Dick Knight betting scam on front page of Argus...........

[Ernest]

I thought that reply weird, if he resigned from the board a while back why was he still in the programme for Burnley which was only printed last week ?
I hate to think someone is telling porkies and he only resigned last week or was forced out last week when the scandal broke.

 

[BensGrandad]

I thought that reply weird, if he resigned from the board a while back why was he still in the programme for Burnley which was only printed last week ?
I hate to think someone is telling porkies and he only resigned last week or was forced out last week when the scandal broke.

That smells of michief making or perhaps the truth who knows.

 

[Lokki 7]

I'm sorry you feel got at. But please put yourself in Dick Knight's position and imagine him reading this thread with his integrity being impugned repeatedly in fact-less, hyped-up scenarios. Does he really deserve that from us?

We can do much better than this - we have to stick together and stay united.

I have been generally ignoring this thread because if I allow myself to read all of the stupid and negative comments I know I will get very angry and worked up. I'm glad i did pop in though to read a few calming, constuctive and intelligent posts such as the one above from LI. Thank goodness there is still some shred of sanity left on here, you have put it much better than I could have.

 

[The Auditor]

Recently posted by "Insider":

"."

It would be interesting to know when Companies House received his 288b!

Dated 21/10/04

 

[Brixtaan]

intelligent posts such as the one above from LI. Thank goodness there is still some shred of sanity left on here, you have put it much better than I could have.

I second that emotion.

 

[3gulls]

Dated 21/10/04

Was that the date it was received or when it was dated? These forms are regularly back-dated i believe.

 

[Biscuit]

come on guys,

he was a figure head role, nothing more. He had no money in it.

He did it to help and friend, before resigning.

 

[3gulls]

come on guys,

he was a figure head role, nothing more. He had no money in it.

He did it to help and friend, before resigning.

Oh, I see. You already know the result of the Police enquiry do you. Well that's great then. Me, i'll wait and see if you don't mind, but things don't look good from what I know so far. He cannot hide behind the excuses in his press statement, they don't wash in the eyes of the law. If he was a Director of the company he should have satisfied himself that all was above board. That is his fiducery duty.

Where does he state that he had no money in the business, and did not stand to gain if the business had been successfully sold?

Quote.

"I was invited by Albion director Kevin Griffiths to be the Non Executive Chairman of a new venture called Sporting Options when it was established in 2002. My role was advisory, to act as a figure head and to advise on the launch of the new company. I took no part in the running of the company and never expected or received any payment for my role. I had no involvement in the company and have since resigned as Non Executive Chairman.

"Kevin Griffiths has resigned as a director of the Football Club. The club itself has never had any connection with Sporting Options."

 

[London Irish]

Me, i'll wait and see if you don't mind

Does this mean that this is the last load of accusations you are going to throw at Dick Knight? Or are you just going to keep on and on posting your unsubstantiated smears?

Non-execs are there to advise on the business strategy and direction of the company. It is the job of internal and external auditors to check if there is any funny business going on - for god's sake stop confusing the role of non-execs with auditors.

 

[3gulls]

Does this mean that this is the last load of accusations you are going to throw at Dick Knight? Or are you just going to keep on and on posting your unsubstantiated smears?

Non-execs are there to advise on the business strategy and direction of the company. It is the job of internal and external auditors to check if there is any funny business going on - for god's sake stop confusing the role of non-execs with auditors.

As you don't know what the fuc* you are talking about, i suggest that you read this:

From the Croner Web site.

Is a non-executive director a watchdog or bloodhound?

Introduction
On Monday 15 March Mr Peter Martin wrote to the FT. In his letter he explained that he had been a non-executive director of Equitable Life and was now being 'brutally sued for upwards of £5bn.' He is one of nine former non-executive directors of Equitable Life who are being sued for breach of duty by the Society acting through its present board. He further explained that he could no longer afford to employ lawyers and so would represent himself in person.

Earlier in his letter he raised the question as to whether a non-executive director is 'a watchdog or a bloodhound'.
'If he asks and gets an answer, like a reliable but unaggressive watchdog getting a reassuring pat from a familiar and trusted hand, must he then probe and probe further thus implying a serious lack of trust which may seriously demotivate honest executives if taken too far?'

