Greensill Capital, David Cameron, a financial scandal and a billionaire's downfall | Four Corners

Greensill Capital, David Cameron, a financial scandal and a billionaire's downfall | Four Corners

Show Video

it's about lobbying it's about sleaze it's about cronyism and corruption there was so many elements of this where it looked like a house of cards this is the story of one of the biggest corporate scandals since the global financial crisis with supply chain finance from greensville you use terms like financial engineering disruption democratization of finance you spice with mystique get a few endorsements from the good and great then you stir it and then you serve it up to the ignorant customers and investors as something very clever glamorous and innovative the tale of an australian who wooed the rich and powerful on his way to becoming a billionaire i was paid a annual amount a generous annual night far more than what i earned as prime minister lex bought credibility really well he associated himself with politicians with famous people he looked the part he's been a brilliant salesman and he's had an incredible ambition green cell changing finance to change the world before the business lex greenfield built came crashing down mr greensteal are you a fraudster no mr connor i am not the collapse is threatening the business empire of another billionaire steel baron sanjiv gupta putting tens of thousands of jobs at risk across the globe including in australia well it's the largest of the billionaire but we're not being paid the fallout has sparked a political scandal and investigations of suspected corporate fraud we're looking at fraud we're looking at balance sheet manipulation we're looking at a major major accounting scandal tonight on four corners we trace the rise and fall from grace of two billionaires an australian farmer turned financial and a so-called savior of steel whose businesses and fates are entwined we look at how they beguiled the rich and powerful and lift the veil on the financial dark arts they used to conjure money seemingly out of nothing bundaberg famous for sugarcane and bundy rum [Music] this is the home town of lex greensill his family has worked the land here for three generations [Music] the farm was established by roy greensell in 1945 and it's now a third generation green saw operation i just admire the whole family from um you know roy initially and then lloyd and judy and then through to their sons lex and peter and andrew vince haberman's family has lived in the district since the 1800s and he's known the green cells all his life they're just genuine hard-working community-minded people uh to me they're very very good business operators let me be honest with you this is not the clothes that i would want to wear every day i'm actually a farmer every chance i can i'm on a tractor i grew up but not everyone here buys the folksy story my mom and dad it's a joke i think he's lucky to know one end of a tractor from another he as far as i'm aware he had little do with the family farm growing up and was more interested in the books from his neighboring property russell mortimer watched on as green seal farming expanded far and wide [Music] we've seen an explosion in land acquisitions on behalf of greensville farming equipment labor and basically crop area grown they've gone from smaller smaller cane melon growers into huge sweet potato growers it's a far cry from the struggling family farm that lex greenstall says drove him to set up the finance business that would make him rich where did the inspiration for green seal come from in fact it came from the adversity that my parents our family endured being farmers in country queensland in australia lex grinsell he's a financier but within about five minutes of meeting the guy he'll tell you this great story about how he grew up on a farm in bundaberg in rural queensland and that his family supposedly had some financial difficulties when large companies were late paying their bills on time so greensell's whole sort of corporate origin story was all about solving this problem he said that he had a financial product that could help small businesses like his parents get paid faster with essentially zero risk so i guess our central thesis has always been to deliver finance fairer to the battlers to the the the small businesses in every corner of the globe [Music] greensell came to london in the 2000s he studied at manchester business school up north here and then he ended up getting a job at morgan stanley a big u.s investment bank and he was in the division doing supply chain finance which was kind of yeah it was quite an unsexy bit of banking at morgan stanley he made an influential friend who would catapult his career jeremy haywood one of britain's top civil servants who was on secondment to morgan stanley lex greenstall managed to persuade the very top most senior civil servants in this country the cabinet secretary jeremy hayward that he was a kind of miracle child in 2012 haywood made lex greenseal a senior advisor in the office of conservative prime minister david cameron i think my only claim to fame is being the only boy from bundaberg ever to have an office at number 10 downing street here in london david cameron's best advice to me when i was starting my company was lex don't worry about being a novice chief executive just give it a go after all i'm a first-time prime minister [Music] you know he