1. August 2012 14:48
The recently declared bankruptcy of South London Healthcare NHS Trust has been linked to Barclays Bank’s manipulation of the interbank lending rate (Libor).
Health finance experts have called for a public investigation into the impact of the Libor fraud on hospital PFI debts.
Writing in the British Medical Journal, Allyson M. Pollock and David Price said the conflict between the trust’s falling income and its escalating PFI debts was partly due to the dependence of PFI repayment rates on financial derivatives.
Barclays Capital has been convicted of fraudulently inflating the value of derivatives in order to distort the cost of bank borrowing.
Derivatives play a key role in PFI projects: investment banks such as Barclays Capital use them to secure loans against a hospital’s future revenues.
The PFI scheme for the Princess Royal University Hospital PFI in Bromley, a major factor in the South London Healthcare NHS Trust debt, relied on interest rate ‘swaps’ that created an artificially high interest rate for the deal.
Profits from derivatives are tied to Libor, and so manipulating Libor enabled Barclays Capital to defraud the trust by indirect means, the authors claim.
They argue that “a major public inquiry” is needed “to determine the full extent to which the high interest rates, swap mechanisms and swap margins fuelling the latest round of hospital and service closures are products of Libor manipulation and fraud.”
28. March 2012 14:44
US-based contract research firm Cetero has filed for bankruptcy protection after being put on notice by the FDA for alleged “misconduct and violations”.
The North Carolina company, which carries out early-stage clinical research and bioanalytics for a number of US pharmaceutical companies, was accused last year of faking research documents and manipulating drug samples.
The FDA has warned Cetero’s clients that they may need to repeat or confirm any studies Cetero carried out in support of their applications for regulatory approval between 2005 and 2010.
In July 2011, the FDA said it had uncovered “significant instances of misconduct and violations” at Cetero’s Houston facility.
According to Cetero’s bankruptcy filing, the FDA’s warning caused the company’s financial position to become “severely constrained” due to creditors declaring an event of default.
As part of the bankruptcy process, Cetero has reached a deal with certain lenders for the sale of the company’s assets, and has also secured Debtor-in-Possession financing of $15m to finance this process.
Over the first two months of 2012, Cetero’s revenue totalled $11m while the company had liabilities of $248 million and assets up to $10 million.