Lies, spin and loyalty - Hannam case tells of a banker's code

By Andrew Callus and Clare Hutchison

LONDON (Reuters) - The London-based banker fined last year for being careless in an email with sensitive information believes the takeover talks he revealed to a Kurdish minister in 2008 might have been fictitious, and that he might have made them up himself.

Former JP Morgan banker Ian Hannam, giving evidence at a tribunal at which he hopes to clear his name and reverse a 450,000 pound fine by the UK financial services industry regulator for market abuse, said his only goal in sending the email was to serve his client, Tony Buckingham, the boss of exploration group Heritage Oil.

"I either made it up or I was putting a spin on it to get a meeting (with the minister)," Hannam told the Upper Tribunal in London's High Court on Wednesday. "I know everything I was doing was to further the transaction."

Hannam was responding to questions from Richard Boulton, lawyer for Britain's Financial Conduct Authority (FCA). Boulton is charged with upholding the 2012 finding against Hannam - a rare success for the much-criticised watchdog.

However, the suggestion that the talks were fictitious was made not by Boulton, but by Hannam's lawyers. Part of their argument for having the fine overturned is that by being inaccurate, the contents of the email - and another, later one from Hannam revealing an oil strike by Heritage, could not have been inside information.

The man at the other end of Hannam's emails was Ashti Hawrami, then and still the oil minister of the oil-rich semi-autonomous region of Iraqi Kurdistan. Hannam and Buckingham were hoping to tempt him into a deal that would unlock the region's resource riches, undeveloped for years because of war and political instability. Bid interest from a third party was the bait.

Hannam, who in 2008 was also helping broker closer ties between affiliated investment banks JP Morgan and Cazenove as crisis gripped financial markets, was joined in the courtroom by David Davis, a leading British Conservative politician and supporter of the former soldier and his campaign.

The thick-set 57-year old banker sat defiant in the witness stand facing Boulton, his small, heavy lidded eyes sometimes framed by a large pair of spectacles, sometimes not. Davis sat behind him.

The high-profile case tests the mettle of the three-month-old FCA, a revamped regulator determined to hold to account senior bankers and their employers for market abuse or sloppy controls. It will also fuel a debate about what constitutes inside, or market-moving, information.

Hannam was banned by his employer from December 2009 from initiating or soliciting new business or attending meetings without an "approved person."

An ex-special forces soldier known for multi-billion-dollar deals that transformed Britain's blue-chip share index, Hannam said on Tuesday as the case began that he did not believe he broke any rules.

Hannam resigned from JP Morgan Cazenove last year, leaving his position as global chairman of equity capital markets after two decades at the firm, to pursue his appeal.

The FCA's predecessor, the Financial Services Authority (FSA), alleged Hannam sent two emails on behalf of Heritage Oil in September and October 2008, which included potential inside information.

Both emails were sent to Hawrami. The first, which referred to a potential offer for Heritage and a price, did not name a buyer. The second mentioned a Heritage oil find in Uganda.

Heritage issued an announcement about bid talks nine days after the September email after the UK Takeover Panel regulator noticed "untoward movement" in Heritage's share price. It also announced an oil find after the second email.

Hannan has said no one made any personal gain from the information in his emails and that his honesty and integrity were not questioned by the regulator, who also did not remove his "fit and proper" professional status.

Rebuilding his reputation is critical for Hannam, who is building up a gold venture in Afghanistan and an advisory firm Strand Partners, which includes some of the JP Morgan team that were among the most influential in the sector.

A spokesman for Hawrami and the Kurdistan Regional Government did not respond to a request for comment. JP Morgan has also declined to comment.

(Editing by Greg Mahlich)