• Wed
  • Jul 30, 2014
  • Updated: 12:00pm
NewsWorld
BRITAIN

British Co-op Group chief quits over drugs shame ex-bank boss Paul Flowers

Former chairman of Britain's Co-op Bank faces inquiry after newspaper publishes video of him allegedly paying for crystal meth and cocaine

PUBLISHED : Tuesday, 19 November, 2013, 8:26pm
UPDATED : Wednesday, 20 November, 2013, 4:21pm

The chairman of Britain's Co-operative Group resigned yesterday amid a drugs scandal involving its former bank chairman.

The mutually-owned group's chief Len Wardle quit with immediate effect for his part in the appointment of Paul Flowers.

Flowers, 63, a Methodist preacher, had little banking experience and oversaw the Co-op bank's near collapse.

He was recently caught on film allegedly arranging to buy cocaine and crystal meth.

Wardle's resignation marks the latest chapter in the downfall of a bank once championed as an ethical alternative to Britain's investment institutions.

Lawmakers are demanding answers from Britain's regulators, who approved the appointment of Flowers, as part of a parliamentary inquiry.

The probe will look into claims that politicians encouraged the bank to expand too quickly. Political links between the Co-op and Britain's opposition Labour party are also under scrutiny.

The group is a financial backer of Labour and ruling Conservatives want to know how much influence Flowers, an ex-Labour councillor, had in the party.

Flowers, dubbed the "Crystal Methodist" by British tabloids, issued a statement through the church on Sunday saying he was seeking professional help.

He could not be reached for further comment and has been suspended from the Methodist Church and the Labour Party.

Police said they were investigating allegations made by The Mail on Sunday newspaper, which carried the initial story and released the video of Flowers allegedly buying the drugs.

Flowers, a Methodist minister for 40 years, formerly chaired the drugs charity Lifeline. He became a chairman of the Co-op bank from 2010 until July this year.

During that period it racked up huge losses and faced a £1.5 billion (HK$18.7 billion) capital shortfall. The Co-op Group has since lost its majority stake in the bank to US hedge funds that owned its debt.

Eyebrows were raised when Flowers told lawmakers on parliament's Treasury Select Committee earlier this month that the bank had £3 billion of assets on its balance sheet, when the true figure was £47 billion.

The committee now wants to question the regulators who approved his position as chairman of the board.

When giving evidence in parliament Flowers said the Co-op had been given "considerable nods and winks" from supportive members of the finance ministry over a 2009 merger between the bank and the Britannia Building Society, which ultimately saddled Co-op with a portfolio of souring property loans.

Flowers initially named Labour's current finance spokesman Ed Balls, then a senior figure in the Treasury, as a supporter of the deal. But he later played down his personal involvement with Balls, and said he had not discussed the matter with him.

The Conservative Party said it wanted to know more about the extent of Flowers' influence within the party, laying out a list of 13 questions for Labour leader Ed Miliband and Ed Balls.

The Labour party has been quick to distance itself from Flowers and suspended him for bringing the party into disrepute.

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