LONDON — The joint parliamentary committee looking into the collapse of the failed retailer BHS has accused its former owners Sir Philip Green and Dominic Chappell of plundering the ailing retailer to line their own pockets and described the BHS affair as “the unacceptable face of capitalism.”
The report, published Monday by the British government’s Work and Pensions, and Business, Innovation and Skills Committees, followed months of parliamentary testimony in the wake of the retailer’s collapse into administration earlier this year.
Green, Chappell and a host of managers, advisers and bankers took part in the parliamentary inquiry into BHS, a mass-market general retailer that was a fixture on the British high streets. Its failure was the largest in the U.K. since the Woolworths chain shut in 2008.
Some 11,000 jobs were lost, while 20,000 pensions are now at risk due to the large deficit in the pension fund. BHS had 164 stores across the U.K.
Green purchased the chain in 2000, and while the store had peaks and troughs of profitability over the years, it was a big loss-maker by the time he sold it to Chappell, a twice-bankrupt former race car driver with no retail experience.
Additionally, the pension gap swelled to 571 million pounds, or $748 million at current exchange, under his watch. He sold the BHS business last year for 1 pound, or $1.31, to a consortium led by Chappell.
“Sir Philip Green, Dominic Chappell and the respective directors, advisers and hangers-on who all got rich or richer are all culpable, with the only losers the ordinary employees and pensioners,” the committee said in a statement Monday.
The committee’s parliamentarians said the BHS affair opens up much wider questions about the gaps in company law and pension regulation that must be addressed.
Green “systematically extracted hundreds of millions of pounds from BHS, paying very little tax and fantastically enriching himself and his family, leaving the company and its pension fund weakened to the point of the inevitable collapse of both. Lady Tina Green is still being paid tens of millions of pounds of tax-free repayments on the loan that was engineered to sell BHS from one Green family business to another, and will be for some years to come,” the committee said.
It added that in the early years of ownership, Green “cut costs, sold assets and paid substantial dividends offshore to the ultimate benefit of his wife. The so-called ‘King of the High Street’ failed to invest sufficiently in stores or reinvent the business to beat the prevailing high-street competition.”
The committee said it found “little to support the reputation for retail business acumen for which [Green] received his knighthood” and added “we don’t doubt that Sir Philip had some affection for BHS — to an extent it created him. Now it could also bring him down.”
Frank Field, chair of the Work and Pensions Committee, said: “One person, and one person alone, is really responsible for the BHS disaster. While Sir Philip Green [assigned] blame to every known player, the final responsibility for up to 11,000 job losses and a gigantic pension fund hole is his.
“His reputation as the king of retail lies in the ruins of BHS. His family took out of BHS and Arcadia a fortune beyond the dreams of avarice, and he’s still to make good his boast of ‘fixing’ the pension fund. What kind of man is it who can count his fortune in billions but does not know what decent behavior is?”
Separately, a board of civil servants is now conducting an investigation into whether Green should be stripped of his knighthood, an honorary title given to him under Prime Minister Tony Blair’s government for services to the retail industry.
A spokesman for Green has declined all comment.
Last month, Green testified before the joint parliamentary committee and apologized publicly for the BHS fiasco, admitted that he sold the ailing retailer to the wrong person, and stressed — multiple times — that he was working to fill the BHS pension gap.
The billionaire Green, a born-and-bred Londoner who also owns Topshop’s parent Arcadia Group, told the committee “Nothing is more sad than how this has ended,” and said he was actively working on filling the pension fund gap.
“I have never run away from looking into solutions to the pension fund. I am prepared to sort this out, and find a solution for the 20,000 BHS pensioners. The problem is resolvable, and I am here to sort it out. There does seem to be a light at the end of the tunnel,” he said last month.
Green also suggested that — with hindsight — he would never have taken out the millions in dividends in the years immediately following his purchase of the then-profitable BHS, had he known the trajectory the company would take in an increasingly difficult retail environment.
“We let it run too long, and had put a lot of money into it already, and it was time to move on.” He told one MP, “If retail was easy, everyone would be doing it. In this business, you get good years and bad years.”
The BHS pension is now in the hands of the Pension Protection Fund, an industry-backed safety net. As it stands now, pensioners will get a fraction of the money that they would have from a properly funded BHS. It remains unclear how gravely impacted the PPF will be if it is indeed forced to foot the whole BHS pension bill.
The point of these parliamentary investigations, which are open to the public and available to watch online, is to hold individuals accountable for their actions and to gather evidence that lawmakers believe is in the public interest.
One member of the committee told WWD last month there was no basis for any eventual criminal proceedings in the BHS case.
The joint parliamentary investigation is one of five probes into the sale and management of BHS by bodies including the pensions regulator and the U.K.’s Serious Fraud Office, the government body that investigates and prosecutes serious and complex fraud, bribery and corruption. The latter is in its early stages.