Bankers, like headhunters, ignore what common sense tells them

LAST WEEK, there were two stories in the papers about bankers being taken for a ride by conmen and nutters.

Both tales were profoundly enjoyable: seeing investment bankers with egg on their faces is always cheering.

They were also enjoyably profound, making one question what bankers get up to all day and which talents are needed to perform those tasks well.

The first story concerns a 49-year-old Brit who applied for a job as deputy chief executive of a City of London bank.

His background appeared pukka: Oxford, Harvard and then 20 years at JPMorgan.

During two interviews with headhunters and Ahli United Bank, Peter Gwinnell made all the right noises and was duly appointed.

After doing the job for a month, during which time he did what senior bankers do and took a lot of flights and attended a lot of meetings – someone ran some checks on him.

They found he had never worked at JPMorgan. He had never studied at Oxford or Harvard.

Instead, he was a conman who had been in prison and, after last week’s conviction for fraud, is now under the supervision of a probation officer and being treated for depression.

The interesting thing about this story – apart from making you wonder what headhunters do for their huge fees if they can’t even be bothered to do a basic Google search – is how easy it is to con people into thinking you are a senior banker.

You simply need to invest in the right wardrobe and learn the right language.

Mr Gwinnell was pictured in the papers looking entirely plausible in the perfect shade of deep banker blue shirt and the perfect sort of grey pinstripe suit.

And though history doesn’t relate exactly how he spoke in those meetings, all that was required was for him to talk in such a way that no one else could understand what he was saying, so that it wouldn’t matter if he didn’t understand it himself.

Last week provided the perfect example of the sort of talk required at the highest level in investment banking.

James Gorman, CEO of Morgan Stanley, gave an interview to the Wall Street Journalin which he said that "we've focused less on building pure flow, client-driven businesses . . . What we're doing strategically is going back to the future. It's a sweet spot where we're very comfortable."

Any decent conman should be able to mug up a pure flow of sweet spots, and Bob’s your uncle – or Peter’s your banker.

The second story is less dramatic, as there was no court case but merely a paragraph buried in a Securities and Exchange Commission filing spotted by a keen journalist on the Houston Business Journal.

However, it thrills me even more, as it shows the great Goldman Sachs being made a fool of by a homeless bloke.

The bank, along with Greenhill & Co, has been acting for Dynegy, the US energy producer that Carl Icahn is trying to buy.

During the “go-shop” process – in which the bankers try to tease out higher bids – Dynegy received an unsolicited letter from an outfit called Buisson Baudoin Rondeleux, expressing an interest in buying it.

According to the filing, the person who signed the letter “did not respond to repeated telephonic and written attempts by Goldman Sachs, Greenhill & Co to contact him”.

Finally, a Goldman banker tracked him down and found he was using “a phone number associated with a Columbia, South Carolina, telephone exchange and a return address associated with a homeless shelter”.

The filing then reveals that Buisson Baudoin Rondeleux “did not appear in searches of public records and the internet”.

When the Goldman banker finally managed to speak to the homeless person, he “indicated that he did not have financing for the purported proposal and had no prior experience in acquiring public companies”.

This offers a fairly scary glimpse into what goes on in an M&A department.

Bankers, like headhunters, ignore what common sense tells them. But, unlike headhunters who do no checking at all, they check to a fault.

And then, once they have all been led thoroughly up the garden path, some poor lackey solemnly documents the journey for the SEC’s elucidation.

Surely any imposter, or anyone homeless, would have done better than this.

They would have taken one look at the ludicrous company name, spent two seconds Googling it, and thrown the letter in the bin.

Unless, of course, the bankers were pretty sure they were wasting their time but, as they were being paid so very handsomely, were more than happy to do so. – (Copyright The Financial Times Limited 2011)