29, 1999

    The game has heated up. On November 26, Bank of Scotland raises its hostile bid for NatWest by 15%, to $41.07 billion. On November 27, NatWest published its final defense document, claiming that it would achieve cost savings of $842.3 million by fiscal 2002, and buy back over $3 billion of its own shares. Pundits began touting Royal Bank of Scotland as the new “favorite” to win NatWest (Reuters, Nov. 26) -- but the Sunday Telegraph of Nov. 28 reports that NatWest has rejected Royal Bank’s “friendly” bid. Thereafter, wire services quoted sources that Royal Bank is preparing a hostile bid for November 29, and that Banco Santander will be providing cash and support. Developing...

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November 22, 1999

   News of the week: Bank of Scotland’s plan to offer banking through 5,000 pharmacies in Australia unraveled last week. The Sunday Herald, in what it labeled an exclusive, analogized this most recent failure to BofS’ Pat Robertson fiasco earlier this year. To the Daily Mail, a NatWest spokesman said, “Bank of Scotland has tried divine intervention. It seem that pharmaceutical intervention is no more effective.”

   Royal Bank of Scotland on Nov. 16 denied that one of its internal memos, published by the Sunday Express, does not necessarily mean it will bid on NatWest. Bank of Scotland itself on Nov. 18 said it has not decided whether or not to raises its bid for NatWest. At week’s end, it appeared that the Takeover Panel’s timetable may be extended, tolled while the Office of Fair Trading considered referring the deal to the Competition Commission.

* * *

November 15, 1999

    Quote of the week: NatWest’s CEO David Rowland’s November 11 letter to shareholders said that Bank of Scotland’s projected cost cuts “would require something akin to divine intervention to succeed -- which Bank of Scotland has sought in the past, without success.”

    On his Virginia compound, Pat Robertson was sure to get a kick out of that, as he counted (or used) the break-up fee Bank of Scotland had to pay him.

    U.S. bank takeover battles simply don’t use the same quality of literary tropes, the veiled implications, the accusations of “hubris and parochialism” (this also from Rowland’s November 11 letter). BoS’ Peter Burt uses a more American-style bluster, firing back: “NatWest is seeking to justify its flabby performance.” Flabby performance? We award this round to NatWest, on the quality of invective. It’s a twelve-round prize fight, however, and, reverting to Americanisms, “it ain’t over until the fat lady sings,” and the flabby performance is definitely dissected. Hubris and divine intervention! Where’s Banco Santander? To be continued...

* * *

November 8, 1999

    The London Sunday Times of November 7 reports that Royal Bank of Scotland is mulling at $42 billion bid for NatWest, along with its partner Banco Santander, which already owns 10% of Royal Bank of Scotland. The partners currently have until December 3 to make their intention’s known. The Takeover Panel rejected Bank of Scotland’s request that Royal Bank be made to disclose its intentions soon than that. The game proceeds...

* * *

November 1, 1999

   NatWest has announced its defense strategy, in the face of Bank of Scotland’s bid: to sell off four businesses, and lay off 11,650 employees. Rhetoric has continued to heat up, with NatWest’s Sir David Rowland pointed to previous less-than-successful BoS moves (including the aborted Pat Robertson partnership), and BoS’ Peter Burt calling NatWest’s track record “one of change, failure and disappointment.” NatWest claims it has already closed 500 branches, more than the entire BoS network. Next deadlines: Day 39 (Nov. 22), when NatWest must make its last pre-decision disclosure, and Day 46 (Nov. 29), the last day for BoS to raise or change its bid. Royal Bank of Scotland, Abbey National, and perhaps others still wait in the wings -- a bid by one or more of them would reset the clock in this takeover game.

* * *

October 25, 1999

    The NatWest take-over game is proceeding under uniquely British rules, with timetables for “defense documents” (NatWest’s are due on October 28) and increased bids (Bank of Scotland would have to do so by November 29, 46 days from its initial offer document). Britain’s “Takeover Panel” deputy director general Tony Pullinger says the panel is “watching” Royal Bank of Scotland -- which, along with Abbey National, is expected to submit a bid just after NatWest’s defense, if at all. There’s a “specialist betting company,” Odds on Finance, taking bets on who will win. At last report, it’s offering 5-to-2 against NatWest remaining independent. But that was before the supposedly earth-shattering news that J.P. Morgan vice chairman Mendoza has gotten involved in NatWest’s defense. U.S. readers might consider Wells Fargo - First Interstate, an unhappy merger in which J.P. Morgan was also involved. It worked out so badly for Wells that it no longer exists -- the predator was itself eaten, by Norwest, last year. But there are no refunds of fees, from these international mercenaries. Victory at all costs! Bank of Scotland says it would lay off 28,000 if its acquires NatWest. NatWest is said to be preparing its own blood-letting proposal, a minimum of 10,000 jobs. Meanwhile, U.K. industry minister Patricia Hewitt is proposing a sort of voluntary Community Reinvestment Act for British banks, in which banks would voluntarily disclose the services they offer to people who are either poorly paid or unemployed. Better hurry...

