MG Rover pair accused of lining their pockets
The four directors of Phoenix Venture Holdings, the consortium that bought MG Rover from BMW for a token £10, were yesterday accused by MPs of using financial sleight of hand to line their own pockets.
The four directors of Phoenix Venture Holdings, the consortium that bought MG Rover from BMW for a token £10, were yesterday accused by MPs of using financial sleight of hand to line their own pockets.
In an extraordinary public grilling before the Commons Trade and Industry Select Committee, the so-called "Gang of Four'' were also accused of issuing "junk bonds'' to the 6,500 employees at Longbridge in the form of worthless share certificates while treating themselves to multi-million pound bonuses.
Martin O'Neill, the Labour chairman of the committee, led the attack, saying the "wave of public goodwill'' which accompanied the original rescue of MG Rover in May 2000 had become "frayed at the edges".
"You have treated yourselves rather well. It is not very good corporate governance, is it?'' Mr O'Neill said.
"The scale of your industrial achievement seems to be undermined by what appears to be financial sleight of hand. You are rewarding yourselves. You are the judge and jury of your own success and failure and there are a lot of people with meaningless share certificates. It depended on the goodwill of a lot of individuals including the workforce but they are now excluded.''
John Towers, the chairman of Phoenix, and Peter Beale, its vice-chairman, mounted a vigorous defence of their behaviour, saying they had taken huge financial and reputational risks which could have led to "personal devastation'' if MG Rover had gone under.
Referring to the buy-out of the Midlands car maker, Mr Towers told MPs: "There was huge emotional support from all over the place and we are particularly grateful for that. But at the end of the day there were only four individuals who were prepared to put their hands in their pockets to save the business - not the banks, not the Government, not the financial institutions. No one else. More than 6,500 directly and 25,000 indirectly would have lost their jobs. Four years later it is quite easy to forget that.''
During one and a half hours of fierce questioning, Mr Towers and Mr Beale were tackled over why MG Rover's loss making car producing division had been separated from its profitable businesses such as property, engine manufacture and its car leasing arm MGR Capital, which are all owned directly by the Phoenix directors and not by the workforce or dealers.
Mr Beale responded that this was "a perfectly normal, almost textbook way of running a group of companies'' which created "a huge amount of transparency''.
Mr O'Neill responded: "The transparency seems a rather effective conduit for looking after yourselves.''
Mr Beale said the four directors had each put up £60,000 to buy the car business and a further £500,000 each as security for the purchase of MGR Capital - a business which had a book of £327m in loans owed to it by customers.
Each of the four directors stands to make a minimum of £3.5m from loan notes issued to MG Rover and the retained profits in MGR Capital. This is in addition to their salaries and the £13.6m paid into their private pension pot.
Mr Towers told the MPs that the MG Rover pension fund was in a very healthy position with a £160m surplus and that "many British companies would give their right arm to have that kind of pension fund''.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies