BHS: How Did it Happen? Panorama

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The collapse of BHS - S branded the unacceptable

face of capitalism.

I'm saying Philip, because he should not be Sir Philip,

because he's shafted us all, hasn't he?

Envy and jealousy my doctor told me are incurable diseases.

I've done nothing wrong.

There's still no deal in sight for the BHS pensioners.

Cut the crap and actually start delivering to them.

Sir Philip Green's under scrutiny and under pressure.

He was a bully.

The deal was open ended.

The deal is not a deal.

It's a scandal that's tarnished the reputation of British business.

Would you give it back?

No, I have no intention of giving that money back.

We hear from the man whose bid to save BHS was turned down.

I was 100% convinced, with the backing I had, we could put a

credible offer to Sir Philip.

We discover special payments for favoured BHS staff.

The people at the bottom end, who do the hard work,

generate the profit, always get left behind.

As Parliament prepares to debate the demise of BHS, we ask:

How was it allowed to happen?

This summer in an Italian port, the finishing touches were being put

to ?100 million yacht.

The owner, Lady Green, was checking every designer detail,

as her husband was being grilled in Parliament about

the collapse of BHS.

I don't tell lies.

You can probe them all you like.

I'm not hiding.

I can't answer you.

Sir, do you mind not looking at me like that all the time.

It's really disturbing.

It didn't stop the Greens enjoying a nine-week cruise in the Med.

I made a very different journey to Liverpool.

Like many high streets in Britain, it's dominated

by Sir Philip's brands.

The biggest of them was BHS.

Well, the BHS store may not be one of the city's architectural gems,

but it's long held a very special place in the heart and

the history of Liverpool.

BHS has been in Liverpool since the 1950s.

Some families have worked here for generations.

I think my proudest moment, if you like, is when I

was made the general manager of BHS Liverpool.

It's a company with a logo, but your consumer,

we're the face of BHS.

We have always made BHS and what BHS has stood for.

This was a summer of leaving parties, in Liverpool

and across the country, as staff prepared to close

their stores for good.

Yeah, blood, sweat and a lot of tears, I know.

There will be a lot of tears at the end definitely.

The collapse of BHS with ?500 million hole in the pension fund has

left many feeling betrayed.

Philip Green, I'm saying Philip, because he should not be Sir Philip,

the way she's shafted us all, hasn't he?

And doesn't think he's done anything wrong.

That's what I can't understand.

Things have changed for Sir Philip.

Knighted for his services to retail, he once hobnobbed

with royalty and showbiz stars.

Go away.

Now he's under pressure, like never before.

He has the mannerisms of a wide boy.

He's very determined.

Lots of use of expletives.

You have to accept if you do business with Philip he's

going to call you some pretty unpleasant things and to

be quite aggressive.

Before he bought BHS, Sir Philip's flamboyant

style had mixed results.

The young entrepreneur's jeans venture, endorsed

by Joan Collins, failed.

At retailer and public company, Amber Day, he clashed with

shareholders and the board.

He had to leave.

It was a lesson for Philip Green.

When he acquired BHS in 2000, he took it private.

He would no longer be accountable to shareholders.

Great value, good quality.

The much-loved British institution had been in trouble.

Within two years, he was claiming a dramatic turnaround.

I want to win on the High Street.

It's not about making money.

It's about getting it right.

In the first four years, it looked like he was getting it right.

BHS was making money again.

Profits of ?208 million.

But twice that much, over ?400 million was

paid out in dividends.

?307 million went to the Green family, off-shore.

It ended up in Monaco, a tax haven and magnet

for the megarich.

It's home to Philip Green's wife, Tina.

He loves his job.

He loves his family.

I started with him.

I've been with him for 25 years.

So, we came from nothing and from very humble beginnings.

He's still a very humble man today.

I love that about him, because he is a very humble man.

Yes, he has a big roar, and yes, he has a big personality,

you know, without that, there's no Philip Green.

When BHS went under, MPs wanted to understand the Greens'

complex financial affairs.

So when it says in the accounts, "P Green and his immediate family

are the ultimate controlling party," what does that refer to?

I'm not the shareholder or beneficiary.

I don't have any shares.

This is your wife then?

Yes.

She has the accounts, you don't?

