panorama.s2014e44.did.the.bank.wreck.my.business
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00:00As the government warns of another economic downturn, Panorama investigates how our state-owned
00:08banks treat British businesses.
00:11They were absolutely brutal.
00:13Their only goal was to basically, how fast can we get our money back?
00:18One high street giant accused of wrecking companies and refusing to come clean about
00:23it.
00:24I think RBS's attitude has been appalling really.
00:27It seems they're more interested in covering things up and continuing what they're doing.
00:32While another is in the firing line for failing to support loyal customers when they need
00:37it most.
00:38When times were starting to improve, the carpet was literally swept from underneath us.
00:43We reveal the network of bank advisors who stand to profit when businesses go under.
00:49It's jobs for the boys and then don't worry because we'll make sure money's available
00:52to pay you.
00:54Can we ask, has trust in the banks we all spend billions saving been broken?
01:00Good companies appear to have been put at risk or in some cases destroyed by banks'
01:05behaviour.
01:24Meet one of the country's most successful businessmen.
01:28Lawrence Tomlinson made his name making racing cars.
01:35So here we are in Ginetta.
01:37Apparently we're the third largest manufacturer of race cars by volume in the world.
01:41So we're creating really good jobs for people here in engineering and apprenticeships and
01:46about 80% of our cars now go abroad.
01:51He's so successful that in 2013 he became the government's entrepreneur-in-residence,
01:57a job which led him to look at how banks deal with small and medium-sized businesses.
02:04He was disturbed by what he discovered.
02:08Viable businesses started at the beginning of what seemed to be a process and ended up
02:13destroyed at the end.
02:14I mean, it's just absolutely abhorrent what's happened to some of these people.
02:18But also the way they've been dealt with, they've just been dealt with in a terribly
02:24dispassionate manner.
02:28His findings were published in a scathing report.
02:32His harshest criticism reserved for RBS, the bank we bailed out for £45 billion.
02:47One of its customers was Birmingham-based Surinder Hullate.
02:51There are five million small-to-medium-sized businesses in the UK and he used to own one
02:56of them.
02:59Until two years ago, Surinder was the proud owner of commercial properties here in the
03:04city's jewellery quarter.
03:08If I'm coming this way, I rarely come past a property.
03:12It just brings back so much emotion.
03:15I've stood there, I've worked hard on that building, put my blood, sweat and soul into
03:21that property.
03:22I know it's only a property, but it was work for me for some two, three years.
03:28And it was an enjoyable experience, but unfortunately RBS have taken it away from me.
03:34His property business was financed by a loan from RBS.
03:38What happened next is disputed.
03:42Surinder says he made all of his interest-only repayments on a loan of nearly £1.4 million.
03:50The bank says he didn't repay any capital or secure refinancing elsewhere.
03:56After his loan ended, RBS moved him to a special division within the bank, the Global Restructuring
04:03Group, or GRG.
04:06The whole purpose of GRG is to help customers return to financial health and then put them
04:11into mainstream banking.
04:12If that can't be achieved, then you obviously have to look at then how the bank protects
04:16its lending.
04:19For Surinder, it was the start of a process which would end with him losing his business.
04:26How did it affect you financially when you entered to GRG?
04:29Massively.
04:30Massively.
04:31It basically just crippled me.
04:33GRG, instead of being a place where I thought, I was told by my bank manager, would assist
04:38me, would encourage me, would help me advance and bring me back into mainstream, those were
04:43his words.
04:44It, in fact, ruined my business.
04:47The bank increased Surinder's interest payments by 2% and slapped on additional fees.
04:54That would have meant around an extra £30,000 a year.
04:58I just couldn't believe that this was happening to me.
05:01You know, I was a straightforward businessman, I'd worked hard all my life, and now here,
05:07they sat here quite smug and saying, look, this is the way it's going to go down.
05:14It's exactly a year since the Tomlinson report was unleashed on the banks and the government.
05:21Of course I'm very alarmed because, you know, good companies appear to have been put at
05:26risk or in some cases destroyed by banks' behaviour.
05:32Lawrence Tomlinson concentrated on RBS.
05:36But is there more to the story?
05:39RBS isn't the only bank that we bailed out.
05:46The government spent £21 billion saving Lloyds Banking Group from going under.
05:53Lloyds says the Tomlinson report has nothing to do with the way it treats businesses.
05:59Our goal is to support businesses, you know, small and medium-sized businesses in particular
06:04are really important to us.
