Top executives at Global Asset Management were not initially sure what to make of Daniel Sheard’s allegations. In 2017, Alex Friedman and his team were dealing with the hostile activist investor, a broad restructuring plan, poor overall performance and integrating new acquisitions. They didn’t appear to have grasped the seriousness of Sheard’s allegations. Tim Haywood, the firm’s star fund manager, seemed convinced he could make money from the Greensill investments. He even showed them that all was fine by selling a couple of Greensill assets at a profit (though it later turned out that he’d only sold them back to Greensill, and the deals never actually closed anyway).
By spring of 2018, GAM managers told Haywood that he couldn’t enter any more transactions with Lex unless they were straightforward supply chain finance deals. They had also launched Project Dill, an investigation into Haywood’s conduct. They hired two separate groups to conduct the probe. One of these was Bryan Cave Leighton Paisner (BCLP), a law firm, whose team was asked to look specifically into Haywood’s conduct and whether he’d broken any rules. The other piece of the investigation was carried out by Prytania Solutions, a specialist firm that mostly assessed the value of the assets he’d bought from Greensill.
BCLP provided a draft set of findings early in the summer. The law firm said that Haywood appeared to have acted in good faith, and that he was motivated by getting a good return for the funds he managed. But they also found that he’d shown extremely bad judgement in taking flights on the Greensill private aircraft, and accepting other gifts. The lawyers also found that Haywood failed to carry out proper due diligence on his investments with Greensill, failed to create proper records of some of those investments and failed to comply with GAM’s own procedures. He’d also communicated with Greensill through his private email, rather than company email. This had meant some of the Greensill trades were not visible to the broader team. Haywood might have acted in good faith, but the allegations about his behaviour included some serious evidence of misconduct.
Friedman and others became particularly concerned about a series of events they regarded as suspicious.
In one incident, recorded in telephone transcripts, a broker from Morgan Stanley who played a kind of middle-man role in selling Greensill-sourced assets to GAM, asked Haywood, ‘the financials [accounts] are in two weeks. Do you want to hold off [making the investment] until you see the financials?’ Haywood replied, ‘No need. I trust Lex.’
Another time, Haywood put about $1 billion into investments sold by Greensill tied to Gupta. That was about 10 per cent of his entire fund – a huge amount of concentration for a supposedly diversified fund, and all of it concentrated in a single business tied to a controversial industrialist. And he did almost all of it in a two-week period in late August 2017, when most of the rest of the GAM management team was away on holiday. Some of the senior management team wondered aloud whether Haywood had deliberately timed the trades to avoid scrutiny.
On several occasions, Haywood made Greensill trades without getting proper signatures and didn’t enter them into GAM’s order management system that is meant to record all deals.
The ninety-two-page report from Prytania was more damning. Through a long-time source, I was able to get my hands on a copy. It was gold dust. The report went through all of Haywood’s Greensill investments in meticulous detail. And its authors didn’t hold back. My reading of it was that they were incredulous at the valuation of some of the investments. At other times, they appeared to be dumbfounded by the lack of due diligence or the speed with which Haywood had handed over hundreds of millions of dollars of investors’ money to Greensill.
The report also clearly contradicted claims from Lex and his aggressive PR team that the GAM affair was an internal matter that had nothing to do with Greensill. For starters, it was clear that hardly any of the investments Haywood had made had anything to do with SCF or similar trade finance lending. That showed that a core piece of Lex’s business was something altogether different to what he was saying in public. The report also showed in detail that many of the investments were highly risky – Lex must have known that they were a problem for Haywood’s fund.
Above all, getting hold of a copy of the report gave me all the confidence I needed to keep pursuing this story. Something was wrong with Greensill and, now that I knew about it, I couldn’t let it go.
Prytania was hired in early May and delivered their report two months later. They told GAM’s management that there were major gaps in the data they’d been asked to look at. What they had found showed that Haywood’s due diligence on the Greensill investments ‘was not what it should have been and/or that the internal retention of documents is woefully short of adequate.’ It said that one of his investments with Greensill ‘appears to be little more than a “crap shoot”.’ Some of the Greensill assets were specifically forbidden, where individual investors in Haywood’s funds had required all assets to have publicly available price quotes, or that the funds couldn’t invest in complex structured credit products, for instance.