I've never had an overseas bank account.

Sir Philip ran BHS but it was his wife, Lady Green,

who ultimately owned it.

I think Lady Green's role was a simple but

incredibly fruitful role.

Because the actual ownership was with Lady Green

they were able to escape taxes.

I think there's no question that the person that pulls

everybody's strings and the Napoleon in the sense of this whole farce

is Sir Philip Green himself.

Philip Green is a man who likes to be in control.

I think that is maybe not strong enough.

I went to meet someone who knows him well and who worked with him at BHS.

Philip is a bit abrasive at times, but really intense.

A guy who absolutely knows what he wants,

how to get it and how to manage a business of that size.

His family's life, you know, was all invested in that business.

His mother loved the stores.

His daughter worked in the stores.

I can remember Chloe being behind the tills at BHS.

Philip Green saved that company.

The intensity of work that went into those first three

years and beyond there.

But Parliament had a different take on the BHS success story.

Despite the growth in profits, sales had stayed roughly the same.

Sir Philip made money by driving down costs and squeezing suppliers.

He widened the margins through being very aggressive on his sourcing,

driving for the very lowest cost of goods.

It's running the business not with a ten-year view,

but with a two or three-year view.

He was very good at doing that.

A number of BHS suppliers told us they felt the squeeze.

Carol Duncumb says, for her, it was particularly uncomfortable.

In 2003, her business had agreed a ?5 million contract with BHS.

Some stock had even been delivered.

Then Philip Green summoned her to his London headquarters.

I was left with a couple of his senior henchmen.

They were very direct in their message to me,

which was that if we weren't prepared to write a cheque

back to Philip Green, back to BHS, then we would have

to consider our options, which meant essentially

cancelling the order book.

Losing the rest of the multimillion pound order would have left

Carol's company in trouble.

She wrote a cheque for ?100,000.

She then went to look for Philip Green.

I told him I was disgusted by the way I'd been treated.

What did he say to that?

He laughed.

That resulted in fairly heavy words between the two of us.

And what did that incident tell you about Sir Philip Green?

He was a bully, that a deal was open ended.

A deal is not a deal.

A spokesman for Sir Philip said BHS sold ?12 billion worth of goods.

It's unreasonable to expect a comment on one possible

dispute over ?100,000.

But there's one supplier who was much closer to Sir Philip.

Richard Caring, his equally well connected friend.

His company supplied women's wear to BHS.

Richard has a number of factories, I think, himself, he was able to get

cost prices that we needed as we expanded the business.

Any business, when you start up, it was pretty much a start up,

when Sir Philip took over BHS, you need a supply

base you can rely on.

But other suppliers suspected there was more to the relationship

between Sir Philip and Richard Caring.

His name cropped up a lot from buyers and buying directors.

He certainly seemed to have quite a bit of interest in what other

suppliers into BHS were doing.

What no-one knew back then was that Richard Caring was more

than just a supplier.

In 2001, he bought a stake in BHS for ?10 million.

He got 22% of the business.

His investment only became public last year.

MPs wanted to know why it had stayed hidden for so long.

Mr Caring told them his stake was kept quiet in case other BHS

suppliers might think they had an advantage over them, by seeing

their product lines and prices.

At the time, it didn't stop Carol Duncumb having her suspicions.

It was possible that Richard's businesses were

cross-costing against ours.

What does that mean?

That they were looking at what we were supplying,

looking at the garment, the design and the costing.

Richard Caring told us there was nothing inappropriate

about his arrangement with BHS and that he sold his share

in the company years before it got into trouble.

By then, Richard Caring had already done very well out of BHS.

By 2006, he'd received ?93 million in dividends, nine

times what he put in.

When Lady Green bought BHS the Greens got much more

than a retail business.

They got a portfolio of valuable properties too.

It was another opportunity to make money.

What the people who worked here at BHS in Liverpool didn't know

is that Sir Philip Green had sold the store.

It was one of a group of prime sites hived off to his own wife.

It would earn the Greens tens of millions of pounds and bring them

huge tax advantages.

The money washed up off-shore in another tax haven,

this time in Jersey.

Ten BHS properties were sold to another of Lady Green's

companies, which was based here for ?106 million.

She then charged BHS rent for them.

