Greensill Capital: Founder apologises for collapse of firm as watchdog launches probe

ITV News Political Correspondent Carl Dinnen explains how damaging the lobbying texts could be for David Cameron

The boss of Greensill Capital apologised for the failure of the finance firm saying he takes "complete responsibility" as the City watchdog launched a probe into the firm.

Greensill was placed into administration in March, threatening thousands of UK jobs at Liberty Steel which was dependent on its finance.

The company's relationship to David Cameron, who lobbied for the firm, has been thrown into the limelight and MPs are examining the former prime minister's role in trying to access government funding for the financial company.

Giving evidence to the inquiry on Tuesday, Lex Greensill told the Commons Treasury Committee: "Please understand that I bear complete responsibility for the collapse of Greensill Capital."

The boss of Greensill Capital continued: "I am desperately saddened that more than 1,000 very hard working people have lost their jobs at Greensill.

"Likewise I take full responsibility for any hardship being felt by our clients and their suppliers, and indeed investors in our programmes.

"It’s deeply regrettable that we were let down by our leading insurer whose actions assured Greensill’s collapse, and indeed some of our biggest customers.

"To all of those affected by this: I am truly sorry."

Former prime minister David Cameron, who lobbied for the firm, is due to appear before MPs on Thursday. Credit: PA

Text messages sent by the former prime minister to Cabinet minister Michael Gove and Chancellor Rishi Sunak have been released to the inquiry.

Mr Cameron is due to appear before MPs at the Committee on Thursday.

Earlier, the Financial Conduct Authority (FCA) said it is formally investigating how two Greensill companies failed, and how one of them was overseen by a company whose licence it piggybacked on to operate in the UK.

FCA boss Nikhil Rathi said that there have been a number of allegations about the circumstances in which Greensill failed, "some of which are potentially criminal in nature".

“We are also co-operating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions,” he said in a letter to MPs on the Treasury Select Committee.

The company’s main business was so-called supply-chain finance, which ensures that suppliers get paid more rapidly by their customers than normal.

US-based Mirabella Advisers allowed Greensill Capital Securities to sell products here using its license with the FCA.

In March Mirabella ended its relationship with Greensill which had been in place since 2017.

It made Greensill Capital Securities an appointed representative (AR) of Mirabella.

"A principal firm (in this case, Mirabella) is responsible for ensuring that, on an ongoing basis, its AR complies with the requirements, rules and regulations of the FCA," Mr Rathi said.

Greensill would pay suppliers directly, and then collect the money later from the customer. It made its money by charging a fee that offset the risk of the customer going bust before it could pay.

Rushanara Ali MP likened collapsed finance company Greensill to Bernie Madoff, an American fraudster who ran the largest Ponzi scheme in history.

She said: "It is a Ponzi scheme. Frankly, it smacks of fraudulent behaviour and it smacks of the sort of stuff we saw conducted by the likes of Madoff in the financial crisis. That’s what is smacks of. It doesn’t smack of a proper process where people can get supply chain finance which is reliable and credible.”

Mr Greensill admitted that his business had made mistakes but defended the business model of supply chain finance.

“It is absolutely correct, we ultimately failed. So there clearly was a flaw in our business,” he said.

But the business model “absolutely is the future, but the way that I did it definitely has flaws,” he said.

Ms Ali added: “Your idea might have been valuable to the world of finance. But what you created ultimately, and the conduct of lobbying in the way that happened – using a former prime minister, frankly bringing that position into disrepute, to profit – is where the problem lies.”

Greensill’s collapse caused shockwaves among its customers, with worries that some could fail, putting thousands of jobs on the line.

But Greensill also had a product that it wanted to run with the NHS which would – for free – offer to pay nurses and doctors their salary on a daily basis.

It would, Greensill argued, reduce their need for payday loans.

However, FCA notes released on Tuesday show that in 2019 founder Lex Greensill said that the scheme would be free for the NHS, but that it was an "add on" product as "they are already making a lot from Greensill contracts".

Mr Greensill offered the service to 18 other employers as a “foot in the door,” the FCA notes reveal.

At the time FCA executive director strategy and competition Christopher Woolard warned that good innovative ideas can go wrong, but that there could also be upsides.

Mr Greensill told MPs that the decision of the company’s leading insurer, Tokio Marine, ultimately led to the collapse.

He added that there were three reasons for his insurer’s decision: “One, Covid had an impact both on the insurance industry itself and on many of our customers.

"Two, as you’ll be aware, we did have some concentrations and indeed those are a source of regret to me with respect to some of our larger customers… and three, the actions of the regulator of Greensill Bank in Germany created uncertainty with respect to our ability to continue to support and provide liquidity for a key customer that replied upon us."