Greensill: a tale of hubris, hype and greed
The story of Greensill Capital's rise and fall has everything: investment banks, opaque finance, private jets, trophy mansions and the biggest British lobbying scandal in a generation, involving former prime minister David Cameron. The FT charts the rise of Lex Greensill and Sanjeev Gupta and examines where it all went wrong
Filmed by Petros Gioumpasis and Jamie Kennerley. Graphics by Russell Birkett. Produced, directed and edited by Daniel Garrahan
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This is a story of hubris.
This is a story of hype. Greensill over the last eight years has significantly disrupted the way working capital is delivered.
It's one of those stories that's got everything.
Power. Money. The dark corners of the financial world and what goes on in it.
This is a story of Lex Greensill and his company Greensill Capital.
A financier who flew too close to the sun.
It's a story that involves investment banks, politicians.
It's also the story of Sanjeev Gupta.
Steelworks, private jets, trophy mansions, scandal, intrigue.
It's the biggest lobbying scandal in British politics for a generation.
And it's a story that ends in tragedy.
Please understand that I bear complete responsibility for the collapse of Greensill Capital.
Lex Greensill was obviously at the centre of all of this.
He's sort of like this financial Wizard of Oz.
Lex Greensill was the ultimate salesman. He had this rags to riches story of being brought up the son of watermelon farmers in Australia.
Sometimes companies wouldn't pay them fast enough. This would cause financial ruin for his family.
He ends up coming to the UK in his 20s. He started working as an investment banker.
He then left to create his own firm, Greensill Capital, in 2011.
Mr Greensill, are you a fraud, sir?
No, Ms McDonagh. I am not.
Greensill Capital said it was making finance fairer, and helping small businesses get paid faster. It actually did that by using quite an unsexy technique, which is known as supply chain finance.
A supplier will sell something to a company. That company might not pay for quite a long time. The supplier obviously wants to get paid as quickly as possible.
Instead of getting paid by the company, they get paid by a bank or a company like Greensill.
And then the bank will then reclaim that money later from the company and take a cut of the money. A big part of his pitch was that small businesses like my parents would have benefited from having access to the kind of financing that my company is now providing. It became a big story because of the way it was being used.
Problems come when you start dealing with less credit worthy companies. The key accounting trick here is that this transaction is not classed as debt.
It lets companies hide how much debt they really have.
He talked about AI, machine learning, all these buzzwords. How it's all going to make this magically safe.
Some people have questioned whether it was the technology that was the new thing. Or whether it was the smooth, brash, salesman skills of Lex Greensill which enabled him to open so many doors. And sell his financing to so many companies.
Disrupting entire economies takes time. And therefore, a long-term view is critical.
His whole story was central to the company's rise. He'd talk about the red soil of Bundaberg. That's the place he's from. And he'd say, they'd rather be on a tractor than in a suit.
It got him into the corridors of power in UK government. He had access to people like David Cameron, the former prime minister, who would go on to become an employee of Greensill Capital.
In 2018 General Atlantic gave Greensill $250m. A quarter of a billion dollars in investment.
A big New York base. Very highly regarded private equity firm. They've got about $50bn under management. These are the guys that backed Facebook, Alibaba. And what's critical about that is that it paves the way the following year for SoftBank to come along.
They invested 1 and half billion dollars.
SoftBank wanted to follow in the footsteps of General Atlantic by backing our continued growth on a global basis.
The whole thing reaches a whole other scale at that point. He's now this titan of a tech company rather than just a boring banker.
A big part of the story was that they were using artificial intelligence and technology to turn something that had been a boring backwater of finance into something that was much sexier and more exciting. And something that could be branded fintech.
General Atlantic is supposed to be the smartest guys in the room when it comes to tech. The fact that they invest in Greensill seemed to say to people, well these guys are legit.
Really there was very little technology involved in what Greensill was doing. They were relying on third-party companies to provide a lot of the technology.
It was really when he gets this venture capital money to feed his grand ambition. That's when the story really takes off. In 2016 Greensill actually had a horrible year, massive losses. In 2017 it has this big resurrection. It suddenly books $100m in revenue over that. It's incredible. It's investors were looking at this. And they're like, wow, this guy's actually cracked the secret to this stuff. The actual secret behind that was a man called Sanjeev Gupta.
Without Sanjeev Gupta the story wouldn't be the story that we're now telling.
