Hard-hitting investigations. Jennifer O'Leary investigates claims that a leading bank forced businesses into insolvency.
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Ulster Bank - bailed out by taxpayers,
now accused of pushing some businesses into bankruptcy
to boost the bank's balance sheet.
If the Ulster Bank had been prepared to work with the business,
those jobs could have been saved.
It was as if we had been attacked in our sleep.
A Government-commissioned report also claims the bank pushed
viable businesses to the wall for its own profit.
It's ingrained in us to trust the bank and, I think,
that's where people have gone wrong.
An insider claims that a division of the RBS Group, Ulster Bank's parent company,
targeted some businesses that could have survived.
I was directed to destroy viable businesses by the bank.
That was my job. I was told to do so.
Ulster Bank denied the allegations,
but questions persist about how the bank treated some business customers.
The fall-out from Northern Ireland's toxic debt crisis.
This is the company's offices here.
Downpatrick-based building company Polly Bros Ltd
went into administration in late 2009.
The construction company was started by my father in 1957.
I took over the business in the mid-'80s
and grew the business from there.
And, at one stage, it employed about 120 people.
What was your business ethos in terms of Polly Brothers?
My bankers, the Ulster Bank, always said I was a conservative customer.
If I wanted to buy a piece of land, I had the money to buy it,
I didn't need to go near the bank.
During the boom years,
according to Brian Polly, Ulster Bank was keen to lend to him.
The bank were very happy to lend me large sums of money,
but I was very apprehensive.
There were two sets in particular that the bank wanted me to buy.
They rang me up and asked me, "Come in on Monday morning, the deeds are here,
"and the money is here for you."
I said, "Boys, I'm not interested in buying that.
"I'm not interested. I have enough."
Brian Polly did, however, borrow from the bank.
I bought a site in a prime location in Belfast.
They lent me the money and then they got it revalued again after I bought it
and they said there was plenty of equity in it, let's go again.
Brian Polly's company had loans of £6 million from Ulster Bank.
Ulster Bank has for decades been among Northern Ireland's leading business banks.
In 2000, it became part of the Royal Bank of Scotland, RBS.
In the boom years, the bank, like others, went on a lending binge.
In 2007, Ulster Bank had a loan book across the island of £55 billion.
Ulster Bank was infected by the same culture as RBS,
which was that RBS basically kept on betting on future growth in the economy.
And Ulster Bank, in the same way, bet on an assumption
that you would have constant growth in property prices, both north and south.
It was a huge bet brought down in part by a global financial crisis.
This is a once-in-a-half-century,
probably once-in-a-century type of event.
They can't close the markets like that!
By 2008, collapse of the investment bank Lehman Brothers
triggered global financial turmoil.
Weeks into the crisis, RBS, Ulster Bank's parent company,
came within hours of running out of money.
The end of an era for British banking.
Some of the biggest names go cap in hand to the Government.
A £37 billion Government bailout
saved Ulster Bank's parent company, RBS,
along with HBOS and Lloyds TSB, from collapse.
The move made Ulster Bank 81% taxpayer owned.
For Brian Polly, it seemed, at first, nothing much had changed.
They were ringing me up, trying to get me to come to the Christmas party
after being bailed out by the UK taxpayer.
I point blankly refused to go. It wasn't what I stood for.
You cannot be bailed out by people on the street and then it's party time. No.
But the party was over.
Property values began to slide.
Ulster Bank was, like most UK banks,
extremely exposed to the property market.
And when the property market fell and fell dramatically,
it had a lot of loans which were bad, in essence.
A bad loan is when the value of the firm, or the company that has borrowed,
is actually less than the value of the loan.
Property prices fell by about 50%.
That meant that anyone who borrowed money with conditions attached to it,
in terms of the loan being immediately repayable
once the property prices fell, that meant they were stuffed, basically.
The small print was about to become a big deal.
Once the value of the underlying property, the securing the loan,
falls below a certain value, then the banks essentially can do what they want.
They own that business, in essence.
And so they essentially can transfer money between different accounts.
They essentially can put very strict conditions on what the actual business can do.
