From the perspective of British MPs, the report into the calamitous demise of British high street stalwart BHS, and the role of retail supremo Sir Philip Green in it, might have been titled: "How to Make a Corporate Killing Legally."
It’s a game Green has been playing for decades. And he’s very good at it.
But in a classic piece of crass timing, the celebrity retailer was aboard the Lionheart – one of his three private yachts thanks to the billions of pounds of winnings he made from BHS before it finally went bust with a pension deficit estimated to be £571 million (€676 million) – when the parliamentary report into the collapse and his role in it was published this week.
Green (64) owned BHS for 15 years before he sold the loss-making 180-store chain to Dominic Chappell last year.
Pantomime villain
With all the charm of a back-street brawler and the pretensions of international business royalty, Green is a pantomime villain; his interrogation by the British parliamentary select committee earlier this year was so cringeworthy, even tabloid reporters had to look away. So it was no surprise when, in the unusually critical final report into the BHS collapse, the work and pensions select committee branded him “the unacceptable face of capitalism.”
The losers in the story are the 11,000 mainly low-paid BHS employees and 20,000 pension-holders.
Unable to find a buyer, the administrators of the store chain, Duff & Phelps, are currently implementing a rolling store-closure programme. The last shops are due to close on August 20th.
A Mrs Lloyd, who worked in the South Shields branch of BHS, saw her store closed down last week. Finding her last day at work emotional and difficult, she told her local paper: “There are a lot of older women who were really proud to work at BHS and earn money . . . [I’m] devastated that one person’s greed has spoilt that for us all.”
Pension protection fund
BHS pensioners will now have 77 per cent less retirement income than they previously thought. Also out of pocket are the other pension schemes in the Britain’s pension protection fund (PPF) – a safety net for member sof collapsed pension funds – who will now have to pick up the bill for some of the missing BHS money. Many of them are small companies for whom the PPF levy is already a considerable expense.
Companies in BHS’s supply chain and their employees will also suffer as they will never now be paid for goods and services rendered.
The biggest winner in the fiasco is Green. His behaviour has been roundly criticised as immoral, although only Frank Field, the chairman of the work and pensions committee has dared to suggest it was illegal – and he was quickly issued with a writ by the peer's lawyers.
Even Simon Walker, the head of the Institute of Directors, called his behaviour lamentable and deeply damaging to British business.
‘Circular firing squad’
But the real lesson from the MP’s report is that Green was by no means the only winner. Many of those closest to the decisions that led to the collapse of BHS have walked away greatly enriched despite the company’s failure.
“The evidence we have received over the course of this inquiry has at times resembled a circular firing squad. Witnesses appeared to harbour the misconception that they could be absolved from responsibility by blaming others. The worst example was Sir Philip Green,” said MPs this week.
“The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable.”
So how did they do the winners do it? The short answer is by being Green’s friend, family or acquaintance. Or by holding their noses and looking – or pointing – the other way.
Web of trusts
The biggest winners were of course Green’s family.
BHS Group, which was owned through a complex web of trusts by Tina Green and family, paid out dividends of £423 million (€501 million" between 2002 and 2004 following a sale and leaseback of BHS's property empire. At the time the family was resident in Monaco – if you believe the retailer's evidence to MPs – for heath reasons and because the UK's world-beating public schools were not good enough for his children. The more cynical have pointed out the tax advantages of the principality, which meant no personal income tax was owed on dividends.
Running BHS instantly made Green more credible to the City, which helped to fund the family's acquisition of Arcadia, the owner of of the still-lucrative Topshop, Wallis and Burton, beginning his metamorphosis from slightly grubby trader to peer of the realm.
Jet-set lives
The dividends provided the financial foundation for the entire Green family empire, which has continued to grow. Green’s daughter Chloe and son Brandon, who lead jet-set lives, also benefit from the various trusts he uses to hold his business.
According to the select committee report, “the high level of dividends paid in the early years of Sir Philip’s ownership, followed by several years of losses, meant that BHS was left in a far weaker position”.
MPs conceded many other companies sold off their property assets for cash in sale-and-leaseback deals, but they viewed Green’s dividend as particularly aggressive.
Stripped of investment, the company lumbered along zombie-like for years as sales fell and an initial pension surplus moved to a deficit and grew. By 2008, there were regular newspaper reports – dismissed by the peer as “conversations” – that Green was actively looking for a buyer for BHS
In 2013, there was a chance for a solvent restructuring of the company and its pension deficit when Green hired Deloitte at considerable expense to design Project Thor. But Green mothballed that project in summer 2014, citing instability in the Ukraine and the Scottish independence referendum. MPs believe his real motivation was to resist pressure from the pensions regulator to plug BHS's growing deficit.
“He did not wish to respond to requests for information regarding historic dividends, management charges, sale-and-leaseback arrangements, inter-company loans and the use of BHS shares or assets as collateral for company purchases,” MPs found.
Whatever the reason, BHS's pension problem became intractable at this point, the company's doom mapped out. After a deal to sell to a consortium headed by Paul Sutton – an acquaintance of Green, a bankrupt and convicted fraudster – failed, Sutton's friend Dominic Chappell stepped into he breach taking on BHS for £1.
“Dominic Chappell had scarcely, if any, more credibility than Paul Sutton as a suitable buyer for BHS. Mr Chappell had a record of bankruptcy, of which Sir Philip was aware and neither retail experience nor any experience of running a similar-sized company,” said the report.
Gold-standard advisers
A raft of gold-standard professional advisers including Grant Thornton, Olswang, Linklaters and Goldman Sachs were involved formally or informally with the disastrous sale to Chappell.
MPs found that although Grant Thornton and Olswang were increasingly aware of Chappell's Retail Acquisitions Ltd's manifold weaknesses as purchasers of BHS, they were nonetheless content to take generous fees and lend both their names and their reputations to the deal.
Goldman Sachs, which informally vetted Chappell on behalf of Green, was criticised for failing in its role as "gatekeeper". Sir Anthony Grabiner, the esteemed QC whom Green appointed as the chairman of Arcadia group, came off worst because of his close ties to the company.
No doubt, as he sails the Agean, Green feels a pang of conscience for his employees, who following the collapse of BHS just months after Chappell took over are now looking for work.
He is also troubled by the cheeky reporters buzzing around his yacht for comments and generally troubling the staff. Then there is that talk he’ll have to have with Chloe Green, a former star of UK reality TV show Made in Chelsea, who insists on partying on Instagram while the Mirror runs pictures of minimum-wage BHS shop workers left crying because her daddy let them down.
Prince Albert
And there is also that call he is dreading from Prince Albert II of Monaco who – if you believe the Daily Mail – has decided to evict Phil and Lady Tina because his tax haven principality should no longer be a “sunny place for shady people”.
Actually, although the phone Green always answers rings constantly, the calls turn out to be from journalists rather than Prince Albert, or the celebrity friends he once cultivated, but who have suddenly gone rather quiet.
Green has called the lawmakers’ report into his sale of the company “the predetermined and inaccurate output of a biased and unfair process”.
Following the report, he has said he is trying to find a solution for the BHS pensioners and is working with the pensions regulator.
“I am sad and sorry for all the BHS people caught up in this horrid story, but I do not believe that this story is being in any way fairly portrayed,” he added.
Without BHS, Green might have been just another wealthy ex-pat retiree. With it he is where he is now – friendless, perhaps, but a billionaire: safely, legally and untouchably minted.
