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Green to ‘sort’ BHS pension mess

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15th Jun 2016
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Former BHS owner Sir Philip Green has apologised for the collapse of the retail giant, and to all employees past and present in a belligerent, sometimes bizarre hearing at Westminster.

During the six hour performance in front of a joint committee of MPs tasked with investigating BHS’s demise, Green also promised to sort out the pensions “mess” left behind by the retailer’s collapse last month.

BHS is set to be liquidated after administrators failed to find an acceptable buyer for the business, putting all of its 164 stores and 11,000 jobs at risk, and leaving a £570m black hole in the company’s pension fund.

Pension trustees ‘asleep at the wheel’

When asked about the company’s pension scheme Green admitted that “stupid, idiotic mistakes” had been made, but told MPs that his advisers were working on a “resolvable and sortable” solution for its 20,000 members. Green’s plans will apparently deliver a better result to those enrolled in the scheme than the proposed PPF plan, and could end up costing him up to £275m to implement.

When questioned about how the BHS pension scheme drifted from a £43m surplus to a huge deficit, Green stated that he “could not run a business of this size” doing everything himself, and that he was “not actively involved” in pension contributions.  He went on to blame poor two-way communication, and insinuated that pension trustees were ‘asleep at the wheel’.

‘We found the wrong buyer’

Green ran the company for 15 years before selling it last year for £1 to the Retail Acquisitions group headed by Dominic Chappell, and Green railed against the former racing driver, claiming that he broke deal covenants within 24 hours of signing them, taking £7m from a property deal to which BHS was entitled.

In hindsight, Green said, “we sold it to the wrong guy”. He added that he would ‘1,000,000%’ not have sold to Chappell if advisers told him not to, despite a Goldman Sachs ‘sniff test’ identifying that Chappell had previously been twice declared bankrupt.

Dividends ‘not excessive’

Upon being quizzed about the £400m taken out of the company in dividends between 2002 and 2004, Green stated that the financing of the company was “extremely conservative”. He added that when the dividends were extracted the business “did not have more than one times cash flow as debt”, and asked MPs to look at the dividends “in terms of cash flow, in terms of profit”.

He also stated that his Arcadia group had injected over £600m into BHS.

He did, however, acknowledge an ongoing payment of £20m a year to his wife from the purchase of BHS by Arcadia.

Chappell a ‘premier league liar’

At an explosive committee hearing last week MPs heard from Chappell and other former executives at BHS. The company’s former financial consultant Michael Hitchcock called Chappell a “premier league liar” but a “Sunday league retailer”, and accused Chappell of having his “fingers in the till” at BHS.

Chappell heavily criticised Green’s role in the collapse of the business, and told MPs that Green had blocked a rescue deal for BHS with Mike Ashley’s Sports Direct – something which Green denied in his evidence. Green told MPs that he had actually offered £5m to help Mike Ashley secure a deal.

After six hours the hearing was brought to a close, but MPs reserved the right to ask Green for further evidence. They may yet call Lady Green, in whose name the family business interests (including Arcadia) to give evidence.

Green’s quotes from the hearing

 

During its six hours the session provided some fiery exchanges between MPs and Sir Philip. Some were humorous, some testy, others plain bizarre:

  • Green to MP Richard Fuller: "Do you mind not looking at me like that all the time, it's really disturbing. You just want to stare at me, it's uncomfortable."
  • Green to another MP: “Which bit of ‘don’t remember’ do you not want to listen to?”
  • Green on the pension regulator: “By a strange quirk of fate they called me last week. Maybe somebody bought them a telephone.”
  • To MP Richard Graham: “I’m sorry are we in the same room?”
  • In response to questions on why he sold the business to Dominic Chappell: “If you look out of the window is the sky light or dark?”
  • “I could be a murderer the way they [the press] write about me”
  • On why he was getting a bad press, Green said: “Envy and jealousy, my doctor told me, are two incurable diseases”
  • To MP Jeremy Quinn: “Put your glasses back on. You look better with your glasses on.”

Do you think that Green should bear ultimate responsibility for the downfall of the business and its pensions black hole, or are businesses like BHS just too big for one person to govern?

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Replies (4)

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By Moonbeam
16th Jun 2016 12:15

Obfuscation seems the best way to describe the last 2 hours of Mr Green's evidence (I missed the earlier 4 hours) and that of Mr Chappelle.
Presumably the truth is somewhere in the middle. Let's face it, BHS was not in the best of health when it was sold, and if Green couldn't save it why should a non retailer even try.
I assume the property income came in very handy to Chappell. Green is shrewd enough to know that Chappell was going to make a pigs ear of things.
You could argue "that's business" (although I don't know anyone in business as dodgy as this lot).
I think govt really must pass some more stringent legislation about how pension funds should be kept topped up before dividends are taken and they should do that sooner than later, before other companies with big deficits go under.

Thanks (1)
Tom Herbert
By Tom Herbert
16th Jun 2016 12:48

Thanks Moonbeam. I battled through the vast majority of the hearing and it was pretty tough going.
Green kept repeating that he didn't want to blame anyone else for BHS's demise, but then blamed the pension regulator, the pension fund trustees, Dominic Chappell, the law firm who advised him and many others who don’t spring to mind just at this moment.
The corporate governance angle on the pension contribution interested me though. Yes, it is a pretty big company, but surely BHS's CFO would have known about the fund’s deficit and the contributions towards it, and raised it at board meetings…

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By Mike Lacey
16th Jun 2016 12:58

For Green to say he had no idea as to the pension liability within BHS is bizarre.

FRS17 requires such liabilities to be stated within the balance sheet and for somebody in his position to claim he didn't see liabilities of tens or hundreds of millions in the balance sheet is just not credible.

Thanks (2)
Glenn Martin
By Glenn Martin
17th Jun 2016 21:55

Two things stuck me about this hearing and the earlier one with Mike Ashley.

The first is how powerful and arrogant these people think are that they can sit in front a government select committee and quite frankly take the [***] out of them.

The second is how detached from the practices and greed of modern big business these modern career politicians are.

If Green is prepared to cough up £275m that he has no legal obligation to pay out to "sort it out" I suspect its to nip in the bud any [***] storm that is coming his way as I suspect if some serious digging was done into the whole affair I doubt he would come out smelling of roses.

Surely these committees should be led by people who actually know the mechanics of big business and have the ability to come up with some answers that actually get somewhere.

I suspect the only outcome that will happen from this enquiry is that 20000 will still have no jobs, and will be thrown a few peanuts as compensation for the pension they paid into for years, whereas Green and his cronies will carry on to rape business proceeds to offshore accounts un checked and un taxed with full protection from the people that award him his Knighthood.

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