had his own business card he had his own security pass i mean this is sort of this isn't normal it's not normal for a financier to kind of have free reign of the corridors of power in the uk he was able to have the kind of access no one can dream of i mean generally big banks in the uk have a lot of access to government regular meetings but no one has an office in in the prime minister's ministry you know no one has a card saying that the prime minister's special adviser this is an absolutely unparalleled level of access the prime minister was clearly impressed with his new advisor david cameron soon adopted a plan from lex greenseal to help small businesses get credit black screen hildax where are you give us a wave it was a version of what's known as supply chain finance the core business of his newly launched firm green cell capital the whole idea with supply chain finance is you have a very big company with a lot of smaller suppliers and big companies are sometimes not great at paying their smaller suppliers you know they might have chaotic systems or whatever so the idea here is that a finance company interjects itself in the middle of this and it pays the suppliers but it pays them a discount so it pays them a bit less than what they owned and then the finance company collects the full amount from the big company later it's been going on since the bronze age in mesopotamia and all the way through the industrial revolution to today there's nothing new about this thing there's very little new about it green seal capital marketed itself as a company that could use technology to bring supply chain finance into the 21st century i think it was maybe the uk government's you know silicon valley moment they were like ah this is you know really exciting new fintech product um and it was also a new ideology we need to get business people into the heart of government but no one really thought through the implications and how you manage the conflicts of interest that that creates where you have a private interest inserted right into the heart of government and that's what happened with lex greenstill robert smith is the lead reporter in an award-winning team covering the green seal capital story at the financial times i first wrote the word greenstall in a story in 2014. so i've been covering this for years and years and years and it's always seemed obvious to me that it was going to end in tears you know there was so many elements of this where it looked like a house of cards by 2014 the still fledgling finance firm was acquiring serious assets in germany greenfield capital bought a defunct lender and promptly renamed it green sill bank through the bank it bought the first of what would become a fleet of private aircraft in my experience trade finance was never very glamorous trade financiers flew in the back of the plane not in private jets as seems to have been the case with greenfield despite the trappings of wealth greenfield capital appeared to be struggling in 2016 it posted a loss of 62 million dollars but the fortunes of greenfield capital were about to change as its founder forged a relationship with another budding entrepreneur [Music] welcome everybody to liberty still newport it's a proud day for us today as we start production please let me show you around indian-born british-educated sanjeev gupta had audacious plans to become a giant of the steel industry sanjiv gupta was like a nobody in the steel industry he wasn't even a big name in commodities trading that was his background he was a pretty obscure figure there and he came out of nowhere and just started buying asset after asset after asset [Music] commodity trading and commodity firms are a small tight-knit community where everybody knows everybody and what they're doing the arrival and growth of sanjeev gupta's gfg group caught them a little bit by surprise they were not clear on what the business model was how he could take the risks he was taking and where the money that was funding his empire was coming from [Music] gupta's sprawling network of companies known as the gupta family group or gfg alliance needed finance greenseal's emerging startup needed business they came together like hand and glove the relationship between greenstone and gupta is forged at a time when greensville's business was going through a lot of difficulties so this is back in 2016 and it lost a lot of money on sort of bad loans bad debts it had been doing the supply chain finance for some inferior companies and what gupta did was he wrote in and he said i'm going to pay you massive fees if you start providing me this financing and suddenly on paper green source business looked like it'd been resurrected the purchase of an ageing aluminium smelter in scotland and a hydroelectric plant that supplied its power was the first major deal involving gupta's gfg alliance and green cell capital there's a deal in scotland which was kind of it was like the deal which cemented this marriage of green cell and gupta and it really it was really the sort of origin of this financial engineering taken to extremes between them the gfg alliance bought the smelting operation at lochaber because they could see a positive future built on scotland's century of experience making aluminium the scottish government was desperate to stop the smelter closing this leverage allowed gfg alliance to extract extraordinary terms what the scottish government guaranteed was