Sanjeev Gupta is a British businessman who was born in India. As a young man he went to Turkey selling bicycles for his father. He then went to Cambridge University in the UK. He was kicked out of university halls for starting his own commodities trading business. That would be the start of Liberty House.
Eight years ago he started buying up steel and aluminium assets around the world from very large steel companies like ArcelorMittal. These are mostly unloved assets so nobody really wanted them. They were sort of seen at the end of their life. He bought these up in very rapid succession and built quite a big company, GFG Alliance.
He said that he had this way of maintaining all the jobs. But at the same time of making the steelworks far more environmentally sustainable. This really kicked off the run of acquisitions around the world. Scotland, Australia, the United States, Europe, and India. He was buying everything. Steelworks, aluminium smelters, car parts factories, you name it.
And people saw him as a sort of saviour of steel. He's saving lots of jobs. Governments liked him. The steel workers liked him. And others were always wary. Where's all the money coming from? Why is he going to be able to do something different that the large steel companies haven't been able to do?
Within the metals industry it raised a lot of questions. People were saying who is this guy?
Greensill was the lender which enabled a lot of this rapid growth through acquisition, because they were providing the finance for it.
As we dug more into Gupta's GFG Alliance we realised it'd been built on financial engineering.
It was turning rusting steelworks into gold plated finance.
While he was trying to turn around a number of these businesses he was still going on the acquisition trail. And snapping up plants and factories around the world. Within a few years Sanjeev Gupta had built this industrial empire with $20bn in revenues and 135,000 employees. But because it was privately owned nobody really knew how it was performing.
He used these supply chain finance techniques from Greensill. But he used them in very aggressive ways. So this financing would usually be based on invoices you have today. Often the financing that Greensill did was based on invoices that didn't exist. Invoices which were going to exist in the future.
It started to emerge that there were problems at some of these businesses. Then he promised that he would consolidate all the steel businesses into a single group, and publish a set of consolidated accounts. That was in 2019. We still have seen no accounts. The GFG Alliance, it's not even a company. It's sort of this umbrella term for a web of all these different companies. And some of them are owned by Gupta. And some of them are owned by his father.
It really is a dizzying array of interlinks. Both from a shareholder perspective. We've got companies that move from one shareholder to the next, to the next, to the next. We have shared directorships with people who are still employees of Liberty, who are directors of companies that Gupta, GFG says they are independent. So it's a huge web. Are these independent companies as GFG and Gupta keep saying? Or are they companies where he has a stronger say than we might think?
In terms of what was Greensill financing. It's kind of a whole mess. We're talking about hundreds of different entities here.
Sanjeev Gupta loved hobnobbing with politicians, and this proved quite fruitful. In lots of countries he got support from the state. Things really started to get tricky last year when there was a downturn in the steel industry. Liberty Steel, his main steel business, had to lay off hundreds of workers in the UK. Sanjeev Gupta starts getting UK government backed Covid loans. So these are loans of government guarantee and it's supposed to help businesses. And he was doing this for Greensill. So there's a £50m pound cap on the money one company is supposed to be able to draw.
By carving his business up into lots of different little companies, Greensill was able to draw hundreds of millions of dollars through this scheme. Now what the Financial Times revealed is that in August last year he bought a £42m house in Belgravia, in his wife's name. This is a huge house. It's a six-storey townhouse. It's one of the most expensive property sales that year.
This is not some kind of ordinary family home. This is a very, very extravagant purchase. And one of London's most expensive areas. The idea that he was buying at that time when he was also receiving government bailout money has really struck a chord with a lot of people.
So this is a man with a real taste for luxury. He's got a number of mansions that he owns, these trophy homes. He really loves flying in private jets. The relationship between him and Lex Greensill and their companies was symbiotic really.
They end up having matching lifestyles. So Lex Greensill owned a lot of planes. Sanjeev Gupta ends up owning planes. Lex Greensill had a plane that matched Sanjeev Gupta's planes. They had the same paint jobs. For a company like Greensill's to have four private jets is deeply unusual. Supply chain finance, it's not a high margin business. I know another guy in the industry. And he once said to me like, Rob, this is a great industry but I fly Ryanair.