06:08But that's not what some of their customers say.
06:14When Ross Finch and his family wanted to invest in a hotel in Stockport, banks were queuing
06:19up to lend money.
06:23The company went with Lloyds because they promised a long-term relationship.
06:27They borrowed £11.6 million.
06:31What really stood out about Lloyds at the time is they said they were different.
06:37They said, you know, we're different, we're not like the other banks, we want to provide
06:41you with a relationship, we see it as a partnership.
06:47The bank even featured Ross' business in one of its corporate videos.
06:51I think the differentiator in this deal was, first of all, our enthusiasm right from the
06:56start.
06:57Because of the added value that we brought to the process it became more about wanting
07:01to work with us.
07:02They were very, very keen on a relationship and that's exactly what they've been given.
07:08Ross says they never missed a loan repayment, but then Lloyds halved their overdraft.
07:15They'd reduced the overdraft limit at actually the worst time of the year that you could
07:19do that.
07:20We explained to them time and time again that this was, in effect, suicidal.
07:26It was unworkable for the business and why would you want to do that?
07:30The company exceeded the lower overdraft limit, so Lloyds transferred it to their business
07:37support unit.
07:39Ross says it was anything but supportive.
07:42The bank piled on fees and extra interest.
07:45He says an extra £298,000 in one year.
07:51Lloyds says Ross' allegations run true, but they can't discuss details because of legal
07:56proceedings.
07:58Your business support unit levies extra interest and heavy fees rather like GRG does, doesn't
08:04it?
08:05No.
08:06Our business support unit will sometimes charge fees that are appropriate, that are reflective
08:10of cost, but always with a view to what the customer can afford.
08:14More than two-thirds of customers get back to viability to be treated like normal customers.
08:20That's over 1,000 this year alone.
08:25Then why would a bank damage a viable business that's making its repayments?
08:32We've spoken to a banking insider who worked for RBS in its global restructuring group.
08:40The whistleblower, whose identity we're protecting, says after the financial crash of 2008, it
08:47was all about getting loans off their books and cash in from the customers.
08:54The whole focus of this team was to maximise profitability.
08:58And the customers were between a rock and a hard place.
09:02They were not dealing with the comfortable relationship managers that they had been dealing
09:07with before the recession.
09:09And customers were basically bullied and mistreated.
09:15Precisely what the government's entrepreneurial residents had reported on.
09:20But there was more.
09:22Laurence Tomlinson didn't just accuse RBS of wrecking viable businesses, he explained
09:27how they were doing it.
09:29He said they were using questionable property valuations to put those businesses in trouble.
09:41Sarinda Hullade says that's what happened to him.
09:46In 2011, his commercial properties were valued at around £2.4 million.
09:53When he was put into the global restructuring group a year later, the bank revalued them.
09:59It said they were now worth £1 million less.
10:03But the bank wouldn't show him the paperwork.
10:06I asked them to see this valuation and they said to me, you can't see it.
10:11They would not give me that information and to this date I still don't have that valuation.
10:18Sarinda was now in trouble.
10:21His debt had been around 55% of the value of his properties.
10:26With the new valuation, it was almost 100%, well above his borrowing limit.
10:33They basically sat down and gave me some options.
10:38And the options were to pay them £400,000 within 28 days, to give them a percentage
10:44of my business or to sell my assets, you know, and they were absolutely brutal.
10:52Their only goal was to basically, how fast can we get our money back?
10:59RBS says property prices were falling and it exercised significant forbearance, presenting
11:05a number of options for the restructuring, refinancing and repayment of Sarinda's borrowings,
11:11none of which were accepted.
11:14His complaint has been dismissed by the Ombudsman.
11:19But is RBS alone?
11:21Not according to a lawyer who acts for businesses in dispute with their banks.
11:27Alison Loveday says Lloyd's customers have also been shocked by low valuations.
11:35After examining a number of cases, we did coin the term, the Lloyd's effect, because
11:40we could see the valuations were hammering the property value down as much as 50%.
11:4650%?
11:47Yeah, 50%.
11:48So, a dramatic reduction in circumstances for some properties where it really was very
11:54difficult to understand any fall.
11:56If we undervalue a property, and indeed if a property is sold for less than its worth,
12:01we'd just be increasing the losses eventually on that particular situation for the bank.
12:07So it wouldn't make commercial sense.
12:09Maybe you wouldn't care so much about those losses if the taxpayer was bearing a chunk
12:13of them and if you were under pressure to reduce your loan book.
