Back in that sunny summer of 2014, there was some really strong live sport on for financial journalists. It was the infamous appearance, on Tuesday 17th June, of Derek Sach and Chris Sullivan at the Treasury Select Committee (TSC). It was in this session that Derek Sach, in his final public outing for RBS, explained that the Global Restructuring Group (GRG), used to dismantle perfectly healthy companies, was not a profit centre. Of course, everyone knew he was lying, and he didn’t last long after that.
But what became of GRG? A few weeks after that spectacle at the House of Commons, RBS announced it was shutting GRG and getting rid of Derek Sach. That is all very well, but it hasn’t made the litigants disappear. One example of an entrepreneurial property developer in the North West, Stuart Wall of Opal Property Group, is a court case due to be heard in October 2017 valued at £400 million. Strangely enough, today’s London Evening Standard suggests the case is now worth £700 million. That number probably includes RBS’s astronomical costs. The same article suggests the case could be worth between £114 m and £669 m, a very wide range indeed.
Anyone assuming that the shenanigans at GRG were just one bad apple, Sach, running around like a rhinestone cowboy is naive. GRG, and its cohort, West Register, had been going since the recession of the early 1990s, as Ian Fraser’s epochal book “Shredded” makes clear. They were the two halves of the shell: GRG took on the loan book of a “bad company” and West Register took up the equity and ownership of properties. Sachs was a former director of West Register, which is actually a string of separate entities around the UK.
So who might have helped Sach? Chris Sullivan? Nathan Bostock? Probably. But who underneath did the actual torching? Well, it was someone known euphemistically as a “relationship manager.” These relationship managers, in the words of Chris Sullivan (from the Treasury Select Committee), helped to identify which businesses were ripe for harvest:-
It will be formed by a combination of the relationship manager who will see an event, some deterioration in business performance, a particular contract that is lost, excessive use of overdraft, excessive limits, behaviour that is generally— [interruption]
It would be very easy to blame the senior managers, but the culture is carried out by the boots on the ground. In fact, another bank, HBOS, took the decidedly cowardly option of blaming “bad apples” / “boots on the ground” on the Reading Six fiasco which resulted in criminal convictions and porridge for their staff.
It might be quite interesting to look at where some of these relationship managers are now residing. Step forwards, Hudson Advisors. They’re a clever bunch of people who manage property loans belonging to Lone Star Funds, an American company.
Strangely enough, several former GRG alumni are now peddling their wares over at Hudson. Some examples include Mark Anderson and Rob Gray. Not mere foot soldiers, but quite senior managers, formerly of GRG, now specialising in Hotels and Leisure over at Hudson.
Remember that TSC outing for Sachs and Company? It took place in June 2014. In May 2014, Gray hightailed it out of GRG in the direction of Hudson. A few weeks after the TSC, in September 2014, Anderson followed his example, quitting GRG for Hudson.
How quickly the canaries can fly out of the mine when trouble is in the air. How quick RBS were to shut GRG in August of 2014, even though they believed it did nothing wrong.