Master of deceit who should lose his knighthood — and face full weight of the law
The fast-talking, foul-mouthed ‘King of the high Street’ Sir Philip Green has been exposed as a master of deceit and duplicity in this devastating Commons report. By the standards of often disappointing, mealy-mouthed official reports into corporate failure and wrongdoing, the select committee document sets new standards for plain-speaking.
It is now abundantly clear that Philip Green – owner of many of the most famous fashion names on our high Streets – knowingly sold BHS to an untrustworthy thrice-bankrupt for £1, only to watch the company go broke under its new owner with a £571million pensions deficit.
As Green and his wife Lady Tina luxuriate this summer on their new £100m yacht, the Lionheart, they leave in their wake a trail of woe which has destroyed the lives of 11,000 workers at BHS and left 21,000 members of the collapsed company’s pension scheme facing a shattered retirement.
It is also clear that, shockingly, Green was aided and abetted in this calamity by some of the most blue-blooded firms in the City of London.
In a clear echo of the Lonrho scandal of more than four decades ago – when Tiny Rowland, the boss of mining conglomerate Lonrho, was accused by his directors of concealing financial information from the board – Green and his cohorts in the City are accused of indulging in ‘the unacceptable face of capitalism’. This was the phrase edward heath, then prime minister, used when he referred to the scandal at the time.
Today, the same stinging rebuke comes as a new Prime Minister, Theresa May, promises to crack down on ‘irresponsible behaviour in big business’ (another recent example is the appalling treatment of workers at Sports Direct’s warehouse at Shirebrook in Derbyshire, whose boss Mike Ashley has also been quizzed by MPs).
The BHS report provides May with an immediate opportunity to demonstrate she means what she says, and to insist that the full force of the law be brought to bear on those it implicates in wrongdoing.
First and foremost among them, of course, is Green himself. To those of us who have followed his career over several decades, the report’s exposure of his moral and ethical shortcomings as an entrepreneur comes as no surprise.
Back in the early 1990s, he was cast out of the only public company he ever headed, the jeans firm Amber Day, after fellow directors found serious governance shortcomings.
YET despite this, and despite his continuing reputation for unscrupulousness and for putting his own personal interests above those of staff, suppliers and colleagues, Green was still elevated to a knighthood by the Blair-Brown government and used by the Cabinet Office during the Tory years to conduct a review of overspending by government departments.
The plain facts are these. Green bought BHS 16 years ago. he bled it dry by using its dividends to finance his own and his wife Tina’s jet-set lifestyle, and to help build up his Arcadia clothing company which owns leading fashion brands including Topshop, Wallis, Miss Selfridge, Topman and Burton.
As the MPs note ‘the dividends paid in the early years of ownership, followed by several years of losses, meant that BHS was left in a far weaker position in 2014 than it had been when it was bought in 2000.’ By the time it was sold it was on what the MPs pointedly describe as ‘life support.’
The most disturbing revelation of the report is the way Green destroyed the BHS pension fund. When he took over BHS in 2000, the fund, remarkably, had a surplus of £43million. By the year 2015 this has ballooned into a deficit of £350million and a buyout cost – the money required to make the scheme safe – of £571million.
Green engaged in intermittent efforts to resolve the black hole in the fund, but he never showed any real commitment to resolving the problem.
While the pension fund’s trustees and the Pension’s Regulator must take some share of the blame, the MP’s probe concludes the ‘massive deficit is ultimately Sir Philip Green’s responsibility’.
Green gave the Commons committee the impression that he had been prepared to make a deal over the pension fund before the sale of BHS went ahead, as if it were a company asset he could use to enrich his family.
The fact is that to try to use people’s pensions as a bargaining chip is breathtakingly immoral. If Green at the outset had placed part of his £3.2billion estimated fortune in an ‘escrow’ or safety account, with reputable custodians, to be used to meet any pensions shortfall, he could have saved himself from the intensely uncomfortable position he now finds himself in as his business practices are scrutinised.
The ownership structure of his companies – the way his major retail investments have been owned by his wife Tina in tax-free Monaco since 2004, yet have been run by her husband from London – is an area of that has raised yet more concerns.
Under this arrangement Lady Green received an eyewatering £1.2billion dividend from Arcadia in 2005 alone – tax-free.
Many of the Green family companies sit in offshore jurisdictions such as the British Virgin Islands, where it impossible to know how the cash is being handled.
Furthermore, money moves backwards and forwards between the UK-domiciled firms and the unaccountable private firms of the Green empire, with little interference from Green’s auditors, City firm PWC.
Such inter-company transactions are deeply frowned upon by company law – which perhaps explains why PWC’s role is now being looked at by audit regulators the Financial Reporting Council.
Both this regulating council and the HMRC now face a huge task in sorting out the tangled web of interests that have never been properly tackled by the authorities.
And this brings us to what I consider, as a longstanding City editor, one of the most disturbing aspects of the BHS report: what it says about the moneygrabbing, self-interest of some of the nation’s leading legal and accounting firms which are such an important component of trust in the Square Mile.
ensuring the City’s legal and advisory network remains cleaner that clean and at its most competent and professional has become even more important in a post-Brexit era, when London will be challenged for business by overseas financial centres including Paris and Frankfurt.
The City law firm Olswang and accountants Grant Thornton received an estimated £8million in fees from a ruined BHS as advisers to the firm’s clearly unsuitable buyer Dominic Chappell and his cohorts.
how could they have failed so abysmally by agreeing to let the sale go ahead? And how predictable that they refused to cooperate, claiming ‘confidentiality’, when the Commons asked for paper evidence of their role in the catastrophe.
Green’s own advisers come out just as badly. The leading law firm Linklater simply relied upon Olswang for doing the ‘due diligence’ checks on Chappell to assess whether he was reputable.
GREEN’S favourite investment banker, Mike ‘Woody’ Sherwood of Goldman Sachs, is another whose reputation has been tarnished. In spite of claiming only to provide informal advice to Green, the bank allowed itself to become the ‘gatekeeper’ to the transaction. Goldman’s stellar reputation in finance added ‘lustre to an otherwise questionable process’ and gave Green a chance to say he had acted on the best advice.
Then there are individual culpabilities like that of the distinguished barrister Lord (Tony) Grabiner. he was chairman of the board of Green’s company Arcadia when it sold BHS. The great irony is that, until recently, Grabiner was collecting huge fees for advising the Bank of england on ethical wrongdoings.
At least once in every decade there is a financial scandal that shocks the country to the core and delivers a blow to the reputation of the free-market capitalism which I and this paper passionately believe offers the best route to prosperity.
In the 1980s we had the Guinness scandal, in which the company’s share price was manipulated to enhance its chances in a take-over bid; in the 1990s, Robert Maxwell mysteriously fell off his yacht, the Lady Ghislaine, leaving behind a shattered empire and a plundered pension fund; and in the noughties the whole of the financial system almost came tumbling down when the banks disgraced themselves with toxic sub-prime mortgages.
BHS emerges as the greatest swindle of the present decade. It is particularly emotive because of the impact it has had on the ordinary lives of consumers, employees, suppliers and people in the BHS pension fund. It plays right into the hands of the hard Left and critics of Britain’s age-old financial system which delivers prosperity to this country and its peoples.
That is why that all those involved in this messy affair must at the very minimum be driven out of finance for ever and – if found guilty of illegal acts – suitably punished.
As far as Green is concerned a Commons jury has spoken. his untrammelled behaviour cannot be allowed to continue and, at the very least, the knighthood he has so abused should be taken away from him.