There were very specific concerns about several of Haywood’s Greensill investments. One of these was called Steinway and related to British-Irish property developer Andy Ruhan, the former shareholder in Greensill Bank, who had declared himself bankrupt in divorce court proceedings. It was the Atlantic 57 deal that involved a stake in a New York skyscraper development.
The Prytania report’s authors struggled to unearth everything they needed to see about this investment: ‘We were informed by GAM that there was “very little to share”.’
The report said, ‘We understand that the investment is effectively the purchase of a loan which was originally made by a (one time at least) billionaire (Andy Ruhan) to the developers of a “super scraper” in New York with extremely high-end living apartments on the top floors.’
Prytania’s experts found that Haywood’s due diligence into this transaction was severely lacking, and that it seemed unlikely he’d seen any documents related to the underlying loan.
They understood that Ruhan had invested $28 million in the building development and sold his interest to Haywood’s Absolute Return Bond Fund (ARBF) for $18 million in October 2016. When it was not paid back a year later, the investment was rolled for another year at a higher value. In fact, the whole investment was far more complex even than that, and Ruhan’s stake in it was disputed. The development sat at the corner of West Fifty-Seventh Street and Sixth Avenue, on a stretch known as ‘Billionaire’s Row’, atop a former Steinway & Sons piano store. It had become the focus of a drawn-out legal dispute. A group of financiers, including renowned US real-estate developer Arthur Becker – the former husband of designer Vera Wang – had apparently purchased the site in 2013. The complex ownership of the site also involved a $21 million loan from a pair of Russian oligarchs, who had previously done business with Ruhan’s Formula One team. Their stake was allegedly routed through two entities registered in the British Virgin Islands called Grenda Investments and Atlantic 57 Consultancy, about which there was very little information anywhere, though Grenda was linked to Ruhan in court proceedings related to his divorce. (Haywood had also told colleagues at GAM that Ruhan had rights to property at an airfield owned by BAE Systems, which, he said, could be a source of value for the repayment of the Atlantic 57 loan. Prytania didn’t refer to this, and my sources believe it was a red herring that didn’t signify anything of value.)
The series of loans and investments were meant to pay off once the skyscraper was completed. But that’s not what played out. Instead, the Steinway development was hit by massive cost overruns and long delays in construction. The owners and the lenders to the building development fell out. A real-estate investment firm that had provided a loan to the developers foreclosed on the property, meaning Ruhan and the other backers were wiped out. Litigation related to the development has dragged on for several years.
According to Prytania’s report, GAM’s own real-estate experts had advised against the deal and suggested GAM should ‘prepare for a binary outcome’, implying a fifty-fifty chance that the fund would lose its money on the deal.
(This loan was still sitting in the GAM fund when it was suspended. Later, I noticed the Atlantic 57 loan turned up in Greensill’s Credit Suisse funds. After I asked the Swiss bank about it, the loan disappeared. But it still wasn’t paid off. Eventually, it showed up in Greensill Bank when the firm filed for administration in early 2021. These could have all been different loans, though most likely each Atlantic 57 loan was simply paid off with a new one.)
Haywood had also invested $430 million in six deals brokered by Greensill tied to aircraft leasing payments. Five of those deals related to Norwegian Air, for whom Greensill had arranged the purchase of several Boeing 737 Max 8s. Lex had said in a press release at the time that the aircraft deals showed how Greensill combined ‘capital, technology and expertise’. Greensill was particularly proud of the transactions, which were developed from a new insurance-based aircraft leasing programme established by Lex’s insurance brokers at Marsh. Lex was especially pleased that Greensill had taken just six weeks to launch the deals. There was even a case study on the Greensill website, proclaiming the innovative transactions.
The Prytania report struck a different tone. It noted that Haywood had invested in the Norwegian Air deals when the airline was close to bankruptcy. The consultants suggested that the investment decision by Haywood was made too quickly, with no time for adequate due diligence. They found that the deals didn’t pay enough, given the risks involved, and that the investment decision was likely entirely dependent on the associated insurance policies. Later, when aviation authorities around the world grounded all the 737 Max 8s because of a series of crashes, those Greensill press releases disappeared from the top of Greensill’s site.