* * *

October 18, 1999

    Things are getting uglier on The Mound, Bank of Scotland’s headquarters in Edinburgh. On October 14, BoS made public its formal $35 billion offer for NatWest, and its cost-cutting projection: 1.015 billion pounds over three years. BoS CEO Peter Burt, who earlier this year had to jettison his planned joint venture with Pat Robertson, said he would close or relocate 90% of NatWest’s branches -- or reconfigure them under BoS’ “bank in a box” model. Other potential bidders, including Abbey National and Royal Bank of Scotland, are expected to come out shooting, most probably just after NatWest files its defense documents, due 14 days after BoS’ October 14 filing.

    On the U.S. front, Inner City Press has now received a copy of Bank of Scotland group counsel Alastair Loudon’s October 6 letter to the Office of the Comptroller of the Currency, “withdraw[ing] its application... to charter NEWCO, National Association.” Mr. Loudon writes, “Many thanks to you and the members of your staff who assisted throughout the application process.” Ah, civility... to the US regulators. What will the Jekyll and Hyde on The Mound do next? We’ll see.

* * *

October 11, 1999

     The Bank of Scotland on October 6 formally withdrew its application to start a bank in the United States. The application to the Office of the Comptroller of the Currency had been on hold, but still pending, since Bank of Scotland broke off its planned joint venture with televangelist Pat Robertson. Bank of Scotland has said it is seeking another U.S. partner in order to go forward. But on October 8, an OCC senior attorney informed Inner City Press that Bank of Scotland has now formally withdrawn its application.

     Meanwhile, Bank of Scotland has stepped up its hostile campaign to take over NatWest. On October 7, the bank’s CEO Peter Burt announced a harsh cost-cutting plan if he acquires NatWest: cutting 15,000 jobs, shrinking the size of (or relocating) up to 90% of NatWest’s branches, and closing over 40 data processing centers (Financial Mail). NatWest responded on October 8 by firing its CEO, Derek Wanless. NatWest chairman David Rowland, now taking over the CEO post, said “What we wanted was people who eat red meat for breakfast.” Fairly poetic, but most bets now are that NatWest will not survive as an independent company. Royal Bank of Scotland has yet to make a bid. Analysts have expanded their list of possible U.S. acquirers, from Citigroup to Chase or Bank One. The U.S. finance companies -- City Scape, The Money Store, et al. -- haven’t fared too well in Britain, so this may be a longshot. NatWest has also tried a “conflict of interest” defense, noting on October 8 that one of Bank of Scotland’s investment bankers, Eric Gleacher of Gleacher & Co., owns $18 million in NatWest stock. Bank of Scotland’s also being advised by Morgan Stanley Dean Witter & Co..

October 4, 1999

   Bank of Scotland is pushing forward with its hostile bid for NatWest, while other potential bidders do little more than monitor the situation. The Guardian of September 30 quotes Bank of Scotland CEO Peter Burt saying he will “get” Nat West... “The bank was talking to two American companies to devise a plan to replace its disastrous link with US evangelist Pat Robertson.” Bank of Scotland’s main claim is that it would aggressively cut NatWest’s cost, including by “re-siting” up to 90% of NatWest’s 1,700 bank branches. Royal Bank of Scotland continues to “monitor” the situation, and Banco Santander, which holds ten percent of Royal Bank of Scotland’s stock, would be expected to support any bid by Royal Bank -- or to simply make its own bid. By October 3, NatWest was considering breaking itself up -- selling Ulster Bank, Gartmore Investment Management, and Greenwich NatWest (which operates in the U.S.), to both make itself less attractive to Bank of Scotland, and to make itself (temporarily) more attractive to its own shareholders. This is the “cut off your nose” take over defense strategy. Developing...

September 27, 1999

    Bank of Scotland, which earlier this year applied to open a bank in the United States with televangelist Pat Robertson, then paid a break-up fee to cancel the venture after Robertson called Scotland a “dark land” run by homosexuals, but has yet to withdraw its proposal for a US bank -- on September 24 announced a $34 billion hostile bid for NatWest, which in 1996 sold its retail US bank to Fleet Financial, but which maintains a capital markets presence in the United States.

    Bank of Scotland called on NatWest shareholders to reject NatWest’s pending deal with the insurance company Legal & General Plc. Over the weekend of September 25-26, NatWest tried to solicit other companies to top Bank of Scotland’s bid. Royal Bank of Scotland CEO Sir George Mathewson rushed back to the U.K., and retained both Merrill Lynch and Goldman Sachs to advise it. Bank of Scotland has hired both CSFB and Morgan Stanley. Whatever the outcome, the U.S. investment banks are making out like bandits. Other banks reportedly in the mix to bid on NatWest are the ex-building societies Abbey National Plc and Halifax Plc, and, less certainly, Citigroup. At press time, the Independent reports that Abbey National is instead preparing a bid for Legal & General. It’s a chaos.

