The Greensill saga was white-hot for months. Cameron’s work with Greensill has led to widespread demands for changes to UK lobbying rules, and it is a cornerstone of an ongoing debate about the revolving door between Parliament and business.
Several different parliamentary inquiries and reviews have been launched off the back of Greensill’s collapse. There are those looking into the use of supply chain finance by the government, reviewing private sector positions held by civil servants, and considering the need for an overhaul of standards in public life. The names and reputations of several top politicians have been trashed, not least that of David Cameron. The affair also ignited a firestorm of criticism of the UK’s Conservative government that spread through the summer and over the following months, reaching the door of Number 10 Downing Street. By late 2021, the accusations of sleaze that had started with Cameron and Greensill had become a defining characteristic of UK politics and was a major issue as the Tories faced headwinds in local elections and parliamentary by-elections alike.
In December, the UK’s Financial Conduct Authority finally settled its investigation into Haywood and GAM, citing ‘conflicts of interest and gifts & entertainment matters.’ The regulator hit the asset management firm with a £13 million penalty (reduced to £9 million because GAM accepted their findings) and landed Haywood with a £230,000 fine (£319,000 before discount). It was a relatively tame outcome, which had been achieved without much of an investigation, according to my sources. They had not even talked to some of the people directly involved in the Greensill investments, or the way GAM managed the affair. The settlement felt less like a definitive conclusion and more like a plea bargain designed to make the whole issue go away.
Other regulatory actions are still ongoing at the time of writing. The UK’s Financial Reporting Council has also launched an investigation into Greensill’s auditor. And the Serious Fraud Office is still investigating both Sanjeev Gupta and Greensill too.
The strain on Gupta’s GFG Alliance steel empire is testing whether governments are willing to bail him out or face massive job losses. A pick-up in steel prices will help the value of GFG’s assets. But there is little doubt that Gupta’s business looks fragile. The findings of the SFO investigation will be critical to its future.
Greensill’s access to the government Covid-19 bailout loans has come under particular scrutiny. In March, as Greensill was collapsing in on itself, the British Business Bank wrote a ‘letter of concern’ to the company and suspended the government guarantee on the loans it had made. The BBB said it couldn’t verify some of Greensill’s information. By some calculations, the UK government could yet be on the hook for several hundred million pounds for loans that Greensill administered.
In Scotland, there is a lingering issue too. Amounts guaranteed by the devolved government there in relation to loans and schemes involving Greensill and Gupta have left Scotland with a potential liability of hundreds of millions of pounds.
The ripples of Greensill’s collapse are felt around the world. Regulators in Australia are trying to figure out how an Australian insurance company played a pivotal role in a multibillion-dollar global scam. In the US, the divisive governor of West Virginia, Jim Justice, is facing damaging financial implications. His family personally guaranteed the loans they got from Greensill. In Japan, Tokio Marine now looks to be entangled in years of litigation, as investors try to recover funds they thought were insured. The Japanese firm said its own investigation into Greensill’s activities found that for several years Greensill had fraudulently misrepresented and fraudulently failed to disclose material information related to the insurance policies it had taken out with TBCC. Those policies, which were meant to protect investors, were never valid, according to Tokio Marine. The burgeoning supply chain finance industry is almost certain to be heavily regulated – perhaps into oblivion. Global and US regulators are already moving to impose tighter restrictions on how it is used. The implications for hundreds of big companies that fund billions of dollars this way are not yet fully understood. Moving hidden debts suddenly onto company balance sheets could leave some businesses looking a lot less healthy.
Credit Suisse has quickly run up a bill of more than $150 million just trying to recover the billions of dollars of client money that is still missing. In early 2022, the bank said it expected litigation was needed to try to recover funds from some of the companies Greensill loaned money to. The legal cases could take up to five years, the bank said. The bank agreed to restructure a small portion of the GFG loans, backed by facilities in Australia – instead of paying them back in a few weeks, they will now be paid back over several years. It’s likely that billions of dollars more will never be recovered, and it is unclear who will foot the bill for that.
The bank finds itself in a similar position to that which GAM faced a few years earlier. They have been sold a bunch of dud assets, but if they are too open about that, if they acknowledge the investments they’re holding are riddled with problems, they’ll never shift them on to someone else.
Meanwhile, clients are angry. But if the bank gives them all their money back, then Switzerland’s financial regulator could plausibly tell Credit Suisse it must stand behind every fund it sells in the same way – that would cripple the bank, as it would have to set aside billions of dollars in additional capital to cover future payouts. Instead, Credit Suisse must first go through a painful process of trying to recover as much as it can, through insurance or by negotiating with the obligors. After that, it may resort to legal action to recover a bit more. Every step must be carefully managed so as not to prejudice any later lawsuits involving the Greensill funds or Gupta or the insurance companies or any number of interested parties.
The bank commissioned a report into what happened and hired Deloitte and a Swiss law firm to investigate. Initially, the bank’s senior leaders indicated at least some of their findings would be made public, though later they decided none of it would ever be released. One can only imagine how embarrassing it might be. In late September, the bank’s Zurich headquarters were raided by Swiss police as part of a criminal investigation related to the Greensill debacle. Its lawyers then set about trying to seal all the documents the police had seized, so that they would never become public.
Administrator Grant Thornton appears to be one of the big winners of Greensill’s collapse. The accountants are charging a commission for every loan they recover, as well as fees for running the shell business during the loan recovery process. They’re expecting to make tens of millions of pounds out of Greensill’s collapse. Critics say the audit firm is conflicted. Grant Thornton advised Sanjeev Gupta for years on many of his more esoteric deals. They helped Gupta come up with a valuation for his metals businesses, against which he borrowed so much money. Each time, Grant Thornton and its partners billed millions of pounds for their work. A spokesman for the firm told me in an email to that, ‘Prior to accepting the appointment as administrators . . . Grant Thornton UK LLP gave careful consideration to the Code of Ethics relating to such matters and satisfied ourselves that there is no threat to our independence as a result of any prior relationships.’
The big investors General Atlantic and SoftBank each come away with a nasty black eye. GA got its money out before things turned sour. SoftBank may have sunk about $2 billion into Greensill all told. The Vision Fund can easily afford it. Stakes that don’t pay off are inevitable when you are investing in hundreds of rapidly growing start-ups. Several other backers with smaller stakes were also left holding worthless shares.
And what of Lex?
It seems highly likely that Lex and his brother Peter took hundreds of millions out of the company, before sinking some of it back in. In the end, Lex may need what is left to deal with potential lawsuits from investors and others.
In Greensill Capital’s final months, Lex took a series of steps that had the effect of distancing his personal fortunes from those of the rest of the family. He sold his stake in Greensill Farms to another company controlled by a Bundaberg accountant. His name was removed from documents related to the family business. The Greensill family say that if you want Lex’s money, you better look elsewhere.