Press Report : MPs plan to take Phoenix Four to court to get millions back
Birmingham Post, 13th September, 2009
The scandal-hit MG Rover Directors could be forced to hand back the millions they took from the company in an explosive civil court case, MPs warned last night. The Phoenix Four face being struck off as Company Directors after a devastating Government report accused them of profiting from the collapse of the Birmingham car giant.
In total, the four bosses – together with Chief Executive Kevin Howe – took £42 million from the company in wages and pensions before it collapsed in 2005 with the loss of 6,500 jobs. The damning report also reveals Director Nick Stephenson paid £1.7 million to a female consultant who became his lover as the pair struggled to broker Chinese deals to save the failing company. The report branded the sum “plainly excessive”.
Another wealthy Director, Peter Beale, was also accused of destroying evidence the morning after it was announced that Government inspectors were to investigate MG Rover’s demise. He was also accused of deliberately misleading a local MP, as well as a Parliamentary committee, over how much money the Phoenix Four had personally invested in the company.
Last night, John Hemming, Lib Dem MP for Yardley, revealed plans to consult Birmingham City Council leader Mike Whitby and Carl Chinn – trustee of a fund set up to help former workers – about forming a group to sue the Phoenix Directors. He said: “I want to see what can be done to try to ensure that some of the money taken from MG Rover is recovered for the workers – in addition to the money in the trust fund for workers. It may be that a lawsuit is the way to do this now.”
The 850-page report took four years to compile and cost £16 million to produce. It exposes in staggering detail how the Phoenix Four – John Towers, Nick Stephenson, John Edwards and Peter Beale – and Chief Executive Kevin Howe made fortunes from the company. While workers toiled ever harder on the factory floor in desperation to keep MG Rover afloat, their bosses were diverting millions into an offshore account.
The Phoenix Four bought the crisis-hit Longbridge car maker from BMW for a nominal £10 in 2000. They each invested a modest £60,000. But in return they were given access to a £427 million ‘dowry’ from BMW, a stockpile of cars and other corporate facilities including the local Studley Castle conference centre and the Longbridge plant.
I want to see what can be done to try to ensure that some of the money taken from MG Rover is recovered for the workers – in addition to the money in the trust fund for workers. It may be that a lawsuit is the way to do this now.” John Hemming MP for Yardley
However, the historic car company was never really to recover. In the first year under the Phoenix Four, MG Rover lost £227 million, and then £68.4 million in 2002. Yet the high-living Directors marked the anniversary of their purchase by jetting off to Portugal for a break. It was while enjoying the sun that Stephenson and Beale discussed “ways in which we should be appropriately remunerated”, according to the report.
John Edwards later told the inquiry he had “stayed awake all one night on the couch”, then in the morning told the other members of the Phoenix Four that their pay “must be appropriate to what [they] were achieving”. However, they went on to pay themselves “out of all proportion to the incomes which they had previously commanded”, the report concludes.
Together with Chief Executive Kevin Howe, the Phoenix Four rewarded themselves a total of £42 million in salaries and pension contributions between 2000 and 2005. The Directors netted around £9 million each, while Mr Howe received nearly £6 million.
While sales of MG Rover cars plummetted and the company continued to haemorrhage money, the directors’ company, Phoenix Venture Holdings, diverted £17 million into an offshore trust in Guernsey. Of this £16.9 million went to the four men and Mr Howe, together with another employee, Jane Ruston, PVH’s head of legal.
Among the most damning new information in the report about the Directors’ conduct is the revelation that at 10.05am on the day after Government Inspectors were appointed in June 2005 to probe MG Rover’s collapse, Peter Beale bought a computer program called Evidence Eliminator which “deep cleans” a computer’s hard drive of any “sensitive material”.
The Director installed it at 12.20pm the same day, using it to delete 10 documents. These were tagged with titles such as “jt mgr income”, “NetWorth2” and “Joint Assets” as well as “2004 balance sheet & Man accounts”.
Beale told the Inspectors that he had done nothing wrong and was merely destroying documents which related to the Directors’ personal financial circumstances. When investigators examined the computer about a week after he ran the program, they discovered that he had deleted a sub-folder called “MG Rover”. They later found that one of these files contained details of the income and benefits received by John Towers.