    Meanwhile, the U.K. financial services industry union, UNIFI condemned Bank of Scotland’s bid in a September 24 press release, stating that “The Bank of Scotland recently made a grave error of judgment by trying to tie-up with American evangelist Pat Robertson -- we believe this bid is also a mistake, which we hope will also be unsuccessful.”

June 21, 1999 -- Bank of Scotland, recently burned by Pat Robertson, will this week announce a joint venture with Clydeport Plc, to develop office space, housing and a five star hotel on the River Clyde in Glasgow, according to the Sunday Telegraph.  Sort of like Robertson’s Virginia Beach spread, without the ideology... Meanwhile, Bank of Scotland’s search for a substitute U.S. partner goes on, and the bank has still not withdrawn its Robertson-based application to the Office of the Comptroller of the Currency.  This will be updated... Until then, for or with more information, contact us.

June 14, 1999

   In the aftermath of Bank of Scotland’s canceling its joint venture with Pat Robertson (while paying a break up fee reported between $10 and $30 million dollars), Bank of Scotland has yet to formally withdraw its application for a bank charter from the Office of the Comptroller of the Currency. The OCC indicates that if Bank of Scotland amends its application to include a new (and presumably less controversial) partner, it would trigger new public notice, and a new comment period. For that, the current, “emptied” application should be withdrawn. Future development will be reported in this space, including whether Bank of Scotland re-asserts the argument that it could collect deposits nationwide, while only acknowledging a Community Reinvestment Act duty in a single city (in the Robertson proposal, Stamford, Connecticut). Stay tuned.

    Never a dull moment with Pat Robertson: he has also withdrawn from the board of directors of Laura Ashley. Back in the U.S., the Wall Street Journal of June 11 (at 24) reports on Robertson’s attempts to restructure his Christian Coalition, after the Internal Revenue Service made clear it would reject the Coalition’s application for tax-exempt status. Robertson has decided to split the group in two: an openly-political “International” charter, while relegating all conceivably tax-exempt activities to the Texas chapter of the Coalition, which already has an IRS exemption. Robertson, who will head both entities, plans to raise $21 million and distribute 75 million “voters guides” in the 2000 campaign. Robertson is meeting this week with House Speaker Dennis Hastert (R.-Ill.) “and Senate leaders to plot a legislative strategy to mobilize the GOP base.” Robertson’s views, which crashed in Scotland, are apparently eaten up by “mainstream” Republicans in the United States.

* * *

June 7, 1999

    Late on June 4, the Bank of Scotland finally called off its banking joint venture with Pat Robertson. Inner City Press has not yet learned if Bank of Scotland will be (and it should) withdrawing its bank charter application to the Office of the Comptroller of the Currency. Bank of Scotland’s application, which ICP has been commented to the OCC against since March, was predicated on using Pat Robertson to do outreach for the bank. Robertson was to have owned 25% of the bank. While Bank of Scotland now says it is trying to find another partner, it cannot continue to pursue a generic bank charter. Bank of Scotland should withdraw its application to the OCC. At some future date, Bank of Scotland is free to come up with a new plan, perhaps a new partner, and re-apply to the OCC.  Applications for U.S.-wide telebanks, which seek to limit their Community Reinvestment Act duties to a single town (as Bank of Scotland has) remain of concern.

    On June 4, the Scottish Daily Record reported that Pat Robertson would receive a break-up fee up to 10 million pounds. This has not been confirmed -- the OCC has kept confidential, at the bank’s request, most of the bank’s application. Sunday’s London Independent recounts ICP’s attempts to get access to this information under the Freedom of Information Act, in order to prepare its comments, and reports: “A spokesman for the U.S. Comptroller’s office declined to characterize the degree of secrecy involved in New Foundation Bank’s application. ‘Every application is unique,’ he said.”

    Unique, indeed. Somehow, the Bank of Scotland failed to check out its business partner before committing to a break up fee. Robertson, once the Scottish press began asking questions, went on his 700 Club TV show and declared Scotland a land of darkness, where “homosexuals” are incredibly powerful. The problems in Scotland (and Europe), according to Robertson, is “too much tolerance.” (A number of ICP’s Scottish sources found this comment particularly amusing). Now, key shareholders of Laura Ashley, to whose board of director Robertson was appointed in January, are seeking to oust him from that board. The fashion designer’s daughter Jane says her mother, who died in 1985, would have been “appalled” that Robertson is part of the company she founded. Robertson’s support on the board is Ashley’s largest shareholder, Malayan United Industries and its chairman, Khoo Kay Peng. Meanwhile, Robertson has signed a mineral development agreement with Liberian strongman Charles Taylor, who the U.S. State Department accuses of human rights violations during his ascent to power. The Robertson beat goes on...