they guaranteed a deal to sell power between a business owned by gupta's father and a business owned by gupta so a very strange relationship there not a normal guarantee and what grinsell did was it turned this guarantee into kind of financial investments that it was able to sell that government guarantee of power sales was a valuable asset and greenfield capital turned it into gold raising nearly 500 million pounds for gfg from investors gupta has been extraordinarily clever in the way he's financed himself and some of the transactions that i've observed have been you know genius financial engineering getting other people to pay to allow you to take over a business from the united kingdom please welcome the ceo of the year liberty house group's sanjeev gupta after saving jobs and factories sanjeev gupta was hailed as a business genius you're the man behind britain's industrial revival so how does it feel to pick up the award tonight i'm not i'm not the man there's five thousand men and women behind us and who was there cheering him on but his friend and [Music] financier lex greensell was also winning accolades royally bestowed as commander of the order of the british empire for services to the economy the boy from bundaberg and the saviour of steel were in the embrace of the british establishment it's so remarkable what mr gupta has achieved here in ensuring a future for this steel mill here in london you know the financial times we talk to banks every day and normal sources of financing the sort of bankers who'd usually do these deals they were sort of baffled by it they're like where is the money coming from and it was green silk as the gupta family group alliance bought steel mills throughout europe green seal capital lent it billions often what greenzel would do he'd provide sort of over fund a deal and that would almost provide money for the next deal and you had this sort of daisy chain of deals where the financing of one was dependent on the other and crucially it all allowed gupta to make these deals without putting much of his own money in often no equity really went into these transactions so incredibly risky just borrowing money after money after money to do this sort of self-perpetuating chain of acquisitions clearly there was a very close relationship between gupta and green cell and and clearly um gupta was being extended a very significant amount of credit that wasn't wouldn't ordinarily have been given by an independent arms land third-party transaction the future is coming fast green seal is already there green seal capital created some complicated financial products to help fund its lending so what they did was take the invoices against which they'd lend bundled them up into securities and these securities were then sold to other banks or investment funds for them to raise the money which they on lent to their clients working capital finance is easy green cell uses your customers credit rating to pay your invoices early then we turn those invoices into bonds investment bank credit suisse raised billions for green seal capital through this model telling investors insurance took away the risk what credit suisse did was it set up these funds which only invested in green source products and it told its investors that these were super safe okay because of the insurance because of the financial engineering you don't even have to worry about them these are the sleep at night funds these are the really safe funds the way it was funded was by having credit suisse run a fund which bought assets from greensell was sold to relatively rich investors and they were sold on the promise that the assets were all insured by a double-a insurer normal supply chain finance is pretty safe short-term lending but the allegation is that somewhere along the line greenfield capital started giving credit for possible future sales that might never happen to potential future customers that might never exist what queensland seems to have done what some of their clients allege that they did was they gave them credit on the basis of customers they didn't even have this is really aggressive stuff and it shows how far green sauce strayed away from the normal path of this sort of financing lex greenseal denies this in a statement to four corners his spokesman said green sill capital issued credit based on future forecast trade with current customers i am completely flummoxed that somebody can make money out of guessing what business will be done between companies in the future and lending on the basis of it that to me sounds a bit more like clairvoyancy than high finance as greenfield capital expanded the boy from bundaberg embraced life in country england [Music] home was a stately manor in the village of saul and the finance firm had so many planes people joked it could start an airline if you've got a large corporate then you may well have a fleet of aircraft it usually is a very big company not a company the size of green cell it had four and they weren't just four private jets one of them was a gulfstream 650 now a private jet is a thing that a billionaire might buy but a gulfstream 650 is a plane outside the realms of ordinary billionaires think of it as sort of being able to fly new york to china or maybe london to somewhere in queensland in one hop and it would cost about as much as 10 private jets and you have to lend an awful lot of money before you can start affording a gulfstream 650.

