BBC BLOGS - Peston's Picks
IN ASSOCIATION WITH
« Previous | Main | Next »

How did Phoenix Four do it?

Robert Peston | 13:08 UK time, Friday, 11 September 2009

I feel slightly nauseous having waded through a substantial chunk of the inspectors' report into the demise of MG Rover.

The five executives criticised in the report feel hard done by. They have issued a robust riposte - and accused the inspectors of whitewashing the involvement of the government in Rover's collapse.

Q gate at the Longbridge MG Rover plant, 08/04/05

But they make no attempt to justify the astonishing sums of money they extracted from a business that needed every possible penny retained for investment, were it to have the faintest chance of staying alive.

The basic story is this.

In May 2000, the Phoenix consortium - John Towers, Nick Stephenson, Peter Beale and John Edwards - acquired the business for nothing (well, a nominal £10) from BMW. And because BMW wanted shot of this loss-making motor manufacturer, the German company endowed it with £75m (in lieu of warranties) and an interest free 49-year loan of £427m.

BMW's largesse ensured that MG Rover could survive for a few years. But from the outset, it was clear that it had no long-term future unless it could find a substantial business partner within the motor industry.

To be fair to the consortium, it did try to find such a partner.

But the executives - and the chief executive they appointed, Kevin Howe - failed to meet their own targets for car sales (they wanted to sell 180,000 vehicles a year; retail sales in 2004 were just 115,000). And operating losses for MG Rover could not be stemmed.

In the five years to the end of 31 December 2004, operating losses were £962m - and the business was losing money at the rate of £250m a year by the time it shut down.

This is not a tale of industrial success. However, as I mentioned last night, Messrs Beale, Edwards, Stephenson and Towers each pocketed £9m (give or take a few thousand) between 2000 and 2005 and Mr Howe received £5.7m.

Also they arranged to receive a further £14.4m between them - which the inspectors say they "now stand to obtain" although the executives insist they won't be receiving this sum.

Hmmm.

The inspectors describe the remuneration as "unreasonably large" for a whole host of reasons, such as:

(1) the financial performance of the business was lamentable;
(2) the executives risked only paltry sums of their own money;
(3) they had never in the past been paid anything like this for their alleged business skills.

How did they get the money out?

Well the loss-making operating company, MG Rover Group, which made the cars, was separate from the company that held the loan from BMW, Techtronic. Now, although the loan from BMW was interest-free, Techtronic charged interest on the loans it made to Rover.

Hey presto: Techtronic generated a profit, even though Rover was incurring losses.

And Techtronic paid dividends to another company, Phoenix Venture Holdings, which in turns rewarded Towers et al.

MG Rover reportThe other primary source of rewards for the executives was tax losses, primarily tax losses of MG Rover. According to the inspectors:

"tax losses to which MG Rover Group was entitled were transferred to PVL and PVL2, subsidiaries of PVH in which MG Rover Group had no interest, to facilitate schemes suggested by Barclays Capital".

As you know, Barclays Capital's creativity in generating profits from tax deals is legendary - although there is no suggestion in the report that this subsidiary of Barclays did anything improper.

I should also point out that the inspectors make no criticism of Rover's auditors, Deloitte, although they do say that:

"Deloitte... played a very prominent part in a number of transactions that helped, or could have helped, the Phoenix Consortium to achiever their financial ambitions".

I could go on and on (although the inspectors' 830 pages could have benefited from some judicious editing).

But there are two further points to make.

The inspectors say that the executives exaggerated in statements to MPs the personal financial risks they were taking. And the inspectors add that the executives misled MPs about how they engineered for profits to be extracted by them, rather than being available for use by the operating business.

Also, there is a riveting chapter about how one of the executives, Peter Beale, used specialist computer software to eradicate documents of probable relevance to the inspectors' enquiry.

The inspectors say that "we consider that Mr Beale gave untruthful evidence during his interviews" when he said that "he had not deleted from his laptop any documents relating to the companies under investigation".

However, the inspectors found no evidence that a crime had been committed either by Mr Beale or his colleagues.

Comments

Page 1 of 2

  • Comment number 1.

    So Robert, why isn't the Govt going after Deloitte? The impression I get is that the Phoenix consortium weren't actually bright enough to set all this up on their own. Is there a way of finding out the level of fees that Deloitte were paid?

  • Comment number 2.

    The liquidators and subsequent inspectors found that these directors had done nothing illegal.

    If anything is at fault it is company law so Mr Mandelson cannot justify any of what he says unless he is prepared to change the laws that allowed it in the first place.

    I guess what we are seeing is just more political posturing on a day when more important things are happening and are going unreported.

  • Comment number 3.

    Executives, by nature, are competitive and selfish. If these instincts are channelled well so that the executives only do well if the business (ie its owners) do well then these traits can drive a business forward. However, as is often seen, the executives if given the opportunity will engineer a situation where they can never be losers - this is a wholly rational thing to for them to do. The easy time to do this is 1) when a business has problems the owner or vested interests (eg government) just want someone to take the problem off their hands or 2) when profits are rolling in and everyone is happy (in the short term). Scrutiny drops and hey presto all sorts of imaginative reward packages are agreed to whose full consequences aren't truly appreciated (apart from by the executives). Publishing executive remuneration packages for plc's (so 1000's of eyes can vet them) is suppossed to stop this problem and it does to a degree in those cases. However, further down the people chain deals don't have the light of day (even though they may have dire consequences for the companies due to their magnitude and relation to risk) or , as in this case, the people signing off on them don't care (eg BMW) or don't understand (eg government).

    This will happen again - executives will always run rings around civil servants and politicians with no business experience who just want a quick fix to a political problem.

  • Comment number 4.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 5.

    Where in the report does it refer to MG Finance and the sums that were recieved for it's sale, if they were did they go to the motor business or into PVH? The Phoenix 4 are commonly known as the Phoney 4!!! Where's the money gone?