June 4, 1999

    For two days now, it has been reported that the Bank of Scotland is preparing to break off its deal with Pat Robertson and “Robertson Financial Services.” Bank of Scotland officials are flying across the Atlantic to meet with Pat Robertson in Boston today. Apparently decisive to Bank of Scotland was Pat Robertson’s diatribe against Scotland itself, on the 700 Club television show on May 18: “You can’t believe how strong the homosexuals are. It’s just simply unbelievable... You can go back into darkness very easily.” Once reported, Robertson’s statements led to an increase in the number of Scottish institutions planning to withdraw their accounts from the Bank of Scotland

    At least two questions arise: if Bank of Scotland decides not to proceed with its plan to charter and operate a bank with Robertson, is there any “break up fee” payable to Robertson? Inner City Press requested the entire application for the Office of the Comptroller of the Currency in March of this year. Initially, the OCC withheld virtually all of the application. On May 6, the OCC provided ICP with more of the application, include a redacted copy of the “Amended and Restated Agreement Between Shareholders, dated as of February 26, 1999, among Robertson Financial Services, The Governor & Company of the Bank of Scotland, and Pat Robertson.” Most pages of the Agreement were blacked-out with magic marker, including even many of the headings in the Table of Contents of the agreement. There is a Section 10.6 of the agreement, entitled “Dissolution” - but the entire page has been redacted.

     Most U.S. bank merger agreements provide for break-up fees. Usually, these arrangements are disclosed, because the banks are publicly traded, and must report material contracts to the Securities and Exchange Commission. Here, whole sections of the agreement have been blacken out. One questions: did Bank of Scotland propose and obtain some type of “morals clause” in the agreement, whereby no break up fee would have to be paid if the break up were cause by the statements or actions of Robertson himself? Professional sports contacts often contain such a clause (viz., the contract of New York Yankees outfielder Darryl Strawberry, his recent legal troubles in Tampa, Florida, and the Yankees’ suspension of payments to him). Perhaps “moral clause” is not the right phrase, as applies to Pat Robertson. Or perhaps it is.

    A second, more practical question: if Bank of Scotland breaks off its relationship to Robertson, could it proceed with its application to the OCC for approval of a new bank charter in the United States? ICP contends not. The February 1999 application was a joint venture between Pat Robertson (to own 24.9% of the venture) and Bank of Scotland (to own “not less than” 51%). The elimination of Robertson would change the plan materially; one cannot apply for a generic or stealth charter and fill in the blanks later. Bank of Scotland’s application would have to be withdrawn, and/or a new comment period begun.

     Finally, in light of Bank of Scotland’s statement that it will meet with “other shareholders, including Pat Robertson,” one wonders who was to control the other 25% of the venture. Was M&I in Wisconsin, which was to do processing for the bank, to own this final 25%?

May 14, 1999

    Bank of Scotland has proposed, along with Pat Robertson, to open a bank in the United States, putting its only office in Stamford, Connecticut, but soliciting deposits nationwide by telephone and Internet. The application, made to the U.S. Office of the Comptroller of the Currency and subject to public comment, raises many troubling issues, which are discussed below in ICP’s comment letter, filed May 14 with the OCC. For or with more information, contact us.

     On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, “ICP”), and pursuant to your letter of April 22, this letter follows up on ICP’s March 30 and April 1, 1999, preliminary comments opposing, and requesting for an extension of the comment period on, the above-captioned application to the Office of the Comptroller of the Currency (the “OCC”).

Despite your May 3 and May 6 correspondence providing to ICP portions of the material for which the Applicants erroneously requested confidential treatment, the Applicants are still withholding basic information that the public has a right to view before the comment period can close. As simply one example (further examples are set forth infra in this comment), the Applicants are still withholding, in full, the list of products the proposed bank would offer (Appendix II to the Operational Plan). How can the public meaningfully comment on a proposed new national bank if the applicants seek to withhold in full the list of products the bank would offer?

Your letters of May 3 and May 6, 1999, each state that the enclosures annexed thereto “are provided to you at this time because of your expressed desire to prepare comments relating to the application” and “because the applicant has withdrawn its prior request that confidential treatment be extended to this material.” Presumably, the Applicants reiterated their erroneous request for confidential treatment of their list of proposed products, their “vision,” and other clearly non-confidential material portions of the Application (see infra).

