I thank the Chairman and members for the opportunity to address the joint committee this morning. I am appearing today on a personal basis representing Glencullen Holdings, which was our company, and on a group basis representing the Ulster Bank GRG Irish Business Action Group. The action group was set up because more than 2,140 Irish businesses have experiences of abuse, breach of contract and unfair treatment at the hands of Ulster Bank's Global Restructuring Group or Ulster Bank GRG. This has resulted in a tsunami of receivers being appointed, businesses closing and lives and families being ruined.
We believe Ulster Bank and its Global Restructuring Group deliberately targeted and shut down viable businesses in a property grab strategy. These businesses are representative of a wide range of sectors, including industry, retail, property, farming, automotive, warehousing and distribution. We represent 60 such businesses and the numbers are increasing daily. When their individual stories unfold, it becomes obvious that there is a commonality of experience.
From 2008 onwards, all businesses experienced cashflow problems as business in general took a dive during the financial crash. Royal Bank of Scotland, the parent group of Ulster Bank, reported a loss of £24 billion and its share price fell by 66%. The bank targeted UK and Irish businesses with loans of between €1 million and €25 million. These businesses were removed from Ulster Bank’s normal relationship managers and placed in its Global Restructuring Group, which is headed up by two special agents of the bank. The reasons given by the bank had a common theme. These special agents or managers were to restructure the debt of each company, guide it through the recession with cost saving strategies, and achieve better productivity, reduced interest rates and so forth. The GRG was sold to the business owners under the guise of the bank taking a special interest in their company in a friendly and caring partnership arrangement. Businesses did not suspect that GRG was a purpose vehicle designed to take down the company, as has been borne out in disclosures in the United Kingdom.
RBS, Ulster Bank and the Global Restructuring Group engaged in a grab for cash strategy. I refer to the whistleblower account on Buzzfeed and the "Newsnight" programme on BBC2. They first targeted companies which had a positive loan-to-value ratio. These companies were essentially easy targets. I will give members a brief snapshot of one of the businesses in question, how it was dealt with and how Ulster Bank and the GRG engineered a default. I refer to our company, Glencullen Holdings limited, which had been a customer of Ulster Bank since 1990 and had never defaulted on a loan. The company was experiencing cashflow difficulties in 2009. In 2010, the bank demanded further securities and pulled in all properties in the group. This gave it an overall cover of properties worth €65 million for a debt of €10.5 million and an overdraft of €1.5 million. In October 2011, the company was put into Ulster Bank's Global Restructuring Group, which immediately started to squeeze the cashflow. It restricted trade, put a shadow director in charge and basically monitored every move, every car that was bought and sold, parts, service and so on. Every cheque payment had to be sanctioned by the shadow director. The bank grabbed all cash that was brought in through the company, including the personal pension of the 100% shareholder and chairman, who had already invested €20 million of his own money in the company. Despite this, the GRG wanted more.
Just six months later, in April 2012, Ulster Bank reduced the overdraft facility for the company from €1.5 million to €800,000. This lack of cash put our franchise terms and conditions contract under pressure and resulted in the company having to pay cash at the gate, so to speak, for all vehicles and parts. At that time, we were turning over €200 million and employed 200 people directly. It was not possible to keep the business going without credit. An internal Ulster Bank Global Restructuring Group document revealed by Buzzfeed and "Newsnight" stated the following: "If the company has not defaulted. We can engineer one." That is how Ulster Bank's GRG engineered our default.
In July 2012, with the lure of cash and at the insistence of the GRG, taking into account the understanding that the company could acquire other franchises, Glencullen decided to part company with its main franchise for a buy-out price. GRG managers-agents went into a frenzy at the thought of cash. They were on the telephone daily during the negotiations - I personally heard these conversations - insisting that the company take the cash. A portion of the payment, namely, €650,000, had been earmarked by the company financial controller for the Revenue Commissioners. While the bank, which controlled the cheque book, agreed to this payment being made provided it received the balance, it was never made.
