By the time Lex held a group call with the senior management team to tell them that the company was finished, he had gathered himself again. He was his usual assured, confident self. It was over. He knew exactly who to blame. The insurance companies had let Greensill down and there was nothing anyone could do.
Next, there were two company-wide calls. One was with the people leaving – hundreds, mostly in the northwest, who had lost their jobs. Many of them had loved working at Greensill. It was an exciting place to be. They had bought into the idea that they were changing finance for ever. They were stunned. For months afterwards, many of them still felt loyal to Greensill and could not believe what had happened.
The second call was with people who were staying behind. These were mostly risk managers and people who worked on the worst of the Greensill loans, about a hundred people in all. They were needed by the administrators from Grant Thornton, who were trying to unwind the complex, convoluted tangle of loans and special purpose vehicles left behind by Greensill’s collapse. Doran also hung on to his position.
In Germany, prosecutors began a deeper investigation into Greensill Bank, even as they delved into a deposit protection scheme to bail out individuals and municipalities that feared they had lost their money with Greensill’s collapse.
At Credit Suisse, it quickly became clear that it would be tough, maybe impossible, to collect several billion dollars. Some of the loans to big corporations were paid back as intended and Credit Suisse doled out the cash to its investors. But then there was all the GFG debt, and the Bluestone loans too. Neither Gupta nor Justice were in a position to pay the money back quickly. Justice launched a lawsuit claiming he was the victim of an elaborate fraud perpetrated by Greensill. The Swiss bank began issuing regular updates on how much was still missing, listing some of the details of the obligors who hadn’t paid up. To me, the list was incredibly familiar. There was Catfoss (and a host of related Catfoss companies), which had been a long-term Lex client. Tradeshift, the oddball loan Lex had written on a bar napkin, was also there. So too were loans to Tower Trade, Kerry Leeds, Special Needs . . . in fact, pretty much every obligor I had asked the bank about and queried with Lex and Doran was on the list of non-payers.
I had no sense of smug self-righteousness, though one or two Greensill staffers I tried to talk to accused me of exactly that. Lex and some of his lieutenants had helped perpetuate the idea that this was partly the media’s fault. Instead, I felt genuinely sorry that I had not been able to stop it getting so out of control. The only satisfaction came when one of my best sources called, full of emotion. Greensill had been a festering problem for years, and the company had so many powerful fans. For those on the other side of that equation, who had called Greensill out and suffered for it, it had been an agonizing time. Greensill’s demise felt like some vindication for people like Sheard, the GAM whistle-blower, and others who had suffered because they had stood against the tide of Greensill supporters.
The collapse of Greensill fomented a feeding frenzy among financial journalists. Suddenly sources who had been impossible to pin down were readily available. Some Greensill insiders had quit even before the end and were now sharing their insight. Others looked to distance themselves. In political circles, information about Greensill’s access to government and David Cameron’s entanglement with the firm was everywhere.
The fallout from Greensill’s demise was widespread. Aigis Banca, the Italian bank to which Greensill had sold some GFG loans, had gone bust. Deal Partners, the firm to which Lex had loaned Credit Suisse money, filed for administration. Kerry Leeds was struck off the Companies House register, while a related company, Kerry Ireland Investments, filed for administration with a loan of almost £14 million to Greensill unpaid and assets of £2.6 million.
Many Credit Suisse investors began talking to lawyers who were readying lawsuits. The bank suspended Michel Degen, the head of asset management in Europe, the Middle East and Africa, as well as Luc Mathys and Lukas Haas, who had been much closer to the running of the funds. Lara Warner, the head of risk, left the bank too. Over the following months, the bank stumbled from one big scandal to the next. After Greensill, there was a multibillion-dollar loss on a relationship with a failed hedge fund named Archegos; the bank’s new chairman was forced to resign for allegedly breaching Covid regulations; and there were revelations from a consortium of international journalists about the bank’s work financing dozens of sanctioned or otherwise ethically problematic clients.
The Greensill story had gone mainstream. From his home in Dubai, Sanjeev Gupta was scrambling to keep his steel empire intact. As Lex had warned, thousands of jobs really were at risk. Gupta began hardball negotiations with Credit Suisse. There’s an adage in finance that if you owe the bank £1,000, it’s your problem, but if you owe the bank £1 billion, it’s the bank’s problem.
Gupta had other issues to worry about. In May, the UK’s Serious Fraud Office said it was investigating his businesses over suspected fraudulent trading and money laundering, including its financing with Greensill.
Details emerged also of the lobbying by Cameron and Crothers and Lex himself. Their efforts to get access to government Covid-19 loans and the Covid-19 Corporate Financing Facility (CCFF) became a front-page sensation, and Lex’s face was plastered across newspapers around the world. Several government inquiries were launched. Cameron, Lex and others were hauled in to explain themselves to parliamentarians.
In spring, Lex spoke to the Business, Energy and Industrial Strategy committee by video call from home. His hair was cropped shorter than usual. He wore a black tie, white shirt and navy suit. His collar sat uncomfortably high, as it always did. The wood-panelled wall in the background was covered with family photos.
In an opening statement, Lex initially sounded contrite.
‘Please understand that I bear complete responsibility for the collapse of Greensill Capital.’
Lex said how sad he was for his staff, Greensill’s clients and the investors in Greensill’s funds. And then he blamed someone else.
‘It’s deeply regrettable that we were let down by our leading insurer, whose actions assured Greensill’s collapse.’
