Barlow Clowes International

Monday 7th February 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Barlow Clowes group of companies collapsed in 1988, following the misappropriation of investors’ funds, which had been routed through approximately 50 related companies and entities in 16 jurisdictions. In the same year the Le Quesne report was published on regulatory functions in this matter. In 1989, the Parliamentary Commissioner for Administration published the report “The Barlow Clowes Affair”, which criticised the Department of Trade and Industry for maladministration in the handling of Barlow Clowes.

The Government disputed the main findings in the report but made a decision to make substantial ex gratia payments to Barlow Clowes investors. This was based on an exceptional combination of circumstances and was not to be regarded a precedent. At the same time the Government gave a clear assurance to Parliament to try and recover the cost of the ex gratia payments. The Government subsequently paid £153 million in ex gratia payments to 14,250 investors who suffered a loss as a result of the collapse of the Barlow Clowes group.

Since 1988, successive Governments have followed a policy of vigorously pursuing all claims in relation to the Barlow Clowes companies which showed any prospect of cost-effective recovery, in order to reduce the cost to the taxpayer of the ex gratia payments scheme.

The court-appointed receivers and liquidators to the Barlow Clowes companies have now concluded the last outstanding litigation in this case and will take no further action.

On 9 December 2010 the Supreme Court of Gibraltar granted the release of the receivers and liquidators of the various offshore portfolios previously promoted by Barlow Clowes International Limited, with effect from 6 January 2011. This brings to an end the Barlow Clowes affair.

As at 19 January 2011, from the recovery of assets and proceeds of legal action, the Government have recovered £120 million and £36 million was recovered and paid to investors. In total the investors, including the Government under their assigned rights, have been repaid £156.5 million, net of all costs.