Another aircraft investment also raised some red flags. This time, Greensill had set up a special purpose entity, in Ireland, called ‘Panamera Aviation Leasing XII DAC’. Panamera bought a Boeing cargo jet on behalf of a US-registered leasing group called Intrepid Aviation, which leased it on to a Russian air freight company that was part of the Volga Dnepr Group – an air transport operator with close ties to the government in Moscow. Haywood invested about $170 million in Panamera. Prytania noted that selling this investment would be difficult given its size and the nature of the group that was ultimately leasing the plane.
Prytania also scrutinized the Laufer investments. Starting in October 2016, Haywood had invested in these securities that supported Greensill itself. Lex had written to other Greensill shareholders telling them that GAM was ‘refinancing’ the company. Over the next few months, Haywood had poured £311 million pounds into Greensill in a series of one-year loans. He’d also agreed that if Greensill couldn’t repay the loans, the interest could be added to the total and the loan could be rolled over for five years to 2021. This was a highly unusual arrangement. Prytania’s consultants also said that the return on this investment of about 5 per cent was less than half what it would expect. Effectively, Haywood was financing Greensill – a loss-making finance start-up – at well below market rate and with little protection if it defaulted on payments.
Other investments reviewed by Prytania included several tied to Gupta and brokered by Greensill.
These included the so-called Little Red Boxes (LRBs) – biofuel generators owned and operated by the SIMEC Group, which was owned by Parduman Gupta, Sanjeev’s father, and which are part of the Gupta group of companies. In total, Haywood invested £650 million in securities tied to the LRBs, the report said. Greensill marketed the investments on the grounds that once the LRBs attained UK government accreditation, they would qualify for subsidies and could be sold to businesses as a backup power source. In theory, Haywood’s funds stood to receive future flows until 2037 of more than £1 billion in total.
Prytania’s consultants were shocked at ‘the pace of acquisition of the assets, much of it over short time periods’. They found that Haywood appeared to have invested hundreds of millions of pounds within just a couple of weeks of being presented with the transaction. They wrote that ‘we cannot comprehend how any significant [due diligence] was/could have been undertaken in that time frame.’
What made the investment even worse was that the LRBs never actually worked to the extent or in the way that was planned. At one point, Gupta Family Group (GFG) sales staff were urged to go out and persuade their contacts to buy an LRB, which were also known as ‘GenSets’. But there were few takers. Instead, the LRBs mostly sat at a GFG site in Newport. From time to time, when potential buyers were shown the GenSets, a GFG staffer would hook one to a conventional generator and fire it up to show how they might, theoretically, operate.
(Eventually, SIMEC bought a biofuel specialist company called Fleetsolve to ‘accelerate plans for the deployment of its biodiesel generators’. When I asked GFG about the LRBs in early 2020, a company spokesperson said that ‘the business case for the GenSet bonds – based upon a range of third-party suppliers of fuels, on power prices and GenSet operating metrics – was robust, independently validated and shared fully and transparently with investors when issued.’ The spokesperson also told me the GenSets ‘have all been made operationally ready. The business plan has evolved since launch due to a number of external factors and all bond obligations have been met in full by SIMEC during that time.’)
There were two large deals with GFG that Prytania looked at in detail. In the far Highlands of Scotland, on the scenic west coast, Gupta wanted to buy a group of assets from the giant mining company Rio Tinto. These consisted of an aluminium smelter and two hydroelectric power plants, all located near the tiny village of Kinlochleven and the region around it known as Lochaber. (Gupta had also acquired the 114,000-acre Jahama Highland Estates, a major location for grouse shooting, deer stalking and rural businesses.)
Gupta already had a relationship with the Scottish government, who had helped him pick up other assets in the past. The government in Holyrood wanted to support the continued operation of industrial facilities, especially in remote regions, to support the local economy and jobs. Gupta, Lex, Haywood and Jay Hambro schmoozed Scottish politicians to get their buy-in. The group of four dined with Scotland’s Cabinet Secretary for Rural Economy, Fergus Ewing, at Cail Bruich, Glasgow’s only Michelin-starred restaurant.
Starting in December 2016, Greensill set up a series of complex structures that provided financing for these deals. These were funnelled through Greensill’s special purpose vehicles (SPVs) known by names such as Lagoon Park and Wickham – they were named for areas close to where Lex grew up in Bundaberg. In one case, the investments were backed by the promise that one Gupta-owned entity that ran the aluminium smelter would buy electricity from a hydroelectric power facility that was also owned by Gupta. If the Gupta-owned smelter failed to make the payments, the Scottish government agreed that it would cover the shortfall. Greensill and Haywood had claimed that guarantee made the investments effectively fail-safe.
