If we were to tell you that you are a shareholder in a British bank, you might be surprised. If we were to mention that that bank has been consistently running at a loss for a decade, you may begin to worry about your investment. If we then said the organisation you’re invested in is accused of asset stripping compromised businesses to make a quick buck, you probably wouldn’t believe us. As a British taxpayer you saved – and now own – almost three-quarters of the Royal Bank of Scotland (RBS), but how safe is that investment?
Now the bank stands accused of the greatest theft anywhere, ever. Successive British governments have all tried to solve the problem that is RBS. None have succeeded. Barely a day goes by now without another story about the toxic culture and the ruthless practices that were apparently commonplace in the bank’s restructuring division, GRG, or The Global Restructuring Group.
Joining us to discuss RBS’ recent return to profit and whether it is now going to repay the British taxpayers is businessman, RBS victim, and former CEO of Torex Retail PLC, Neil Mitchell.
Mitchell is someone who is very close to the RBS story and has studied it extensively.
“I was a CEO of a very significant British software development company, Torex Retail PLC,” he says.
“We were put into GRG by RBS and within four months they had shadow directors, they had taken control of the business, they’d put in their own consultants and advisers, they’d loaded the business with extra fees and costs, and after four months they had basically prepared it for asset stripping and then sold the assets to a US vulture fund for £400 million undervalue and therefore a loss to me and my shareholders,” he told Renegade Inc.
GRG is an operating turnaround division, the restructuring unit of RBS. It is supposed to be an intensive care unit. It supposed to support customers and encourage their ongoing business, their growth and development.
“It is fundamentally about taking control of the business, selling the assets, getting the cash, making sure that the bank gets its money back, to the detriment of shareholders, creditors, and employees. Therefore, in returning the cash to the bank, it’s all about restructuring the bank’s balance sheet,” says Mitchell. “Artificially propping up this bank.”
And taxpayers have no real clue about that because why would they? They haven’t had to. They haven’t sat there and done the due diligence, but what Mitchell is saying is that to get the cash back through the RBS books and onto the balance sheet, GRG has gone out and become a profit centre in and of itself, and found businesses that it can utilise to get that cash back.
RBS GRG: The graveyard of British business
“Yes, its a profit centre and it’s all about supporting the bank,” says Mitchell. “Let’s not forget this bank was bailed out with £46 billion of taxpayer money. It has made cumulative losses of another £58 billion. It has been supported by the government in other ways to the tune of £258 billion and yet, that was not enough.
“They have had to use GRG as the cash generator to artificially support this bank for another 10 years and that’s the real issue here, is the industrial scale of this. It’s not individual businessmen and businesses, it is in the tens of thousands, and therefore it makes it into the tens of billions of problems and that is what the bank is trying to suppress.
“More than 90% of all British businesses put into GRG do not come back out.”
Neil Mitchell’s business was one of the ones that didn’t make it out. His bondholders, shareholders, staff and wider circle have been disenfranchised. That is why he has taken this fight so personally and been so assiduous.
“I have spent 10 years of my life, millions of pounds and at a huge cost to myself in terms of the energy, the time and effort that is required to investigate my own case and that of my shareholders, but also literally now hundreds of other cases. I have travelled all over the UK and Ireland and overseas investigating this and I’m so pleased now, in a way, to see that finally it is out there in the public domain and literally this is a story that is developing and unravelling by the hour now.”
Mitchell was vindicated in many ways, but at the beginning of this journey, it was a lonely road as he told people this story about the systematic nature of RBS’ business practices that we are only just now learning about.
“It has been said before that this is every MP’s dirty little secret,” he says.
“Every MP, 650 of them, have RBS GRG cases and complaints sitting in their constituency offices and that’s why in the House of Commons debates, in Parliamentary committees and inquiries, there is cross-party support. Every single opposition party in England, Wales, Scotland, Northern Ireland and Southern Ireland is absolutely united on this issue.
