A millionaire executive stole more than £2m from his own company to pay two senior managers of the Co-op group in a shady trade-off to secure a £1.2bn supply contract, a court was told yesterday.
Andrew Regan, 35, allegedly used a network of offshore bank accounts and City contacts to secure the deal with two corrupt executives at Britain's largest mutual retailer – the Co-operative Wholesale Society, or CWS – to be its exclusive food supplier.
A jury at Snaresbrook Crown Court in east London was told that Mr Regan needed the deal to boost the flagging share price of Hobson Holdings, the stock-market listed supply group of which he was chief executive.
The self-made entrepreneur, who founded his first company aged 20, is accused of stealing £2.4m from the accounts of a Hobson subsidiary to turn Allan Green, 44, the chief general manager of CWS, and David Chambers, 56, the chief buyer for 800 Co-op food stores, into millionaires in return for their consent to a two-and-a-half year extension to a three-year food supply deal.
The "tea, custard and biscuits'' contract, signed early in 1995, was presented to the stock market as the further cementing of a close relationship between CWS, which also owns the Co-operative Bank, and Hobson.
Some 18 months earlier, Hobson had paid CWS £105m for the Food Manufacturing Group (FMG) which supplied the Co-op's nationwide chain of stores and supermarkets with a vast array of own-label goods produced at a series of British food factories.
Douglas Day QC, for the prosecution on behalf of the Serious Fraud Office, told the court that Mr Regan, who held more than nine million shares in Hobson, became anxious late in 1994 to extend the deal which named FMG as the Co-op's exclusive supplier.
The contract, which was initially signed for three years and widened to five-and-a-half years under the allegedly tainted extension, was worth £220m a year in turnover, or £1.2bn over its full term.
Mr Day said: "Hobson plc was finding it difficult to expand its non-Co-op business and there was concern in the City about the commercial viability of Hobson when its supply agreement expired. That in turn was responsible for the poor performance of Hobson's share price. It was in Andrew Regan's own interests to bolster the share price since he owned some nine million shares and had options for three million more.''
The jury was told that after an initial rebuff from Mr Chambers and Mr Green during negotiations, Mr Regan used his role as chief executive to steal the £2.4m from FE Barber, part of FMG.
Mr Regan – who had become chief executive of Hobson after selling his first venture, supplying cleaning products to supermarkets and DIY stores, to the company in a share swap – took the money without the knowledge of his fellow directors, the court heard.
It was claimed that the £2.4m was transferred by Mr Regan to a Swiss bank account belonging to a Dutch business associate, Ronald Zimet, who is to give evidence for the Crown after being told he would not face charges. Payments of £1m each were then sent to secret accounts set up in Jersey for Mr Chambers and Mr Green after the extension deal was signed, it was alleged. The court was told that the remaining £400,000 was paid to Mr Zimet as a commission for the use of his Zurich bank account.
Mr Regan, who has six children, voluntarily returned to Britain from his home in Monaco to face the charges. He denies a single allegation of theft. Mr Green, from Beaconsfield, Buckinghamshire, and Mr Chambers, from Skipton, North Yorkshire, deny charges of corruptly accepting a bribe. A fourth defendant, Paul Thomas, a City solicitor, denies assisting in the bribery by setting up the Jersey bank account.
The case, which is expected to last 10 weeks, continues.Reuse content