12:16Our goal as a bank is to help Britain prosper.
12:20The government as a shareholder would expect nothing more than us to run our business professionally
12:26and to seek to have long-term sustainable practices.
12:37But when businesses get into trouble, there's still money to be made for the professionals
12:42who work with the banks.
12:44Take this car auction in Leeds.
12:46It's one of the biggest in the country.
12:49And it's traded profitably for years.
12:51Were there bargains?
12:53Yeah.
12:54Depends what you're after.
12:56Did you buy anything?
12:57Not today.
12:58Not today.
12:59What I'm after is on there.
13:00Did you buy anything?
13:01Yeah.
13:02A few bits and pieces, yeah.
13:03Cheaper than a dealer?
13:04Yes.
13:05Definitely.
13:09Keith Elliott built the business from scratch.
13:12When it had a cash flow problem, the bank recommended accountants PricewaterhouseCoopers
13:18to help.
13:19They recommended and put forward a director of PwC.
13:22We met, and I got on tremendously well with him, and indeed, I was very excited.
13:26And I rang the bank the same day and thanked them for their introduction.
13:32Keith was paying, but the paperwork made it clear that PwC would be acting mainly for
13:38the bank.
13:39And PwC's review of Keith's business made gloomy reading.
13:44Lloyds agreed to lend another £2 million to keep the auction business going.
13:49The bank immediately ordered Keith to sell up.
13:53What he didn't know was that another part of the bank was trying to buy his company.
13:59These documents which we found out were on the Data Protection Act show that at the time,
14:05Lloyds Development Capital were discussing taking over the business.
14:08At the same time as they're telling you to sell it?
14:10At exactly the same time.
14:11This is October.
14:12The date is October 5th, and September 5th, the month beforehand, then we've got the bank,
14:18one division of the bank, saying, sell this company vigorously and robustly.
14:21If that's not a conflict of interest, I don't know what is.
14:25Three months later, the bank pulled the plug.
14:28Keith was pushed out without getting a penny, and PwC became the administrators, pocketing
14:34£450,000 in fees.
14:37And what about Lloyds?
14:41Keith's discovered they got a stake in the auction business when it came out of administration.
14:46So the bank ended up with a slice of his old company.
14:51I met some guys that you really wouldn't want to do business with, but these are the worst.
14:54These are bad guys.
14:56You don't want them in your life at all.
14:59Keith is now suing Lloyds and PwC.
15:04The bank says it will robustly defend the proceedings, as they have no basis in fact.
15:11Lloyds says the allegations have been rigorously examined by the bank and outside parties,
15:17and no evidence of any wrongdoing has been identified.
15:23Lloyds also says the financial problems of the auction business were exacerbated by Mr
15:28Elliott's extravagant spending.
15:31But Keith's case has already been brought up in Parliament.
15:35What I want to do today is tell the story of the theft of a profitable York company
15:39by the mafia.
15:40And I don't mean the criminal mafia we often speak of, I mean Britain's dark-suited mafia,
15:47which in this case is represented by Lloyds Bank and PricewaterhouseCoopers, both acting
15:53in collusion.
15:56PwC say they reject and refute these claims.
15:59They say Mr Elliott's legal action is wholly misconceived and will fail.
16:06His attempt to have PwC removed as administrator was rejected by a judge.
16:12They say other independent third parties also found no evidence of any wrongdoing by PwC.
16:20But lawyer Alison Loveday says the professionals are just too close to the banks.
16:26Effectively, the professionals are facilitating the process, so that can include the valuations,
16:33that can include lawyers, insolvency practitioners and accountants.
16:37And given the volume of business that the banks effectively distribute, then we see
16:44that they do have a real stranglehold over some of the firms involved.
16:51RBS customer Sarinda Hullate has discovered for himself how these relationships can work.
16:57After his properties were revalued by the bank, he stopped paying interest.
17:02The properties were later sold by receivers for £1.2 million.
17:07RBS told us it made a loss of more than £300,000.
17:14Sarinda's been in dispute with the bank ever since and has used the law to force it to hand over documents.
17:22As you can see, a lot of the documentation is blacked out and it's really very hard to make out.
17:28But thankfully, if you sort of hold it up to the light, you can sort of make out the text just behind.
17:35And this passage is quite interesting. It actually refers to me when I'm about to go into receivership.
17:40And it says here that we can use colliers in Birmingham as they are likely to act quickly and take a hard approach to the customer.