In September 2012, we secured a stocking loan of €1.5 million from another bank. Ulster Bank refused to sign the standard letter as our main banker, even though it had insisted that we give up our main franchise to bring in cash. Having done this, the bank refused to support any new franchises for us to continue in business. Suddenly, our two GRG relationship managers were not available to sign the letter. Our shadow director said he could not sign, having previously stated there would be no problem in doing so. It became clear to us that Ulster Bank GRG was reneging on its promise. In denying us the franchises, it prevented us from continuing in business.
In October 2012, we were struggling on as we tried to hold on to the business. The GRG managers were on the telephone daily telling us we were insolvent and that we had to call in the receivers. At this time, our property values outweighed our loans by a ratio of at least three to one, even after they had been reduced from the figure of €65 million. We now know that it was a requirement that we call in the receiver because the bank had a difficulty pulling the plug on a company that had not defaulted. It refused to pay Revenue in an attempt to force Revenue to appoint a receiver instead.
Eleven months after GRG took over Glencullen, the receiver was called in and everything was taken, including all our documentation and the back-up receiver. This left us with nothing with which to fight back. In the intervening four years, it has stonewalled us and refused to give us any documentation on loans, a payment schedule or bank accounts in spite of numerous requests. This systematic abuse of customers is mirrored across all the other businesses we spoke to across the country.
Motor industry sales have increased by 66% since 2012. This proves that a company such as ours, which had secured good franchises, would not only have been well able to survive, but would have thrived in the improving economy of the past four years. Having sold five of the prime properties for €8.1 million, Ulster Bank's GRG had its money back as it had written the debt down to €8 million. We were advised of this by the GRG manager. The remainder of the properties have been left derelict with no maintenance or security. They have been broken into and some have been set fire to, with the remainder sold off to vulture funds.
We also believe there were preferred client deals on our properties. We know Ulster Bank's Global Restructuring Group gave a pre-pack deal and right of first refusal arrangement, along with a €12 million loan, to a preferred client to expand his business. This proved that Ulster Bank had an appetite for the motor business at the time, despite informing us that it had no appetite for the motor business.
That particular prime property lay empty for three years and was denied to us and to other investors who approached about purchasing it. Other prime dealerships, such as at Liffey Valley, were taken over by other preferred clients and our customer database was used to write to customers, telling them that they would be opening and looking after their needs. This was within weeks of receivership.
There is a personal loss to all of this, as there is to all of the stories that the committee will hear today. Mr. Aidan Cullen, the managing director of Airside dealership and the younger brother of our chairman, died from a stress-induced heart attack ten days after the receiver took over.
Collectively and conservatively, these 2,141 businesses put into GRG employed over 20,000 people, which is the equivalent of several large multinationals. Their tax contribution to the Exchequer was in excess of €250 million per annum, not taking into account corporate tax. Taking the average salary of €35,000, this equates to over €1.25 billion over the past five years.
The knock-on effect to the economy was and still is immeasurable. The personal debt remains with these people as Ulster Bank sold the loans on to vulture funds for a pittance. That injustice continues as they have taken the bank’s place in pursuing the owners for 100% of the loan. Ulster Bank lied to the joint Oireachtas committee during its submission in December 2016. I was present at the time in the Gallery when its representatives said they had not received any complaints. They received many complaints from customers, our members included. They also committed to writing to all customers. No letters have been received to date.
There is a UK precedent. I refer to the Berg banking report and Ms Alison Loveday is with me today. She compiled that report and is available to answer questions later if the committee so wishes. On 8 November 2016, RBS announced that despite its previous denials, it now accepted that it had failed some GRG business customers and would, as a result, be implementing a new complaints review process and an automatic refund of complex fees charged to GRG customers between 2008 and 2013. Following investigations into the conduct of RBS, Mr. Andrew Tyrie, MP, chairman of the UK parliamentary treasury select committee labelled findings "shocking", and demanded that the firms affected be paid compensation. He said that many businesses "who deserved better" have been at the wrong end of RBS conduct. Dr. Lawrence Tomlinson has also commented that the perverse incentives described in the Tomlinson report did exist within GRG. He went on to comment that there were many questions for the banks and the regulator to answer. Mr. John Mann, MP, has asked the Serious Fraud Office to open an "urgent investigation" into RBS.
