Morgan Grenfell lost £400M to a fund manager who hid losses in shell companies

Morgan Grenfell Asset Management (MGAM) was the investment management arm of the British merchant bank Morgan Grenfell, which had been acquired by Deutsche Bank in 1990. It was one of the UK's most respected fund management houses.

In September 1996, MGAM revealed that fund manager Peter Young had caused losses of approximately £400 million through unauthorized investments. Young had set up a network of shell companies in Luxembourg between July 1995 and May 1996 to shelter his dealings in unlisted companies, mainly in technology and Scandinavian stocks. This allowed him to breach the 10% limit on non-quoted stock investments in his funds.

Deutsche Bank was forced to bail out 180,000 investors who had been exposed through the funds. Morgan Grenfell was fined £2 million by the Investment Management Regulatory Organisation (IMRO) — the largest fine ever imposed on a UK financial institution at the time.

Peter Young was charged with conspiracy to defraud and offenses under the Financial Services Act 1986. He declared himself mentally and legally incompetent to manage his affairs, and the case never went to trial. Six staff members left the firm, and four were suspended by IMRO for periods of 16 months to 3 years. The scandal severely damaged MGAM's reputation and led to the dismantling of the Morgan Grenfell brand.