17:49So they wanted someone who was going to be hard on you?
17:51Yeah, I think they obviously had a good relationship with colliers, but I really didn't stand a chance.
18:02Colliers told us it complied with its duty to recover debt owed by selling the two properties on which the RBS loan was secured.
18:10It says it prides itself on delivering a professional, fair and independent service.
18:17So what does RBS say about that email?
18:20We've got an internal email which shows an RBS employee saying that they wanted a receiver that would take a hard approach to a customer.
18:27Do you think that's appropriate?
18:29Well, in the way you describe it, no, it's not appropriate in that sense.
18:32But I also accept the difficult job that a receiver or an administrator has actually got to carry out.
18:37And those are tough decisions.
18:39But I would in no shape or form condone any inappropriate behaviour by anybody acting on behalf of RBS.
18:44That's not part of our agenda in supporting customers.
18:50The bank says GRG helped minimise losses where it could and successfully turned round the vast majority of businesses.
19:01RBS also paid one of its go-to law firms, Clifford Chance, £1.5 million to look into the allegations made by Lawrence Tomlinson.
19:12And here's the result, a 60-page report which has a few gently worded criticisms of RBS
19:18but clears the bank of the central allegation that it was systematically wrecking businesses.
19:25Clifford Chance found no evidence of artificial down-valuations of businesses by RBS.
19:35And the company's fightback continued this summer.
19:39Deputy Chief Executive Chris Sullivan and GRG boss Derek Saich gave evidence to MPs.
19:45The burning question? Was GRG making profits for the bank?
19:50Are GRG acting as a profit centre or a cost centre?
19:54A cost centre. In the terms you've just asked, there would be a cost centre.
19:58So GRG is not, as is commonly supposed, a profit centre?
20:01It is absolutely not a profit centre.
20:04In the bank?
20:05Absolutely not.
20:06It is inappropriate to describe this activity as has been widely described.
20:11Totally inappropriate.
20:13The bank said troubled businesses cost it more than £2 billion between 2008 and 2013.
20:20But was RBS telling Parliament the full story?
20:25A month after RBS bosses appeared before MPs, they changed their minds.
20:30Their evidence had been incomplete.
20:33GRG, it seems, was a profit centre after all.
20:39RBS has also admitted that the Clifford Chance report wasn't as independent as the bank had claimed.
20:46Their evidence was willfully obtuse.
20:48Some might say it was misleading.
20:50But everybody would have to agree that it was the opposite of what you and I mean by straightforward.
20:56If this is how RBS deals with a parliamentary committee,
20:59how much reliance can regulators and the bank's customers place on the way they're being treated?
21:08And the banker who apparently misled MPs?
21:10Just weeks later, Chris Sullivan was given what RBS calls a fixed share allowance.
21:16It's worth almost half a million pounds.
21:19Chris Sullivan and Derek Sage have already put up their hand and written to the Treasury Select Committee
21:24and apologised unreservedly for any mistakes they made.
21:28Mistakes? Andrew Tyree said they were willfully obtuse.
21:31And they've made that perfectly clear to Mr Tyree.
21:34They had no intention to intentionally mislead the Treasury Select Committee.
21:38We take it very seriously in terms of RBS's support
21:41and the support of the process in terms of the Treasury Select Committee.
21:44If this mistake was taken seriously,
21:47why, eight weeks later, was Chris Sullivan awarded a bonus of £467,000?
21:55Well, because you have to look at somebody's overall performance.
22:00And just because somebody makes a mistake,
22:04is that something that we need to take into account in that respect?
22:10The banks tell us placing businesses into receivership or administration is a last resort.
22:16But have they found another way to get unwanted businesses off the books?
22:22Remember Ross Finch and his hotel venture in Stockport?
22:26Three years after his company was placed in Lloyds Bank's business support unit,
22:31he says he was contacted by his bank manager.
22:34The news wasn't good.
22:38I got a phone call when I was on my way into the office
22:41from one of the people in Edinburgh that we'd been dealing with
22:44and who said, I've got to read you a statement.
22:49And at which point they said, we are selling your loan,
22:53we expect the transaction to complete today.
22:57Lloyds, who'd made a video about their great relationship with Ross' business,
23:02had washed their hands of it without any prior notice.
23:06His loan had been sold to a US private equity company called Cerberus.
23:11Ross came here for a meeting at their Mayfair office.