that makes you an organization the size of a city group or a bank of america and i doubt either citigroup or bank of america has splurged that much there was a lot of other people's money and he wasn't very careful with it sanjeev gupta also had a plane named in honour of his metals empire the extraordinary thing was that gupta's aircraft had a particular livery one of the green cell fleet had the identical livery and well that's like bizarre kind of relationship where you paint your planes the same color sanjeev gupta's plane was often spotted in bundaberg which is where the two men hatched to plan to rescue australia's troubled steel industry [Music] backed by green sill capital sanjeev gupta turned his sights to waiala buying a steel works that had gone under with crippling deaths and wyala embraced the man of steel this man is a great australian he's now become a great australian starting with south australia this truly is the spiritual home of steel in australia and here we can build one by one a world-class steel industry while i was in a very precarious situation at that time we didn't know what our future held so when gfg and mr gupta came in and bought the steelworks it was a it was wonderful for our city it meant we had a future so it was very welcome and it was a very exciting time hi how are you welcome great to see you gfg alliance promised massive new investment and everyone wanted to believe thank you the vision was to build and transform the current steel works here in waialae to set our uh our industry here up for generations to come mr gupta doesn't think about small ideas he only thinks about big ideas he's a man with extreme optimism and it's infectious when he talks to you of course that doesn't necessarily mean that the foundations are there to execute some of his big plans well it's the largest of the billionaire but we're not being paid ewing's contractors is a trucking company that supplies the steel works at waialae and owner kingsley ewings had high hopes when gupta's gfg alliance took over in the first nine months it was business as usual and then it started to change uh were you ringing up for a pickup were you they just didn't pay us how long four or 100 days 120 days or not at all until you did something about it and there was never anybody to talk to about it how much debt did they rack up owing to you oh at times up to 600 700 thousand dollars i was talking to probably 20 or 30 contractors all of whom were under great stress and pressure because they weren't getting paid on time in effect sanjeev gupta was treating his suppliers as a bank and that was most inappropriate my office got significant numbers of complaints from small businesses that were having extended payment times from the gupta group particularly in the waialua area and remember these are businesses that are already under pressure suppliers were told if you want to get paid on time use greenfield capitals supply chain finance gfg brought greensell to the table in fact had a joint meeting with the small businesses in yala where they together put forward a proposal where the small businesses could be paid on time but only if they paid a percentage of their invoice and that percentage could be as high as eight percent to green seal to greensville it's a huge whack and of course it all depends on how quickly they want to be paid but remember for a lot of those small businesses they told us that they were they already had their price squashed or squeezed by fgfg um you know they were having to offer really low prices to get the contract to start with so another percentage on top of already reduced prices made it made it not profitable what do you reckon about this supply chain finance i think it's a method of extracting money from people and kicking the can down the road it's just a method of moving money around in circles the astounding thing is much of the finance for gfg alliance was short-term credit from greenfield capital that had to be constantly renewed it was borrowing from greenville capital paying it back and borrowing again four corners has learned that senior executives in gfg's australian operations repeatedly raised concerns with sanjiv gupta about the solvency of the steel business here and its rickety financing he was urged again and again to find long-term funding and stop relying on short-term credit from green seal in response we're told he'd say don't worry i've got lex in my top pocket [Music] by now greenfield capital boasted a bevy of blue chip clients alongside gfg including airbus ford vodafone and telstra it also caught the eye of japan's richest man you've got to hand it to him he's built a business in a very short time and managed to extract money from one of the most savvy investors in the world masayoshi song masayoshi son ceo of japan's softbank scouts the world for investment opportunities lex greenstall became part of the entourage after son adopted him as a protege through softbank's vision fund son tipped 1.5 billion us dollars into the australian finance house come fintech making lake's green sill a multi-billionaire one of the great things about joining the softbank vision fund family hasn't just been the network the capital and the advice it's actually been having masa as a partner and a mentor looks at things differently seeking answers to questions others find impossible to answer yet seasoned observers were skeptical author and financier shot digit das forecast the global financial crisis he found the green silk capital spin all too familiar you use terms like financial engineering