Meanwhile, Applicant Robertson has stated that he “expect[s] regulatory approval by the end of June” (Sunday Herald, May 2, 1999; see also Daily Mail of London, April 24, 1999, quoting a Bank of Scotland spokesman that “[e]verything is going ahead as we planned... The regulatory process is moving forward and we expect it to get approved within the next few months”). Robertson has indicated that the Applicants are considering doing an initial public offering for this proposed bank. See Bloomberg newswire of May 1, 1999, further discussed below. The Applicants have not submitted any response to the issues raised in ICP’s March 30 and April 1 comments, including on the issue of how a bank 25% owned, and primarily promoted by, an individual who has, as simply one example, stated that Hindus are similar to Satanists (see, e.g., Dayton Daily News, June 18, 1997, Remarks An Ugly Reminder: “Robertson once posed this question on his 700 Club program: 'What is Hinduism but Devil worship, ultimately?’”) -- would comply with federal, state and local anti-discrimination laws. ICP hereby timely requests a further extension of the comment period, under 12 C.F.R. 5.10(b)(2).

While, as further set forth below, the comment period cannot legitimately close at this time, ICP takes this opportunity to submit preliminary comment on the five-page “CRA Outline Statement” (hereinbelow, the “CRA Outline”) provided under cover of your letter dated May 3, 1999.

The Applicants’ CRA Outline is insufficient, by its own terms. The Outline states that “[i]t is preliminary because until the filing of this application, the existence of the proposed venture and the identities of its participants were not made public... At the earliest opportunity following the filing of this application, NEWCO’s CRA officer will begin to contact the candidates...[to] identify potential products, investments and opportunities for partnerships that may be suitable for NEWCO’s CRA program.” CRA Outline at 1-2, emphasis added.

This application was filed in February 1999, that is, two-and-a-half months ago. At the time it was filed, the Applicant’s CRA Outline expressly sought to defer most substantive presentation of its CRA plans until it submits a CRA Strategic Plan. Since CRA is a statutory factor on this application, ICP questions whether the Applicants can evade the question of CRA by stating that they will file a CRA Strategic Plan later.

The Applicants sought to explain this “put-it-off-until-later” approach by stating that until the application was filed, they were constrained by their desire for confidentiality of the proposed venture and its participants. See supra, and Outline at 1. The Applicants stated that at the earliest opportunity after the “filing of the application,” they would (be free to) begin elaborating the referenced CRA plan. It is now two and a half months after the filing of the application, but ICP, which requested the application and all updates / supplements, has not received anything on CRA beyond the February 1999 Outline quoted from above. This is illegitimate. Since the comment period cannot legitimately close based on the information the Applicants are still seeking to withhold (including but not limited to the list of proposed products), during the required further extension(s) of the comment period, the Applicant should be required to submit the further CRA information they stated they would compile, complete and file “at the earliest opportunity after the filing of the application” (two-and-a-half months ago).

There is little in the other generalities in the (insufficient) February 1999 CRA Outline on which to comment. For the record, the proposed bank, if it were chartered, should not be designated as a wholesale or limited purpose bank, given the Outline’s projection of retail credit products. See Outline at 4, and see Sunday Herald of May 2, 1999: “‘We will expand to an eventual full service bank, offering any sort of service that’s legally allowed in the United States... That includes insurance, all of those services,’ said Robertson Financial Services president Neil Volder”). This is particularly true given the one year lag on rescinding wholesale or limited purpose bank designations. Furthermore, since it is clear that the proposed bank would be soliciting deposits on a nationwide basis (see, for example, the Application’s focus on Mr. Robertson’s nationwide viewership, Operating Plan at 3, and, even more dispositively, the statement in the Charter Application at 10 that “NEWCO will be competing in a national market for all its products and services”), ICP opposes the Applicants’ proposal to limit their CRA responsibility and assessment to the Stamford MSA (Outline at 2), and the projected limitation of CRA service and outreach to this MSA (Outline at 1,2 and 3), while the bank would be collecting insured deposits nationwide, including, it has become more clear, through the Internet. The Bloomberg newswire of May 1, 1999, reported that “Bank of Scotland... is planning to sell shares in an Internet banking service it will start in the U.S... Bank of Scotland board member and television evangelist Pat Robertson is expected to recommend that the shares be sold on the NASDAQ stock exchange, in a sale that could be worth billions of dollars, the newspaper said. ‘I do know the [dot] com bank would be a hot initial public offering if they wanted to do it,’ the newspaper quoted Robertson as saying.”

Further note for the record, and in light of the applicants public statements (with all details currently redacted from the documents provided to ICP) that this would be a “dot com bank” (apparently -- see Sunday Herald of May 2, 1999), that there are particularly difficulties for new, Internet-based institutions such as the one proposed to sufficiently serve the credit needs of low- and moderate-income consumers. There remain disparities in computer ownership and Internet access, by both income and race. See, e.g., Scott Wooley, Virtual Banker, Forbes, June 15, 1998, at 127: “Internet-savvy bank customers tend to be high-balance types. Booz, Allen figures Internet customers, with their average household income of $80,000, are two to four times as profitable as other customers.” Emphasis added. This does not mean that Internet banks could not comply with CRA -- but particularly attention must be paid, and a credible plan must be laid out, and made public, during this applications process.