  • Comment number 6.

    Robert, AS usual I agree with your conclusion. A couple of points, how much longer could Rover have carried on had the directors worked for no compensation? Wasn't Rover always just a bad dog?

  • Comment number 7.

    What is surprising is that anybody is surprised by all this. The Directors are answerable to the shareholders - who were themselves!! They have structured the holding company and its subsidiaries to ensure losses stayed with Rover while profit accumulated elsewhere. This practice (of having many limited companies within a holding company) is common in many large organisations. What is unusual is that the subsuduary was eventually left to go bust owing over £900m and there is no comeback for that. Surely that element alone warrants censure - MG Rover must have been insolvent for years before it eventually went under - in the process damaging otherwise good supplier companies.

    Limeted liability companies can always be manipulated by their owners to enrich the directors at the expense of employees and suppliers. Its a revision to the Companies Acts to make directors much more personally liable than they are when they continue to trade long after the company is doomed!

  • Comment number 8.

    (3) they had never in the past been paid anything like this for their alleged business skills

    ...and who was just saying that these men 'were pretty good at what they did'???????

    The rich keep on getting richer and the rest of us are being mugged off on a daily basis.

    REVOLT!

  • Comment number 9.

    The Phoenix four should be brought to book as a warning to other unscrupulous venture capitalists

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    Good God that is staggering!

    Even if a company is going bust it is possible for outside parties to generate profit off the back of it!

  • Comment number 12.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 13.

    WHEN THE AUTHORS OF THIS REPORT HAVE CONSUMED £16 MILLION OF TAXPAYERS MONEY TO ACCUSE THE DIRECTORS OF ROVER GREED IT STRIKES ME AS THE POT CALLING THE KETTLE BLACK.

    THE TAKING OF 4 YEARS TO PRODUCE A REPORT THAT IS ALREADY BEING JUSTIFIABLY RUBBISHED AS A WHITEWASH AT THIS OUTRAGEOUS COST IS A SCANDAL IN ITSELF

  • Comment number 14.

    Without a doubt the unacceptable face of capitalism - if it looks like a fraud, smells like a fraud it should be treated as one.

  • Comment number 15.

    It's clear that these amoral people only set out to benifit personally and cared nothing for the thousands of workers who had to fave penury. Somewhere we must have a Government which enacts suitable laws to prevent this and in this case, recover the money. Use their tactics and find some legal wriggle to go for them, and do it now.
    Castallaman

  • Comment number 16.

    Scandalous, as per usual, but just as worrying is the 16m spent on the report, that works out at 20k per page!

    Now I would like a slice of that please, I estimate that I would only really need about 50 or 60 pages to keep me going until my pensions kick in.

    All offers will be reviewed carefully, and hopefully I will be producing a report as to their merits - but at a very reasonable 10k per page to get the ball rolling.

  • Comment number 17.

    Ah! should have guessed that a blood-sucking vampire like Barclays would have been lurking in the shadows.

    As for Deloitte (A well known accountancy and management consultancy company,)the inspector writes "they (Deloitte) played a very prominent part in a number of transactions... that could have helped the Phoenix Consortium (Towers et al) achieve their financial ambitions." BDO Stoy Hayward.....is also a well known accountancy and management consultancy company! I mean the hypocrisy is just monumental, one snake-in-the-grass like company, calling the other black! It's like one pirate having the gall to question another's morality. BDO, quite frankly are just having a (£16million quid) LAUGH!

    The point is, what is the ONLY thing that Deloitte is going to say?......wait for it......."None of what we did was Illegal!" (Yes, it's the..IT WAS WITHIN THE RULES, Malarky, AGAIN!!!)

    Welcome to Britain, we do immorality, fraud, rip-off the poor, self-interest, rook you, crookedness, ALL while you wait! There is NO Level to which we Don't stoop, (because we have the required, "civilised," Legal Framework in place, to ensure that you can do all of the above and who cares if it's immoral, just so long as it's legal?)

    Some people are calling, Revolution....that doesn't go far enough...but it's a good place to start! Enough!!!

  • Comment number 18.

    It seems the government has singled out the Phoenix 4, but a scan of the report and the comments by the inspectors suggests that they have done nothing wrong apart from taking on a manufacturing business that was going nowhere.

    The financial shenanigans with Barclays that generated the cash outside MG was effectively stopped in the 2006 Finance Act (Section 10 if you want to look it up), but this was proposed to Phoenix by Iain Abrahams at Barclays and employees of Deloittes who had a big hand in its execution. Deloittes received over £2m in fees, and Barclays benefitted to at least the same extent as Phoenix.

    Why are Deloittes and Barclays not subject to the similar public castigation as the Phonix consortium? Probably because Mandelson has no real case in law and big boys like Deloittes and Barclays will see him off.

    More explanation here:

    http://alexmasterley.blogspot.com/2009/09/why-stop-there-at-phoenix-4.html

  • Comment number 19.

    Is there any point to Mandelson banning them?

    Pheonix (Phenix) - "a person or thing that has become renewed or restored after suffering calamity or apparent annihilation."

    They're laughing at you all
    From the other side of the wall
    Which you thought was for your protection
    But is infact to stop insurrection.

  • Comment number 20.

    You seem to be appointing all blame to the Phoenix four. You seem to have overlooked that £30-40 million is a drop in the ocean for a business like Rover was and not 'unreasonable' given the risk they took. Afterall, the government is attempting to throw them to the dogs and prevent them ever working at a senior level again. That is a pretty reasonable risk!

    Note also that the government did not inject cash itself when it had the opportunity - during the time the Phoenix four were in charge, the government received £400 million in taxes from the salaries that were paid to the Rover staff (and Phoenix four!). £400 million is a slightly more significant sum than the £30 million the directors received.