It may be timely, therefore, to outline the present state of the law on this issue and to start by reminding ourselves of some of the basics.

The distinction between an executive and non-executive director
It is important to remember that English company law makes no formal distinction between executive and non-executive directors. Both types of director owe fiduciary duties and duties of skill and care to their company. Both can incur personal liability if they are found to be in breach of these duties.

However, in practice and in law, recognition is given to the distinction in two principal respects: First in examining the level of skill and care required from a non-executive, and second in implementing the provisions of section 727 of the Companies Act 1985, which permit a judge to mitigate or excuse liability of a director if he acted 'honestly and reasonably'. Non-executive directors may well be able to show that even if their judgement fell short of what the law requires of a non-executive, they may nevertheless have otherwise behaved honestly and reasonably.



Duties are owed to the company
The second basic to remind ourselves of is that the duties are owed to the company not to individual shareholders. Thus, it is only the company which can bring a case for breach of duty. In the Equitable Life case it is the current board which has decided to bring an action in the name of the Society against the former directors.


The duty of skill and care
In the leading case of Re D'Jan of London Limited [1993] BCC 646 Lord Justice Hoffman held that the duty of care owed by a director to the company at common law is correctly stated in s. 214 (4) of the Insolvency Act 1986.


Section 214 (4) provides as follows:
'For the [above] purposes, the facts which a director of a company ought to know or ascertain, the conclusions which he ought to reach and the steps which he ought to take are those which would be known or ascertained , or reached or taken , by reasonably diligent persons having both:'


[the so-called 'objective' test] 'the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to that company; and'
[the so- called 'subjective' test]' the general knowledge, skill and experience that the director has'.


Thus the 'subjective' test recognises that the court has to look at the general knowledge, skill and experience which that particular non-executive director has, as well as requiring the director concerned to have satisfied the 'objective ' test of knowledge, skill and experience which a reasonable person would assume he should have.


In other words, a non-executive cannot say: 'well, I am not [for example] a technology expert and therefore I don't have the knowledge to make judgements on the proposal to bet the company's entire resources on buying this technology company and rely on what the company's chief executive tells me' if it becomes clear that the director concerned did not generally behave in a 'reasonably diligent' manner and exhibit a reasonable level of knowledge, skill and experience in relation to the issues before the board.

Put another way a non-executive director can say 'well, I am not a technology expert etc' if it can be shown, for example, that he insisted on a report from an external and independent source on the technology concerned, and a report from the audit committee scrutinising not only the target from a financial profile but also the ability of the company finance the deal and to execute the acquisition well and extract value.

That will be the heart of the issue in the Equitable Life case.


Trust until reason to distrust
The key question arises as to how far the objective standard requires the non-executives to go in acquiring information about the activities of management. In particular, to what extent should they be entitled to rely on the executives to volunteer the necessary information?


There is plenty of judicial authority for the proposition that 'men in responsible positions must be trusted….until there is reason to distrust them'.


In the recent case of Re Continental Assurance Co of London plc ([2001] BPIR 733 ) the judge said, in terms, that although a modern non-executive is expected to monitor the actions of the executives, it would be unrealistic to expect them to overrule the specialist directors, like the finance director.


However, the modern approach is getting tougher on non-executives


English case law is surprisingly light on pointing how far non-executives should go to monitor executives. However, an Australian case (AWA Limited v Daniels (1992)) has been cited with approval in England. In that case the NSW Court of Appeal stated: 'In our opinion the responsibilities of directors require that they take reasonable steps to place themselves in a position to guide and monitor the management of the company.'


This suggests that non-executives should play a proactive role in gathering and testing information supplied by management-relying on information supplied by management would not appear to be enough.


That approach was in fact supported by Hampel in the 1998 Report:' The effectiveness of a board (including in particular the role played by the non-executive directors) '[my emphasis] ' is dependent to a substantial extent on the form, timing and quality of the information which it receives. Reliance purely on what is volunteered by management is unlikely to be enough in all circumstances and further enquiries may be necessary if the particular director is to fulfil his or her duties properly.'[Again, my emphasis] Indeed these words found themselves into the 1998 Combined Code.