In further evidence of cover-up, the report accused Beale of giving “inaccurate and misleading information” about the company’s collapse when he subsequently appeared before a committee of MPs, including how much money the men had personally invested.
During their five years in charge the Directors heavily restructured the business and continuously sold off assets. The company had lost £92.6 million in 2003 and talks with Chinese auto manufacturer Shanghai Automotive Industry Corporation (SAIC) about a make-or-break merger began in April 2004.
Despite the floundering finances Stephenson, who was divorced in 2004, hired 45 year-old female consultant Dr Qu Li – who later became his lover. She was placed on a £1,000-a-week retainer plus £1,000 a day for each day she supported negotiations abroad, and a £750-per-day rate when in the UK.
The Chinese-born consultant, who had previously worked for a number of Chinese companies, was initially taken on for one month from February to March 2004 but she ended up working for MG Rover until April 2005 – and walked away with a staggering £1.7 million paid to her Midlands-based company, China Ventures Ltd. The Inspectors said this was far more than she had ever been paid before.
Dr Li and Stephenson were put at the forefront of efforts to seal the SAIC deal – but there was confusion about her role and some MG Rover executives thought she was an interpreter. The lovers, who were seen by Longbridge engineers cosying up on a flight to China, were heavily involved in SAIC talks in 2004 but the report noted that neither of them had “any significant financial or legal training or much experience in corporate finance.” The ‘intimate’ affair took place during 2004 but both Stephenson and Dr Li gave differing accounts of when it started and ended while giving evidence.
The Sunday Mercury uncovered claims of bribery and intimidation in June 2005, when MPs alleged MG Rover bosses tried to keep them quiet about the company’s dire financial problems. John Hemming said he was offered a £22,000 luxury car and a ‘consultancy job’ with the car-maker when he questioned huge payments made to management. “They wanted to buy my silence but I was having none of it,” he said at the time.
He (Peter Beale) phoned to have a go at me. It was a very menacing and aggressive call. He said words to the effect of ‘We know things about you and if you don’t shut up we’ll come after you, and embarrass you in your constituency’.” Julie Kirkbride MP for Bromsgrove
Julie Kirkbride, the Conservative MP for Bromsgrove, told how MG Rover Director Peter Beale threatened to wreck her political career if she continued to criticise the company in public. “He phoned to have a go at me,’ she said. ‘‘It was a very menacing and aggressive call. He said words to the effect of ‘We know things about you and if you don’t shut up we’ll come after you, and embarrass you in your constituency’.”
At the time Mr Beale’s response to the Sunday Mercury’s questions was: “You’re wasting my time. I have nothing to say to you.” The Department of Trade & Industry, however, said the allegations were serious enough to warrant investigation.
One of the biggest betrayals of workers’ trust was the claim by the Phoenix directors that every car leaving Longbridge went straight to a confirmed customer. In 2005 the Sunday Mercury discovered that tens of thousands of vehicles, worth hundreds of millions of pounds, were tucked away in disused airfields and warehouses up and down Britain. They were spirited out of the car plant on vehicle carriers at weekends when workers wouldn’t see them leaving.
Yet even though they knew the company’s number was up, the Phoenix Four and Kevin Howe were still living and acting like kings right until the end. After Rover’s collapse, former employees told us how Howe had allegedly ordered staff to rip out the dashboard of his MG Xpower SV sports car because he did not like the colour. The job cost £17,000 – the equivalent of a year’s wages for a Longbridge track worker.
On another occasion Howe, who was lambasted for being on holiday in Florida as MG Rover crashed, was said to have turned his nose up at a newly-sprayed Rover 25. One ex-worker said: ‘‘When he came into paint plant A at Longbridge to look at it, he didn’t like the colour and walked away. To me it shows the arrogance of the Directors who appear to have looked on Rover cars as their own private toys.’’
The Phoenix Four and Mr Howe issued a lengthy statement after the release of the report on Friday, denying any wrongdoing. They claimed they had been victims of a Government whitewash and witch hunt – and claimed that details of their pay had always been known. ‘‘Everyone knew what we were paid. It was never a secret,’’ the four said in a statement.
[Source: Birmingham Post]