    If the government had re-injected that £400 million then Rover would certainly not have collapsed when it did. Not to mention the further £16 million this report cost the taxpayer.

    This is the government jumping on the one part of the report that can get headlines in their favour and is an attempt to misdirect the media from the government's own failings and responsibility. If this article is anything to go by, it seems they are succeeding.

  • Comment number 21.

    Oh I wish you could see some of the things I'm getting moderated out.

    So these 4 have cleary broken the moral code (judging by the public reaction) and yet the BBC wish to protect their names from 'defamatory statements' and to protect them from retribution.

    Are we choosing our sides today BBC?

  • Comment number 22.

    If you get a group of executives who see their route to profit as separate from the legitimate business of the compny concerned, of course the business will be milked of the vital resources it needs to function. British Leyland had a sorry and tortured history, but British Aerospace began to turn it around and its cars became popular. BMW made a mistake buying it and another mistake selling it to Phoenix. In the end everybody argues about who is to blame, but it is the workforce and the local community which pays the price when a vital employment centre goes under.

  • Comment number 23.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 24.

    I suppose the tory boy response will be "well it's human nature, innit?" ... all the government's fault for letting it happen

    sorry, tory girl! ... pls see VSL @ 2

  • Comment number 25.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 26.

    So many tales of financiers, executives and top directors 'milking' the system: raking in obscene bonuses, for meeting achievable targets,and feathering their own golden, pension 'nests'. Meanwhile, foreign companies are buying up British utility companies (created from public money), British manufacturing industries and anything else they can get their hands on (including parts of Royal Mail, if Mandy had his way). So why are British so-called entrepreneurs lining their own pockets, while foreign investors are buying up the 'family silver' at knock-down prices? Poor management skills? A greed culture (remember the Thatcher boys and girls, and their City bonuses)? Both?

  • Comment number 27.

    We the tax payer have paid £16 million to be told that our government picked the wrong group to run MG Rover. Perhaps this money would have been better spent in identifying who in Whitehall was responsible for making that decision.

    The chances of that happening are slight. This government has never done anything wrong according to itself.

    I have a feeling that the furore developing around adults having to have CRB checks to ferry children to events is a symptom of the government putting avoiding measures in place so they cant be blamed.

    Perhaps I am just cynical........

  • Comment number 28.

    18. At 2:09pm on 11 Sep 2009, AlexInTheCity wrote:

    "It seems the government has singled out the Phoenix 4, but a scan of the report and the comments by the inspectors suggests that they have done nothing wrong apart from taking on a manufacturing business that was going nowhere."


    ...so let me get this right, if I see a man lying in the street who has obviously been mugged, it's OK for me to rifle his pockets because he's clearly 'going nowhere' and I didn't actually commit the mogging so I'm morally free - right?

    I think some people need to examine their moral standpoint before defending the Pheonix 4

    I am certainly not excusing the Government but the order of carnage needs to be:
    The participants and direct beneficiaries
    The accomplises
    The associates

    For anyone to say that taking a multi million pound salary from a failing company when you HAVE NEVER HAD A JOB THAT PAID YOU ANYWHERE SIMILAR IN THE PAST is not 'fair game'

    If those are the rules you want to play by then fine - back to the barbarism of the past it is then......or will you be the first one crying about how unfair it is?

  • Comment number 29.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 30.

    Clearly the Pheonix 4 have used some of their 40million to pay some of the fools who have come on this blog to defend them.

    Saying that 'Mussolini wasn't as bad as Hitler' does not excuse the actions of the former - even if it is true.

    Clearly some people think 'every man for himself' will suit them - well once we all start playing it then you're going to change your mind PDQ.

  • Comment number 31.

    We all know that the laws needs changing!

  • Comment number 32.

    The thing that really strikes me as unpalletable in all of this is the fact that the "Phoenix 4" were able to take the loan from BMW (which was presumably provided in order to help keep Rover solvent through the takeover and transition period) and use it to profit personally from it while it actually cost Rover money in interest. How on Earth can that be right. Legal, perhaps, but right? I think not.

    The bottom line to the whole sorry tale, however, is that Rover was a dead duck even before BMW sold it off to Phoenix ... its cars were poor, uninspired and desperately unreliable, and had been so ever since the partnership with Honda was dissolved. There is a good reason why I made sure that the only two Rovers I have owned both had Honda (and not Rover) engines!

  • Comment number 33.

    22. At 2:17pm on 11 Sep 2009, sonbinor39 wrote:

    "but it is the workforce and the local community which pays the price when a vital employment centre goes under."

    ...and that folks is the truth.

    Just remind us who pays for the rebuilding of the community and forks out for unemployment benefit?

    Oh yes - that's the british MUG taxpayer.

    MUG MUG MUG MUG MUG MUG MUG MUG MUG MUG MUG MUG

    We are all MUGS - are we going to suffer this quietly?

  • Comment number 34.

    Looking at post 20, I agree with the sentiments expressed.

    Mandelson is raising a smokescreen to hide the responsibility of the government in the demise of MG Rover. Never mind avoiding mention of the political situation when the decision to select the Phoenix 4 offer and to reject Jon Moulton proposal to build sports cars. The latter offerd job loses and who knows maybe there would still be production at Longbridge.

  • Comment number 35.

    Sixteen Million in fees and four years work to produce this report? DOH!!
    Even then, no assessment of the acute politicking that we know went on with Rover very close to that time of a General Election.
    The Directors and the Accountants who produced the report should set up together in business. They obviously know how to make money.
    No doubt Mandelson's huffing and puffing is a diversion to obscure something much more significant.
    Hopefully that will find a way into the public domain soon.
    John C.

  • Comment number 36.

    I see the First Secretary of State has called on the Phoenix Four to apologise!