However, interestingly, Higgs in his Review in 2003 into the role and effectiveness of non-executive directors drew back from that somewhat sceptical approach and placed the emphasis on the supply of information by the Chairman and secretary, rather than a proactive approach by the non-executives. Thus, Main Principle A.5 of the 2003 Combined Code states: 'The board should be supplied [my emphasis] in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties."


Nevertheless, it is my view that the courts would support the Hampel approach which itself follows the AWA case approach
That view would seem to be supported in the judgment of Morritt LJ in Re Barings Plc (No 5) [2000] 1 BCLC 523 at page 535 where the Court of Appeal approved the summary given by Jonathan Parker J at first instance in these terms:


"(i) Directors have, both collectively and individually, a continuing duty to acquire and maintain a sufficient knowledge and understanding of the company's business to enable them properly to discharge their duties as directors.
(ii) Whilst directors are entitled (subject to the articles of association of the company) to delegate particular functions to those below them in the management chain, and to trust their competence and integrity to a reasonable extent, the exercise of the power of delegation does not absolve a director from the duty to supervise the discharge of the delegated functions.
(iii) No rule of universal application can be formulated as to the duty referred to in (ii) above. The extent of the duty, and the question whether it has been discharged, must depend on the facts of each particular case, including the director's role in the management of the company."

The Equitable Life case
In 2001 the present board of Equitable Life took advice as to whether there were good prospects of a successful claim against the former directors of the Society for breach of the duty of skill and care and of fiduciary duty.Apparantly the board was so advised and proceedings were started in 2002 against fifteen former directors (six executive and nine non-executive) and the auditors, Ernst & Young.

The case is set down for trial in April 2005, it is estimated to have cost Equitable Life so far about £10 million, and if it goes to trial may reach as much as £20 million and rising because whichever way it goes there are bound to be appeals ad nauseam. The D & O policy has been exhausted already by the legal fees and now five of the non-executives are representing themselves.


Broadly, the claim against the directors is for the loss allegedly caused to policy holders by the board's failure to act in a prudent and timely manner (and also acting in breach of the articles of the Society) to make appropriate provision for the cost of a popular 'guaranteed' annuity product sold by the Society over many years mainly to the professional classes of England, including many lawyers and judges!

When interest rates and markets fell in the 1990's the Society found itself unable to honour the so-called 'guarantee' and argued before a series of courts that 'guarantee' did not actually mean that exactly. It was successful in the lower court but lost on appeal to the House of Lords.

It is by claimed by the present board that provision should have been made when it should have been apparent that the courts might well rule (as they did) against the Society and construe that the annuities were indeed guaranteed.


As a result, amongst other alleged losses, a sale of the Society to an entity which would have been able to underwrite the guaranteed annuities had become impossible. [One may think that the issues of causation which the Society has to argue look pretty interesting to say the least. In addition, the recent Penrose report into the causes of the debacle, and whether the UK regulatory authorities were at fault in not monitoring the situation more carefully, has said that in any event the cause of the Society's failure was not the guaranteed annuities but the policy of 'over bonusing' without replacing reserves-so the basis of the claim in this case seems misconceived for a start!]


The non-executive directors brought interim proceedings in October 2003 ([2003] BCC 829) under s.727 of the Companies Act 1985 to the effect that they should be relieved of liability since they had acted 'honestly and reasonably' within the meaning of the section. The judge, unsurprisingly, refused to grant relief on the grounds, in effect, that until there had been a full trial it was not possible to say whether or not the directors had behaved honestly and reasonably.


However, the interesting point so far as this article is concerned is the judge's comments about the duties of non-executive directors in relation to the executives: ' I do not think this statement [ i.e. that directors are entitled to trust the full time executives for information] does represent the modern law at least if (as the applicants were inclined to submit) it means unquestioning reliance upon others to do their job. It is well known that the role of non-executive directors in corporate governance has been the subject of some debate in recent years. For present purposes,… it …suffices to say that the extent to which a non-executive director may reasonably rely on the executive directors and other professionals to perform their duties is one in which the law can fairly be said to be developing and is plainly "fact sensitive". It is plainly arguable, I think, that a company may reasonably at least look to non-executive directors for independence of judgment and supervision of the executive management.