All the investments tied to these convoluted transactions ran into several hundred million pounds. It was a staggering sum to have invested through a single broker, Greensill, into a single business owner, Gupta.
(In 2019, Reuters News Agency reported that there was evidence warranting further investigation that Greensill had given bond market investors false information regarding the Scottish government guarantees. Greensill responded by filing a claim for defamation in the High Court. In May 2020, Greensill lost a dispute about the meaning of the allegations made within the article.)
THE ATMOSPHERE AT GAM became fraught. None of the whistle-blower’s claims had been much of a secret. The dispute had been out in the open and dozens of people at the firm knew about it. It made for a tense period when work colleagues eyed one another with suspicion and worried about its future. At one point, Friedman’s office was broken into. A couple of laptops and some files were stolen, though there was little evidence of damage and no breach of security. The incident was a mystery. Was it an inside job? They didn’t know.
Haywood was operating under a dark cloud. The investigations were in full swing. Sheard had not been into work for some time, which had sent the rumour mill into high gear. Some big investors in the ARBF fund were getting wind of problems at GAM. Several of them decided to pull their money out. One big Australian pension fund manager visited the office in London. It was crawling with consultants and lawyers. Everyone seemed to be reluctant to talk. The fund manager met with Haywood and told him they were out – about $90 million was yanked from the fund in one go. Haywood practically begged them not to do it, but they were in no mood to change their view. The whole place seemed toxic. Within days, other fund managers followed, and Australian institutions alone had yanked several hundred million dollars out of Haywood’s fund.
In May 2018, GAM’s senior managers were increasingly nervous about the relationship between Haywood and Lex. Haywood was still doing new business with both Lex and Greensill, months after he’d been told to wind down his Greensill investments. Instead of reducing his Greensill investments, he appeared to be ramping up. By then, there was also evidence that Haywood had not entered Greensill deals into GAM’s internal systems, had failed to disclose some Greensill deals at all, and documentation relating to at least one big deal had been stuffed into a locked drawer rather than disclosed to his concerned senior managers. Haywood later defended his conduct, saying that there were certain terms of the investments that couldn’t be inputted directly into the company’s record keeping systems. Nevertheless, at the time of the investigation, GAM’s lawyers advised the firm’s senior management that Haywood’s conduct was problematic and that he was risking enormous sums of client money to keep the Greensill relationship alive. On this advice, Haywood’s authority to make any transactions was pulled entirely.
In the summer of 2018, GAM’s management shared the Project Dill findings with the Financial Conduct Authority (FCA). GAM was already under scrutiny from the regulator because of the Section 166 Skilled Persons Review related to the FCA’s previous concerns about the firm’s processes. This new admission about issues with the firm’s star fund manager was highly embarrassing, but there was no option other than full transparency with the FCA.
Friedman and the rest of GAM’s management and board were unanimous that Haywood had to go. But they also worried that the departure of a well-known fund manager would spark a run on his funds, with grim consequences for the entire company. They debated whether to let him retire quietly and run down his funds in a more orderly fashion. That would be difficult, because many of the Greensill investments weren’t very liquid – there was no ready market where they could sell the investments quickly. Friedman and the rest of the top team also felt caught between the rules that protect whistle-blowers and the employment law that curtailed their ability to deal with Haywood.
GAM’s management felt that the regulator made it clear their first responsibility was to protect investors in Haywood’s funds. GAM’s shareholders, its staff – they were a lower priority. They unanimously agreed to have Haywood retire, and if he resisted, they would suspend him, pending a fuller investigation that would likely lead to him being fired.
On a call in late July 2018, GAM’s top management team laid out their proposal to the FCA, and their concerns about the damage that could unfold if Haywood’s departure was sudden and public. A few days later, the FCA and GAM’s executives exchanged emailed letters.
Karen Jones, a manager in the supervision unit of the FCA, explained the regulator’s position. ‘We note the concerns you expressed on our call regarding the possibility of fund volatility, diminution in value or adverse effects on liquidity of Greensill-issued assets as a result of customers/markets learning of a suspension of [Tim Haywood] and/or related circumstances. You indicated that potential adverse impact on customers from such developments may lead GAM to favour a retirement option for TH. To be clear, we do not agree that appropriate action in relation to serious misconduct should be compromised. Rather . . . we expect appropriately robust action.’