    Here's a better one Peter, why doesn't the government apologise for it's part in killing off the Alchemy bid for Rover which would have allowed a significant car making business to continue at Longbridge. The Phoenix Four only got their hands on Rover because Stephen Byers was desperate to avoid job losses in the important Midlands marginals a few months before the 2001 GE.

    I wonder if this will get through moderation?!

  • Comment number 37.

    It is no real surprise to see the Government attempt to put a very narrow spotlight on the failing of this company while refusing to allow any in-depth investigation of it's own bungling. It also remains deeply irritating that such a report has signally failed to include the myriad other reasons why the company was doomed. A disastrous agreement made by BMW to prevent MGR from restructuring the workforce was one. The poor product planning made by the directors was another - including the unfortunate outsourcing agreement for development on the new medium range model to TWR and the ridiculous 'halo' model that was the SV. The decisions made by Kevin Howe that tarnished the brand even further from reliability issues and drove down quality. And so the list goes on.

    The antics of the Directors involved are at the very least difficult to justify on a moral ground, although I smell a lot of envy from other posts made here from the salaries paid to them. But there remains a lot of details surrounding this saga that have not been made public; the directors comments on the ineptitude of the Government, the fumbling over the temporary payments and the antics of the parties involved in the break up of the company.

    One day it will all come out, although you can be certain this Administration won't want it to be around election time.

  • Comment number 38.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 39.

    31. At 2:36pm on 11 Sep 2009, nautonier wrote:

    "We all know that the laws needs changing!"


    ....or maybe removing....because I don't think most people would fare worse in a lawless society - at least they will be aware when they're getting screwed!

    The law is simply there to protect the rich in situations like the one we're in now.

    Where are the human rights of the taxpayer? The Government has (without a mandate you'll notice) allowed the wholesale and robbery of tax payers capital, through the banking bailouts, the mis-management of public investment (i.e. the NHS) and the selecting of a P.E. group to swizzle money into their pockets from a taxpayer funded insititution (Rover)

    Laws are not for us - which is why we should no longer adhere to them.

  • Comment number 40.

    33, Writings..............

    'We are all MUGS - are we going to suffer this quietly?'

    Looks Like it!!!

  • Comment number 41.

    why are people on these pages blaming the govt, surely these 5 men were in charge of the company, not the govt, exactly what is the govt trying to cover up, next time an alcoholic knocks a child down lets blame the highways agency for putting a road there,

  • Comment number 42.

    READ BETWEEN THE LINES:

    "Our remuneration was not the reason for the collapse. The real reason is the government bungled the last chance to save MG Rover," said Mr Howe, chairman John Towers, ex-vice-chairman Nick Stephenson, Peter Beale and John Edwards.

    ....note how he didn't say the renumeration wasn't dishonest - but merely stated it wasn't the reason for the collapse.

    GUILTY - GUILTY -GUILTY -GUILTY -GUILTY -GUILTY -GUILTY

  • Comment number 43.

    Are these the actions of 'honest men'?

    * Mr Beale bought software to "clean" data from his personal computer, a day after investigators were appointed, "despite being aware that we would want to image and then review the contents of his computer for documents relevant to our investigation"
    * Mr Stephenson paid more than £1.6m to a consultant he had a "personal relationship" with
    * Executives had exaggerated in statements to MPs the personal financial risks they were taking
    * MPs investigating the demise of the firm were given "inaccurate and misleading information" by Mr Beale
    * There was evidence of a questionable briefing to the press by an adviser to former Trade Secretary Patricia Hewitt.

  • Comment number 44.

    Sorry Robert, "It" is there clear as day, but could really have done with a bit more emphasis. "It," being, "Now, although the loan from BMW was interest free, Techtronic charged interest on loans it made to Rover."

    So, interest free money, that I think the wider population, (us ordinary Joe's,) believed would be given to MG Rover, to help secure its future, (interest-free,) was given to MG Rover. But ain't no way the Phoenix 4 were going to let MG Rover have the loan Interest-free, they CHARGED interest!

    Sorry, but this is the corporate equivalent, by ordinary people's standards, of nicking money out of the charity box! Just that people, who are no better than pond-life, the sort of people who rule over our lives as well BTW, have laws which make it legal for them to do it!

    I think it fair to say that the BBC are NOT reporting this more widely, say on the radio or TV? Why is the question, at least, not being asked as to why doing this is legal?

    To call it truly shocking is one of the under-statements of the year!

    People have every right to be angry at the Government for NOT saying they are going to stop this. Unbelievable!

  • Comment number 45.

    Ho-Hum...It's a Friday and Robert appears to be bored. So we've spent £16 million to be told what we knew anyway. So, who brokered the deal between Phoenix & BMW? Answer: this government. And now they turn around and make all kinds of scurrilous accusations. As the old adage goes, tax evading is illegal but tax avoidance is not. Many of the top footballers in the UK are paid in a very creative way so that they don't pay the full whack of income tax. If this is wrong, then how do we fix it? So, either take the "Phoenix 4+1" to a court of law and prove their "guilt" or JUST SHUT UP. And, PESTon, find some other story to cover.

  • Comment number 46.

    Is it just me or is the number of comments that break the "House Rules" on the increase in the past few days?

  • Comment number 47.

    What is astonishing is that they were allowed to charge Rover interest on the supposed interest-free loan from BMW.

    Equally astonishing is the lack of due diligence by the media, the Government & BMW on 4 charlatans, masquerading as turnaround specialists.

    I imagine their general wealth accumulation over the period was even more than their pay packets, for example I'm sure they have stuffed themselves full of millions of air miles flying to and from China being entertained.

  • Comment number 48.

    This report took £16 million of tax payers money to produce.

    £16 million is 1,600 man years if the men are paid min wage.
    £16 million is 32 man years if the consultant is paid £250 hour.

    Just exactly how many man years (48 weeks * 5 days * 8 hours) did this report take!