With so much bad debt on its books,
Ulster Bank was under pressure to get as much of its money back as possible.
It started by slimming down its loan book.
The practice of removing a bad debt from a bank's books is not unusual
and Ulster Bank has a division to deal with loans
that are going bad, or seen as risky.
It is called GRG - the Global Restructuring Group.
In January 2009, Brian Polly was introduced to Ulster Bank's GRG division.
The executive out of the Ulster Bank, he said, "We are just putting you
"into GR...it's only a short-term arrangement.
"We think the business is just a wee bit sick.
"It's like a wee bit of special care and you'll come out again in a month, two months' time."
GRG is supposed to get businesses back in shape
and, at the same time, protect the bank's position by minimising further losses.
But Brian Polly claims pressures imposed by GRG
tipped his company into insolvency.
There was an arrangement there that every time there was a house completed,
the bank got such a percentage per house
and that the remaining moneys would be left in the account to further progress the work in progress.
But the bank just started taking all the money.
There was a considerable sum of money that came in one Friday evening of almost £400,000.
I checked the internet banking on the Friday evening, the money was there.
I went into my office as usual at 6.30 on the Monday morning, everything was there.
Before I left, whenever I went in to make sure the money was there,
the money was gone. 400. Almost 400K was taken out of the account.
I was absolutely flabbergasted.
Flabbergasted. Could not...
The stress of that there is absolutely unbelievable.
It meant that it sort of very much tipped the business towards the edge.
Obviously, the creditors - that was the creditors' money, the suppliers,
people who had done work on that particular contract.
It took the thing into a negative state.
By the end of nine months in GRG,
Brian Polly's company was no longer in a position to pay its bills.
Ulster Bank told Spotlight that, following multiple petitions by creditors,
the company was placed into administration.
I put proposals to the bank on a work-out situation.
I had employed professional people to help me do that.
Er, the bank just wasn't prepared to listen.
Brian Polly is convinced that he had a worthwhile business.
This here was another design-and-build scheme.
We built, I think, 270 houses there.
But that didn't matter to anyone. It didn't matter.
There were 45 people directly employed. They lost their jobs.
If the Ulster Bank had been prepared to work with the business,
those jobs could have been saved.
Because I had a number of design-and-build schemes lined up.
Brian Polly wanted to trade his way out of trouble,
but, in the wake of its bailout, the bank had a mandate
to rebalance its books and address so-called bad loans -
liabilities that were now underwritten by taxpayers.
What effect has the loss of your business had on you?
It is like letting off a hand grenade in the middle of you. You are completely devastated.
I sometimes think, "Was it all my fault?"
How come I've ended up here after working so hard?
Another casualty of the downturn was Michael Taggart,
whose firm Taggart Holdings collapsed in 2008.
He also alleges that the actions of Ulster Bank
contributed to the failure of his construction and property development company.
In June 2007, Ulster Bank refused to pay cheques made out by the company.
The cheques were stopped out of the blue. There was no warning.
There were no e-mails, there wasn't anything.
It was as if we had been attacked in our sleep.
The bank claims that a Taggart company had breached
the terms of a loan agreement, but Michael Taggart disputes this.
Our business was sitting with in excess of 20 million on deposit.
We had about £650 million of assets.
We had £250 million of borrowing.
The Ulster Bank had less than 10% of that borrowing.
Michael Taggart alleges that Ulster Bank's actions immediately damaged his company's credibility.
Months later, the value of his company's assets decreased rapidly
when the property market crashed.
You understand that when you took those loans from the bank,
that there was a small print that they could call in those loans?
I wish they had called in the loans in June '07, because, if they had,
we could have paid them. That is what I wanted to do.
But they led us to believe we don't need to do that.
That was the mistake I made, that I did believe them.
Ulster Bank declined to comment because of an ongoing legal case
between Michael, his brother John and the bank.
It is a big task to take on a bank,
which is why most people roll over and say, "OK, do what you want."
I do what I believe in.
Part of their legal case is centred on personal guarantees
for borrowings by Taggart Holdings.
It wasn't good enough that they destroyed the business, then they
had to try to take us out personally and completely finish the job.
