Political Scrutiny and the new CEO of the Scottish National Investment Bank

THIS week Eilidh Mactaggart was appointed as the first CEO of the new, state-owned Scottish National Investment Bank (SNIB).  Her annual “base” salary is £235,000 – presumably she gets a bonus.  The FM’s salary is £135,605 and is pegged at 2008 levels.
The Glaswegian Ms Mactaggart was most recently European head of investment management for the US insurance giant, Metropolitan Life – better known as MetLife. She has 20 years in investment banking.  As with SNIB’s chair, Willie Watt, Ms Mactaggart’s appointment was not subject to any political scrutiny or confirmation.  So we’ll do it here.
MetLife is America’s biggest insurance company.  It has 90 million customers in over 60 countries. MetLife ranked No. 43 in the 2018 Fortune 500 list of the largest US corporations.  MetLife is the living embodiment of rapacious Us finance capital.
Ms Mactaggart worked for the UK arm of MetLife.  As per the usual bank and financial scams, this unit is actually owned by MetLife’s Irish operation.  This is little more than a name plate which allows MetLife to avoid paying corporation tax.  In fact, Dublin is the base for all MetLife’s European operations. Alas, even Ireland’s low corporation tax is not low enough to suit MetLife. Last year the company announced it was transferring jobs to India and Poland.
MetLife began as a mutual company operated for the benefit of policyholders.  But in 2000, it converted into a for-profit public company looking after its shareholders and managers. MetLife managers were later accused of breaching US securities laws by misrepresenting and omitting information in materials given to policyholders during this change.  After years of litigation, MetLife agreed a $50m settlement in 2009.  This February, MetLife reported a 37% jump in quarterly profits as a result of charging higher premiums.
If you type into Google “MetLife” and “fines” you will find pages of examples of the company’s financial transgressions going back to the 2008 banking crisis.  MetLife buys up existing pension schemes from other companies, knowing that many potential pension recipients have disappeared or got lost, in the economic convulsions that have gripped America.  Which means MetLife can hang on to the money unless someone objects.
Last year, after a long investigation, the Commonwealth of Massachusetts fined MetLife for failing to pay pensions to 13,500 state retirees the company had wrongly designated as “presumed dead.”  MetLife also had to set aside $510m to pay the missing money and future entitlements.
This is not the first time MetLife has been fined.  In 2016, for instance, the US Financial Industry Regulatory Authority clapped a fine on MetLife and ordered the company to return millions in fees to customers “for making negligent material misrepresentations and omissions” on applications annuities
In 2014, MetLife was hit with the largest New York state fine against an insurer ($50m) to settle allegations that its international operations sold insurance in the state without proper licensing.  In 2012, MetLife agreed to pay nearly $500m in a settlement involving more than US 30 states, again for “losing” affected customers from its books.  Currently, MetLife faces a string of class action cases for similar malpractice.
In 2012, MetLife failed the US Federal Reserve’s stress test, intended to predict the potential failure of the company in a recession (like the one that’s about to hit us). The Fed’s analyse showed MetLife need a third more capital in reserve, to be safe from bankruptcy. At the time, the company was using $2bn of its cash to prop up the stock price, plus increase its share dividend.
Of course, Ms Mactaggart is in no way responsible for the strategic direction or dubious business model of MetLife. However, it remains a serious worry that the Scottish National Investment Bank is being staffed by career finance executives from the heart of a corrupt (those fines!) and inefficient financial system.  The SNIB’s rationale is to invest long term for the social good, not to operate as a rapacious Wall Street or City financial pirate.
Ms Mactaggart has worked two decades in the global infrastructure investment game. This involved her in over £60bn of private infrastructure transactions (she claims).  She has worked for Commonwealth Bank of Australia, Portugal’s Banco Espirito Santo and ABN Amro.
The now defunct Banco Espirito Santo (BES) became a global byword in deliberate financial corruption, money laundering and political chicanery.  Before finally being put out of its misery in 2014, BES was the hub of a corrupt multinational empire that included interests in oil, construction, tourism, healthcare, insurance, power generation and agriculture.  German Chancellor Angela Merkel blamed BES’s gargantuan as partly responsible for the crisis of the euro.  Quite why anyone would mention BES on their CV is beyond me.
Ms Mactaggart joined MetLife in 2014 to establish a European infrastructure and project finance investment team.  MetLife investments has over $15bn invested in infrastructure and project finance globally, with $7bn located in the UK and Europe.
MetLife Investment Management provides capital for infrastructure development. As a long-term, buy-and-hold lender, the company focuses on greenfield and brownfield investments that provide “essential public services” – and which provide steady and predictable profits, usually from public sector owners.
What sort of infrastructure does MetLife in Europe invest in?  Ms Mactaggart is on record as saying that the definition of infrastructure is very “elastic”, which it is.  MetLife is discrete about where it has invested in Europe but one such project is Copenhagen Airport, which is the largest in Scandinavia.  MetLife Investments and associates sank $145m into this project in 2014.
Ms Mactaggart says the new Scottish National Investment Bank is “an opportunity to create an ethical and environmentally conscious bank, that will seek to benefit everyone across Scotland”.  Is an airport an ethical investment?
None of this is said to question Ms Mactaggart’s character or competence. But it is to suggest that the general culture of global finance which she has inhabited for two decades is deeply toxic. Which means that the Scottish National Investment Bank requires a greater degree of public scrutiny than normal. Ms Mactaggart’s appointment should be subject to vetting by MSPs for her own sake as well as the public’s. And she should be subject to an external board that is composed of more than bankers.