    How ever you look at it it looks like we, the tax payer, were ripped off!

  • Comment number 49.

    Since 'The Phoenix four' apparently did nothing illegal, they can only really be accused of being amoral.
    As I understand it from many conversations at the time with people with links to Rover the eventual demise all goes back to when BMW were allowed to take them over and the Government were complicit in the whole thing.
    BMW took what they wanted(Mini, 4WD technology from Landrover) and made decisions that hampered any realistic chances of future prosperity. Either deliberately as they didn't want another viable competitor to their own models, or as ill though out cost saving measures in production.
    The Phoenix consortium kept Rover running just long enough to ensure no liabilities fell back to themselves or BMW whilst extracting as much cash as possible. They may have extracted even more had they not messed up in their negotiations with the Chinese who got what they wanted much cheaper by allowing the negotiations to fail.
    I have even heard it said that Jon Moulton commented on how they had done an even better job of asset stripping than would have been the case with his own unsuccessful bid.
    It may well be true that no matter what, Rover would have struggled to ever become viable, however it was never even given the chance.

  • Comment number 50.

    Dear dear. First Goodwin and his pals and now this lot of asset strippers. Ever get the feeling our governance is ridiculously weak and ineffective.

    'Something is rotten in the state of Denmark' doesn't apply these days - it's too mild.

    Shameful immoral greed rules the corridors of power across the 'estates' of the UK

  • Comment number 51.

    Dear Robert
    Please can you fix it for me to run a big company? I know I don't have the experience but I really really want to be paid lots of money.
    A bank would be great, but if you can't find one of those for the tenner I saved up from my pocket money, then a nice little car company would be lovely.
    My favourite song is You Win Some, You Lose Some by that nice Robbie Williams - "like a phoenix from the flames"
    Yours richly undeserving etc


    And then we are told to worry about £500 on a benefits scam here and there. When compared to the corporate "rewards" we have turned a blind eye to, everything else is but a drop in the ocean that is the excesses of the tiny number of individuals who have ridden the gravy train of the last few years.
    The New Capitalism eh Robert - well it can't be worse than this one can it?

  • Comment number 52.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 53.

    Folks.

    Many of you are misunderstanding the roll of auditors. Auditors are not engaged to help with transactions. Their task is to review the financial statements, and acertain whether a true and fair view is presented by them.

    You are confusing the roll of auditors with financial advisors. I confess I do not know the depth of the relationship my former employer had with Rover, but it is highly unusual for one firm to do both, as it is a serious risk to independence, one of the key necessities of the auditor relationship.

    Unfortunately, these 4 were clearly looking out for themselves, but the plain fact is, they have done nothing wrong (at least, in any way other than morally). Their legal obligation as directors is to the shareholders (themselves), and only if they can be found to have continued trading beyond the point where they could reasonably be certain the game was up (improper trading). It is unfortunate for the workers and employees, but thats the nature of the beast I am afraid. Besides which, I highly doubt the £40m odd would have been enough to save the company.

    This is a story of moral drudgery than any serious wrongdoing, so calls for the protagonists to be locked up or struck off are a little missplaced. Ask yourself though, would you be likely to consider appointing any of them as directors after this?

  • Comment number 54.

    Interesting that yesterday there were reports that they would be disqualified as Directors by Mandelsons department but today he is merely saying that they should "voluntarily" disqualify themselves. Perhaps this is because someone has reminded him that any disqualification action undertaken by the Department for Business, Innovation and Skills (BIS)has to start within two years of the date of the company failure!
    £16m, four years and the deadline for disqualification action missed. Great! Perhaps the money would have been better spent on the former workers!

  • Comment number 55.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 56.

    39, Writings. I agree 100% with that post.

  • Comment number 57.

    50

    Aye, thats the problem, a failure of governance. Complex governance guidelines are in place for how exec and non exec directors should be structured in a public company. Unfortunately, in a private or wholly owned company, there is naff all anyone can do. How would you feel if you owned a shop but were told how you had to run it?

    This ended up with 4 men being in an obscenely powerful position over a company far too large for anything of this sort to have been allowed. Who is to blame? The 4 of course for taking advantage of the situation, but those who allowed, nay encouraged, it to happen should have a very long hard look at themselves. How on earth did they not see something like this happen?

  • Comment number 58.

    53 should read

    " and only if they can be found to have continued trading beyond the point where they could reasonably be certain the game was up (improper trading) have they done anything legally wrong.

  • Comment number 59.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 61.

    40. At 3:01pm on 11 Sep 2009, JavaMan1984

    I have faith in the British people - surely they are man enough to stand against the tyranny of the state?

    Maybe they're already plotting and simply haven't involved me.

    I think you said before (wisely) it's when the recovery starts the trouble will begin, not while we're still in downfall. At the moment only the a relatively small number are being hurt, but what comes later will cover most of the population and that's when people start getting militant.

    ...especially when they vote in a Tory Government and quickly realise they're no better than Nu Labour - that's got to hurt...

  • Comment number 62.

    41. At 3:01pm on 11 Sep 2009, ars-havin-a-laugh

    Nicely put.

  • Comment number 63.

    Can I just say - NO WONDER MANDELSON PASSED IT TO THE SFO.

    I suspect he assumed this activity was illegal (or he was just buying time).

    Either way the odd behaviour around this report is starting to make sense.

    Now what about BaE?

  • Comment number 64.

    45. At 3:17pm on 11 Sep 2009, NonEnglish wrote:

    "If this is wrong, then how do we fix it? So, either take the "Phoenix 4+1" to a court of law and prove their "guilt" or JUST SHUT UP. And, PESTon, find some other story to cover."

    NonEnglish - I presume you don't realise this wasn't against the law which is why it cannot be taken to court.

    We could change the law, but the people who decide law are also implicated in this deceit and are therefore unlikely to change it.