Possible legislation-The DTI consultation on director and auditor liability
In December 2003 the DTI published a consultation document called 'Director and Auditor liability' [www.dti.gov.uk/cld/condocs.htm] which contains an excellent , clear summary of the current law and also invited comments on a number of options which might be available in order to clarify some of the issues of director liability and measures which might be taken to provide reasonable protection.



From this paper it seems that we might expect legislation even before the next general election which would: set out a statutory statement of the duties of directors probably using the draft clauses already suggested in the 2002 White Paper (Cm 5553-II-clause 19 and schedule 2)-interestingly, the draft clauses nowhere suggest that non-executive directors have a special duty of care in relation to the executives;
give companies wider and clearer powers under s.310 of the Companies Act 1985 to indemnify directors against liability including advances in respect of legal costs;
broaden the scope of s.727 of the Companies Act 1985 so that the court's discretion to excuse a director from liability could be exercised if it believes that ' a director ought fairly to be excused'.

A director's risk strategy
Nothing is ever going to be totally risk proof-being a director is inherently a risky business. Nonetheless, every director should have a personal risk strategy but non-executives especially so.
They need to think through where the risks of misjudgement or error at board level may arise and pitch their efforts at minimising risk in these areas. In addition they need to get from the company Directors' and Officers' Insurance cover and make sure that the 'small print' is adequate.

Conclusion
The law is still very unclear on many aspects of non-executive director liability in relation to the activities of the executives. Perhaps the Equitable Life case will go to trial and up to the House of Lords (or 'Supreme Court'!) for some modern definitive statements on the subject.


However, there seems to be little doubt that the day of the watchdog is over and the day if not of the bloodhound then perhaps the terrier is at hand. It seems to me inescapable that non-executive directors do, under the modern approach, need to be alert to the extent to which they do not know what they do not know.

They need to share that concern with great vigour with the executive directors, not with a view to being bombarded with yet more paper but rather to get executives into a proper mind set of self examination and openness. Non-executives need to get the executives to the point of being willing on occasions to test their recommendations against independent specialist scrutiny.

Failure to do so may amount to breach of duty.


Related sites
IAS Knowledge
Audit 2005
Accountancy magazine

 

[The Auditor]

Non-execs are there to advise on the business strategy and direction of the company. It is the job of internal and external auditors to check if there is any funny business going on - for god's sake stop confusing the role of non-execs with auditors.

Doesnt take away legal duties being "Non Exec"... if Dick knew there was a problem (and I am not saying he did ) and didnt do anything about it he is just as guilty and will be dealt with in accordance with the law

Not me guv I knew nothing ..isnt a defence in this type of situation.

Dicks position will be clear once the investigations findings are public .. until then he is innocent but not because he is a "non exec"

 

[Lokki 7]

Dicks position will be clear once the investigations findings are public .. until then he is innocent but not because he is a "non exec

Exactly. 3gulls, I do not understand why you are getting so worked up and spouting so much negative shit. What is the point? All this wild speculation is pointless at this time and achieves nothing. You are just making yourself look like a cock (IMHO).

 

[BensGrandad]

Dicks position will be clear once the investigations findings are public .. until then he is innocent but not because he is a "non exec"

I would agree with that comment but do get annoyed when people blindly babble on about DK is innocent BECAUSE he is/was a Non exec.

 

[Ernest]

Still no answer from Insider about when Griffiths resigned

 

[The Auditor]

Was that the date it was received or when it was dated? These forms are regularly back-dated i believe.

21/10/04 ...That is the resignation date per the list of appointments on Companies House Website

 

[BensGrandad]

The date shown as the resignation date is 21/10/04 and I am not sure how to read it as either the date the amendment was made to the list or the date Companies House received it this is shown as 2/11/04.

