The Yorkshire businessman who has accused Royal Bank of Scotland of deliberately killing off viable businesses for profit was highly critical yesterday of the bank’s decision to appoint a top law firm to examine his allegations.
Clifford Chance was hired earlier this week by RBS to conduct an internal investigation into the latest damaging allegations that bankers in its turnaround division, the Global Restructuring Group (GRG), purposefully distressed businesses and took their assets away at a discounted price for the bank’s gain.
RBS said that Clifford Chance’s review will be conducted on an independent basis, with a team from the law firm that has had no previous dealings with GRG matters.
But Lawrence Tomlinson, the author of the report which unearthed RBS’s appalling treatment of small businesses, said the decision still amazes him: “We know [Clifford Chance] has relationships with some of the small businesses that have made complaints against RBS.…There are too many conflicts of interests…. Why are they wasting another £1m – our money as taxpayers – on Clifford Chance? They should have done it themselves.”
And Mr Tomlinson will tell Ross McEwan, the RBS chief executive, what he thinks when they meet next Monday. The meeting has been in the diary for months – before he knew the report was being published.
“The timing couldn’t be better,” he said. “Now I can tell him that since publication we have had 250 new complaints against GRG specifically. Not all of them have been vetted but even if half of them are true it’s still huge. If I get time, I’ll also say why RBS should be split into three new banks and the RBS name should go – it’s toxic.”
Cutting the cosy links between bankers and government is another of Mr Tomlinson’s ambitions. He says RBS and Lloyd’s should pull out of the British Bankers’ Association (BBA), the industry-lobbying group. “Why should state-owned banks be employing lobbyists to lobby government when it’s the tax-payer who own the two banks? It’s madness. Do you know what the BBA’s response has been to my inquiry? Nothing. Extraordinary isn’t it?”
The industry’s lobbyists may have been silent but Mr Tomlinson’s website and phone have been inundated with new allegations.
Within hours of him posting the report on Monday, he had received 2,000 hits and more than 250 new cases. They are still coming.
“I’ve had hundreds of emails in my post-box (www.tomlinsonreport.com) and new ones are coming in by the minute,” he said, picking up his mobile phone to show me. “Look, there are another 40 or so in the last few hours. People are trying to contact me in all sorts of ways – through friends, acquaintances, even guessing my email.”
“They all tell a similar stories of abuse; in one case a bank closed down a family-owned business.
“One farmer has had to slaughter his herd of 500 pedigree cattle because they stopped his credit. I can go on and on. What the banks have been doing is shameful.”
What’s most shocking of all, he said, is the “culture of fear” that bankers have instilled in the small business owners he has interviewed; fearing either a backlash from their bankers or closure if their cases came to light. Many of the ex-bankers who have come forward providing him with evidence are also frightened of talking out, worried about having their pensions stripped if they are seen to be critical.
“Banks are not acting like banks anymore. They have become huge conglomerates driven by impossible profit motives. Some relationship managers have their pay based on 15 per cent returns. Anyone knows that it’s impossible to grow a bank’s business by more than 1 per cent per annum so that means you get growth either by acquisition – or by robbing Peter to pay Paul. That’s what’s been happening.”
An engineer by profession, Mr Tomlinson, 49, stumbled upon these latest revelations by chance after becoming Entrepreneur in Residence at the Department for Business, Innovation and Skills (BIS) in March this year. He applied because he wanted to do more to help small businesses get off the ground and kick-start economic growth (he’s donated his £10,000 annual fee for a national prize and doesn’t claim expenses).
Starting businesses is a speciality of his, having employed more than 10,000 people at his Leeds- based LNT Group. He was 23 when he took out his first £526,000 loan from the Midland Bank in Batley to buy the care home owned by his parents. Today, LNT is a mini-conglomerate employing around 2,000 people from building care homes to making deicing liquids for aeroplanes to Ginetta cars.
It was the disconnect between what he kept hearing the bankers saying on TV and in the press about how they are lending to the real economy, and what he was hearing from his thousands of suppliers that he asked BIS if he could look at access to finance.
“In June I put up a page on LinkedIn which was sent to about 50 people. We asked them to get in contact about their experiences with their banks. They flooded in. A pattern soon emerged with multiple complaints being made about GRG. It’s clear that it was being run as a profit centre that undermined its role as a turnaround division. It’s inconceivable to me that this was by accident – it had to be run like this from the very top. ”
Mr Tomlinson has decent relations with his own banks, which include RBS, Santander, Yorkshire Bank and Bank Leumi.
One of LNT’s subsidiaries has an outstanding complaint against two RBS individuals.
“BIS knew about this. Why would I declare that? It’s not relevant,” he said.
He hopes that by unearthing this latest scandal it will be the last from the banks.
“After PPI, swaps, Libor, this is the final scandal to end all scandals. But it’s the most important to sort out because it’s only by growing small businesses that we can revive growth. I do believe some of the banks’ actions may be criminal. The liabilities for RBS could be enormous if individuals companies were to take action or if criminal action is taken against the bank.”
Has he put a number on this?
“I couldn’t say but some people estimate it could be billions,” he replied.
Getting RBS and Lloyds – which have 60 per cent of the small and medium-sized enterprise lending market between them – to be more competitive is his solution. He wants to see six new banks and strict controls put on banks being allowed to grow by acquisiton.