    The only thing we have left is our right to FREE SPEECH and you suggest we should shut up about it.

    Obviously you are either in Government, one of the Pheonix 4 or simply a naieve taxpaying MUG who is in denial as no-one could seriously defend the actions being discussed here.

    It's truly tragic when people don't realise they are being taken for fools..

  • Comment number 65.

    We all know Mandleson spins a good line but is his latest request for an apolgy from these guys the joke of the year.

    Wouldn't it just be nice to hear Labour, particularly Mesrs Brown, Mandleson & Blair apologise for the mess they have got this once great country's economy in.

    Then, just then we might take seriously what any of this stealth taxing group of economic illiterates says with more than a pinch of salt.

  • Comment number 66.

    51. At 3:35pm on 11 Sep 2009, 66dave wrote:

    "And then we are told to worry about £500 on a benefits scam here and there. When compared to the corporate "rewards" we have turned a blind eye to, everything else is but a drop in the ocean that is the excesses of the tiny number of individuals who have ridden the gravy train of the last few years."

    I'm glad someone has pointed this out - well done 66dave.

    It's an old trick where you get people to blame those below them and therefore protect your own dishonesty.
    All those £500 dole scams over my lifetime don't amount to half a bank bailout - so why should I care about them?

    The criminals live at the TOP of the tree - NOT THE BOTTOM. Anyone who tells you otherwise is AT THE TOP ALREADY STEALING FROM YOU!!!!

  • Comment number 67.

    53. At 3:48pm on 11 Sep 2009, greatHayemaker wrote:

    "Ask yourself though, would you be likely to consider appointing any of them as directors after this?"

    I wouldn't - but I bet you a £16 Million report that some 'buddy' will.

    Didn't you know Fred Goodwin's already keen to get back into work (even though you thought he retired)

    Don't kid yourself that this sanction will make ANY DIFFERENCE - and besides, who needs a directorship when you've just squeezed £9million from the tax payer / last motor manufacturer in Britain?

  • Comment number 68.

    Condemning the Phoenix Four is a smokescreen to cover up the fact that the government wouldn't support Alchemy's valid scheme to keep and protect 2000 jobs because of the political fallout of laying off the remainder. Instead a scheme that anyone with half a brain knew would never succeed went ahead with the inevitable loss of all the jobs(6500 I think) with many many millions of taxpayer's and BMW's money lost. My only hope is that Mandleson will pursue himself with the same legal vigour he applies to the Phoenix Four who like Mandelson re his mortgage application were not found guilty of anything 'criminal'. Labour's hypocrisy knows no bounds and it will be interesting to see where this vengeful flight (I'm Mandy.....) of fancy takes this rotten bunch.

  • Comment number 69.

    If nothing illegal was done then it's high time that the law was changed, retrospectively if possible. I'm sure that it would be possible - and just as sure that nothing will be changed.

  • Comment number 70.

    A lot of moderated comments today - is this showing the depth of feeling out there (or rather hiding it)

    Come on BBC - we're all adults here and we can take the occassional swear word directed at the CRIMINALS who run this country.

  • Comment number 71.

    (1) the financial performance of the business was lamentable;
    (2) the executives risked only paltry sums of their own money;
    (3) they had never in the past been paid anything like this for their alleged business skills

    Seems to be the modern way. Zero risk = massive payouts.

    Reward should be a reflection of risk, ability and mostly results.

    They have not done worse than many of our Politicians or civil servants.

  • Comment number 72.

    ....just a little side note...

    On previous blogs there has been a lot of chat about increased tax rates causing brain drains to places like switzerland and Dubai.

    http://news.bbc.co.uk/1/hi/business/8249313.stm

    Good luck to the rats who leave the sinking ship. I discovered the other day there are NO CONTROLS on rents in Dubai and the landlord can up it whenever he likes.

    That's the future of Britain if we're not careful....

  • Comment number 73.

    69. At 4:45pm on 11 Sep 2009, possumpam wrote:
    If nothing illegal was done then it's high time that the law was changed, retrospectively if possible.

    ---------------

    Tricky area when you get into telling people what they may do with their own companies, and effectively therefore their own money. Getting to be a bit big brother.

    The real issue is that they were allowed to walk uncontested into this position in the first place.

  • Comment number 74.

    As I understand it, had the Phoenix group not bought Rover, everyone concerned would have been out of job immediately. What these 5 men did was to prolong the death-throes of Rover and keep a lot of Brummies in jobs for an extra 4 years.

    Who cares that they walked away with millions? Rover was never going to survive. The only travesty here is that the inspectors have pocketed £16m for this report.

  • Comment number 75.

    The Government of the day,(yes, it included Mandelson), were desperate to offload MG to anyone else.

    So someone came along and had it. And the ignorant Government.

    So, to cover their uselessness at the time, the Govt have spent a further £16 million to attempt to blame someone, anyone other than themselves, for the loss of the country's car manufacturing capability.

    Well, look now, we have the Opel sale, with as further two UK plants at risk; Belium has complained about it to the EU, so the Germans who sponsored the deal will ensure that the Belgian workers are OK in return for the complaint being seen off, leaving the now Lord Mandelson to explain to the rest of us in the UK what hard work he has done around the deal, ...oh yes, and to hand over another £16,000,000 to some pals so that they can blame someone, anyone, other than the Labour Government and Lord Mandelson for the loss of thousands of UK manufacturing jobs.

  • Comment number 76.

    these tricks and ducking and diving that was not illegal, happens all the time, Robert Glorifies this kind of thing in his book, so we should all shut up and doff our caps to these captains of industry

  • Comment number 77.

    I am tired of Mandelson's supercilious face on television asking that they should not be allowed to hold office.... pot kettle black comes to mind....

