Sir Philip Green is scheduled to appear before MPs on Wednesday for one of the most eagerly-anticipated parliamentary hearings since they were first televised in 2002.
The billionaire is under mounting pressure to explain his role in the demise of BHS, with MPs from all the major parties calling for Green to be stripped of his knighthood.
The boss of Arcadia – which also controls fashion chains including Topshop, Dorothy Perkins, Evans and Miss Selfridge – has threatened to pull out of the hearing unless Frank Field, the Labour MP, resigns as chairman. Green has claimed that Field is biased and attempting to destroy his reputation. Field has insisted, however, that he is going nowhere.
If Green does appear, these are the questions the MPs on the work and pensions committee and business, innovation and skills committee should ask:
Why did you sell BHS to Dominic Chappell?
The obvious question for Green and one that is at the heart of the BHS scandal, which has put 11,000 jobs at risk and left the department store chain with a £571m pension deficit. Dominic Chappell’s consortium Retail Acquisition bought BHS for £1 from Arcadia in March 2015. The deal was done despite Chappell being declared bankrupt three times and having no experience in the retail industry. Michael Hitchcock, the former finance consultant of BHS, told MPs last week that Chappell was a “premier league liar”. Why did Green trust this man to run BHS? Chappell himself has claimed that Green “genuinely thought” Retail Acquisitions would fail to turn around BHS.
Why were you in such a hurry to sell BHS?
Chappell told MPs last week that Arcadia had decided it would not put any more money into BHS. As a result, Green either needed to sell the company or put it into liquidation before a £50m quarterly rent bill due in March 2015. Is that correct?
What profit did you and your wife make from BHS?
The Guardian has calculated that Green and other investors took out more than £580m from BHS in dividends, rental payments, and interest on loans. The tycoon controlled the business between 2000 and 2015, with his wife, Tina, being the ultimate owner. MPs have accused Green of being an “unscrupulous chancer” and overseeing “wealth extraction rather than wealth creation”. In response, Green has claimed that BHS racked up years of losses that hurt Arcadia, and that his company wrote off more than £200m of loans that it had pumped into the struggling department store chain. However, BHS had been starved of investment according to evidence from Chappell and senior management at BHS. Is Green prepared to admit that he took money out of BHS and could have done more to modernise it?
What will you do to help the BHS pension scheme?
The MPs are likely to spend a significant amount of time in the hearing on Wednesday questioning Green on the negotiations that took place between himself, the BHS pension trustees and the Pensions Regulator about restructuring the BHS pension scheme. Why, for example, did Green say he was only prepared to put £10m a year into the scheme despite it being deep in deficit? Also, why did Arcadia “pause” a plan to restructure the BHS pension scheme in 2014? However, what really matters is what Green does next. The BHS pension scheme is heading for the Pensions Protection Fund, where workers will suffer a 10% cut to their benefits. The Pensions Regulator is exploring whether Green should be forced to contribute to the BHS pension scheme.
Sources close to the situation claim Green might propose his own plan that involves creating a separate pension scheme, backed by his own money, which could mean BHS workers avoiding a cut to their benefits.
How much did you know about Chappell’s deal with the Dellal family?
Ace, a property company owned by the Dellal family, provided £35m to Chappell so he could demonstrate his financial credibility to Arcadia. However, evidence from the Dellals and Chappell shows this £35m was then meant to be spent on buying Marylebone House, BHS’s headquarters, which was owned by Green. This looks like it could be a roundabout way of Green effectively financing Retail Acquisitions’ takeover of BHS. Also, why, after Green pulled out of the Marylebone House deal, did he pay Retail Acquisitions £10m in compensation, which is what Chappell has claimed?
Why did you sell Marylebone House to Arcadia when there were external buyers?
Wilton Equity, the offshore vehicle that owned Marylebone House, was bought by Arcadia for £53m. Wilton Equity was controlled by Lady Green, meaning the deal netted her a £53m windfall and was similar to a dividend payment from Arcadia. Although the property was not owned by BHS, could Green not have used its value to help the retailer?
Did you use £35m of debt to unduly influence BHS in the past year?
Arcadia is owed £35m by BHS and is one of the company’s main creditors. Green says he left this debt in place when selling BHS in order to offer security to the pension scheme. The tycoon is now under pressure to waive Arcadia’s claim to that £35m, and that is another question for MPs. However, Chappell’s claims that he spoke to Green “every other day or every third day” after buying BHS mean MPS must get to the bottom of how much influence the tycoon was still wielding over the retailer even after he sold it.
Did you break a promise to arrange credit insurance for BHS?
Credit insurance is vital for a retailer. It means a supplier is insured when they sell products to a retailer in case they do not get paid. Retailers without credit insurance have to pay funds upfront to suppliers, which is a heavy burden. Chappell claims that Green promised to ensure that BHS had the major credit insurers. However, it lost credit insurance, which put major pressure on the company’s balance sheet.
Did you block a BHS rescue deal with Sports Direct?
Chappell claims Green went “insane” when he found out BHS was in talks with Mike Ashley’s Sports Direct about buying the company. Green allegedly blocked the deal and called in Arcadia’s £35m of debt, pushing BHS into administration.
How much did you or your companies pay to Retail Acquisitions or Dominic Chappell?
Chappell has promised to provide deals of transactions involving himself, BHS and Retail Acquisitions, so Green should reveal the deals between himself, Arcadia, and Chappell. Chappell claimed that he received £10m from Arcadia and the Greens as compensation for the collapse of the Marylebone House deal, including a £3.5m loan from Lady Green. However, Lady Green has already written to MPs to say in “unequivocal terms” that she and her husband have never had personal business dealings with Chappell or Retail Acquisitions.
Do you think your conduct has been befitting of a knight?
Morals and ethics are at the core of the BHS scandal. Green and Chappell had a responsibility to the 11,000 workers at BHS but let them down. MPs should just get to the point and ask Green whether he believes his stewardship of BHS was appropriate for a man who has been knighted for services to the retail industry.
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