The men who bought MG Rover for £10 and subsequently made millions for themselves on Tuesday were accused of “financial sleight of hand” and “manipulative bookkeeping” in the way they are running the company.
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According to the Daily Telegraph, John Towers and Peter Beale – two of the original four-strong Phoenix Consortium – admitted that a £10 million loan note handed to them at the time of a restructuring three years ago had now been paid out, swelling the millions they have made from the company.
The paper said the pair were giving evidence in a 90-minute session with MPs on the House of Commons trade and industry committee, which is investigating the state of the British car industry.
The London-based newspaper, which has been scrutinising MG Rover’s finances for months said the Phoenix four – which also includes Nick Stephenson and John Edwards – have been heavily criticised after restructuring MG Rover’s assets into a group structure called Phoenix Venture Holdings, in the process netting themselves millions of pounds, including a £13 million pension fund.
Beale reportedly said each man had risked much by buying MG Rover – they invested £60,000 each to buy MG Rover, receiving a £427 million soft loan from BMW in return, and £500,000 each to buy separately MGR Capital, Rover’s finance arm.
According to the Daily Telegraph, Beale said: “It would have been personally devastating for me if it had gone wrong in the past two years. People like John Towers and Nick Stephenson – they had a huge reputational risk taking on this business. They have had highly successful business careers.”
After an exchange on the amount of money the four directors have received and corporate governance, committee chairman Martin O’Neill reportedly said: “You are reviewing yourselves. You are judges and jury on your own future. The scale of your individual achievements is being undermined by what appears to be financial sleight of hand. Nothing illegal, but manipulative bookkeeping practices, so you are doing well and everyone else is just muddling along.”
According to the paper, Beale replied later: “I take issue with financial sleight of hand. It is the right way to run the company – we are very proud of it.”
The Daily Telegraph said the pair revealed that the Phoenix four are the only shareholders in some of MG Rover’s prized assets which include Studley Castle (a West Midlands conference centre), Phoenix Distribution and Powertrain, its engines plant.
Phoenix’s other assets, such as the car-making operation, are controlled through a share ownership structure which includes the workers and dealers, the report added.
The Telegraph said Towers, who at times hit the table to emphasise his points, admitted frustration: “We are a private company, but sometimes I think we are between a private company and a piece of national heritage.” In an angry intervention, he reportedly said that MG Rover was saved by the four men when liquidation officials had arrived from BMW to close it.
“At the end of the day there were four individuals who were prepared to put their hands in their pockets and save that business,” Towers said, according to the Telegraph, adding: “Not the banks, not the government and not the financial institutions. Without that happening, 6,500 and 25,000 indirectly would have lost their jobs. Four years later, it is quite easy to forget that.”
According to the Daily Telegraph, Towers, who said he was paid £282,000 a year, said Phoenix would appoint an independent non-executive director by year-end to ease criticisms about corporate governance.