In 1996, ICP commented on Toronto Dominion’s application to the Federal Reserve Board (“FRB”) to acquire Waterhouse National Bank (“WNB”). The application stated that WNB would offer its credit products only to those trading securities electronically). ICP’s comments to the FRB, cc-ed to the OCC’s, WNB’s regulator, asked: given the demographic of customers, and the applicants lack of a CRA record, how would the target bank serve low and moderate income borrowers? The FRB, after a months long proceeding, required Toronto Dominion to submit a detailed three to five year CRA plan. See, e.g., letter from Mr. Glenn Loney of the FRB to counsel to Toronto Dominion, dated August 16, 1996, which stated:

“In order to provide the Board with information that would give it the ability to evaluate the issues involved in this matter... we are again requesting additional information regarding the CRA program at WNB and the plans of TD to oversee and implement the further development of WNB’s CRA program. We understand that, since TD is a Canadian company and owns no banks or thrifts in the United States, it has no record of dealing with the [CRA]... since the Applicant would be assuming responsibility for WNB’s CRA program, and since the record is currently unclear as to TD’s future plans for WNB’s CRA program, please provide, with the greatest degree of specificity possible, TD’s plan to oversee and develop WNB’s CRA program over the next three to five years... with time frames for anticipated actions, proposals for monitoring, progress reports and the like.”

    It would be more than a little surprising if less scrutiny was given here. Bank of Scotland and Robertson have requested confidential treatment for most material portions of the Application. ICP reiterates its request (part of its timely FOIA request/appeal) for this erroneously withheld information, and contends that the public comment period cannot legitimately close at this time.

    ICP’s opposition to this proposal is not limited to these assessment area and Internet / marketing issues; the full CRA comments that ICP is entitled to make cannot be expected to be submitted until the Applicants submit more substantive information than was contained in their February 1999 CRA Outline.

    ICP’s March 30 and April 1, 1999, preliminary comments noted the potential fair lending and other compliance issues raised by the central involvement, particularly as a spokesman / pitchman for the bank, of an individual who has, for example, publicly drawn analogy between Hindus and Satanists. (See, e.g., Dayton Daily News, June 18, 1997, Remarks An Ugly Reminder: “Robertson once posed this question on his 700 Club program: 'What is Hinduism but Devil worship, ultimately?’;” and see the other remarks quoted in ICP’s April 1, 1999, submission, incorporated herein by reference). Here a few more of Mr. Robertson’s publicly reported comments, compiled in The Independent newspaper (of London), April 14, 1999:

His views on gays have embarrassed even his followers on occasions. For instance, he forecast that tornadoes, hurricanes and perhaps a meteor would strike Disney World in Orlando because it hosts gay events. “Many of those people involved with Adolph Hitler were Satanists, any of them were homosexuals,” he has said. “The two things seem to go together.”

Mr. Robertson has also insulted Hindus and Muslims. “When I said during my presidential campaign that I would only bring Christians and Jews into the government, I hit a firestorm. ‘What do you mean?’ the media challenged me. ‘You’re not going to bring atheists into the government? How day you maintain that those who believe in the Judeo-Christian values are better qualified to govern America that Hindus and Muslims?’ My simply answer is, ‘Yes, they are.’” [from Pat Robertson’s book, The New World Order, page 218].

* * *

   The partially-redacted material provided to ICP on May 3 and May 6, 1999, if anything, make the nexus between the proposed bank’s marketing and Mr. Robertson all the more clear. The Operating Plan, at 3, enters into the record before the OCC, purportedly in support of the charter, that Dr. Robertson established Christian Broadcasting Network (CBN); “CBN’s flagship program, the 700 Club, which is still hosted regularly by Dr. Robertson, attracts a daily average U.S. audience of 1.0 million.” The Application stresses Dr. Robertson’s “opinions and values” (id. at 3) and emphasizes, clearly in support of the proposed bank’s marketing strategy, that Dr. Robertson “has a very substantial and loyal following.” Also in the public record (and now in the record before the OCC) is the Sunday Mail of May 2, 1999, quoting Robertson in an interview in Virginia: “in the future we will use the CBN to sell the phone bank.”

     Even before receiving the rest of the information that it is entitled to, and commenting thereon, ICP poses the following question: is it not entirely foreseeable that, for example, a follower of the Hindu religion, or, for further example, an Indian national more generally, being aware of Mr. Robertson’s widely quoted “opinions and values” (see supra), would be discouraged from approaching or applying to this proposed bank for credit? Particularly given the centrality of Mr. Robertson, his “opinions and values,” and CBN outreach, ICP contends that an objective consideration of this question will require denial of this application.

