A top Goldman Sachs executive has conceded that the US investment bank’s reputation had not been enhanced by its involvement in BHS, a corporate failure that has cost 11,000 UK jobs.
Goldman provided informal — and unpaid — advice to retail tycoon Sir Philip Green ahead of the sale of the now collapsed department store chain to former bankrupt Dominic Chappell.
Michael Sherwood, co-head of Goldman in Europe, told MPs investigating the sale of BHS that investment banks often accepted such informal assignments from longstanding clients such as Sir Philip’s Arcadia Group.
Mr Sherwood was brought up in north London a few miles from Sir Philip and has stayed close to the billionaire since the two worked together on a failed takeover bid for retailer Marks and Spencer more than a decade ago.
“It’s obvious to everybody that there’s a very significant asset that Sir Philip owns,” Mr Sherwood said on Wednesday. “At some point he might decide to do something with it. That was the transaction that we want to hang round the hoop for.”
However, Mr Sherwood said Goldman was now reviewing whether to keep Sir Philip as a client, adding: “The frequency with which we review clients will be looked at again.”
Sir Philip has insisted that Goldman’s observations helped persuade him to sell BHS to Mr Chappell for £1 last year. “If they had said, ‘Don’t deal with this guy’, that would have been the end of it,” he told MPs earlier this month. “But that is not the advice that we got.”
However, Mr Sherwood said on Wednesday: “I absolutely do not accept blame. He [Mr Chappell] never passed our sniff test. All we highlighted was observations about the risks around Mr Chappell and the transaction. Our role was extremely limited.”
MPs also questioned whether the bank had adequately scrutinised Mr Chappell’s claim to have raised a £120m loan from a US hedge fund. The fund previously told MPs it never committed capital or agreed to the loan.
“You hadn’t seen the term sheet. You didn’t know that it wasn’t providing sufficient working capital,” Richard Fuller, a Conservative MP, told Goldman banker Anthony Gutman, who also testified. “As a consequence, BHS ended up in the hands of a three-time bankrupt. That seems to me to be a dereliction of duty whether you are paid for it or not.”
Mr Gutman replied that he had made clear that the loan offer was only provisional and that it was up to Arcadia to decide whether Mr Chappell’s financing arrangements were adequate.
Paul Brudge, Arcadia’s finance director, who appeared in front of the MPs later on Wednesday alongside colleagues, went further, suggesting Goldman was partly to blame for the BHS debacle. “With hindsight, we’ve let ourselves down, Goldman’s have let us down,” he said, adding that blame was widely shared.
Parliamentarians reserved their most strident criticism for Sir Philip’s Arcadia empire.
“What’s required is a very large cheque out of the Green family that have done so well out of this exploitation,” said Frank Field, who chairs the work and pensions committee.
“The City is furious with your behaviour,” the Labour MP told three of Sir Philip’s top lieutenants, including his stepson Brett Palos and Mr Budge.
“The image you put over, that everybody in business is not about creating jobs and spreading wealth. It’s about nicking money from other people,” Mr Field said.
Sir Philip said Mr Field’s remarks “demonstrated . . . clear prejudice against myself, my wife and my executives, who turned up for a second time”.
“He arrived very late, offered no apology, heard no evidence, clearly just to put on a 10-minute show and was extremely rude,” the retail tycoon added. “Accusing me and my family of theft is totally false and unacceptable on any basis.”
Sir Philip told MPs earlier this month that he would find a way to “resolve” the £571m pension deficit left behind by BHS. One of the retail tycoon’s advisers on Tuesday described talks between Sir Philip and the pension regulator as “a work in progress”.
Mr Field suggested he was growing impatient. “We’ve got left very vulnerable pensioners,” he said. “And Sir Philip could fix this today if he was serious.”
Goldman also helped out informally on the BHS pension issues. In 2014, Goldman partner Stuart Cash held several discussions with the retail chain’s pension trustees over investment strategy.
Goldman received no fees from the pension discussions or from the informal assistance it provided at the time of the BHS sale. In fact, Mr Sherwood said the bank had received very little money from Sir Philip since the 2004 M&S bid, describing any fees it had charged as “de minimis”.
Earlier this month Goldman gave MPs a log of 95 calls, meetings and emails it had with people outside the bank about the sale of BHS, but on Monday it wrote to the parliamentary inquiry again to disclose two more conversations Sir Philip had with Mr Sherwood.
Mr Sherwood apologised to the parliamentary hearing for belatedly disclosing that the US bank received a request to provide £40m of financing for the sale of collapsed retailer BHS.
“I apologise for providing it to you late,” he said on Wednesday after being asked why Goldman had not initially disclosed the calls.
“It was logged on our system. I missed it — I should have mentioned it to our lawyers,” Mr Sherwood said. “I can only apologise.”
The Goldman vice-chairman said the request for the £40m loan, which would have been backed by Sir Philip’s Arcadia, was “around for an incredibly short period of time” and the bank was soon told another party had agreed to lend the money.
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