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Categorized | Banks, Financial

Goldman Sachs faces more MP questions

Posted on July 31, 2016

Pedestrians walk past a BHS store in London, Britain July 25, 2016. REUTERS/Neil Hall©Reuters

Goldman Sachs has been asked to give details of any paid work it has done for Tina Green, as MPs continue to question the bank’s involvement in her husband’s decision to sell BHS for £1, a year before the failure of the high street chain.

A parliamentary investigation last week upbraided Goldman for lending a “lustre” of credibility to the “otherwise questionable” transaction that saw BHS pass from billionaire retailer Sir Philip Green to a thinly-capitalised investment vehicle led by a former bankrupt.

    Goldman has said it often carries out unpaid work for longstanding clients. The bank listed 25 unpaid assignments it undertook for Sir Philip over the past 12 years in a document that MPs have agreed to keep confidential.

    But the new demand sent last week to Michael Sherwood, Goldman’s European co-head, suggests that MPs want further clarification of the bank’s relationship with the retail tycoon.

    “Your letter describes a longstanding relationship but one that did not, by investment banking standards, generate significant fees,” wrote Richard Fuller in a letter seen by the Financial Times, adding that this “raises questions about why Goldman would do this over such an extended period”.

    Mr Fuller, a member of the business select committee that oversaw the parliamentary inquiry, added that BHS “was not an isolated example” of Goldman Sachs acting in an informal manner which “has the potential to lead to misunderstanding”.

    He asked the bank to list any work it had done for Lady Green and for the family’s offshore businesses, and to explain why it was willing to provide “varied and frequent advice . . . for no compensation” over more than a decade.

    He also asked Goldman to confirm whether its earlier letter had listed all paid work that the bank had done for Sir Philip and his companies.

    Goldman, which declined to comment, has yet to reply to Mr Fuller’s letter, but a person familiar with its position said that the bank had nothing to add, as its previous disclosures to MPs were full and accurate.

    Sir Philip sold BHS to an investment vehicle led by Dominic Chappell, a former bankrupt with no retail experience, in March 2015.

    The demise of BHS barely a year later has cost 11,000 jobs and left behind unfunded pension liabilities of £571m, triggering an official rescue that will force thousands of pensioners to accept deep cuts to their retirement incomes. MPs have branded the affair “the unacceptable face of capitalism”.

    A spokesperson for Sir Philip and Lady Green, and the Pensions Regulator all declined to comment.

    In their report last week, MPs said that Sir Philip and his Arcadia Group, rather than Goldman, were responsible for selling BHS to the “manifestly unsuitable” Mr Chappell. Arcadia had brushed over concerns that Goldman bankers expressed about the deal, MPs found, and should not have relied on unpaid advice.

    But MPs said that Goldman had lent credibility to the transaction.

    “They enabled their prestigious name to be cited as that of ‘gatekeeper’,” the report said, adding that the bank “did not seek to disabuse” the parties to the deal of their confused understanding of Goldman’s involvement.

    Last week, libel lawyers acting for Sir Philip demanded an apology from Frank Field, chair of the work and pensions select committee that co-authored the BHS report, over alleged defamatory remarks.

    Over the weekend, Sir Philip stepped up his criticism of Mr Field, saying that the MP’s recent comments to reporters were “a step too far, even by your own disgraceful standards”.

    “Even before the parliamentary inquiry started hearing from witnesses, you turned it into little more than a kangaroo court, with your constant press campaign barracking and insulting me and my family and your announcement from day one that the predetermined result of the inquiry was that I either sign a large cheque or lose my knighthood,” Sir Philip wrote in a letter sent on Saturday.

    “Your repeated attempts to lead the public into thinking that it is simply a matter of me writing a cheque are utterly disingenuous,” Sir Philip added. “The Pensions Regulator has its own processes that we are obliged to follow.”

    Mr Field could not be reached for comment.

    Sir Philip and Arcadia are understood to be locked in continuing talks with the Pensions Regulator about a deal that would see the retail magnate hand over a portion of his personal fortune to shore up the BHS pension scheme.