GAM’s own internal head of compliance, Natalie Baylis, had only recently joined from the FCA. In her view, she told the rest of the management team, this was as stern and direct as the regulator gets. The message they wanted to convey was to get rid of Haywood, or the entire management team and board might be held responsible for his wrongdoing. The FCA’s Jones had sent her letter to GAM on Friday 27 July. GAM suspended Haywood the following Tuesday.
The announcement said that an internal investigation had found issues with Haywood’s conduct and pointed to concerns about procedures and record keeping. It also said the investigation ‘has not raised concerns regarding [Haywood’s] honesty.’
But the result was as predictable as it was sudden. Investors immediately began pulling their money from Haywood’s funds. GAM was forced to ‘gate’ – block investors from taking their money out – to stop a full-blown run. Even funds that had nothing to do with Haywood were hit, as suddenly investors feared a knock-on effect on the rest of GAM’s business. Its share price tanked. Management was in turmoil. By November 2018, Friedman and several others were gone. GAM was forced to cut 10 per cent of its staff.
The ARBF fund was liquidated, though it took until late summer 2019 to sell all the illiquid Greensill assets. Some of them soon popped up again elsewhere.
When Haywood was suspended in the summer of 2018, he still had a lot of friends and supporters at GAM. He had been, in many ways, top dog in the firm’s London office. He managed the most amount of money. He was confident and popular. His detractors – Sheard and, to some degree, Friedman – were much quieter figures. It wasn’t hard to find former colleagues of Haywood’s who’d say the whole thing had been blown out of proportion. Haywood himself hired a big-name PR firm that was more than willing to push the line, parroted by Lex and his own media relations man, James Doran, that the real issue was one of jealousy; that Sheard had grown envious of Haywood’s success and his bonus.
It’s possible Lex and Haywood even began to believe it themselves. The FCA, which had privately put some pressure on GAM to deal harshly with Haywood, based on the evidence of his behaviour and his investments in Greensill, was doing nothing in public to suggest they were aware of any wrongdoing. Instead, the regulator remained silent.
Then, in February, GAM announced it had fired Haywood. ‘In certain instances, Haywood may have failed, in our judgement, to conduct or evidence sufficient due diligence on some of the investments that were made, or make accessible internal records of documents relating to these . . . Following the conclusion of the investigation and disciplinary proceedings [Haywood] has now been dismissed from the company for gross misconduct.’
Haywood didn’t walk away quietly. He told journalists that GAM had made him a ‘scapegoat’ and that he intended to appeal the decision to fire him.
‘I dispute many of the findings, while noting the majority of allegations have been dropped,’ he said in emails to reporters.
Two months later, in early May, Haywood staged a bizarre moment of theatre. The former portfolio manager bought shares in GAM, which theoretically gave him the right to attend the company’s annual shareholder meeting. He caught a flight from London to Switzerland. He made his way to the Park Hyatt, on Beethoven-Strasse on the shores of Lake Zurich. And he attempted to walk into the GAM shareholder meeting taking place that day. There, he would have been able to ask difficult questions and vote against the company’s results. Instead, he was turned away at the door. GAM claimed Haywood had failed to complete a ‘straightforward’ shareholder registration process correctly. Haywood claimed that it was another example of GAM singling him out for mistreatment.
‘No other shareholders were barred from attending,’ he complained to journalists. ‘I have been treated unfairly yet again.’
In July, GAM’s new management team sought to put an end to the public name-calling. A year after it had first suspended Haywood, the Swiss firm said in a statement that it had finally completed its investigations and another tribunal that investigated how it was all handled.
‘GAM is focused on the future of the business, and while it stands by its finding of gross misconduct, it has agreed with Tim Haywood that neither party will pursue the other based on current facts.’
It was a head scratcher for those of us following the story closely. Haywood and his PR team were left to interpret it in their own way, claiming that he had a case for unfair dismissal, but that it was too expensive to pursue it.
In truth, the whole episode had finished Haywood’s career. It could have been just as bad for Lex. His major source of funding had suddenly, sharply dried up completely. At that point, Greensill’s business could have died in an instant. But somehow, Lex avoided defeat.