Since evidence of RBS Global Restructuring Group (GRG) deliberate “Dash for Cash” strategy of targeting and destroying viable and profitable SME businesses for profit was broken by Buzzfeed and BBC News on Monday 10 October, several myths have emerged in recent media coverage which deserve to be debunked.
Whilst it is undoubtedly true a percentage of businesses transferred into GRG were genuinely in distress and would have failed irrespective of actions by RBS, what the leaks confirm is a calculated and deliberate policy by RBS management to vindictively target profitable business for destruction, either if SME businesses considered moving their account to another bank, entered legal dispute with RBS, or simply fell out with bank managers.
RBS staff were instructed to conceal conflicts of interest from customers when demanding cheap shares in their businesses or stakes in their properties.
RBS auditors Deloitte repeatedly warned about perceived conflicts of interest in GRG and the lack of Chinese walls supposed to restrict staff interactions between GRG and the property arm used to purchase and dispose of stripped assets – West Register.
Myth 1) – RBS GRG Existed to “Turnaround” Struggling SME’s and Restore Them To ‘Good Health’
The RBSleaks documents show GRG staff were asked to split customers into two groups – those considered “viable” and those “the bank would like to exit”.
“Viable” firms would have their debts restructured to boost the bank’s revenues and were often forced to surrender cheap stakes in their assets or equity to GRG’s investment arm. But if firms were considered a potential risk, even if they were not insolvent, staff were instructed to “exit” by “placing pressure on the company to repay the debt as soon as possible through refinancing, realisation of assets, and possibly commencing insolvency proceedings.”
The GRG strategy of refusing to hand over documentation re: customer bank accounts once they were placed in GRG put victimised firms in a state of total financial paralysis, akin to a financial straightjacket. Firms in GRG were unable to determine how much they owed the bank, partly as a result of the opacity of the massive additional charges to which firms in GRG were subjected, making it impossible to calculate how much tax they owed and especially made it impossible for them to move to another bank, even if they had raised sufficient funds to reach a full and final settlement with RBS.
When assets were sold out of insolvency, often for dramatically discounted prices, West Register would be brought in to decide if it wanted to make a bid, with GRG managers privately guiding its staff on how much they would need to offer.
Even in circumstances where RBS decided businesses were non-viable and chose to ‘exit’ the relationship by initiating insolvency, the bank should have sought to recover full value for their assets.
Derek Sach, who ran GRG, and Chris Sullivan, the bank’s then deputy chief executive, testified to Government that RBS GRG staff were not put under pressure to increase customers’ fees and that properties acquired by West Register were “always marketed on the open market” – claims which RBS GRG internal documents contradict. 16,000 businesses passed through GRG and West Register between 2008 and 2014.
Neil Mitchell is a Scottish businessman and former CEO of Torex, destroyed by RBS GRG in 2008. Mitchell suggests 750-1000 business were passing through GRG at any time, and rather than being a “turnaround unit” to restore the businesses to good health – figures published by RBS confirm a staggering 96% of firms that went into GRG, never made it out alive.
To put these figure into perspective – The battle of the Somme in 1916 during WW1 is recorded as the bloodiest battle in the history of the British Army, with 19,240 soldiers killed on the first day alone.
The highest casualty rate of any unit during the Somme campaign was 90% losses (suffered by a Canadian unit), meaning soldiers had a better chance of survival against the massed artillery, barbed wire, and machine guns of the German army, than SME’s placed into the ‘care’ of GRG – which RBS had the audacity to label an ‘intensive care unit.‘
The bitter truth of RBS GRG is that the so-called “psychopath unit” not only destroyed viable business, but tens of thousands of jobs, livelihoods and marriages, placing immense financial and emotional strain on victims families, and casting innocent customers into bankruptcy and personal debt.
Though often invisible to the public eye, the economic warfare unleashed by RBS on Small and Medium size Enterprises (SME’s) rivals the economic damage inflicted during conflicts throughout history, except it was committed in the name of a ‘Royal Bank’ against the citizenry of the United Kingdom and sanctioned by our own Government.
Myth 2) – RBS GRG was only converted into a “profit centre” after the 2008 crash
RBS GRG and its predecessor ‘Specialised Lending Services’ and property arm West Register were created around 1992 by former Executive Derek Sach. You can hear Sach gloating about debt restructuring opportunities in this 2013 video.
Repeated warnings from RBS’s auditors Deloitte about the “reputational risk” arising from this apparent conflict of interest were ignored by RBS.
Government pressure on RBS to reduce its loan exposures and return to profitability, coupled with the opportunity to raid the cash, equity, and assets of businesses going under, gave RBS a powerful incentive to pull the plug on thousands of its customers, with at least 16, 000 firms passing through GRG since 2008.
Yet claims GRG only went rogue after the 2008 crash are undermined by cases such as former SME customer Nigel Henderson, whose Hotel business was destroyed by RBS in 1999.
Nigel spoke with Max Keiser and Stacy Herbert about his case on episode 980 of the Keiser Report: The ‘Royal’ Bank of Scotland and the “Stunned Commoners”
The sale of the Park Hotel in 1998 was prompted by an unsolicited offer received, valuing the hotel at 50% more than the valuation placed on it the previous year when the Henderson’s changed banks.