It is nothing more than blood sport. It is just blood sport.
Several business owners contacted Spotlight,
alleging that Ulster Bank's GRG division pushed their business
to the brink of bankruptcy and, in some cases, into insolvency.
They all spoke of the enormous strain being put on them, but would not go public
because, they said, they are scared of the bank.
Spotlight wanted to speak to Ulster Bank's chief executive
about the bank's treatment of business customers.
It is Jennifer O'Leary here again, from BBC Spotlight.
I am aware you have previously indicated there is nobody from Ulster Bank,
including the chief executive, Jim Brown, available to interview.
If you could get back to me, I'd be very grateful.
We first asked Ulster Bank for an interview five weeks ago now.
And at different times making the programme,
we've asked the bank to consider putting a spokesperson,
if not the chief executive, forward to speak to us.
But they declined to do so.
They did provide statements through their lawyers, in which they say
treating all customers fairly is at the core of what they do.
It's a consistent message.
In 2010, Henry Elvin, the bank's then head of business banking
told a Stormont committee that Ulster Bank was on the side of its business customers.
I sat in a meeting this morning where we had ten difficult customers.
If we wanted to be difficult,
we would have put receivers into half those customers. We didn't.
So the banks, and I can only speak for Ulster Bank, and the other guys can speak,
the banks are giving these guys every chance.
But RBS and Ulster Bank's treatment of business customers is under scrutiny.
Sports car manufacturer Lawrence Tomlinson was a Government adviser when he was commissioned last year
by Business Secretary Vince Cable to write a report on bank lending.
His report made a number of damning allegations about GRG.
It was really shocking.
In fact, some of the first cases that came to me
were actually from Ulster Bank.
Businesses saying, "Not can we not get access to finance,
"but our finances are being taken away from us and we are being distressed
"and we are losing jobs and we are being shut down by this GRG."
The Ulster Bank customers who spoke to Spotlight on camera
did not make contact with Lawrence Tomlinson ahead of his report.
In it, he accused the bank of forcing some good and viable businesses to collapse,
so as to make more profit.
Businesses that had a future were put into this business support unit,
called GRG, on the pretence that they would be helped.
There were really huge fees charged immediately.
Their facilities were shrunken.
They caused distressed.
They had some kind of independent business review that cost them a lot of money.
It seems, in these instances, that GRG has acted just to be a profit centre
and make as much money for the bank as possible.
The Tomlinson Report also claimed
there were instances of businesses having their assets revalued without consultation
and then being told they were in breach of their loan conditions,
which triggered the bank calling in personal guarantees.
Personal guarantees could be their family home,
it could be agricultural land.
Once the loan covenants are breached,
then the bank can move against and call in the personal guarantee.
What GRG did, allegedly, and there is a lot of evidence behind this,
is that GRG said if it liked the assets,
it would take over the assets through a complex process
by putting the company into administration.
And that is where we have the serious problems with GRG.
That's particularly affected Northern Ireland,
with a lot of Ulster Bank customers having their assets recovered
through this rather painful process.
Ulster Bank called in Brian Polly's personal guarantees in 2010.
I had a farm here that I particularly enjoyed at the weekends, you know.
I always loved walking over my farm at the weekend
and they got it. The first thing I knew about my farm being up for sale
was there was a signpost put at the end of the road and it was a shock.
Strangers came round to look around the farm and I was absolutely devastated.
I had invested in five houses for my kids.
But, er, the bank got them all.
They probably saw it as a soft company to go after, you know, and grab the assets.
We would have liked to have interviewed the bank about these claims.
We have, however, made contact with an RBS insider.
He worked for a number of years in a GRG division,
although not with Ulster Bank clients.
I'm on my way to meet with the insider who's agreed
to speak to Spotlight on the basis of anonymity.
He did not deal with businesses in Northern Ireland,
but he says he has first-hand experience of working in GRG at RBS,
Ulster Bank's parent company.
GRG was a global division which takes care of all subsidiary RBS banks.
Is GRG the same in how it operates in Belfast, London, Dublin or Edinburgh?
Yes. Every different bank within the UK,
Northern Ireland, Ireland, it's all done exactly the same.
