LONDON - The chairman of Co-operative Group resigned Tuesday as the group continued to reel from the emergence of a video that allegedly showed the former chair of its banking unit buying illegal drugs.
The group, Britain's largest mutual society, said Len Wardle resigned because of his involvement in the appointment of Paul Flowers, who was caught in a Mail on Sunday video allegedly buying crystal meth, cocaine and ketamine. Co-op has launched an investigation and pledged to examine the way it makes appointments at the bank.
"I have already made it clear that I believe the time is right for real change in our operations and our governance," Wardle said in a statement.
The pressure has been building for weeks at Co-op, which has reshaped its leadership in the wake of troubles that emerged following its 2009 acquisition of the Britannia Building society. The bank has had to plug a 1.5 billion pounds ($2.4 billion) black hole in its finances and recently agreed to a rescue plan that saw hedge funds move in and take a huge share of the bank's operations.
Though the group, which also runs grocery stores, pharmacies and funeral parlours, will retain 30 per cent of the bank, it was forced to take out full page advertisements in British newspapers to underscore its commitment to retaining its values.
The Mail on Sunday reported that Flowers, a Methodist minister, bought the drugs just days after a parliamentary committee grilled him on the bank's disastrous financial performance.
That committee session was memorable because Flowers apparently failed to know very basic facts about his own bank. Flowers told Treasury Select Committee chair Andrew Tyrie that Co-op's total assets were about 3 billion pounds ($4.83 billion) — they actually total about 47 billion ($75.7 billion).
At a time when the financial crisis already saw the public questioning the ethics of bankers, the testimony raised questions over their competence. Now critics are wondering whether regulators were doing enough to supervise — and monitor — a bank's most senior leaders and decision makers.
"This latest episode over the chairmanship of the Co-op illustrates how much there is to do to reform the regulatory approval process for bankers, especially those at the top of our banks, and how important it is that fundamental reform take place," Tyrie said in a statement.
Unlike people who manage investments, for example, there's no set qualification for a chairman. Knowledge of an organization and how it works is among the critical factors authorities examine, but many organizations seek out a board with a diversity of backgrounds and experience making any single test difficult to administer.
Flowers apologized for his behaviour and said personal and profession pressures led him to do things "that were stupid and wrong."
West Yorkshire police are making inquiries.