Upon attempting to repay the bank in cash following the sale of the Park Hotel, Henderson was stunned when RBS attempted to charge him a loan “breakage fee” in excess of £200,000. During the sales process, Nigel was informed the maximum he would pay was 3 months interest charges.
RBS had securitised the Henderson’s hotels using derivatives, but failed to disclose this fact to their client. The Royal Bank did not want the Henderson’s to repay the loan, as to do so would necessitate the breakage of derivatives contracts.
RBS seized the company’s cash, forcing the partners to sign a pledge with the bank, and proceeded to enforce bankruptcy proceedings on the partnership, stripping both their business and personal assets in the process.
In his “Dash for Cash” – Herald Scotland article published 18 October, Ian Fraser details four case studies of business dragged through RBS GRG. Notably, 3 of the 4 cases Fraser cites pre-date the October 2008 bank bailouts, allegedly when GRG was converted into a profit centre by RBS.
- Jan 2007 – Stuart McCredie (Terminal Music)
- June 2008 – Kenny Riddoch (Grampian Construction)
- June 2008 – Rod Coffey (Stable Holdings)
Only David Booth (the Property Booth) entered GRG in 2009, after the bank bailouts.
On page 307 of RBS – Shredded – Inside the Bank That Broke Britain, Ian Fraser details how on 08 August 2008, RBS CEO Fred Goodwin boasted about putting growing numbers of business into Specialised Lending Services (SLS) – the precursor to GRG.
Nigel Henderson’s experience together with the three cases listed above, destroyed by RBS prior to the 2008/09 crash, when considered with the statements made in August 2008 by CEO Fred Goodwin strongly suggests RBS GRG had perfected their model of destroying businesses for profit long before the financial crisis and as far back as the late 1990s.
When I contacted the Financial Conduct Authority to ask for the numbers of RBS GRG victims referred to the financial regulator prior to 2008, the FCA stated “they could not comment, prior to the publication of the “skilled person” s.166 report into GRG” which has been in preparation since 2013 – but “would not be rushed. ”
Crucially, the skilled person review commissioned by the FCA into GRGs activities only considers the period 2008-2014, so victims including Nigel Henderson, Stuart McCredie, Kenny Riddoch and Rod Coffey destroyed by this rogue unit prior to 2008 are unlikely to receive compensation, unless the scope of the FCA’s investigations into GRG are widened.
Myth 3) RBS is fully co-operating with regulatory and Police investigations into GRG
Since at least 2010, RBS has been wilfully deceiving regulators and Government regarding systemic, institutionalised fraud, committed by its Global Restructuring Group (GRG) and property arm West Register.
Neil Mitchell first handed evidence of GRGs systemic, institutionalised fraud to George Osborne, Chancellor HM Treasury, Business Secretary Vince Cable, RBS Chairman Sir Philip Hampton, and CEO Stephen Hester in April 2010. RBS refused to investigate the matter, nor fulfilled key regulatory duties by referring the matter to the UK’s so-called regulator, the Financial ‘Conduct’ Authority (FCA).
Mitchell was placed under illegal surveillance by RBS, and had to be shielded under witness protection and moved to Italy as part of a whistleblower scheme administered by City of London Police.
Journalist Ian Fraser in his must read account of RBS criminality “Shredded” – Inside RBS – The Bank that Broke Britain” notes the RBS Board and Executive have been turning a blind eye to shareholders’ complaints regarding GRG fraud since 2010. Three years prior Lawrence Tomlinson’s report into alleged GRG criminality was released in November 2013.
In response to the Tomlinson Report – RBS shut down Tomlinson’s business accounts and called in his personal mortgage. Russia Today‘s accounts with NatWest would suffer the same fate three years later, simply the latest chapter in what Nigel Henderson refers to as “jackboot culture” of bullying and intimidation within RBS.
Scottish Police, investigating Henderson’s case under the suspicion of fraud, were also unable to attain the file from RBS, and suggested he obtain the case file from RBS using Subject Access Request (SAR) rights available to citizens to request information held on them by Corporations.
Rather than Police pressure, it took the media frenzy created by the Buzzfeed investigation for RBS to spill the beans. The day after the RBS files were released, Henderson received a call from RBS confirming RBS had miraculously found his case file and would organise its transfer, upon receipt of authorisation from his wife.
Yet instead of admitting defeat and cooperating with SME victims following the devastating publication of the Tomlinson Report and RBS files leaked by Buzzfeed – RBS remain in ‘bunker mode.’ Underground, unwilling to front media, firmly on the defensive and refusing to admit fault.
Not only has RBS been withholding key documents from customers, Andy Keats of the SME Alliance has documented dozens of cases, as discussed on BBC Newsnight, where RBS has systematically doctored customer call transcripts, emails and other case records, in order to absolve the bank of responsibility for mis-selling and fraud and to falsely infer guilt on the part of the customer.
With Nigel Henderson, Neil Mitchell and other RBS GRG victims waiting decades to hear the truth, let alone obtain justice, lets all hope the FCA’s long awaited report into GRG criminality is not further delayed – and when it does arrive – it provides the basis for full compensation for the thousands of SME victims of the Royal Bank of Scotland, including those who were forced into GRG prior to 2008.