Though Lex was typically verbose, the panel interview went downhill from there. MPs said he was running a Ponzi scheme. They asked if he was a fraud. Lex read out an email exchange with the former Treasury minister, Paul Myners, including personal details of Myners’ health issues, in a crude attempt to undermine earlier testimony from Myners that had been critical of Greensill. He launched into a strange dispute with one MP over the use of the phrase ‘prospective receivables’ instead of ‘future receivables’.
It struck me that one of Lex’s biggest failings was that he could never admit he was wrong, he could never lose an argument. It meant he could not turn away a loan. It meant he would not back down to his risk committee. He wouldn’t write off a bad debt if he could tuck it away somewhere else.
He was a persuasive salesman and a clever lawyer. But he didn’t know how to manage risks. He didn’t know when to stop. Fuelled by floods of cheap money (investment into both Greensill itself and into the funds he built up), this personality flaw had become an enormous, multibillion-dollar accident waiting to happen.
BY THE SUMMER of 2021, the inquiries into Cameron and Greensill were still rolling on. Credit Suisse was still trying to recover its clients’ money. Lawsuits were swirling. Regulators in the UK were looking at changing the rules related to several critical aspects of the Greensill story. Sanjeev Gupta was still under investigation by the Serious Fraud Office, as was Greensill itself. Greensill Bank was still under criminal investigation in Germany too. Lex’s own future was deeply uncertain.
For once, Lex was in a self-reflective mood, unsure of himself. At last, there was a crack in his armour. He told an acquaintance that his mental health was suffering. Of course it was. Without his family, Lex said, he might not have survived the last few months, when the Greensill name had been dragged through the mud.
For those of us who had been following this extraordinary corporate saga from the start, it was time to ask: how had we got here? Could it happen again? Are there other Greensills out there?
Part of the answer is that the ‘system’ played a critical role. Banks like Morgan Stanley and Citigroup had seen Lex’s tactics up close, but had continued to work with him, earning millions of dollars in fees. Regulators, including the UK’s Financial Conduct Authority, were warned of his behaviour, and red flags were waved in their face, but they ignored them because Lex’s business didn’t fall squarely within their purview. Asset managers like GAM Holding and Credit Suisse put billions of dollars’ worth of their clients’ money into Greensill’s assets but failed to safeguard them properly. Investors in his business – like General Atlantic and SoftBank – saw that things were going wrong but failed to stop Greensill veering completely off the rails. Armies of lawyers, media relations people and bankers took huge fees to cover over Lex’s tracks too. Certain journalists were also happy to boost Greensill’s profile in the name of a scoop, without asking any tough questions. Greensill’s board was far too ready to accept Lex at his word when a little digging would have unearthed many problems long before they became a crisis.
The role of some of these actors was to help Greensill grow, even when it was clear the business was rotten. Most of them had no incentive to kill the golden goose, or to tell the world the assets they had invested in were worthless.
Greensill Capital was also the product of circumstances of the post-financial crisis business world. The company was one of many shadow banks that exploded when the traditional giants of finance retreated from businesses that were no longer profitable because of new regulations that followed the financial crisis. Greensill also benefited from the global trend of persistently low interest rates, which were meant to boost flaccid economic growth but which left big institutional investors scratching around for a decent return on their investments. This ‘hunt for yield’ helped turn a mundane, low-octane business that didn’t generate much profit at all – supply chain finance – into something relatively super-charged. The flood of money from tech investors like SoftBank into anything that looked new and disruptive also strapped a rocket to Greensill’s growth.
All these trends have been around for years and still exist to some degree. They mean there are likely more companies running around with similar flaws to the Greensill model.
But the system only explains so much of what went wrong.
Lex blamed the Covid-19 pandemic and unreliable business partners for the company’s downfall. In truth, though Covid-19 might have hastened Greensill’s demise, the writing was on the wall long before the pandemic struck.
Large parts of Greensill’s business made very little money, or no money at all. It was a lending business heavily dependent on loans to a series of interconnected, often directly related parties, as well as other loans to borrowers of questionable repute, many of whom had little or no ability to pay back the sums they had borrowed. Some of the loans were supported only by guesswork. Other loans were backed by invoices that appear to have been made up.
The company also relied too much on a tiny Australian insurance company for a crucial piece of the machinery. There was very little innovative technology to speak of. And lots of the financing Greensill provided had nothing to do with the sort of safe, steady business Lex purported to be promoting. Instead, it looked a lot more like dodgy loans to speculative businesses.
The Greensill business model was also a reflection of Lex’s own deep flaws. Undeniably, Lex Greensill was smart, passionate, an arch-salesman. He persuaded a long list of influential people to lend him their support and take a bet on his supposed genius, including Maurice Thompson, the former Citigroup chief in the UK, David Solo, the banking and trading maestro, Jeremy Heywood, the most powerful civil servant in the UK, David Cameron, the former UK prime minister, and Masayoshi Son, possibly the most influential investor in the world. There were many other lesser lights who also got behind Lex along the way, fuelling his rapid rise and self-belief.
There were others, though, who told me Lex was ‘psychotic’ and ‘a pathological liar’. Whether you’re a believer or a sceptic, it’s clear the rise and fall of Greensill is a deeply personal story. Lex was ambitious and wildly self-confident. There was no one he couldn’t outsmart. There was no problem he couldn’t solve. I don’t think Lex planned to run a bad business from the outset. But, like a rogue trader, Lex kept on betting he could dig himself out of a hole by digging a deeper one. He cut too many corners, relied too much on shifty financial engineering, and showed more bravado than brilliance. And, in the end, it brought Greensill crashing down.