The headquarters of HSBC Holdings in the Canary Wharf business, financial and shopping district in London.
Photograph by Simon Dawson — Bloomberg via Getty Images
By Geoffrey Smith
February 23, 2015

What do you do when the CEO is part of the problem rather than part of the solution?

That’s the question for HSBC Holdings Plc (HBC) after weekend disclosures that its current boss, Stuart Gulliver, stashed away millions in an anonymous account in Panama in the past, while he was running the company’s operations in Asia.

Although they relate to issues over a decade old, the new revelations have piled on the embarrassment for the bank, which has been at the center of a storm of negative publicity since leaks published two weeks ago showed how much its Swiss-based private bank had helped customers to evade taxes in the past.

Gulliver, who took over as CEO in 2011, has spent the last two weeks trying to convince the world that HSBC has mended its ways, and personally signed a “sincere apology” that was printed in three U.K. newspapers last Sunday, saying that “the standards to which we operate today were not universally in place in our Swiss operations eight years ago.”

He told reporters Monday that those practices were “a source of shame” to the bank.

According to The Guardian, Gulliver was listed as the beneficial owner of an account in the name of Worcester Equities Inc, an anonymous company registered in Panama, containing a balance in 2007 of $7.6m. HSBC paid his bonuses into this account until 2003. Gulliver also held a second account in the name of Worcester Foundation, which was closed before 2007, the paper said. Representatives for Gulliver said the account existed mainly to hide the size of bonus payments from colleagues in the bank. Such payments are often the cause of intense jealousy and rivalry.

HSBC Chairman Douglas Flint told reporters Monday that “there is absolutely no story here,” given that Gulliver’s actions were entirely compliant with tax regulation in place at the time.

Gulliver is a Hong Kong resident for tax purposes, having lived and work there for a large part of his career. He’s also employed by a Dutch-based subsidiary of HSBC that the bank uses to ensure that senior staff can move quickly and easily within the group. However, he moved the CEO’s office to the U.K. in 2011, and U.K. papers are now baying to know why he doesn’t pay his taxes in the U.K.

U.K. tax expert Richard Murphy, a prominent crusader against tax evasion, acknowledged in a blog post that Gulliver’s actions were entirely legal, but said it “confirms HSBC is headed by a man who very definitely believes in tax havens and their uses. That’s like having a dinosaur in charge now.”

“Panama is one of the more dubious tax havens in the world,” Murphy said. Why use a Panamanian company? Only because you quite emphatically do not want anyone to know what you are doing.”

To make matters worse, the scandal-plagued bank said Monday it had earmarked another $1 billion for other conduct-related misdeeds in recent years. In its annual report, HSBC said it had put aside $550 million to cover potential fines for manipulating foreign exchange markets (in addition to the $611 million it already agreed to pay last year). It also said compensate customers for up to $500 million for mis-selling payment protection and other products before 2012.

HSBC didn’t immediately respond to a request for further information.

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