Our main remit was to collect as much money as possible from clients to help the bank.
The insider says that GRG staff intercepted payments
being made to companies regardless of the consequences.
We would always watch the accounts.
It would be on our screens all the time.
Several different clients.
We'd see interactions between them and their customers,
or their creditors and, often, we would siphon that money off to our account and call it a debt.
I remember a senior manager in our team was doing a transaction like that,
and he was working with another colleague from a few desks down,
and he stood up and punched the air
and said something along the lines of, "Fantastic, we have it!"
The money had come in and it was grabbed, so to speak.
Any cash that we can possibly get our hands on to make our position better,
we would get our hands on it.
Even if that cash had been set aside
and you had been told by the businesses?
They say, "That money is to pay revenue."
It didn't matter. We were the bankers.
But you were the bank that was saved by taxpayers.
To be frank, most people don't even care about that,
they're bankers before they're members of the UK.
Of course, it was one of GRG's jobs to minimise losses
for the now majority taxpayer-owned bank.
However, the insider claims that profit took priority over small firms that had a future.
Did you, as part of your role in GRG,
did you deliberately push businesses into insolvency?
Yes. I was directed to destroy viable businesses by the bank
and that was my job. I was told to do so.
You're appraised on how much fees you brought in every week
and, of course, you were bought a beer by one of your managers for a job well done.
The insider did not deal with the Ulster Bank customers who spoke to Spotlight,
but he says there was an awareness of the stress some customers in GRG were under.
People were crying.
They were pleading with us to put the money back into the account, or stop taking the fees out.
They'd ask us not to target their business,
which is essentially what we were doing, unfortunately.
If the business had a large number of concrete assets we'd want,
we'd simply shove the business into an insolvency position.
Did you deliberately target businesses that were asset-heavy?
If we had those businesses and assets, say houses, properties,
cars, or anything, we could then sell those onwards to make a profit.
RBS and Ulster Bank have a dedicated property division.
It's called West Register.
The Tomlinson Report raised the concern
that some businesses in GRG subsequently had their assets sold
to West Register at a discounted price.
The customers are being dealt with by GRG on one set of desks,
and then the property ends up being owned by West Register.
If you were a customer who goes into GRG,
are you getting the best value for your property,
if it's bought by the bank who is putting you in distress?
The GRG insider claims that he worked closely
with his colleagues in West Register, the bank's property unit.
We sat 30ft away from them.
We could yell out to West Register to come down and look at a case, if we wanted them to.
You would usually pick up a case file and walk down to West Register,
or they could come and see you under the guise of making it more secure for the bank.
The chief executive of RBS, Ulster Bank's owners, admitted
that the reputation of the bailed-out bank had been seriously damaged
by the allegation that it deliberately wrecked small firms in the pursuit of profit.
He said there was no evidence to back up that claim.
But, nonetheless, the bank hired the law firm Clifford Chance
to investigate the claims made in the Tomlinson Report.
The review covered RBS in Britain and Ulster Bank in Northern Ireland.
The Clifford Chance report supported the bank's contention
that they hadn't deliberately targeted or wrecked small businesses for profit.
Indeed, the report went further.
The Clifford Chance report found there was no evidence of fraudulent activity,
but Lawrence Tomlinson said his report never accused the bank of fraud.
He said a number of the Clifford Chance findings
tallied with the central themes of his report.
For example, the lack of transparency over fees
and the need for an improved business culture in GRG.
The City of London is home to the lobby group Bully Banks.
Their spokesperson, Jeremy Roe, is highly critical of the Clifford Chance investigation.
You have a bank instruct a solicitor,
who it frequently instructs on other matters,
to carry out an investigation into its practices.
The report, I think, could have been written by a bank, actually.
It's got that sort of feel to it.
It doesn't appear to be an incisive investigative report.
Ulster Bank told Spotlight that Clifford Chance were instructed
to report on an independent and objective basis
and the review was led by a team that had no previous dealings with GRG matters.
But RBS and Ulster Bank's GRG division remain in the spotlight.
GRG's activities are still the subject of an ongoing review
with a financial regulator.