RBS: The largest theft anywhere, ever
“In the House of Commons debate, there were a number of Conservative backbench MP’s who stood up and talked about this on behalf of their constituents,” says Mitchell. “There was even one Conservative MP who was a small business owner as well as being an MP, he stood up and told his own experience of the bank. I believe that this is the largest banking scandal this country will ever see.
“It is a theft against the people of this country and against the business community because it’s not just business people. It’s the hundreds of thousands of jobs that have been lost. The families have been affected. The communities that have been affected. The dozens and dozens of suicides it has caused and it has recently been described by Labour shadow minister, Clive Lewis as being the largest theft anywhere ever.”
We caught up with Labour MP for Sefton Central, Bill Esterson and asked him specifically about GRG. This is is what he had to say:
“The clue is in the name: Global Restructuring Group,” Esterson told Renegade Inc. “What did they really mean? They meant the restructuring of RBS, not the restructuring of the customers of RBS and frankly, that’s actually what it did.
“It destroyed the businesses, the business customers of RBS, to help repair the balance sheet of RBS and they didn’t care how they did it or who suffered.
“I’m afraid there are thousands and thousands of people in this country now who are suffering as a result, sometimes 10 years or more later.”
Bill Esterson wrote to the Prime Minister in November 2017 calling for a formal inquiry. To date, he has not received a reply.
“I have a copy of Bill’s letter to the Prime Minister and in it, he asks her to take specific actions,” Mitchell says. “He asks her to force the regulator to release the suppressed secret S166 report. He asks her to authorise a public inquiry. He mentions that there have been dozens and dozens of suicides and he mentions in the letter the economic scale of this and Theresa May has not replied to the letter. She hasn’t taken any action. As I see it, this now sits with the Prime Minister and it is becoming the political scandal of all scandals.”
RBS returns to profit: what now?
RBS are now back to profit, but Mitchell says the figure by which it is back in the black is small fry.
“Let’s be clear: This is a bank that was bailed out 10 years ago with £46 billion of UK taxpayer money,” says Mitchell. “It has made a cumulative loss of another £58 billion. It was given a further £258 billion of UK government support over that 10 year period.
“It has made losses for 10 years and I know that a profit announced this month of £752 million seems like a lot of money to the general public, but for a bank the size and scale of RBS, this is an accounting issue.
“They could have accounted for this as a relatively small profit, or a small loss. What makes it even more ridiculous is that they have under-provided for in their accounts for a looming fine from the US federal authorities that is rumoured to be somewhere between $8 and $14 billion.”
RBS has only made provisions for £3.2 billion
“So if the cheque is required to be any more than that, then the taxpayer is going to have to pay that fine for them,” says Mitchell. “Furthermore they announced in the recent results that they’re making no provisions for compensation beyond the £300 million that they made in November 2016, nor provisions for GRG compensation for the victims of GRG.”
How possibly then can they issue a share sale?
“Well that’s exactly what it’s about,” says Mitchell. “This is all smoke and mirrors between the Treasury and RBS, because it’s not about customers.
“It’s not about victims of GRG. They’re not even concerned about about paying fines to the US.
“All this is about is the government getting rid of RBS, and the only way it knows how to do that is to start selling the shares.
“And in November the chancellor announced that he was now going to start selling the shares from March 2019 because the government basically needed the revenue, the income from that share sale to pay for Brexit.”
And had they budgeted for that? Had they put that as a line item in a budget to say actually we can count on this?
“Well this is the worry,” he says. “He’s not only announced the sale and that it’s to be done over a five year period, but he’s also informed the government that that would be considered as revenue. So it’s in the five-year forecast for the economy. So if they don’t sell the shares or they’re not able to sell the shares then we’re going to have a black hole, a funding gap in the next five years of the UK budget.”
Mitchell fundamentally does not believe that RBS / the government will be able to sell the shares by March 2019.
“Because this pretend profit will just disappear under the size of the fine from the US authorities and over the prospect of a multibillion-pound, and possibly in the tens of billions, in relation to GRG compensation,” he says.
None of this has been accounted for.