 

[London Irish]

3Gulls, YOU clearly don't know the f*** what you are on about - that long piece - did you even bother reading it before posting it? - makes exactly the points I wanted to make about the distinction the law makes between the different levels of responsibilites that exist between execs and non-execs - the Higgs Combined Code which is now the bible of such matters also clearly makes that point to AND I QUOTE FROM YOUR ARTICLE: 'The board should be supplied [my emphasis] in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties."

Now does anyone think the executive went along to the minuted board meeting of non-execs and put down under item two: to agree or not agree the fraudulent transfer of funds from client accounts

The Equitable Life case is about non-execs being sued for the STRATEGIC and POLICY decisions they took which arguably led to the losses sustained - nothing to do with FRAUD. Even that's a test case - you can see how little non-execs have been punished over the years for mistakes.

The only way you can pin something on Dick Knight is to do what the The Auditor has done, advance some ridiculous conspiracy theory of which NO EVIDENCE exists ANYWHERE. The only motive you can have for doing that is to SMEAR DICK KNIGHT.

3Gulls, keep digging that hole for yourself, be my guest, as Lokki says, it just makes you look like a cock (IMHO too).

 

[aftershavedave]

Now does anyone think the executive went along to the minuted board meeting of non-execs

point you're missing is that that's not how private companies work in law (and in practice).

no point refering to corporate governance rules for listed companies etc when in law (and in practice) a company like sporting options would have had board meetings of execs and non-execs., not separate meetings as you suggest.

 

[3gulls]

3Gulls, YOU clearly don't know the f*** what you are on about - that long piece - did you even bother reading it before posting it? - makes exactly the points I wanted to make about the distinction the law makes between the different levels of responsibilites that exist between execs and non-execs - the Higgs Combined Code which is now the bible of such matters also clearly makes that point to AND I QUOTE FROM YOUR ARTICLE: 'The board should be supplied [my emphasis] in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties."

Now does anyone think the executive went along to the minuted board meeting of non-execs and put down under item two: to agree or not agree the fraudulent transfer of funds from client accounts

The Equitable Life case is about non-execs being sued for the STRATEGIC and POLICY decisions they took which arguably led to the losses sustained - nothing to do with FRAUD. Even that's a test case - you can see how little non-execs have been punished over the years for mistakes.

The only way you can pin something on Dick Knight is to do what the The Auditor has done, advance some ridiculous conspiracy theory of which NO EVIDENCE exists ANYWHERE. The only motive you can have for doing that is to SMEAR DICK KNIGHT.

3Gulls, keep digging that hole for yourself, be my guest, as Lokki says, it just makes you look like a cock (IMHO too).

Yes, I did read it. However, unlike you bog irish, i read it without my "DK can do nothing wrong and is god" glasses.

The point that i intended to bring to your attention is this:-

"It is important to remember that English company law makes no formal distinction between executive and non-executive directors. Both types of director owe fiduciary duties and duties of skill and care to their company. Both can incur personal liability if they are found to be in breach of these duties".

As you will recall you claimed "Non-execs are there to advise on the business strategy and direction of the company. It is the job of internal and external auditors to check if there is any funny business going on - for god's sake stop confusing the role of non-execs with auditors".

This is clearly not the case.

I am not trying to smear Dick Knight, i am however concerned that we run the risk of his other business dealing in a dodgy business with one of his mates that was also a Director of the club, damaging the good name of our club.

 

[SussexHoop]

Doesnt take away legal duties being "Non Exec"... if Dick knew there was a problem (and I am not saying he did ) and didnt do anything about it he is just as guilty and will be dealt with in accordance with the law

Not me guv I knew nothing ..isnt a defence in this type of situation.

Dicks position will be clear once the investigations findings are public .. until then he is innocent but not because he is a "non exec"

Having read that post from the Croner website, reading between the lines, I think it's saying if Dick knew there was a problem and did nothing, he's got a case to answer. If he didn't know there was a problem, he's still got a case to answer as to why he was unaware of what was going on but that doesn't necessarily mean he's committed a crime.

AS LI said, non-execs haven't really been punished over the years for mistakes but again reading between the lines, I think things are beginning to change in that respect.