Too Big to Jail: Inside HSBC, the Mexican Drug Cartels and the Greatest Banking Scandal of the Century by Chris Blackhurst

ONE
‘Scottish banking principles’
HSBC began its life by serving drug dealers. Indeed, one of the mighty
bank’s first bosses was a leading player in the drugs trade, although you
would be hard pressed to find official acknowledgement of this from the
bank. Instead, the HSBC website opens with the hardly enticing but
typically unabashed lead-in of ‘How did a local Hong Kong bank become
one of the world’s largest financial services organizations?’ Read the story
of HSBC’s birth and international expansion – and how it has been
connecting customers to opportunities for more than 150 years. The bank,
the website tells us, ‘was born from one simple idea – a local bank serving
international needs’, which is so broad-brush in approach as to be almost
meaningless. Nor will you find mention of narcotics in the official corporate
history: ‘Thomas Sutherland was sailing along the South China coast on the
steamer SS Manila in 1864 when he read an article on Scottish banking in
Blackwood’s Magazine. He was a Scot himself, and despite never having
held a bank account, he resolved to found a bank in Hong Kong based on
sound Scottish banking principles. Unlike all other foreign banks in the
territory, the new bank was to be locally headquartered and managed,
unhindered by overseas directors with little knowledge or interest in the
affairs of Hong Kong. Sutherland drew up a prospectus, and the bank’s
Provisional Committee met in August 1864. Total capital was set at HKD5
million, all the shares allotted to Hong Kong were quickly taken up and the
bank was born.’
Thomas Sutherland was born in 1834, in Aberdeen. His father died when
Thomas was young and he was brought up by his mother’s grandfather,
owner of a cooperage and fish-curing business in the north-east of Scotland.
The grandparents were strict Calvinists, and the intention was that the
young Thomas would go to the local Aberdeen University and study to
become a minister. Thomas was not interested, and he dropped out of
college and joined P&O, the shipping line, as a clerk. Still in his teens, he
went to Bombay for the firm, then to Hong Kong. Before long he was
promoted to become the company’s ‘Hong Kong superintendent’,
overseeing P&O in the new British colony, and in nearby China and Japan.
In 1863, this phenomenally ambitious young man was made chairman of
the Hong Kong and Whampoa Dock Company, managing the construction
of warehouses and wharves, and all of this before he had turned 30.
Although, oddly, he still did not possess a bank account. He was just the
sort of driven individual that HSBC would be looking to fill their glass
office towers with nearly 150 years later as they went in pursuit of their
goal to become the biggest bank in the world.
Sutherland fell in with two brothers in Hong Kong, Thomas and Lancelot
Dent. There is no mention of the Dents in the HSBC history, but what we
do know of them is that they were fellow travellers, young buccaneers who
had originally come from farming stock in Westmorland in the north of
England. It was a tough existence, and they left to seek their fortunes,
travelling east, to India and China. Thomas and Lancelot subsequently
ended up in Hong Kong, where they went on to form Dent & Co, a trading
company, one of the original Canton Hongs.
Dent & Co had spun out of another company, Davidson & Co, which
itself grew out of a business set up by George Baring of the Baring banking
dynasty. The upright, image-conscious Barings disapproved of the
burgeoning traffic in opium, which was being shipped from India to China
via Hong Kong and the Chinese port of Canton, or Guangzhou, where it
was exchanged for porcelain, tea and silk for sending to Britain and the
British Empire. At that time, the narcotic accounted for 70 per cent of all
maritime freight from India to China, and by 1833 the East India Company,
which enjoyed a monopoly over the opium trade running into China, had
grown the business from shipping 4,000 chests of opium a year, each
containing 77kg of the drug, to 30,000 cases. While opium had its
medicinal uses for easing pain, aiding sleep and alleviating stress, it was
also highly addictive. By the late 1830s, there were burgeoning numbers of
addicts in China, and so dependent was the country becoming on the
narcotic that China’s balance of trade was in danger of being heavily
skewed. Americans, in the shape of the ancestors of Franklin D. Roosevelt
and Senator John Kerry, also wanted in on the action, routing opium from

Too Big to Jail: Inside HSBC, the Mexican Drug Cartels and the Greatest Banking Scandal of the Century by Chris Blackhurst