Over the next 15 years, Lady Green collected ?153 million.

By making sure the rents came off-shore here to Jersey,

Lady Green reduced her tax bill.

At the same time, because it was paying rents,

BHS back in the UK, made less profits, so it too paid less tax.

He could reduce the tax payable in the UK to a point

when there was almost no tax at all.

All perfectly legal.

Absolutely legal.

Good business practice?

Legal.

Good business practice?

That must be judged against the context

of what you're seeking to do.

Soon, Sir Philip was parading his latest acquisition,

top model Kate Moss.

She was the new face of Topshop ? part of the Arcadia Group

the Greens bought in 2002.

Banks had been happy to lend money off the back of Sir Philip's

apparent success at BHS.

Arcadia's profits improved too.

Lady Green, the ultimate owner, took another dividend tax-free ?

a massive ?1.3 billion.

Arcadia's parent company bought BHS in 2009.

By now, the high street was changing.

When you have a heavy discounter like Primark

in the arena, you have to either follow it down

or change your business model, and you cannot change your

business model overnight.

Increasingly, BHS became a poor shopping experience

for the consumer.

It lacked focus as to what it actually

was, finally.

It felt underinvested and underloved.

Sir Philip has said even after BHS stopped making profits,

Arcadia still invested ?600 million.

It didn't feel like it in Stockport.

Anne Bostock joined BHS when she was 16.

She met her husband here.

The roof leaked. It was never fixed.

Most of the tills weren't working.

If we wanted anything painting, there was no company to come

in and paint it for you, staff had to do that.

We had to all muck in and do all sorts of things,

not just what you were paid to do.

You had to do the extra mile

to look after things and keep things going.

Arcadia kept BHS afloat.

Sir Philip told Parliament he only considered getting rid

of it two years ago.

What was the point that you started to think about selling BHS?

When did that first occur?

I would probably say about 14.

2014?

Yes.

But seven years earlier, profits at BHS were stalling.

And there were rumours then in the City that Sir Philip

was thinking about selling BHS to his own non-executive

chairman.

Sir Philip's spokesman told us every business gets

approached from time to time.

But there was no sale process and nothing happened.

But we've discovered there was more to it.

Sir Philip even named his price.

We understand Sir Philip wanted half a billion pounds for BHS.

His own chief financial officer came here to bankers Goldman Sachs

to discuss the possible sale.

But "Project Bungalow", as it was codenamed, went no further.

When we then asked Sir Philip's spokesman

about the meeting at Goldman Sachs, he said there had been

an approach via the bank.

The talks happened as a hole was appearing

in the BHS pension fund.

The deficit went from ?7 million in 2006 to ?233 million

six years later.

It was made worse by the financial crash.

Arcadia had been propping up BHS.

Finally, Sir Philip decided it couldn't go on.

Who would buy a failing high street giant with a black hole

in the pension fund?

Out here in the Dorset countryside, there was one would-be entrepreneur

who thought he could be the answer to Sir Philip's prayers.

That man was Dominic Chappell, a former racing driver.

I had no experience of retail whatsoever,

but what we had done was, we'd amassed

a number of people who were very skilled at retail,

and the retail business, and also, we were buying

into the management of BHS and we were backing

that management to take the company forward.

The man himself, though, didn't have much of a track

record in business.

You were a bankrupt?

That's right, six years prior to that I worked

as an entrepreneur and that goes with the territory,

it's a risk that we take.

You were twice bankrupt?

That's right.

And did Sir Philip Green know that you were bankrupt?

Yes.

But there was another offer ? from someone

who knew BHS inside out.

Tony Brown to the ground floor, please.

Tony Brown, the former BHS retail director.

He'd moved on to run other big stores.

This is the first time he's spoken about his bid for BHS.

I knew BHS, and I'd given it a lot of thought.

I knew the problems it was having, I knew some of the things that

were working and weren't working because I still had contacts

inside the business.

And I was 100% convinced with the backing that I had

that we could put a credible offer to Sir Philip.

Mr Brown said he would only buy if Sir Philip put more money

into BHS to help it survive.

Sir Philip turned his deal down in favour of Mr Chappell's.

It was clearly wasn't as attractive to Sir Philip as Chappell's.

Why wasn't it as attractive?