23:15I can only describe the atmosphere as like nothing I've ever experienced
23:19in any formal business arrangement before now.
23:22The main man, who's the co-managing director,
23:26totally disinterested in the business itself.
23:29He was very aggressive.
23:32And when I expressed disbelief about their behaviour,
23:35he said, well, look, what you've got to understand is I am a prick.
23:39Which... I couldn't believe that he would actually say such a thing.
23:47Lloyds says, under its terms and conditions,
23:50it's entitled to transfer business loans to third parties.
23:54Aren't your customers going to be amazed to learn
23:57that they can be transferred to another company without their consent?
24:01It is with their consent, because it's part of the customer agreement.
24:05The second thing is that that transfer is subject to very careful approval.
24:10It's a list of potential purchasers...
24:13OK, let's talk about that approval process.
24:15Let's talk about that approval process.
24:17What steps do you take?
24:19One other thing, Andrew, to say about that,
24:21that they are obliged to comply and follow the terms and conditions
24:27of the loan as it was originally made.
24:30So this is not a complete change in relationship.
24:33It is one that carries on in the way that we would expect
24:37to have managed that loan ourselves.
24:41But for Ross, the relationship did change.
24:45His Lloyds overdraft ended
24:47and Cerberus, Ross's new lender, doesn't do overdrafts.
24:52Within months, he had to put the business into administration.
24:56This was a solid, strong, resilient business
24:59that had got through the recession and the difficult economic times.
25:03But to them, all of that know-how and all of that commitment had no value.
25:10Cerberus says the business was losing money
25:13and Ross did not present a viable business plan.
25:17Cerberus is socially responsible and provides professional management.
25:22The hotel is still serving guests and providing jobs while in administration.
25:30In the last two years,
25:32Lloyds has raised billions flogging loans to Cerberus.
25:37We saw a significant number of clients who were with Lloyds
25:42who had an ongoing relationship, they thought,
25:46and then out of the blue they're told
25:48that their loan has been assigned to Cerberus.
25:51Cerberus have a very particular reputation
25:54as aggressive asset managers.
25:59We've heard from several people that Cerberus is a pretty tough organisation
26:03with an aggressive reputation.
26:05Do you accept that description of Cerberus?
26:08Cerberus are one of a large number of providers that we work with.
26:13You've sold billions of loans to them.
26:15We check to make sure that these organisations
26:18are doing the job that they're asked to do
26:21and that they do behave in a responsible way.
26:25RBS says it's acting responsibly too.
26:28It's decided to close down its business restructuring group, GRG.
26:34But how has the bank treated its toughest critic?
26:38Lawrence Tomlinson has found out for himself
26:41just how easily RBS can turn on customers.
26:45The deputy chief executive of the bank, Chris Sullivan,
26:49wrote to me and said they were cancelling all my accounts,
26:53both my business accounts and my personal accounts.
26:56Did they give a reason?
26:58Yeah, they said it's down to a breakdown in trust.
27:01They even went so far as to saying that I would have to pay back my mortgage.
27:06Really? Your mortgage? Absolutely.
27:10RBS had to back down on the mortgage,
27:13but Lawrence Tomlinson has had to move everything else to another bank.
27:18It's just really designed, I think, to cause me maximum stress and problems.
27:22But you're the entrepreneur-in-residence at a government department.
27:26I would have thought you'd be bomb-proofed.
27:28Well, clearly I'm not bomb-proof.
27:31RBS says it closed down Lawrence Tomlinson's accounts
27:35because of a long-running dispute
27:37and that it had nothing to do with his critical report.
27:43The government has referred RBS to the Financial Conduct Authority.
27:47It's due to report in the new year.
27:49For far too long, we've had a handful of banks
27:52exercising control of the business lending market
27:55for small, medium-sized companies.
27:57It's very unhealthy, and the relationship was a very unbalanced and unfair one.
28:03Business people need to know banks won't turn on them when times get hard.
28:09Our fathers, forefathers and people who've come before
28:13have seen the bank and the bank manager as a trusted relationship.
28:17You can no longer trust that relationship.
28:20They've taken advantage of it.
28:24Our economic recovery needs businesses,
28:27and businesses need banks they can trust.
28:31Right now, that trust is in short supply.
28:42Coming up at ten, as the government prepares to release a report
28:45into what the security services knew about the killers of Lee Rigby,
28:48the Home Secretary announces tougher measures
28:51to tackle homegrown terrorists and radicalisation in schools and colleges.