Tuesday, 10 May 2011

'Phoenix Four' again proves Britain is a de facto kleptocracy

It has just been triumphantly announced by the same UK government Ministry which bungled the investigation of what lay behind 'Amway UK Ltd.,' that four controversial, middle-aged, multi-millionaire British 'businessmen,' Peter Beale, John Towers, Nick Stephenson and John Edwards, have generously agreed to be banned from holding posts as company directors in the UK for a combined period of 19 years http://www.guardian.co.uk/business/2011/may/08/mg-rover-directors-banned-collapse . Yet, 11 years ago, the UK government hailed these reality-inverting, economic alchemists as heros, threw millions of pounds of tax-payers money at them and allowed them to acquire control of 'MG Rover,' the last volume-car maker in Britain. Tellingly, at that time, Messrs. Beale, Towers, Stephenson and Edwards were not multi-millionaires, thousands of manufacturing jobs at MG Rover were under threat and the UK government was seeking re-election.
Immediately prior to 2000, MG Rover had been owned by BMW, but the British subsidiary (based in Coventry) was bleeding to death financially and posed a serious threat to the future health of its German parent. Consequently, the directors of BMW happily accepted a token payment of just £10 for MG Rover when it was transferred into the ownership of 'Phoenix Venture Holdings Ltd.,' a new company created by Messrs. Beale, Towers, Stephenson and Edwards. Furthermore, BMW supplied an interest-free loan of more than £400 millions to 'Phoenix,'  thus fulfilling the former owner's legal obligations to pay compensation if the technically-insolvent company collapsed within 3 years of its sale, leaving the entire MG Rover workforce redundant.
In 2000, UK government Ministers chose the attractively-named 'Phoenix' offer, because its authors appeared like knights in shining armour, and told wide-eyed senior UK trade officials, fearful MG Rover workers and trade-unionists a strangely-familiar fairytale that they all desperately wanted to believe was true. Messrs. Beale, Towers, Stephenson and Edwards had a risky, but viable, long-term plan of immediate salvation and future expansion involving the creation of  a new range of luxury cars and a partnership with another overseas (possibly Chinese) volume-car maker. In the cruel, adult world of quantifiable reality, a rival consortium led by Jon Moulton, had offered to buy MG Rover, but then immediately close its demonstrably-unprofitable volume-car production and concentrate on preserving and expanding the manufacture of its demonstrably-profitable MG sports car range. This realistic plan (which was proposed by a group with the poorly-chosen title of 'Alchemy Partners') would have destroyed thousands of jobs and damaged the sitting government's chances of re-election, but it probably would have bought MG Rover time to grow back to volume-car production.
The sitting UK government was subsequently re-elected (whilst BMW profits and share prices rose), but, in 2005, MG Rover collapsed owing £1.3 billion, and 6500 British workers lost their jobs. A civil investigation pursued by a team of accountants and lawyers, and which, unbelievably, took more than 4 years and £18 million of tax-payers' money, produced a mammoth 800 page report which concluded that Messrs. Beale, Towers, Stephenson and Edwards, along with an associate, Mr. Kevin Howe, had effectively ruined MG Rover whilst creating a labyrinth of 33 companies which they used to maintain an illusion of profitability and falsely justify their own, ultimately, unjustifiable bonus payments. Thus, avoiding tax, and transferring $42 millions pounds of the insolvent MG Rover's liquid assets to themselves. The UK Serious Fraud Office (which is part of the UK Attorney General's Office and which was not involved in the civil investigation) subsequently decided that it would not pursue any criminal investigation, apparently, because it would be impossible to prove criminal intent.However, given the facts of the case (which included the premeditated destruction of material evidence) this SFO decision turns logic on its head. Furthermore, it has never been fully-explained why the SFO was not involved from the start.
Today, the profitable MG brand is owned by a Chinese company which has physically removed the MG production line to China. Although it all sounds like the plot of a James Bond film, this bargain acquisition was facilitated by the seductive, Dr. Qu Li of 'China Ventures Ltd.', http://www.chinaventuresltd.com/ . Previously, the appropriately-named Dr. Li had been paid £1.6 million by MG Rover to act as a 'consultant' http://www.dailymail.co.uk/news/article-1213101/Dr-Li-1-6m-lover-shamed-Rover-boss.html .
You can fool all of the people some of the time and some of the people all of the time, but you can't fool all of the people all of the time (apparently with the exception of UK Ministers, senior trade officials and fraud investigators). 
David Brear (copyright 2011)

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