Who is Australian billionaire Lex Greensill?
A fleet of private jets, unparalleled access to the corridors of power, an honour bestowed by royalty, and stratospheric wealth — Australian Lex Greensill was every inch the corporate titan.
With a company valued in the billions of dollars, Mr Greensill
mixed with the rich and powerful on a grand scale, even calling one of the
world's richest men his mentor, and a former British prime minister his
employee.
It was a lifestyle that a boy from Bundaberg could normally
only dream of living.
Yet many Australians had never heard of Lex Greensill until
the company he founded came crashing down, sparking one of the biggest
international financial scandals since the global financial crisis.
The collapse of his firm, Greensill Capital, has become a
scandal in the United Kingdom, where it has prompted multiple parliamentary
inquiries and fraud investigations.
Its downfall is threatening the business empire of another
billionaire, steel baron Sanjeev Gupta — putting tens of thousands of jobs at
risk across the globe, including in Australia.
Four Corners has investigated how companies owned by Mr
Greensill and Mr Gupta, both politically connected men of soaring ambition,
used financial dark arts to conjure extraordinary amounts of money, seemingly
out of nothing.
Forensic accountant Stephen Clapham said there were red
flags early on, but people wanted to believe the hype.
"He's been a brilliant salesman, and he's had an
incredible ambition. I think we'll find that he sailed too close to the
sun," he said.
Now 44, Lex Greensill grew up on a modest family farm in the
central Queensland town of Bundaberg, renowned for sugar cane and Bundy rum.
His parents grew cane and melons on about 80 hectares and —
the way Mr Greensill tells it — the family lived hand-to-mouth as his parents
waited, often for months, to get paid for their produce.
"Where did the inspiration for Greensill Capital come
from? In fact, it came from the adversity that my parents, our family, endured
being farmers in country Queensland," Mr Greensill would later say.
"Greensill was always designed to fix that problem, to
make finance fairer."
Although his signature outfit is a navy blue suit with
matching tie, he reckons he only dressed in the corporate garb under
sufferance.
"I'm actually a farmer," Mr Greensill boasted
after finance made him a fortune, claiming he was never more at home than
behind the wheel of a tractor.
But not everyone buys the folksy story.
For people who knew Lex Greensill growing up, such talk
prompts wry amusement. They say he was about the only young man in town who
chose to wear a suit.
"I think he's lucky to know one end of a tractor from
another. As far as I'm aware he had little to do with the family farm growing
up and was more interested in the books," according to neighbouring farmer
Russell Mortimer.
But there is one thing the Bundy locals agree on: Mr
Greensill was always destined for life beyond the farm, and wider horizons than
Bundaberg.
After graduating from Queensland University of Technology,
Mr Greensill worked briefly as a lawyer and tech entrepreneur before moving to
the United Kingdom and getting an MBA.
While at investment bank Morgan Stanley, Mr Greensill made a
friend who would catapult his career: Jeremy Heywood, a doyen of the British
civil service and one of its most senior officials, who was on secondment to
the bank.
"Lex Greensill managed to persuade Jeremy Heywood, one
of the very top-most senior civil servants in this country, that he was a kind
of miracle child with this miracle product," says Susan Hawley, executive
director of UK research organisation Spotlight on Corruption.
Jeremy Heywood was appointed as cabinet secretary, the
highest civil service position in the UK, in early 2012.
Almost immediately, Heywood made Mr Greensill an adviser to
conservative then-prime minister David Cameron, handing him an office in the
prime minister's official residence, the heart of British political power.
"I think my only claim to fame is being the only boy
from Bundaberg ever to have an office at number 10 Downing Street here in
London," Mr Greensill would later say.
Ms Hawley is scathing about the arrangement.
"I mean, generally big banks in the UK have a lot of
access to government — regular meetings — but no-one has an office in the prime
minister's ministry," she told Four Corners.
"No-one has a [business] card saying that they're the
prime minister's special adviser. This is an absolutely unparalleled level of
access."
While Prime Minister, Mr Cameron adopted a plan from Lex
Greensill to help small businesses get credit.
It was a version of what's known as supply chain finance —
the core business of his newly launched firm, Greensill Capital.
In 2014, the fledgling start-up bought a defunct German bank
that had gone under during the global financial meltdown and promptly renamed
it Greensill Bank.
