Oct. 14 (Bloomberg) -- Neil Ellerbeck, who helped manage $40 billion at HSBC Holdings Plc’s global liquidity unit, sidestepped the turmoil that wreaked havoc on London bankers last year. At home, his crumbling marriage led to tragedy.

Ellerbeck’s money market funds rose 1.3 percent, and his personal risk was limited after he sold his own investments almost a year before the collapse of Lehman Brothers Holdings Inc. Co-workers thought his home life was similarly flawless, with one describing it as “idyllic.”

Ellerbeck’s relationship with his wife was deteriorating into a series of affairs, tapped phones and concealed money that culminated in the death of Katherine Ellerbeck on Nov. 14, 2008. Yesterday, Neil Ellerbeck was found guilty of manslaughter in the case, almost 11 months to the day after she died following a violent confrontation.

“This is just beyond my comprehension,” said Amanda Howard, a retired teacher who lived next door to the Ellerbecks in the north London community of Enfield. Ellerbeck was “quiet, gentle, unassuming, with a nice sense of humor,” she testified.

Prosecutors said Ellerbeck, 46, murdered Katherine because she wanted a divorce and was having two affairs. Ellerbeck said the two had a fight after his wife attacked him, and she was still standing when he left the house to pick up their daughter and drive her to school. When he returned, she was lying motionless on the floor, he testified.

Jurors found that Ellerbeck didn’t have intent to murder or cause serious harm. The former banker, who is 5 feet 11 inches tall, was sentenced today to no less than eight years in prison.

Ellerbeck was a “secretive, obsessively jealous husband” with a “dark side,” Judge Roger Chapple said when issuing the sentence at the Old Bailey criminal court in London.

Barclays Beginnings

The verdict ends a career that began in the 1980s when Ellerbeck, who didn’t go to university, got a job stuffing envelopes at a suburban branch of Barclays Plc. After five years there, followed by stints at J.P. Morgan & Co., Swiss private bank Lombard Odier & Cie. and Chase Manhattan Bank, he joined HSBC in 2006 at their Canary Wharf headquarters in London.

Ellerbeck met his wife, a 5-foot-4 blonde in 1991, and they married three years later, he testified. Both were born in north London. One of her former lovers described her at the trial as “feisty” and “flirtatious.”

His wife, whom he called “Kate,” was working as a travel coordinator for overseas executives visiting London. She took a voluntary buyout when she was pregnant with their first child, a boy born in 1995, Ellerbeck said. They had a daughter three years later, and she stayed at home to raise the children.

Two-Story House

In the late 1990s, the family moved into the Enfield home, a two-story, mock-Tudor house with ivy growing up the front. She was 46 when she died.

As chief investment officer for HSBC’s global liquidity business, Ellerbeck oversaw fund managers in Paris, New York, Bermuda and London. The unit’s function is to provide risk- averse investors with returns by investing in money-market funds.

Ellerbeck was the “calmest person on the team,” testified Peter Knight, his former boss. An “all round good bloke,” who appeared to have “an idyllic family life,” according to another colleague, Andrew Moulding.

The six funds Ellerbeck helped run avoided most of the fallout of the credit crunch because they bought the safest investments, such as short-term fixed-income securities. The HSBC funds returned on average about 1.3 percent in 2008, according to data compiled by Bloomberg. The average U.K. mutual fund plummeted 24 percent last year.

‘Distinguished Track Record’

Ellerbeck, who was described as having a “distinguished track record” by HSBC according to promotional materials for a 2007 conference, cashed in most of his personal investments around October 2007, avoiding the losses caused by the finance crisis, he told the court.

The banker had assets of 855,404 pounds ($1.36 million) in addition to the family house and 431,556 pounds he had deposited in an account of his sister’s. He was making a basic salary of 136,600 pounds a year, plus a bonus.

The couple began to grow apart around 2001, according to testimony at the trial. Susan Reed, Katherine’s sister, blamed it on Ellerbeck’s job.

Katherine “realized the marriage wasn’t ideal,” Reed said. He “worked long hours, traveled abroad, and went out after work. Kate felt she was raising the kids on her own.”

Ellerbeck said the trouble began when Katherine’s mother died. There was “a little bit of coldness, a little bit of a drift between us,” he said.

Preparing for Divorce

The next year, Ellerbeck reconnected with an old girlfriend and began an affair, he testified. He said he broke it off in 2004 when his marriage began to improve. The relationship was “virtually ideal” for the next three years, until Katherine’s father was diagnosed with prostate cancer, and she began acting “vague” and “secretive,” he said.

Ellerbeck started reading her text messages, monitoring her phone records and eventually taping her conversations, he said. He discovered her infidelity with the children’s tennis coach and a close friendship with another man from the recordings, but he never confronted her because he was afraid it would lead to a divorce and harm their children, Ellerbeck said.

He started up his affair again and by early 2008, the marriage had “deteriorated,” he said.

Both were preparing their finances for a divorce, according to trial testimony.

Final Argument

Katherine consulted Reed on how to protect the more than 300,000 pounds she inherited when her father died. Neil Ellerbeck withdrew 103,500 pounds in 500-pound daily increments over a year, prosecutors said. He also deposited 35,714 pounds into an account held for him by a friend of his mistress.

On Nov. 14, 2008, the smoldering feud flared into the open.

The couple took their daughter to an exam that morning, and bickered on the way home in their car. When they got home, Katherine wanted to continue the argument, and when Ellerbeck tried to walk out she attacked him, he testified. Ellerbeck said he restrained her three times in a violent clash before leaving the house to pick up his daughter and drive her to her school.

Ellerbeck testified that Katherine was alive when he left the house, and that he found her dead in a hallway when he returned a half hour later. Prosecutors said Ellerbeck strangled his wife after she asked for a divorce.

A government pathologist told the court that he found 45 injuries on Katherine Ellerbeck’s body after her death, 19 of which were to the head. He testified that in his opinion she died after “manual pressure” had been applied to the neck.

Ellerbeck appeared impassive throughout the trial, showing little emotion as a spectator and on the witness stand. He wore a dark grey suit and matching tie.

During his interview with the police, he showed no surprise when told that his wife had been strangled, prosecutor Ed Brown said. Ellerbeck said that was part of his character.

“What’s inside doesn’t necessarily show on the outside with me,” he responded.

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; or James Lumley in London at jlumley1@bloomberg.net; or Andrew MacAskill in London at amacaskill@bloomberg.net.

Last Updated: October 14, 2009 13:23 EDT