Erm, it would have cost him more to do my deal.

How much more?

Probably about 100 million more.

So it was significantly less attractive.

Dominic Chappell said he could put up ?120 million,

but didn't deliver.

Sir Philip sorted it.

He wrote off ?200 million of debt while leaving

a ?40 million loan in place.

He guaranteed a further ?25 million loan.

Then he put in another ?10m.

And so BHS was sold.

Why was Dominic Chapell built up?

I think it was a real wish to, now the assets have been ripped

out of BHS, to be able to dump the pension fund, and therefore

it was necessary to have somebody who is naive enough not to realise

what they were walking into.

As the Greens cracked open the champagne last summer,

the deal had already prompted an investigation

by the pension fund regulator.

Neither Sir Philip Green nor Dominic Chappell had sorted out

the pension deficit.

The regulator wanted to know how much Sir Philip had taken out

of the business to gauge what detrimental effect this had

had on the business.

Philip wouldn't give them that information.

A spokesman for Sir Philip says information about BHS

was publicly available.

Dominic Chappell failed to turn the business around.

Sir Philip Green called in his loan. That was the end for BHS.

He said "Fine, that's it, I'm not putting any more money

into this, it's going to go bust anyway because we can't

sort out the pension.

I'm going to pull the pin", and that's what he did.

I said "It's completely out of order, Philip, this is absolutely

ridiculous."

He said, "That's show business".

Dominic Chappell and his company took ?11 million out

of BHS in fees and salaries in just a year.

The Select Committee were very clear that you personally enriched

yourself at the expense of British Home Stores.

I personally have got a lot of expenses, so the money I took

from British Home Stores is totally justified because of

the work and the effort that we put in when we did it.

And how much is it?

It's over a million.

And that money should go back to the pensioners, shouldn't it?

I mean, there's...

No.

..A huge deficit there.

And would you give it back?

No, I have no intention of giving that money back.

Across the country, 164 BHS stores went bust.

After 60 years of trading, Liverpool's BHS finally

shut down in August.

The pension fund was still in dire straits.

Sir Philip has yet to do his bit to put it right.

BHS pensioners are counting the cost.

I've got two pensions.

One's gone down to ?7, which was near enough ?10,

and one's gone down to 80-something

which was 102, so it's not a lot, but it's still...

It's still a loss?

It's a lot when you add it together.

But for a select few at BHS, we'd heard there'd been

efforts to soften the blow,

special payments for staff losing their jobs at head office in London.

We've been told around 200 staff at BHS headquarters

received what they called a "Philip bonus,

in total more than ?2 million.

At first, Sir Philip's spokesman told us Arcadia funded

some ex gratia payments to help retain staff

as the administrator looked for a buyer.

But we knew staff were only told they were getting the payments

after no buyer was found.

At that point, Sir Philip's spokesman said payment

may have been delayed.

Sir Philip's generosity to a select few at head office

didn't extend to the likes of Anne and Keith in Stockport.

It doesn't surprise me, because the higher up

you are, the better looked after you are.

It's the people on the bottom end who do the hard work

at the sharp end, the coal face, whatever, who actually make the firm

work and generate the profit, always get left behind.

Anne and Keith have spent the last few

months looking for work.

Well, the future's, it's uncertain, as they say.

We don't know what's happening, I mean...

We've still got a mortgage to pay and we've still got

the bills to pay.

The couple are in no doubt who's to blame.

You know, he's got his nice yachts and stuff...

Our holiday was very different, but nice.

It was a week in a caravan.

He thinks his family's got all the money

and everything, but it'll come back to bite him on the bum.

There are three investigations now looking

into what happened at BHS.

And there are calls for Sir Philip to be stripped of his knighthood.

Lionheart's summer cruise is long over.

The money, however, is still rolling in.

The loan financing the sale of BHS from one of Lady Green's companies

to another is still earning them ?20 million a year.

I'd like him to do what he said all along, that he has regarded

the BHS staff as family, he feels this bond to the pensioners,

to cut the crap and actually start delivering to them.

The Prime Minister has vowed to stamp out

irresponsible corporate behaviour.

But four months after the collapse of BHS, there's still no sign

of a cheque for the stricken pension fund from the owners

of the Lionheart.