It then used that bank to buy the first of what would become
a fleet of private aircraft.
Despite the lavish spending, Greensill Capital appeared to
be struggling.
In 2016, it posted a loss of more than $62 million and its
liabilities exceeded assets by about $95 million.
But its fortunes were about to change, thanks in large part
to a relationship Lex Greensill forged with another young entrepreneur — the
budding metals magnate Sanjeev Gupta.
The Gupta Family Group, or GFG Alliance, needed finance.
Greensill Capital needed business. They came together like hand and glove.
Greensill Capital raised billions of dollars in loans and
credit for GFG Alliance as it bought steel mills, aluminium smelters, and other
assets across the world, forging a sprawling empire that eventually employed
35,000 people.
The fees and the sheer volume of business transformed
Greensill Capital from a start-up into an established business that attracted a
bevy of blue-chip clients, including Airbus, Ford, Vodafone, and Telstra.
As their fortunes rose in tandem, both men were feted by the
English establishment.
After rescuing a series of steel mills from the north of
England to the United States and Whyalla in South Australia, Sanjeev Gupta was
hailed as a business genius — "the saviour of steel".
Lex Greensill also received accolades. In 2017, Prince Charles
bestowed on him the title Commander of the Order of the British Empire for
services to the economy.
In 2018, Mr Greensill's relationship with David Cameron came
full circle.
The former Conservative leader joined Greensill Capital as
an employee — hired for his contacts and influence and handsomely rewarded with
a salary he would later confess was far more than he earned as Britain's prime
minister.
Befitting his status, the boy from Bundaberg now resided in
a stately country manor in an English village, and his finance firm now had a
fleet of aircraft – so many that some jokingly speculated that it might start
an airline.
Greensill Capital's opulent spending on such corporate toys
caught the attention of seasoned financial observers.
But this did not deter one of the globe's uber-rich from
pouring money into Greensill Capital.
Japan's richest man, Masayoshi Son, tipped $US1.5 billion
($2 billion) into Greensill Capital, and Lex Greensill declared him his mentor.
Being the protégé of one of the world's biggest investors
was just the publicity Mr Greensill needed as he prepared his finance firm for
a planned listing on the share market.
Yet even at this high point, cracks were emerging.
In 2019, the British banking regulator quietly began probing
a bank owned by Mr Gupta.
The watchdog discovered that money that was supposedly being
lent to independent businesses was actually going to companies that were
connected to GFG Alliance; it called in the UK National Crime Agency, which
began overt and covert investigations.
The bank has since agreed to hand back deposits and is being
wound down.
The British banking watchdog also notified its counterpart
in Germany and, in early 2020, the German finance regulator began investigating
Greensill Bank.
It found massive lending exposure to one client — the Gupta
Family Group Alliance.
Even more seriously, the German regulator, BaFin, was
concerned that some of the supposed trading, against which the bank had lent
money to GFC companies, was not genuine.
Greensill Bank and Greensill Capital were lending money to
GFG Alliance companies against what's known as "receivables", which
means money owed to a business.
They were also lending against what they called "future
receivables", or "predicted" future sales.
Normal supply chain finance is pretty safe, short-term
lending.
But the allegation is that with Gupta's GFG Alliance and
others, Greensill Capital started giving supply chain finance on the basis of
possible sales that might never happen, to potential future customers who might
never exist.
Lex Greensill denies this.
He declined an interview, but in a statement to Four Corners
his spokesman said Greensill Capital issued credit "based on future
forecast trade with current customers."
Although the practice isn't unlawful, it's baffled some
observers.
"I am completely flummoxed that somebody can make money
out of guessing what business will be done between companies in the future, and
lending on the basis of it," British Labor MP Siobaihn McDonagh told Four
Corners.
Greensill Bank has now been shut down and BaFin has
recommended prosecutors consider laying criminal charges against the bank for
balance sheet manipulation.
Worried about its exposure, Greensill Capital's main insurer
pulled the plug.
In March this year, at a frantic late-night court hearing in
Sydney just hours before its coverage was due to expire, Greensill Capital
tried to convince a judge to grant an injunction forcing the insurer not to
withdraw.
The judge declined.
That was the end of the show for Greensill Capital.
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