    The inspectors had failed to address key questions about why ministers took the disastrous decision to back the Phoenix bid to buy Rover in 2000 and wasted £6.5million in taxpayer's money in keeping the firm afloat in the run-up to the 2005 General Election.

    Former Trade and Industry Secretaries Stephen Byers and Patricia Hewitt both brushed aside warnings about the credibility of the Phoenix bosses to back them up right up until the firm's collapse in 2005.

  • Comment number 78.

    Mandelson is a joke

    You take £45 million from the taxpayer and what does it get in return? - AN APOLOGY!

    They can stick that apology where the sun doesn't shine.

    The banks are the same

    We're being sold down the river.

    I'm going home for the weekend - still shaking with anger. It might take a while to calm down...

  • Comment number 79.


    Individually, the directors had out anything from £5.8 million upwards each. Now, Mandelson has had exactly how much in pay, perks and priviledges from his time in Government, (UK, EU, UK again and continuing,) .... just what good value have we had from him?

  • Comment number 80.

    Hi Robert

    Has everyone forgotten the behaviour of the government ministers at the time? If I recall correctly there was one company which looked like it had a business plan and real businessmen who said that 1/3rd of the workforce would probably have to go to make the company viable. These other 4 said they could keep everybody on. It was quite plain at the time who the real businessmen were. However Patricia Hewitt ( I believe was the minister) chose the group who at the time looked dubious.

    Why aren't the ministers roles getting more attention? These 4 businessmen probably thought they had ministers over a barrel and could do what they liked....

    As ever with Lord Mandelson there is more at issue here than what initially meets the eye as I feel he is acting pre-emptively to attack the 4 businessmen and create a media storm but in reality they were not the only ones to act badly in my view.

  • Comment number 81.

    Re The Report, it's SNAFU. I suspect there is not a bookmaker out there who would have given odds against it saying anything else, particularly no blame on Government. The Government's problem is that Mandelson is far from blameless in his financial dealings, and has managed to enrich himself ( considerably ) at the taxpayers expense; Brown has ruined the financial standing of the Country, and the rest are lapdogs with the culpability that brings with it.
    So now leave well alone, remember the names, and if they turn up Directors anywhere, take your money some other place.

  • Comment number 82.

    I don't understand how what these four have done is any different from the Directors of all the banks bailed out with public money. All these banks were tanking yet the directors and CEOs continued to feather their nests with sums that dwarf the paltry £40m. And what happens to them? Andy Hornby, possibly Arch culprit of the banking debacle of the last ten years, is appointed CEO of Boots.

    These 4 have done nothing illegal however morally repugmant it seems. But when has capitalism ever embraced ethics? Mandelson will be on a very sticky wicket if he tries to ban them from being directors - this is just empty posturing.

  • Comment number 83.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 84.

    The lost concept of ethics in business. Audits and investigations have become statements about process and not accountability. Current business models will destroy nations as they are schemes about the accumulation of personal wealth and are unrelated to the success or failure of a particulr business. The business model that created a national elevation in the general public wealth has become a corrupt model of individual criminals preying on both governments and businesses to secure personal gain. Deterents, such as public hangings may be in order.

  • Comment number 85.

    I have to admit to originally feeling very bitter about how the Phoenix 4 + 1 had behaved. Then the Dark Lord spoke and my focus of anger shifted. I realised that whilst these guys are dissolute, they had a one off chance to get rich so they just milked a system. (Where have we heard before ‘we only stuck to the rules guv’?) The Dark Lord and his associates have a longer a more insidious history in the Rover saga. This Government had acted in a socially irresponsible manner when in 2000 BMW had asked for help in restructuring Rover and develop new models. The request was for about £400 million, not a lot when you consider how much the Dark Lord feels he can give to his city partners, who have by any standard achieved a much higher level of immorality than the 4+1. The government ignored the plea to help then. Today the Dark Lord demands an apology from the 4+1 for what they have done. It is right that they do apologise, but it is with breathtaking hypocrisy that he or any member of this government stands and points to the splinter in the eyes of the 4 +1. We can do without the likes of Towers et al, but we can most certainly don’t need the unelected and unelectable preaching on standards that he himself could not live up to.

  • Comment number 86.

    The UK seems to become more and more third worldish every passing year. MPs falsifying claims, huge Ponzi schemes like Equitable, nobody doing anything wrong but large sums of money disappear, huge bonuses for unethecial misbehaving con men. Yes London and Lagos have a lot in common.
    I don't think the gravity of the situation has hit London yet, and I wonder will it be hit as a financial centre.

  • Comment number 87.

    Once again we are faced with people who have enriched themselves at the expense of others without adding anything of social value in the process saying they did nothing wrong because everything was within the law.

    The law has nothing to do with it. There has to be a basic morality that says this is not the way to behave. Again where was government when this was going on?

    The big question we have to face is why so many in our society have become so cynical that they pursue their own advantage regardless of others because they simply can. This is why we are being subjected to this endless stream of abuse whether it be MP's expenses, City bonuses, the banking crash and six figure salaries in local government

    For many years these abuses have been permitted due to a moral relativism that essentially assumes that wider society has no part in the way the individual conducts their affairs. The reality of such a view has come to mean that it is easy for an individual to arbitrarily assert their power over other peoples' lives and fortunes. This is immoral.

    I think we have reached the moment when such a moral perspective becomes redundant. Aren't we supposed to be a democracy? Bu then; are we a democracy? I am not so sure, for certainly the people are not well-regarded. Or is democracy not enough? Has the moral consensus in our society completely collapsed?

    So many questions; so few answers.

  • Comment number 88.

    Am I being naive in asking why have company bankruptcy laws not been enacted? It seems self-evident this company was clearly trading when insolvent. Are the directors not liable?

  • Comment number 89.

    Methinks Mandy doth protest too much.