It reminds me a bit of Philip Green, the retail tycoon, where people were quite happy to go along with his excessive yacht, glamorous lifestyle when jobs were safe. And pensions were safe. When that was no longer the case the reputation of Philip Green took a massive nosedive. And Gupta is not the household name of Philip Green is, but I think his reputation is going to be heading in a very similar direction.
There's a lot of unanswered questions around trading relationship between Gupta and very closely connected individuals. But also what we've discovered recently Greensill's administrator was having trouble verifying some of the invoices.
There's invoices that Greensill financed for Gupta. And the companies say that they never did any business.
They have never done any business with them.
He said he couldn't have done what he's done without the support of Greensill. Because of the nature of the businesses that he was buying your traditional bank wasn't going to be that keen to finance these acquisitions. So here's where Greensill came in.
It's not just finance. It's not just business. Politics is a huge part of the story.
Jeremy Heywood was one of the most powerful civil servants in the country for years. He worked for Morgan Stanley where he met Lex Greensill and really took him under his wing.
He had the most senior civil servants in Britain. He was the head of the entire civil service. He had the character of great probity, intelligence, and integrity. And yet somehow Jeremy Haywood's head seems to have been turned by this guy Lex Greensill. He convinced David Cameron that he was very smart and he had brilliant ideas.
Lex became an adviser to David Cameron. He had an official business card, which linked him to the prime minister.
Lex Greensill was given a desk inside Number 10. No one quite knew why this guy had free rein throughout Whitehall. He was trying to sell supply chain finance. His ideas only ended up translating into one project, which was a pharmacy scheme.
It seems deeply unusual for a clever banker to be sat in the room with these politicians.
The big question that no one's been able to answer, and Jeremy Heywood sadly died two years ago so he can't answer it either, is why anyone thought this was a better idea than the government simply paying suppliers quicker, which they had the power to do.
To be enmeshed in the corridors of power in the UK. It's totally unheard of.
He had this incredible access. The kind of access that most entrepreneurs starting businesses could never dream of.
And it perhaps speaks to the salesmanship of Lex Greensill that he was able to get himself in the room.
Fast forward a few years and David Cameron had been prime minister for six years. He leads the Remain side of the EU referendum. He loses by 52-48. And he quit straightaway. And then in 2018 he's offered this job by Lex Greensill, who of course he already knows because Greensill was advising him.
There's also another civil servant who was in charge of $40bn of government procurement for Bill Crothers. He also started working for Greensill.
The civil servants are almost as important as David Cameron in this whole story.
There was talk about the business being worth eventually something like $7bn. David Cameron ended up with share options equivalent to something like 1 per cent of the company. David Cameron's investment would have been worth something up to $70m.
I'm sure David Cameron's already quite a wealthy man. But this would have been very lucrative. Obviously, those options that David Cameron had we assume are worth nothing now.
You then have several years where he is going around the world alongside Lex Greensill.
David Cameron, Lex Greensill, they went on a camping trip with the Crown Prince of Saudi Arabia. This wasn't a passive role that David Cameron played in the business. He was opening doors and he was helping Lex Greensill wow people around the world.
He's less than an adviser, more an emissary of influence. Until it all comes crashing down.
Coronavirus strikes. Greensill wanted access the Covid loan schemes. And he was having some difficulty getting approval. David Cameron rang Rishi Sunak. He texted Rishi Sunak, our chancellor.
The government was setting up four or five different debt schemes, in order to help companies that were struggling because of the pandemic. Greensill got no fewer than 10 meetings with the two most senior civil servants in the Treasury.
You think about how desperate companies were. Not many companies had a former prime minister in their midst, who was ringing the chancellor in charge of the nation's finances.
There were all sorts of lobbying scandals here and there. But it's incredibly rare for them to involve a former cabinet minister directly asking his mates, his former colleagues, for a favour.
This whole episode really threatens to tarnish the legacy and reputation of David Cameron. A former prime minister who himself introduced rules around corporate lobbying.
I think he thought this was an opportunity to make a big success in business. We've been trying to reach David Cameron.
The one time I managed to get hold of him on his mobile phone he said can you talk to my office. I said your office has been stonewalling me for two weeks. And he hung up. For someone who said in 2010 the next big political scandal is going to be about lobbying. There's a certain irony there.
Greensill Bank is a core part of this story. This bank is nearly 100 years old. He bought it and renamed it. It's in Brahmin.
German regulators had started looking into how closely linked Greensill Bank was with Sanjeev Gupta.
