Bank is sued for ‘engineering’ the downfall of quarry company

A QUARRYING company which specialises in Portland stone is suing Barclays, saying that the bank ‘engineered’ the 2010 administration of a subsidiary.

Portland Stone Holdings Limited alleges that Barclays business support unit – the division that is meant to help troubled firms – was ‘an internal profit centre’ focused on making money rather than acting in the best interests of clients in distress.

Similar claims have been levelled against Royal Bank of Scotland’s controversial Global Restructuring Group, which was this weekend revealed to be in the early stages of a possible police investigation.

Barclays denied the allegations this weekend.

Most ‘turnaround’ units within banks are treated as ‘cost centres’, rather than ‘profit centres’ where managers could be incentivised to generate income even if it goes against the interests of the firms in their care.

Portland Stone is suing the bank and former administrators KPMG alleging that they conspired to put Stone Firms Limited, its subsidiary, into administration.

Entrepreneur Geoffrey Smith had bought the quarrying businesses in 2004. After several years of successful trading the group hit cashflow difficulties following a row over a new quarry and the development of a new factory.

Barclays transferred the group to its business support unit and subsequently put it into administration after it was unable to pay a debt to HM Revenue & Customs.

Smith later got finance to buy back the business as part of a voluntary arrangement with creditors and still runs it now. Barclays disputes the claim, saying in court documents that it is ‘a straightforward case of Stone Firms Limited becoming insolvent through the decisions of Mr Smith, which allowed a huge unpaid debt of over £760,000 to HMRC to build up.’

A KPMG spokesman said: ‘We strongly refute the allegation that KPMG or the officeholders acted improperly.

‘We believe this claim has no merit in fact or law and we will continue to vigorously defend the firm and officeholders against it.’

Portland stone is a type of limestone quarried on the Isle of Portland in Dorset, and has been used on numerous high-profile buildings including St Paul’s Cathedral.

Separately, RBS was facing a police investigation into its GRG turnaround unit this weekend.

The bank said that the Police Scotland probe related to an ‘individual complaint’.