Diamond Libor Taint Drives Colby Students Seeking Ouster
Robert Diamond, the former Barclays Plc (BARC) chief, gave $6 million to finance a Colby College building that has become a focal point for student dissent over his role at the 199-year-old school in Waterville, Maine.
Diamond, class of ’73, was forced out at Barclays after the London-based bank admitted to manipulating a key lending rate affecting $300 trillion in finance products worldwide. Since Colby trustees backed him as chairman in August, a group of students and local activists has rallied outside the Diamond Building to call for his removal.
“It’s not just what Bob Diamond stands for,” said Gordon Fischer, a Colby senior from Camden, Maine, who has helped set up protests, including one that attracted more than 30 people on Nov. 11. “It’s how the decision was made by the board to strongly affirm their support for him.”
The market crisis that led to the longest recession since World War II highlighted a cozy relationship between academia and Wall Street. College presidents such as Brown University’s Ruth Simmons served as paid bank directors while academics failed to reveal industry support for research backing deregulation. As campus protests focused on financiers, leaders including Harvard University President Drew Faust urged graduates to resist the lure of banking and investment jobs.
Yet executives who’ve been tarnished by scandal are rarely forced to cut ties with schools and nonprofit organizations they’ve supported, said Stanley Katz, a professor of public and international affairs at Princeton University. Usually a trustee caught up in such situations simply isn’t re-elected, Katz said.
“There’s a big gap between that and forcing a person off the board,” Katz said. “What you’re relying on is the common sense of the guy to throw himself overboard in the best interest of the organization. At some point you’re doing more harm than good.”
Richard Fuld, the former head of Lehman Brothers Holdings Inc. in New York, is an example. He quit as a trustee of Vermont’s Middlebury College after Lehman went bankrupt in September 2008, upending credit markets worldwide.
Under Diamond, 61, Barclays employees tried to rig the London interbank offered rate, or Libor, a global benchmark for lenders, credit providers and an array of financial agreements. The U.K.’s second-largest bank by assets, Barclays paid a fine of 290 million pounds ($460 million) for the attempted manipulation, which began in 2005. Diamond joined the bank in 1996 and rose to CEO after running the investment banking unit for about 13 years.
The ex-banker, who hasn’t been accused of wrongdoing, didn’t respond to e-mailed messages seeking comment on his status at Colby.
“If you force a guy like Bob off, what happens to the next person who does something that offends the students?” Katz said. “Until it comes to an indictment, people aren’t going to ask him to step down.”
As he rose from trader to Barclays CEO, Diamond helped make the bank the world’s second-biggest securities underwriter last year. Yet Adair Turner, chief of the U.K. Financial Services Authority, in July faulted him for fostering a “cultural tendency to be always pushing the limit” of the rules.
“Diamond did stuff during the crisis to rescue the bank,” said Christopher Wheeler, a Mediobanca SpA analyst in London. “Unfortunately, he is tainted, because Libor is one of the ugliest things I’ve seen in 40 years in and around the industry.”
To set Libor, traders at certain banks are surveyed about their cost of lending to other banks and financial institutions each business day, with the results used to set the rate. Participants who conspired to manipulate the calculation through their responses sought to improve trading profits and to make their firms look financially healthier. The manipulation remains under investigation, including U.K. and U.S. criminal probes.
Barclays was the first to admit its role in the Libor scandal in June and Diamond left days later. By then he was already a poster boy for banker bashing in London.
U.K. Business Secretary Peter Mandelson in 2010 labeled him the “unacceptable face of banking” because of his outsized pay. Last year, Diamond told Parliament that the time for “remorse and apology” from bankers regarding the financial crisis needed to end so that they could focus on helping the economic recovery.
The banker set off a furor after he resigned in July by telling a parliamentary panel that only a few traders were responsible for the rate rigging and that regulators were content with leadership at Barclays. A Treasury Committee report to lawmakers in August said he gave “unforthcoming and highly selective” evidence about the role of top managers and that his candor and frankness “fell well short of the standard that Parliament expects.”
Diamond defended his answers as truthful and candid in a statement issued following the report.
“He is totally unfit to be involved with any college,” John Mann, a Labor Party member of Parliament on the Treasury Committee, said by e-mail about the Colby protests. “The man was roundly condemned by our committee for his answers. We had the impression he was dishonest with us.”
Started as a Baptist seminary on the banks of the Kennebec River, a major fur-trading route in colonial days and a channel for logs sent to mills in Waterville, Colby is readying a bicentennial celebration next year. It has evolved into a selective liberal-arts school located about 180 miles (290 kilometers) north of Boston.
Colby, which costs about $55,700 a year to attend, admitted about one in four applicants this year and has 1,815 students from 46 U.S. states and 76 countries, according to its website. Besides Diamond, graduates include historian Doris Kearns Goodwin and Federal Reserve Bank of Boston President Eric Rosengren.
A second generation Irish-American who was raised in the Boston suburb of Concord, Diamond has been a Colby trustee since 1993 and chairman since 2009. He has committed to giving more than $11 million to the school during the past 20 years. The $6 million for the Diamond Building, which houses social sciences departments, including economics, was among the largest donations ever received by the college when it arrived in 2003.
Diamond also helped Colby students get jobs on Wall Street as Barclays recruited from the campus, said Peyton McElyea, a 2005 graduate who worked for the firm for three years out of college.
“People don’t realize how wonderful Bob has been,” said McElyea, who left Barclays to get a masters of business administration at Columbia University and now works for EVOQ Properties Inc. (EVOQ), a private-equity firm in Los Angleles. “He started dozens of meaningful banking careers for students who otherwise might not have landed the same opportunities.”
Colby’s trustees met in August to hear out Diamond on his departure from Barclays. After he finished and left the room, the board conferred on the matter for two hours before it “strongly affirmed its support” of him as chairman, according to a statement Sally Baker, a school spokeswoman, sent to students and faculty.
In his presentation, the ex-banker showed “official reports reflecting that an intensive, multiyear investigation of Barclays by several regulatory agencies resulted in no findings of impropriety against Mr. Diamond personally,” according to the statement. It said Diamond asked for the board meeting.
The Fed’s Rosengren, also a Colby trustee, said by e-mail that he didn’t attend the meeting and has recused himself from any discussions about Diamond.
The first protest against Diamond’s continuing role took place July 14, when about 15 activists from the Occupy Wall Street movement in Maine gathered in front of the Diamond Building. The activists returned on Sept. 12, joined by students, and again on Oct. 20, when more than 40 protesters circulated a petition calling for his ouster on a day when trustees gathered on the campus.
“The board is still strong in their support,” said Michael Kiser, a Colby spokesman. Given the relatively small number of students involved, “it’s not really accurate to call it a student protest,” he said.
“They’re welcome to their opinions,” Kiser said. “We understand there’s a difference of opinion and we’re respectful of that.”
Fischer and another student protester, Shelby O’Neill, were asked to meet with two trustees on Oct. 20, after which a dispute arose over whether the college had agreed on a campus- wide forum about Diamond’s future role. The disagreement shows that Colby’s leaders don’t want to confront questions about Diamond and has added “fuel to the fire,” Fischer said.
“He’s a very generous guy, but where did that money come from?” said Gary Lawless, a poet and a 1973 Colby graduate who runs a bookstore in Brunswick, Maine, near the mouth of the Kennebec. “The college is saying that if you don’t get indicted, it’s OK.”
To contact the editor responsible for this story: Stephen Merelman at email@example.com.