disruption democratization of finance you spice with mystique get a few endorsements from the good and great then you stir it and then you serve it up to the ignorant customers and investors as something very clever glamorous and innovative greensell did very well at this in taking what is one of the most traditional forms of financing with an ancient lineage and presenting it as something highly clever and that actually was their great achievement how fintech was it well to me it's a bit like taking the plow and cart and basically painting it in gold in london the relationship between david cameron and lex greensell had come full circle i started working as a senior advisor to greensville capital in august 2018. lex greenstill wanted me to help him grow what was becoming a successful uk-based fintech firm lex bought credibility really well he associated himself with politicians with famous people he looked the part david cameron spared no effort in promoting greenfield capital lobbying his old colleagues to secure government contracts he was found to have sent 25 text messages 12 whatsapps eight emails 11 calls and require nine meetings by chief civil servants in the treasury at the height of the pandemic to discuss work with green cells i mean it's beyond belief that anybody else would get that amount of attention when really the economy was going into meltdown because of the pandemic that wasn't particularly the conversation the former prime minister was paid well for his efforts as he later told a parliamentary committee well i was paid a annual amount a generous annual amount far more than what i earned as prime minister and i had he at one stage thought his options were worth 80 million pounds it takes a politician of high integrity to not cash out their reputation for that much money when they've left office he was exploiting his personal contacts and his knowledge of government very aggressively i mean it was across the broad range and some of the parliamentarians looking this have described almost as stalking australia's former foreign minister julie bishop also joined the payroll spruiking greenseal on the sidelines of the world economic forum in switzerland when julie bishop labour mp ed husick is leading opposition efforts to find out more about her role we had a someone in the form of julie bishop who'd had 20 years experience as a parliamentarian deep contacts within the coalition contacting directly senior ministers i mean in davos there you had the former finance minister being approached by julie bishop to start talking with lex greensteal who heads up that firm about the idea of extending one of those products to the federal public service in a way that the finance department was very skittish about and likened to payday lending julie bishop went on to personally approach treasurer josh freidenberg to arrange a meeting between greenfield capital and treasury officials but at the time she hadn't formally declared herself on the lobbyist register as an influence peddler for green silk capital julie bishop did not respond to four corners inquiries julie bishop seems to have done exactly what david cameron did in the uk which is exploit a loophole in the lobbying rules where they don't need to declare themselves as lobbyists because they're actually employed by the company and then use their position a very influential position as former ministers with all the contacts that brings to promote a company and benefited and it's a nonsense that the rules don't capture that kind of activity as the virus ravaged britain greenfield capital was made a lender under a government guaranteed emergency loan scheme all but one of the loans it made went to gupta's gfg alliance as green seal capital channeled 350 million pounds to gupta's businesses the gupta empire as it's now emerging set up various new companies to be able to access as many of these uk government-backed loans as possible as his firm was taking taxpayer-backed cheap loans sanjeev gupta splashed out 42 million pounds on a mansion in exclusive belgravia a stone's throw from buckingham palace but the cracks were starting to appear behind the scenes a bank gupta's gfg alliance owned was under investigation it's emerging from some of the parliamentary inquiries in the uk that the bank of england alerted the national crime agency possibly as long ago as a year ago about this bank and some concerns they had about it and the national crime agency started investigating it looks like they may have been doing some covert monitoring in germany the finance regulator began probing greenville bank it discovered the bank had massive lending exposure to gupta's gfg alliance that's very unusual for a bank because you know the nature of a bank is that you don't bet it all better range in one client in a special forensic audit the german regulator contacted companies that were meant to be trading with gfg it concluded much of the trading had never happened you know if you artificially inflate the amount of business you do and on the back of that get loans then that's potentially criminal the team at the financial times was following a similar trail investigative reporter cynthia romero examined a list of customers of a gfg subsidiary liberty commodities i spent about a morning cooling as many as i could in that time frame and you know one after the other kept coming back to me and saying we have never traded with liberty commodities ever not just not in the last year not just not that year but ever so this is sort of raise more serious suspicions of fraud shall we say because