“The taxpayer still thinks it’s a good deal, that money’s back in and all the rest of it so the taxpayer is in the dark, and the action now taken against the bank for the victims of this fraud is what you’re getting at,” says Mitchell. “Where’s that action going to come from?
“The action will come from a group litigation on behalf of the tens of thousands of potential claimants: The UK victims, the business victims of GRG.”
Bankruptcy as a profit model – not a uniquely British problem
Mitchell undertook a tonne of research over the last six months and discovered that RBS GRG had two operating units across all of America. He realised they have been targeting American businesses with significant American job losses and a degree of economic destruction.
“We have also found that RBS GRG was very significantly active in Germany and also in the Republic of Ireland,” he says.
This is not a uniquely British problem.
“RBS and the FCA and the Treasury would like us all to think – us being victims, politicians and journalists – that it is only a UK issue,” says Mitchell. “Even given the scale of it, they’re trying to keep it within the UK, but we’ve realised that this is a big – now global – issue. It is not a uniquely British problem.”
RBS – ‘a finely tuned machine’
Finally from James Glanville, director of Lindale Healthcare Limited, now in administration. It owned a 60 bed nursing home in the heart of Bournemouth town centre. He is also a director of Dorchester care LLP, a 42 bed nursing home and 33 bed care home on the same site.
“GRG is a finely tuned machine,” Glanville tells Renegade Inc. “Someone has described it to me as ‘a hopper:’ they feed you in and nothing comes out. The pressure on me was absolutely just phenomenal. I have been to doctors, stress, medication, counsellors. It’s just appalling.”
Glanville’s wife was diagnosed with breast cancer and passed away 13 months later in the high of the GRG pressure that they were under.
“I remember I sat with her and with her consultant, and I remember she said to the consultant, ‘could any of this be stress related?’ and he said it’s very possible,” Glanville said. “We continued to fight on.
“This is a scandal of epic proportions. Nobody understands what’s going on. It was systematic. This was sold as a swap. They assigned the break-contract to your balance sheet, the instigator, the covenant breach, they moved you to GRG, they asset stripped you and then they put you into administration and that’s what they did.”
RBS by the numbers
Between 2008 – 2011, Buzzfeed + BBC confirmed from a cache of 10,000 RBS documents provided by a whistleblower that there were 16,000 businesses in GRG, 94% of which did not come out. Since then it has been established that there were another 8,000 businesses not counted that were in a related unit of GRG called SRM.
This does not include:
– All UK cases pre-2008 or from 2012 until 2018 (for example, there were 6,415 British businesses in GRG in 2016, two years after the RBS CEO says he closed it down in August 2014).
– Any cases for RBS Ulster Bank in either Northern Ireland and the Republic of Ireland (two areas where there are known to be many thousands of cases).
– Cases in overseas jurisdictions.
Buzzfeed & the BBC estimate that based upon the 16,000 cases alone, RBS’s estimate of the value of these firms was £65 billon.
Put another way, this is 16,000, or 24,000, or 30,000 + British businesses that were not producing any goods or services for the UK economy, nor paying any taxes (thus a multi billion tax loss to HMRC – another unofficial subsidy).
Remember also that there are many British businesses put into RBS GRG between 2002 – 2018 that were much larger than the £20 million cut off point used by RBS and the BBC. For example Neil Mitchell’s business was worth £600 million on the London Stock Exchange with 3,500 employees.
“I know of many, much bigger cases than that,” he says.
To put the size and scale of this in perspective, then Chairman of RBS, Sir Philip Hampton told Robert Peston on the BBC that at its peak, RBS GRG had £90 billion of assets under its control at one point in time – meaning that this was not a total – it was a run rate that peaked on one particular day at £90 billion.
Shadow business secretary, Bill Esterson and his trade union and legal contacts agree that RBS is responsible for more than 100,000 job losses. Let’s take the 24,000 cases for 2008 – 2011 only. Multiply them by 11 jobs each, (based on the UK government statistic for the UK average of SME employees per SME business). Based on that conservative estimate alone, it results in 264,000 estimated jobs lost, just from that sample.
Tune into the rest of the program to find out how to ensure RBS is held to account.