    The whole furore is obviously designed to steer attention away from the poor judgement of the government in allowing the take over by Phoenix to happen in the first place.

    It was obvious Rover was never going to survive as a stand alone trading entity otherwise BMW wouldn't have offloaded it. Poor model portfolio, lack of R&D going forward and a hiving off of all of its assests prior to any takeover.

    If this government is so incensed why on earth didn't they do something prior to letting BMW get their hands on Rover in the first place, let alone agreeing to the takeover by Phoenix?

    Will Mandy be demanding that Brown and Blair be banned from running a "business" ever again, because they've sure as hell bankrupted GB Ltd, both morally and financially!

  • Comment number 90.

    Once again we're back to the shambles of a political system in the UK, which ensures that one of two rotten parties is in power in perpetuity. Everything is a mess here. Root and branch constitutional reform is required to sweep out all the accumulated dross of centuries. Regulation only exists to ensure the rich get richer.

    What is wrong with the people of these islands that they (we) put up with this endless c**p?

    We're at the fag end of a failed Labour/neo-tory government, which has failed like no other before it. Nothing will fundamentally change when the real Tories get in. History is repeating itself ad nauseam. The UK is headed towards third world poverty, and it doesn't have far to go. Nothing works properly here, from filthy public toilets, litter strewn streets, uncontrolled immigration, unnecessary wars, and obnoxious incompetent politicians - you can take your pick of any or all of them.

  • Comment number 91.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 92.

    I heard the Phoenix 4 being defended by their representative on Radio 5 this morning. Talk about weasel words. It was all the fault of the government and the market. Obviously nothing to do with the Phoenix four. After all they were only running the company!
    He said "Their pay was in line with the rest of the motor industry". But MG Rover was by far the smallest mass producer of cars. It is like a village shop owner saying his pay was in line with the boss of Marks & Spencer! So that's OK then, they are both retailers.
    He claimed Ford were in trouble at the time(inference - all car companies were in the same boat). Absolutely not true. Ford were closing car assembly operations in the UK to centralise in Europe. At the same time they were investing heavily in engine production in the UK. The market was substantially more buoyant than it is today.
    They burnt through the best part of £2bn whilst paying themselves enormous sums and leaving the rest of the workforce in the lurch.

  • Comment number 93.

    Is this not perilously close to conspiracy to defraud? And could the deletion of data from the laptop be considered False Accounting?

  • Comment number 94.

    2 blogs on the same subject and not a single objective, journalistic sentiment in either of them. Is this support Mandy day?

  • Comment number 95.

    To say that the money the Phoenix Four took out of the company wasn't the direct reason for its collapse may be (more or less) accurate, but it completely misses the point. The Phoenix Four's management of the company was catastrophic, even by the abysmal standards shown by their predecessors in BL/BMC/AustinRover/Rover. To anyone having even a casual understanding of the car business it was quite obvious from the start that they didn't have a clue about how to save the company (a tall order for even the most gifted of managers). Their press releases and "product launches" (rebadging the old cars, mucking up their looks and sticking Union Jacks on them) were the stuff of dark comedy.
    The money they took was a symptom, not the problem. The real problem, what caused the disastrous collapse, was the fact that the Phoenix Four ran exclusively on greed and hubris. Moderately self-conscious managers with more brains and scruples may not have necessarily managed to save the swerving wreck that MG Rover was before their takeover (for evidence, see BMW's tenure), but at least they would have given it a fighting chance. With the Phoenix Four, MG Rover was doomed.

  • Comment number 96.

    I could not comment con what I really think of the legality of what these people did, because if I was honest I would risk breaking the house rules.
    So, I will say, that it obvious that these executives were motivated solely by the need to save people's livelihood and never waivered from the determination to give good value for money to BMW and the British Taxpayer. I just hope that the Queen will honour them for services to British Industry.
    And hope that people don't think that I am being sarcastic.

  • Comment number 97.

    Totally agree with #87

    No we are not a democracy because the choice we are going to be given is between Dumb and Dumber. In reality the differences between their policies are quite small - fine tuning of the same model.

    Interestingly the activists in the two main parties probably do have different concepts of how business should be run. But the 'profit is god' model which is spewed out by business schools and drives our economies is running out of steam. Yes, profit is essential, but should not be an end in itself. Strange thing is that there are many companies which have not chased profits as a sole goal, which have turned out to be extremely profitable and long lasting.

  • Comment number 98.


    Calling any lawyers!

    Can this wanton & negligent management of corporations (Phoenix 4 & others e.g. Fred Goodwin) not be treated as a failure of Fiduciary Duty?

    http://en.wikipedia.org/wiki/Fiduciary_duty

    As I have stated before, the law seems to be standing idly by as one calamity after another of failed corporate governance occurs. An acceptance of people claiming "rights" (i.e. profits / profiteering) whilst failing in "duty" of care. We have the legal framework yet seem powerless to implement it:

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/09/how_phoenix_four_extracted_40m.html#P85591251

  • Comment number 99.

    "The inspectors describe the remuneration as "unreasonably large" for a whole host of reasons, such as:

    (1) the financial performance of the business was lamentable;
    (2) the executives risked only paltry sums of their own money;
    (3) they had never in the past been paid anything like this for their alleged business skills."

    These are applicable to many other businesses and companies ...

  • Comment number 100.

    I'm not sure what purpose this massive public enquiry which no doubt has cost tax payers a massive amount of money. All it has proven was that the Phoenix Four were at worst unethical and at best incredibly stupid.

    As far as I understand unless they confess to committing fraud or it can be proven that they committed fraud with intent you cannot possibly punish them legally.

    They have been named and shamed in the past and that is as far as it will ever go.

    Why then is public money being wasted so that the current government can come out and say it wasn't the fault of politicians, it was only the fault of the four businessmen and they should apologise?

 

Page 1 of 2

BBC iD

Sign in

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.