RBS files expose the bank’s secret scheme to boost revenues during the financial crisis by draining businesses of cash and stripping their assets. Key findings show that, under pressure from the Government, the largely taxpayer-owned bank ran down businesses in its restructuring unit as part of a deliberate, pre-meditated strategy to cut lending and bolster profits. RBS GRG managers encouraged employees to hunt for ways to boost their bonuses by forcing customers into loan restructuring in order to extract heavy fees as part of the profit drive nicknamed "Project dash for cash". Firms that had never missed a loan payment were pushed into GRG under the bank’s secret policies for reasons that had nothing to do with financial distress. This helped the restructuring unit to a profit of more than £1 billion in a single year. The property division, which amassed assets worth £3.3 billion during the crisis, was passed confidential information that was not available to other bidders when it wanted to acquire properties from businesses in GRG.
A vast proportion of RBS’s business loans were secured against real estate and most agreements contained a loan-to-value covenant stipulating that the customer's borrowing must not exceed 70% to 80% of the value of the assets. The dire economic outlook made it easy to argue that a fall in the value of properties put customers in breach of their loan-to-value covenants. That meant that the bank was able to break the deal. The problem for the bank’s customers was that property valuations are, as its executives later admitted in their evidence to parliament, "an art as well as a science". RBS often evaluated properties in a way that dispensed with any independent checks and balances. RBS managers needed only to perform an internal "desktop valuation", effectively just estimating how much a property would be worth. RBS auditors raised concerns that the "valuation of properties might be manipulated as valuation is performed internally". Managers also tended to assess the value of customers' property on the basis of how much it would sell in a fire sale rather than in an ordinary sale.
It can thus be seen from the various UK Government and media investigations and a review of the bank’s own internal documents that a deliberate process was adopted by the bank to improve its own position at the cost of the bank's customers. There is a solution. In order to achieve fair play and justice against Ulster Bank GRG, we need to level the playing field in the costs of attaining justice. In accordance with the Irish Constitution and EU law, every citizen is entitled to access to justice. For many SMEs, the timelines and costs associated with court proceedings are impossible. The Judiciary needs to deal with cases justly and at an appropriate cost, which includes ensuring the parties are on an equal footing and properly considering the financial position of each party. Affected SMEs in Ireland that were closed down by the actions of the GRG should receive free legal aid or be funded by Ulster Bank. After all, the bank's costs are being paid from the customer’s estate and are being added up against the customer’s debt.
Disclosure is a clear part of the litigation process whereby clear and concise documents relevant to enabling the court to determine issues within a case are provided to save time and costs. Agreeing from the outset what documents the bank is obliged to provide would avoid a situation whereby claimants would be forced to guess at what documents are available or forced to argue their case without the benefit of the documents. A relaxing of the disclosure rules to allow claimants to share documents would sort this. There could be a standard set of documents relevant to GRG claims or Libor actions. This would avoid the need for each individual claimant to incur costs in seeking disclosure of the same. For example, each bank could decide which cases to settle, subject to confidentiality, what disclosures to provide in each case and prevent employees from speaking out or whistleblowing by again making their severance terms subject to confidentiality and so on.
A standard methodology could be agreed for calculating loss. The refund of complex fees as offered in the UK is totally inadequate and is no match for the losses endured by GRG customers. The Central Bank and the Financial Regulator should take an active role in forcing Ulster Bank to compensate customers who have suffered at the hands of GRG and rescind their banking licence pending an independent inquiry and a proper compensation package being put in place. They should reject out of hand the so-called "complaints" system put in place by Ulster Bank, whereby one has to write into the bank to have one's complaint evaluated by the bank itself. In that system, the abused customer is expected to once again enter the lion’s den to complain about the lion. The statement of claim from the Ulster Bank GRG action group is estimated to be in the region of €500 million to date and will rise accordingly as more companies join the group.
The Central Bank code of conduct rules state that all financial institutions must act in the interest of the customer and in good faith. Clearly, the opposite is the case in this instance.