    National origin and creed are protected criteria under federal fair lending laws. Other groups and individuals who would be discouraged from approaching or applying to this proposed banks are protected under state and local anti-discrimination statutes -- and ICP notes that the OCC can and must act on contravention of these laws, under 12 U.S.C. 1818...

    The OCC should also take note, under the financial factors it is statutorily required to consider, that the above-discussed issues have begun to affect the strength and/or deposits of the Bank of Scotland. The Aberdeen Press and Journal of May 10, 1999, reports that the Ethical Investment Cooperative in Edinburgh has divested shares in the banking group for thirty clients, amounting to nearly one million British pounds. The Daily Record of May 3, 1999, reported that the West Lothian Council said it would consider shutting its 250 million pounds a year account “unless the bank scrapped the deal.... Meanwhile, as the protests mounted, the Bank of Scotland spent around pounds 20,000 to fly four Scots journalists to the U.S. to meet Pat Robertson.”

    This bank-paid visit is phrase two of the Applicants’ media campaign. Phrase one, of concern from Applicants’ for a new bank charter, was Robertson’s characterization of all those who question this proposal as being “members of the radical left” (Daily Mail of London, April 24, 1999), and a series of threats made by the Applicants’ (or perhaps only Robertson’s) Glowgow outside counsel, Levy & McRae, to sue any publications which report on Robertson’s previously published (and in many cases videotaped) public statements. See, e.g., The Sunday Herald of May 2, 1999; and see The Scotsman of April 24, 1999, reporting the litigation threats, along with a medley of Robertson’s statements on the 700 Club television program that the Application itself makes so much of, statements such as:

“What you’ve got to recognize is it is Hinduism in another guise, and what is Hinduism but devil worship, ultimately?”

“You say you’re supposed to be nice to the Episcopalians and the Presbyterians and the Methodists and this, that and the other thing,” he said on January 14, 1999. “Nonsense. “I don’t have to be nice to the spirit of the Anti-Christ.”

    And, from Pat Robertson’s letter denouncing an equal rights amendment in Iowa:

“The feminist agenda is not about equal rights for women. It is about a socialist, anti-family political movement that encourages women to leave their husbands, kill their children, practice witchcraft, destroy capitalism and become lesbians.”

    This letter as a predictor of the proposed bank’s compliance with the Equal Credit Opportunity Act (which prohibits discrimination, including, under the relevant case law, “non-intentional” disparate impact discrimination) -- must be considered by the OCC on this application. Robertson has more recently claimed that he simply signed, and did not write, this particular fundraising letter. That, then, should be considered on the managerial factors the OCC must consider in connection with this application.

    While ICP contends that these issues militate for the dismissal or withdrawal of the Application, it does not appear that the Applicants intend to withdraw the Application. In fact, not only did the Application project that the proposed bank would be open by summer 1999 -- the Bloomberg newswire of May 1, 1999, reported that “Bank of Scotland... is planning to sell shares in an Internet banking service it will start in the U.S.... Bank of Scotland board member and television evangelist Pat Robertson is expected to recommend that the shares be sold on the NASDAQ stock exchange, in a sale that could be worth billions of dollars, the newspaper said. ‘I do know the [dot] com bank would be a hot initial public offering if they wanted to do it,’ the newspaper quoted Robertson as saying.”

    ICP finds it extraordinary that the Applicants, who said they had filed an application with the Federal Reserve System (the “FRS”) when the FRS says that no such application has been filed, who said they would elaborate a CRA plan “at the earliest opportunity after the filing of th[e OCC] application,” but, three months later, have not done so, and who are still seeking to withhold even their list of proposed products -- would nevertheless be making public projections of an IPO for this proposed venture, seeking to cash in on the craze for “dot com” banks. While the OCC may disagree, ICP contends for the record that this reflects adversely on the managerial factors that the OCC must consider...

    ICP asserts that, as a matter of law, the public comment period cannot legitimately close at this time, given the quantity of material information which the Applicant is still withholding (and the above-noted insufficiency of the CRA plan, even by its own terms and commitments to elaborate the Outline “at the earliest opportunity following the filing of th[e] application,” now two and a half months ago).

    The redactions to the material provided to ICP border on the absurd. For example, from the Operational Plan, the entirety of page 4, other than the heading “The Vision,” has been redacted. ON page 6, under the heading “Objectives & Expected Benefits,” the unredacted text states that “Newco N.A.’s objectives are most effectively summarised in the Newco N.A. Vision, Mission and Operating Principles set forth in Appendix I.” But the entirety of Appendix I, other than the headings, “Mission” and “Operating Principles,” has been redacted. (In fact, the heading “Vision” appears to have been erroneously redacted, reflecting the arbitrary nature of these redactions).

    Note that a showing of public benefits is one of the required showings for an applicant, and is an issue on which the public has a right to comment. The Applicant answers the question of public benefits by referring to an appendix -- which has been redacted in its entirety. The comment period cannot legitimately close at this time.