The Financial Conduct Authority, based here in London, has appointed two outside firms
to investigate RBS's treatment of business customers in financial difficulty.
The Bank of England told Spotlight that it is also working
with the FCA to examine the details of the report.
I've had over 1,000 businesses contact me.
I've no idea how many cases there could be,
but it is a really considerable number of cases that the FCA are investigating now.
Meanwhile, the Serious Fraud Office told Spotlight
that they continue to monitor developments.
So criminal proceedings cannot be ruled out.
RBS recently announced plans to sell off its controversial West Register property portfolio.
Explaining the move, the bank said there was a damaging perception
that the bank had a conflict of interest
when it purchased a property as part of a restructuring process.
Ulster Bank told us that West Register in Northern Ireland
holds properties that were previously owned by 14 Ulster Bank NI customers.
The bank said that, in many cases, the properties were marketed openly
and that West Register was the highest bidder.
But Ulster Bank declined to confirm whether or not the properties had been part of businesses
previously in the global restructuring group GRG.
Spotlight asked Ulster Bank if it was concerned
about any possible conflicts of interest, given that we know
of two bank executives who are also the directors of private property companies in Northern Ireland.
Ulster Bank told us, as well, that all conflicts are managed
in accordance with its existing code of conduct.
We asked the bank for a copy of that code of conduct,
but, instead, the bank simply referred us to previous statements
in which it had already made that point.
But Jeremy Roe says the situation is of concern.
Would I, as an employee of RBS, conduct myself as a director of a third-party company? No.
Would I allow anybody who worked for me, if I was a senior manager with RBS, to do that? No.
Ulster Bank told Spotlight they continue to strongly refute
the accusations made by Lawrence Tomlinson.
The bank's chief executive, Jim Brown, recently made the same point
to Stormont's Finance Committee.
Mr Tomlinson hasn't contacted me.
He has not written to me, nor phoned me.
He hasn't sent any evidence around any cases regarding Ulster Bank.
I think Ulster Bank's denial of anything being wrong
is just ostrich-like in sticking their head in the sand.
I'm happy to meet Jim Brown. I'm happy to discuss the cases that are specific to him.
Responsibility for banking is not devolved to Stormont.
Westminster's Northern Ireland Affairs Committee
is conducting an inquiry into the banking system here.
Remember, Ulster Bank aren't answerable to anybody here.
The first time Ulster Bank really had to answer questions on any of this
was when it came before the Select Committee.
It effectively got away in the breeze, able to hide under the coat tails of RBS,
when RBS were being investigated for the greater problems that they had created.
Despite their ongoing legal case,
the Taggart brothers have, in recent months, raised money from private investors.
This site is outside Limavady.
We are going to build out the site.
This is the first development since 2008 that we have been involved in.
How does it feel being back on sites?
It feels great getting back at it
and we have every intention of keeping going and being as successful as we ever were.
Four years on and Brian Polly's company is still being run
by administrators appointed by the bank.
Most companies are wounded up after six weeks.
Four years later, my business is still going.
I find that incredible.
Brian is dealing with the personal impact of bankruptcy.
It's very humiliating, you know.
I was an extremely proud man. I loved to pay my people on time, you know.
It was... If you don't have honour and integrity in business, you have nothing.
Despite the setbacks, Brian is determined to get back in business.
There is light at the end of the tunnel.
I look forward to the day - back in business again
and doing what I do best.
Ulster Bank recently posted its first quarterly profit in five years.
Its owners, RBS, have also returned to profit.
But the insider alleges the upturn has come at a cost to some.
There are many businesspeople who did not come out of the GRG process
and they blame themselves for what happened to their businesses.
The majority of them, they became, unfortunately,
a casualty of war in our bid to make the bank more liquid.
I think that if you put RBS and Ulster Bank and GRG and West Register together,
this represents the worst banking scandal, within the UK, of all the banking scandals.
Ulster Bank was bailed out by taxpayers because it was part of a group that was too big to fail.
Now it stands accused of failing some of its customers
and the question remains - was Ulster Bank's approach prudent,
or predatory in the pursuit of profit?