Calvert case shows there’s Cazenove’s law and our law

Chris Blackhurst
15 Mar 2010

It was George Bernard Shaw who said: “The law is equal before all of us; but we are not all equal before the law. Virtually there is one law for the rich and another for the poor, one law for the cunning and another for the simple, one law for the forceful and another for the feeble, one law for the ignorant and another for the learned, one law for the brave and another for the timid, and within family limits one law for the parent and no law at all for the child.”

At first sight, the conviction of Malcolm “Streaky” Calvert for insider trading looks like the perfect counterpoint to Shaw's dictum. A former partner of the mighty Cazenove stockbroking firm, Calvert is today acquainting himself with prison life at the start of a 21-month sentence. No City outfit is more blue blooded than Cazenove (it's the Queen's stockbroker, don't you know), no other firm prides itself as much on its history and discretion.

The esteem in which Cazenove is held can be judged by the fact that when it appeared as though its new US parent JPMorgan might shift its operations down river to Canary Wharf, the City of London Corporation launched an almighty damage-limitation operation to try to prevent the move. The idea of the Square Mile without “Caz” was too painful.

So the jailing of Calvert, who retired from Cazenove in 2000, looks like an improbable victory for the ordinary man. Think again.

Calvert received 21 months when the maximum is seven years. With good behaviour — and the notion of the 65-year-old not keeping his cell tidy and doing as he is told is ridiculous — he should be out in less than 11 months. In sentencing Calvert, Judge Peter Testar said he was not the primary insider — Calvert was using the information he received to make share trades.

He passed on the tips to Bertie Hatcher, the bookmaker. Hatcher bought shares in drugs company Vernalis, construction company Johnston Group and South Staffordshire Water. Each was the subject of a takeover and once the news of the bid became public, their share price soared, making the two men £104,000 profit.

Hatcher, who received immunity from prosecution in return for giving evidence against Calvert, would leave Calvert's part of the spoils with a bookmaker at a racetrack. A third went to Hatcher and two thirds to Calvert, so that he could pay off his mole.

This was not an unplanned, opportunistic act. The judge said that Calvert “must have had a clear understanding of the seriousness of what he was doing”. I'll say he did — unless it's commonplace to turn up at the races and be handed tens of thousands of pounds by a bookmaker without even placing a bet. Calvert refused to identify his source and all that is known is that he or she is a Cazenove employee. For all one knows, inside Caz's hallowed walls, they're now raising a glass to Streaky as someone who did not grass up a mate.

Cazenove may think this is okay. There is a school of thought in the City that insider trading is a victimless crime. Indeed, Sir Martin Jacomb, the ex-senior banker and City grandee, said exactly that in 1986. The judge in Calvert's case disagreed. “It leads to the enrichment of a few at the expense of the public interest and confidence in a clean and fair market.”

Bertie Hatcher, of course, was not a Caz man and he chose to snitch. Calvert was, and kept his mouth shut. It's a shame the judge did not throw the book at Calvert and say “seven years or name your tipster”. But given the Caz code, that probably would not have worked.

What is odious is Cazenove's attempt to put distance between it and its ex-partner. “There were never any charges brought against Cazenove and no breach of systems and controls was identified,” maintained the broker.

So that's okay, then. Except Cazenove, or people there, must have a pretty good idea about who the accomplice is.

If I were a Cazenove client I might be peeved that someone within the firm could not be trusted with confidential information. If I were a major, high-profile, client it may even make me think twice about giving Cazenove my business. In fact, were I Her Majesty I would consider withdrawing my favour — and I'd have a particular reason to do so: the prosecution of Regina v Calvert was, after all, brought in her name.

It won't happen, and Cazenove will continue to follow its gilded path. Shaw, for one, would not be surprised.