this isn't to do with financial engineering it's not to do with providing credit against hypothetical stuff this appears to be pieces of paper that say that gupta's business sold metal to people who denied doing business with him so this is sort of a whole other different level of you know potential dubious lending gfg rejected the allegations in a letter to the financial times sanjeev gupta shifted responsibility to green seal capital saying it financed prospective receivables and that green sill selected and approved companies with whom gfg could potentially do business in the future this doesn't ring true because you don't how can you issue an invoice for a particular dollar amount for a particular product at a particular date um and and then say that it's a future transaction by last year pressure was mounting on green seal capital insurers so critical to its business model were getting nervous greensell's main insurer based in australia warned it would not renew green sales policies [Music] you can't expect the insurers to ensure uninsurable credit risks and you know it wasn't as if the insurers just said overnight oh we're not going to renew your premiums the green cell had ample warning the fate of the global finance empire rested on the outcome of an emergency late night court hearing in march this year in sydney just hours before the policies expired greenfield capital urged a judge to force the insurer to maintain coverage the judge declined credit suisse which had billions invested in these greensville products it suddenly discovers oh no there's no insurance underlying this and it has to sort of halt the whole operation so that's the kind of key trigger this year which brings the whole edifice crashing down lex greenseal declined to do an interview with four corners please understand that i bear complete responsibility for the collapse of greensville capital i am desperately saddened that more than a thousand very hard working people have lost their jobs at greensell likewise i take full responsibility for any hardship being felt by our clients and their suppliers and indeed investors in our programs it's deeply regrettable that we were let down by our leading insurer whose actions assured greenville's collapse there are now multiple parliamentary inquiries into the collapse of greenville capital at a house of commons hearing lex greenseal was called to account mr greensteal are you a fraudster no mr connor i have not he's been a brilliant salesman and he's had an incredible ambition and i think we'll find that um he sailed too close to the sun green seal bank has been shut down by the german regulator and the bank's management are now under criminal investigation in germany there's a potential they could be charged with balance sheet manipulation which is sort of no joke i think it carries a maximum three year sentence the demise of green seal capital has plunged sanjeev gupta's empire into crisis stripped of its major funding source gfg alliance is desperately trying to refinance and offload assets but says it plans to keep waiala i've always wanted sanjeev kuptas to succeed if he were to succeed if his plans were to materialize it would have such a positive effect on whyalla and south australia generally the uk serious fraud office is now investigating the gupta family group alliance for suspected fraud fraudulent trading and money laundering its inquiry includes gfg's financing arrangements with green cell capital between them the gupta empire and green sill are now being investigated by the uk's three top criminal investigators for this kind of economic crime so you've got the serious ford office the national crime agency and the financial conduct authority and they could all impose some some heavy penalties people like to believe in magic beans they like to believe that there's somebody out there that has solved finance he was making finance fairer as he jumped in his gulfstream 650 and flew across the atlantic i don't believe that for a second it was just sort of obvious [Music] in bundaberg locals have watched on as the drama unfolds the struggling 80 hectare family farm that inspired lex greenseal to make finance fairer now spans 3200 hectares money the family harvested from greenfield capital has been plowed into the land in a nutshell they've taken hills out and left flat paddocks the stuff that they did is the thing of dreams for for the rest of us mere mortal farmers they've spent a lifetime worth of of of money uh in a number of years where do you think the money's coming from well it's no real secret amongst us we do believe it's come through greensville capital i can't see any other way that that amount of money could come into that business and have been spent in a short period of time sweet potato grower russell mortimer says the green seal farming giant is crushing small family farms it has absolutely devastated our industry hands down the volumes that are being grown and hitting the marketplace and for the price that they're being sold for in the marketplace as yeah it's put a lot of us to the wall they've flooded they've flooded the market yes and continue to do so in the end karma if anything has played out and that's why green hill has gone under the business model wasn't one that worked and it wasn't fair they were speaking to help farmers like myself and others in the industry with these finance scenarios but nothing has come of that they've profited themselves and have not uplifted anyone else with [Music] it [Music] [Applause] [Music] you

2021-07-15 00:04

Show Video

Other news