They were providing large amounts of opaque financing to one person.
The managers of the bank are under criminal investigation for alleged balance sheet manipulation.
You can get three years in prison for this in Germany. It's no joke.
Greensill's trick was to take this area of unsexy finance and turn it into investment securities. They would basically package unpaid bills into securities called notes. They took these notes and then sold them to investment funds. And one of the biggest investors was the Swiss asset manager GAM.
We had Jeremy Heywood earlier. We have Tim Heywood now, who's a British fund manager but he worked for a Swiss firm. But he was providing large amounts of financing to Greensill. And Greensill was using it to fund Gupta. Heyward got suspended by GAM. He put some of these Greensill investment products into funds that let investors withdraw their money daily. But they're actually really hard to sell. A lot of Gupta's debt ended up stuck in the funds.
Credit Suisse are really important in all of this. They set up these supply chain finance funds. Credit Suisse's really rich clients would invest in Greensill stuff.
Greensill was saying it's fine that we're packaging up all of this debt and selling it on because it's all insured. And so it's safe. This is a safe investment. This is a safe asset class. In the summer of 2020 the company that was providing the insurance said, hang on a minute. We're not so sure about this anymore.
Credit Suisse pulled the plug on the funds. And now its clients could be losing billions.
A couple of years back we came across Credit Suisse and the supply chain finance fund in a huge fraud called NMC Health, which even then in 2019 started raising questions as to the validity of a lot of this debt that was in there.
When David Cameron was lobbying the Treasury, the Credit Suisse funds had financed a lot of Greensill's clients that were going bust.
The thing that really tipped Greensill Capital over the edge was the insurance. We find out that there's a hearing going on in court to put this company into administration. That was when it became clear quite how much exposure the company had to Sanjeev Gupta. $5bn of exposure to Gupta's companies. No bank in the world would extend that much credit to Sanjeev Gupta's steelworks.
Gupta's GFG Alliance Group also went to the UK government recently and they did ask for a £170m bailout, which the UK government has actually refused.
We're talking about the corridors of power. People who are driving expensive cars or flying expensive planes. Behind GFG Alliance you've got real people who work in real steel companies, who might be losing their jobs.
Britain's business secretary Kwasi Kwarteng said that the reason the government refused the plea for money were two things. One is the opaque structure of Gupta's GFG Alliance Group. And also because there were concerns that the money might go offshore and not actually stay within the UK.
Gupta's modus operandi has involved making bold promises of renewal and investments. But it's never been matched by the kind of financial transparency that you would expect.
If you ask the workers at his plants they're still taking him at his word. He's come out and he said I'm looking for a long term financing. I'm going to do the best I can. And the workers at the moment are backing that. They're saying, Sanjeev is saying this is what's happening. We believe him.
Someone like Sanjeev Gupta is very appealing. Someone who comes in and says I have a magic formula. I'm not going to fire anyone. You can see why that was quite alluring to politicians. But they are perhaps now learning that if something sounds too good to be true, it probably is.
What's astonishing I think is that a lot of the issues from Credit Suisse problems, questions raised about GFG Alliance, questions about Greensill's business model, questions about Greensill Bank had all been out in the open before David Cameron made those approaches to the Treasury.
This is an incredible fall from grace for Lex Greensill. A man who is celebrated as a financial visionary.
Well this story will ultimately be remembered for its the way that Lex Greensill was able to persuade people that some pretty mundane factoring business was some incredible high-tech solution.
High finance still has the power to confuse or to dazzle most of us. There is a big question here for the regulators. Where were the regulators? Where was the government? Why did so many people jump on the bandwagon of Greensill? There are echoes of 2008 in this scheme.
The subprime mortgage disaster was all about people thinking the complicated financial products, that financial engineering could make bad loans magically safe. It's the same thing here.
When people come along with promises of great investment. Or when they say that they've reinvented an age old form of finance. Or that they can rejuvenate industries. A real dose of scepticism needs to be applied.
This story has such far-reaching consequences. There's a lot of jobs at stake. A lot of people work in the steel-making industry. And their lives are in his hands to some extent now. And that's the really important issue.
It's a good lesson about the hype around technology. The stuff that Greensill was doing is centuries old really. Financing invoices goes back to the Middle Ages. The idea that AI and machine learning could magic away all the risk in it it's just a fantasy.