Philip Green is hammered in report on demise of BHS
BHS was subject to “systematic plunder” by former owners Philip Green, Dominic Chappell and their respective “hangers-on”, according to MPs, leading to the collapse of a company that once employed 11,000 people.
A damning report published yesterday after weeks of evidence from former executives says the “tragedy” of BHS was the “unacceptable face of capitalism” and raises questions about how the governance of private companies and their pension funds should be regulated.
All BHS’s remaining stores will close by the end of August after the department store group went into administration in April leaving a £571 million ($750 million) pension deficit. Green sold BHS for £1 in March 2015 to a consortium led by Chappell, a serial bankrupt. The retailer failed 13 months later.
Green’s business reputation is torn apart in the report put together by MPs on the work and pensions select committee and the business, innovation and skills (BIS) committee, who concluded there was “little to support the reputation for retail business acumen for which he received his knighthood”.
Their conclusions are likely to add to pressure for Green to make good the pension shortfall or be stripped of his knighthood.
The shadow chancellor, John McDonnell, said: “If Philip Green won’t do the right thing by the members of the BHS pension fund then he should have his knighthood removed. And if he says he can’t afford it then he should sell up his extra yacht.”
Frank Field, the chair of the work and pensions committee, said: “[Green’s] reputation as the king of retail lies in the ruins of BHS.
“His family took out of BHS and Arcadia a fortune beyond the dreams of avarice and he’s still to make good his boast of ‘fixing’ the pension fund. What kind of man is it who can count his fortune in bil- lions but does not know what decent behaviour is? ”
MPs said Green had “systematically extracted hundreds of millions of pounds from BHS, paying very little ta x and fantastically enriching himself and his family, leaving the company and its pension fund weakened to the point of the inevitable collapse of both”.
Green was found to hold prime responsibility for the pensions black hole after years of refusing to provide sufficient funding, despite pleas from the fund’s independent trustees.
The report urges Green to bring about a resolution to the financing of the BHS pension fund by making “a large financial contribution”.
‘A series of bad decisions’
“He has a moral duty to act, a duty which he acknowledges. We still do not doubt that Sir Philip has heartfelt affection for BHS. To an extent it created him; it could also bring him down,” MPs said.
Green last week set out a robust defence of his stewardship of BHS, claiming he put £421 million into the group during his 15 years at the helm. But MPs found the demise of BHS was the result of “a series of bad business decisions and personal greed”.
MPs said Chappell had put no money into BHS and “had his hands in the till”, personally taking £4.1 million from the ailing company in 13 months of ownership including a £1.5 million interest-free loan, secured against his father’s house.
The committees said they would support investigations by the Financial Reporting Council, the Pensions Regulator, the Insolvency Service and the Serious Fraud Office.
MPs plan to launch two new investigations that will examine regulation of the corporate governance of private companies and whether there should be more proactive regulation of pension funds.
Their plans are likely to be supported by Prime Minister Theresa May, who has pledged “to make our economy work for everyone by getting tough on irresponsible behaviour in big business”.
Weak corporate governance at Green’s Taveta group, which was run as a “personal fiefdom by a single dominant individual”, accord- ing to MPs, meant there was little independent oversight or challenge to decisions.
They suggested Green had acted to conceal the true state of the BHS pension fund’s problems from Chappell’s Retail Acquisitions group and said his account of talks to sell BHS to a convicted fraudster, Paul Sutton, did not tally with that of his former adviser Robin Saunders.
The eventual sale of BHS to Chappell – a former bankrupt and business associate of Sutton who had failed to meet Taveta’s own hurdles in terms of providing equity, working capital and a credible retail frontman – went ahead without Taveta’s chairman, Lord Grabiner, even knowing about the deal.
Having gained control of BHS, Chappell’s Retail Acquisitions also suffered from “feeble” corporate governance and its board was peopled with friend’s and family.
Under their stewardship, Retail Acquisitions charged £11 million to BHS in the form of salaries while directors failed to fulfil their responsibilities despite “profiting handsomely” from their positions.