Retail billionaire Sir Philip Green has been savaged by MPs in a report into the collapse of department store BHS, which he owned from 2000 until March last year.
The Work and Pensions Committee and the Business, Innovation, and Skills Select Committee have been holding a joint inquiry into the collapse of BHS, which fell into administration in April. 11,000 jobs are set to be lost.
The committees’ joint report, published on Monday, accuses Sir Philip and Dominic Chappell, who bought BHS from Green for £1, of “the systematic plunder of BHS”, saying: “Sir Philip Green, Dominic Chappell and the respective directors, advisers, and hangers-on who all got rich or richer are all culpable, with the only losers the ordinary employees and pensioners.”
Sir Philip, who also owns TopShop, Dorothy Perkins, and Miss Selfridge among others, is singled out for particularly scathing criticism in the report. Here is just one brutal paragraph in the report’s summary (emphasis ours):
“Sir Philip systematically extracted hundreds of millions of pounds from BHS, paying very little tax and fantastically enriching himself and his family, leaving the company and its pension fund weakened to the point of the inevitable collapse of both. Lady Tina Green is still being paid tens of millions of pounds of tax free repayments on the loan that was engineered to sell BHS from one Green family business to another, and will be for some years to come.”
Sir Philip bought BHS in 2000 for £200 million but the Green family took out more than £580 million in dividends, rental payments and interest on loans, according to the Guardian.
Labour MP Frank Field, who co-chaired the joint select committee inquiry, said in a statement: “One person, and one person alone, is really responsible for the BHS disaster. While Sir Philip Green signposted blame to every known player, the final responsibility for up to 11,000 job losses and a gigantic pension fund hole is his. His 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 billions but does not know what decent behaviour is?”
‘A sorry litany of failures’
Sir Philip argued that his company, Arcadia Group, did everything it could to try and turn the ailing store around, but MPs conclude that: “Over the duration of their tenure, significantly more money left the company than was invested in it.”
The report says that MPs found “little to support the reputation for retail business acumen for which he received his knighthood.”
It adds: “BHS was involved in a number of transactions with a complex web of companies, many registered offshore: whether BHS benefited financially from these transactions is far from clear. What is clear is that the Green family did.”
Sir Philip claimed during the hearing that the responsibility for BHS’ administration lay with Chappell, who ran the business until it collapsed in April this year.
But the report concludes that “the ultimate fate of the company was sealed on the day it was sold,” adding: “Ultimately, Dominic Chappell and RAL failed all of Sir Philip’s nominal tests for a buyer. They were manifestly unsuitable owners of BHS. It is inconceivable that someone with Sir Philip Green’s experience seriously considered otherwise.”
Chappell was a twice bankrupt former racing driver who had no experience of running a retail business when he took charge of BHS. He was also introduced to the deal by Paul Sutton, a convicted fraudster who originally tried to buy BHS but was rejected by Sir Philip’s Arcadia Group on the grounds of his background.
The report says: “Sir Philip’s rush to drive through the sale of BHS – “a chain that had become a financial millstone and threatened his reputation” – was the culmination of a sorry litany of failures of corporate governance and greed.”
‘The apogee of weak corporate governance’
MPs are also scathing on the corporate governance at Sir Philip’s Arcadia Group, which owned BHS until last year. The report calls it “a corporate group run as a personal fiefdom by a single dominant individual.”
Lord Grabiner, who chairs Arcadia’s parent company Taveta, comes in for particular criticism, accused of representing “the apogee of weak corporate governance.”
The report even hints that the judge could face disqualification as a director, the ultimate business humiliation. Here’s the relevant paragraph:
“It was his responsibility to provide independent challenge and oversight. Instead he was content to provide a veneer of establishment credibility to the group while happily disengaging from the key decisions he had a responsibility to scrutinise. For this deplorable performance he received a considerable salary. It is permissible in law for a director to delegate certain functions to other persons, but if a director allows himself to be dominated, or manipulated by one of their number, he may have gone beyond the boundaries of what is proper. He could be found to be in breach of duty and subject to disqualification. All directors of Taveta and RAL have serious questions to answer about their performance in those roles.”
As well as leaving 11,000 people out of work, the collapse of BHS has left a pension scheme with a funding blackhole estimated at £275 million.
Sir Philip told MPs during the select committee hearings that he would “sort” the shortfall, and the report heaps pressure on him to do so.
It says: “Sir Philip had a responsibility to be aware of the growth of the deficit and he was aware of it. That there is a massive deficit is ultimately his responsibility.
“The Committees say Sir Philip Green must act now to find a resolution for the BHS pensioners, a “moral duty” which will undoubtedly require him to make a large financial contribution.”
‘An insult to the employees and pensioners of BHS’
While much of the report focuses on criticism of Sir Philip Green and Arcadia Group, BHS buyer Chappell and his company Retail Acquisitions Limited (RAL) are also reprimanded.
The report says: “In putting his ‘home team’ first, Mr Chappell and his fellow directors were personally enriched as BHS failed around them.
“In effect, Mr Chappell “had his hands in the till”. His description of £2.6 million that he personally took, in addition to an outstanding £1.5 million family loan, as a “drip” in the ocean is an insult to the employees and pensioners of BHS that he let down.”
Alongside the report, the select committees are publishing for the first time a due diligence report on the BHS acquisition from law firm Olswang. Olswang advised RAL on the deal but the document shows it gave “advice against the purchase and express[ed] concern that RAL were reliant on Sir Philip making good his unwritten assurances.”
The select committees conclude that the collapse of BHS “is “the unacceptable face of capitalism” and that the story of BHS begs much wider questions about the gaps in company law and pension regulation that must be addressed.”
Sir Philip Green is facing pressure to give up his knighthood or have it stripped from him and the report will no doubt add to pressure on his position.
Sir Philip Green declined to comment on the report findings when contacted through his representatives by Business Insider.
The Financial Reporting Council, the Pensions Regulator, the Insolvency Service and the Serious Fraud Office are all still investigating the collapse of BHS.