Comments (17)

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  1. Jim Stamper says:

    Incredibly it is stated in this article “As with SNIB’s chair, Willie Watt, Ms Mactaggart’s appointment was not subject to any political scrutiny or confirmation.” How was the decision reached on these appointments and by whom?

    1. Jell says:

      Well done George, we have to hold all the players to account! Where is economic democracy in this situation.?
      Jim. The Herald reported:
      “The process was overseen by an expert panel that included: Scottish National Investment Bank chair, Willie Watt; Liz Ditchburn, director general for economy at the Scottish Government; Benny Higgins, strategic adviser to the First Minister; and, Lesley Knox, former chair of V&A Dundee and Alliance Trust and a non-executive director of Legal & General Group.” If the decision to create the SIB was made on the floor of Holyrood senior appointments should should go back there for scrutiny and ratification!

      1. VC says:

        Who appointed these people in the first place? Not one has any direct experience of the Scottish small company investment landscape. No angel, VC or any relevant background to the needs of the country. Ultimately, Sturgeon and her entourage are responsible for yet another failed project taking Scotland off in another wild direction in the hope of improving its dire record of managing the Scottish economy.

  2. Phil Devitt says:

    well said George Kerevan. I have no doubt that there will be bonuses, this bonus culture is a sickness of our modern society. If you accept the job and pay, you should not be starting the contract with a guarrantee of bonuses. I have also no doubt that she has negotiated a very nice exit strategy (payment/redundancy package) if she fails. As for her salary, I am sorry but no person is worth more than the person running the country. This in my opinion says that a banker is more important than the first minister. This cannot be right. who gave this person the job? was there proper scrutiny and duty of care to the people of Scotland. It is after all our bank. I have lots of questions and opinions about public service appointee’s but if I pose them all I will be accused of ranting . I am not a rabid socialist . I would just like more honest scrutiny and publicity when these top jobs (or any job) are awarded. This is probably a very simplistic argument and will prompt the usual ”you just don’t understand the way things work”. I class myself as a simple uncomplicated person so please can the hidden faces and voices that make these appointments, please enlighten me.

  3. Morag Williams says:

    Nicola is making too many mistakes. She has to go.

  4. Stroller says:

    The Bank of Espiritu Santo was an Opus Dei bank if I recall rightly, the Spanish Christian sect – recognized by the Vatican – who believe they are doing God’s work on Earth as the name of their outfit suggests.