    As simply one further example, on page 14 of the Operating Plan, even a discussion of the proposed composition of the Newco, N.A. Board is partially redacted. It states that Mr. Robertson would retain “the right to appoint one director,” followed by two and a half redacted lines. The text then picks up, “This board will meet monthly.” There is no explanation of the redaction, nor of the redaction from the section on the same page about the Board Structure of the Holding Company.

   Continuing the litany: the Organisational Chart is entirely redacted, as are the charts on the Holding Company and the Management Board.

    Perhaps most outrageously, and directly relevant to the CRA comments that ICP has a right to submit, based on a review of the actual proposal, the entirety of Appendix II, Potential Product Offerings, has been redacted. How can the public meaningfully comment on a proposed new national bank if the applicants seek to withhold in full the list of products the bank would offer? Furthermore, even those few redactions which might having originally been legitimate under FOIA exemption 4 -- no longer are. To be exempt, the information must not be otherwise publicly available. But, for example, the Sunday Herald of May 2, 1999, reported that “Dr. Robertson expects the bank will achieve $3 billion work of deposits in only three years.” An Applicant cannot request confidential treatment of virtually all of its Application, and then make selective statements to the press about precisely the information for which the confidential treatment request remains in force. The comment period cannot legitimately close on this basis.

     For the foregoing reasons, the comment period must be extended; the Application should be dismissed or withdrawn, and the Application could not legitimately be approved.

    If you have any questions, please telephone the undersigned at (718) 716-3540.

Very Truly Yours,

Matthew Lee
Executive Director

* * *

[Previous story / background]

     On March 2, 1999, the Bank of Scotland applied to the Office of the Comptroller of the Currency to charter a new bank, in a joint venture with televangelist Pat Robertson. The bank would be headquartered in Stamford, Connecticut, but would seek clients nationwide, including through Pat Robertson’s endorsement.

    ICP assumes that the bank will try to limit its Community Reinvestment Act duty to its headquarters city -- but has been unable to confirm this, since Bank of Scotland and its outside counsel, Sullivan & Cromwell, sought confidential treatment for all portions of the Application referring to the CRA.

   On March 10, ICP requested a copy of the Application from the OCC. On March 23, the OCC confirmed receipt of ICP’s request, and said that it would send the application in twenty days -- after the close of the OCC’s comment period.

   On March 30, ICP submitted a preliminary comment opposing the proposal to the OCC. The next day, ICP received portions of the Application -- but all the CRA sections with withheld, and the “public portion” of the application nowhere mentions Pat Robertson (though it does mention Robertson Financial Services, and a Dr. Marion Robertson).

    ICP submitted a second comment on April 1, reiterating its request for an extension of the comment period, and putting into the record before the OCC some of Pat Robertson’s public statements, which raise questions as to how the bank would comply with local anti-discrimination laws:

[T]here are strong public policy reasons for the release of all exhibits that contain information on the precise relationship between Mr. Robertson and the proposed bank, given Mr. Robertson’s public statements concerning inter alia religious minorities (minorities in the United States) and other groups protected by local anti-discrimination laws. The OCC in connection with this application will have to rule on these issues, and the public must be afforded an opportunity to comment on these issues, including the specifics of Mr. Robertson’s control over, and activity in, the bank.

As simply some examples: when Mr. Robertson ran for President, he reportedly stated he would “only bring Christians and Jews into the government.” Robertson has also reportedly stated that “Many of those people involved with Hitler were Satanists, many of them homosexuals -- the two things seem to go together.” Mr. Robertson has reportedly stated: “The feminist agenda is not about equal rights. It is a socialist, anti-family political movement that encourages women to leave their husbands, kill their children, practice witchcraft, destroy capitalism and become lesbians.” Mr. Robertson has reportedly stated: “If anybody understood what Hindus really believe, there would be no doubt that they have no business administering government policies in a country that favors freedom and equality.”

“Robertson once posed this question on his 700 Club program: 'What is Hinduism but Devil worship, ultimately?’”-- Dayton Daily News, June 18, 1997, “Remarks An Ugly Reminder.”

Given federal, state and local anti-discrimination laws, it is imperative that the public be given access to the withheld documents specifying Mr. Robertson’s proposed role and stake in the bank, how it would be marketed, etc.. This will also be important in assessing the degree to which the bank, as proposed, would serve the credit needs of low and moderate income communities, including communities of color. The OCC will have to rule on these issues. The OCC should also inquire into the acted-on and pending withdrawals of deposits from Bank of Scotland occasioned by this proposal, as this goes to the financial and managerial factors the OCC must consider in connection with the Application.

    ICP's challenge has been covered in:

“U.S. Group Turns On Bank’s Deal,” by Robert McNeil, The Scotsman (Edinburgh, Scotland), April 1, 1999, at 5, and The Sunday Herald of April 4, 1999.

       To be updated...

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