    The Sect was founded by Escrivá de Balaguer in Spain in the early 20th century and Opus Dei members are one of the powerful factions of the Spanish right-wing Partido Popular (along with old Francoists, neo-liberals and – increasingly rare – old fashioned Christian Democrats) and the Madrid elite in general. Rajoy’s last cabinet had abour four or five Opus Dei members in it.

    The Opus Dei technocrats were credited with engineering the boom in the Spanish economy in the 60’s and 70’s and for “making money acceptable” in Francoist Spain. The Spanish church has traditionally believed that there was a virtue in poverty, and that the poor should accept their status on Earth as part of the Divine Order etc… so the Opus Dei were modernizers in a sense. That the Espiritu Santo was notorious for corruption I did not know, but it comes as little surprise…

  5. Lisa Glaze says:

    I find it very worrying that Nicola Sturgeon does not see the benefit of testing new residents to care homes, particularly as many arrive there from hospital. I find her statement nonsensical as even one person identified as having coronavirus could prevent a catastrophe

  6. richard parker says:

    Thanks again for another nice, astute article.
    Perhaps the lack of comments indicate it is now a good time to publish bad news or, in this case, a dubious appointment.

  7. James Mills says:

    Unfortunately , when appointing people to head these banking organisations we invariably have to appoint a banker ! We are , therefore , f*cked !

  8. H Scott says:

    The lack of transparency on such appointments is simply wrong. We could, and should, have a cross-party committee overseeing senior public appointments. Transparency should be one of the basic principles of Scottish democracy.

  9. Indyman says:

    I have been an SNP supporter for years but I’m really beginning to wonder about them.

    1 – Continued kicking of Independence into the long grass for the last 5 years
    2 – A cabal of senior members conspiring to commit perjury in an attempt to get Alex Salmond jailed. No enquiry, no disciplinary action, no lifting of the anonymity and no talk of legal action against the complainants who clearly broke the law.
    3 – Now the first CEO of the new, state-owned Scottish National Investment Bank (SNIB) is someone whose whole career has been spent in one of the most corrupt, toxic corporate environments in the world. Without any political scrutiny or confirmation.

    This at a time when the whole global corporate world, which was hanging on a shoogly peg anyway, is about to get knocked for six by the effects of coronavirus. Business as usual is not an option, some radical new thinking is urgently required. Sadly the SNP seems incapable of this, the time has passed for the “safe pair of hands, mustn’t frighten the horses philosophy which has been the hallmark of the SNP for a while now. The world has irrevocably changed in the last few months. When is the SNP going to wake up to this?

  10. w.b. robertson says:

    strange situation in our new style democracy!. And at some time soon there will be Holyrood elections. Our political masters should tak kent…if you fly with the craws you get shot with the craws.

  11. mince'n'tatties says:

    The lack of transparency might well be connected to an embarrassing dearth of suitable, willing candidates. For an Investment Bank the CEO salary on offer is small change peanuts.
    Remember Stephen Hester, the Banker who was appointed to restructure the Fred Goodwin RBS catastrophe? He left on a salary of £1.6 million and a £4 million bonus mainly because of public criticism and political interference. He felt the rewards weren’t worth the public brickbats. I’m serious.
    Well Ms Mactaggart can fully expect both soon enough for a salary not much bigger than a Scottish Regional Councils Chief Exec. George assumes there’s a bonus in there somewhere.
    If there is, I would love to know its conditions and if there isn’ expect a quick vacancy.
    It just doesn’t add up [pun intended].

  12. VC says:

    Unbelievable that an individual totally lacking in experience of a angel investment, VC investment and therefore the Scottish investment market should be appointed to this position. Sad indictment that someone with the background of this individual gets the job. Indicative of the poisoned challice of the position and another example of the incompetence and judgment of the Scottish Government

  13. Susan Lindsay says:

    This sounds disturbing. What is the best way of creating pressure to ensure that there is an external board mentioned and that it has a range of different kinds member?

  14. Bob Young says:

    Ah !!! but she is Scottish and Glaswegian….what else matters ?

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