Lex Greensill, 44, was one of Australia’s richest businessmen – until last month, when his multibillion-dollar company, Greensill Capital, went bust. His reputation is now in tatters and his downfall has done huge damage to former PM David Cameron.
How exactly does Cameron fit in?
It’s complicated. In the beginning, there was Lex Greensill and Jeremy Heywood, two bankers who worked for Morgan Stanley. Then Heywood became David Cameron’s cabinet secretary – the country’s highest-ranking civil servant – and in 2012 he introduced the PM to his Aussie chum. Together Greensill and Heywood sold Dave their “big idea”. It was called supply chain financing (SCF) and it would solve the problem of the government always paying its bills late. SCF allows suppliers to be paid quickly: for a fee, a private company would undertake to make the payments, and in due course the government would pay it back.
Why would any government pay someone else to pay their bills?
Quite. All Cameron’s government had to do was make its payments on time. But despite howls of protest from Whitehall mandarins, Greensill was brought in as an unpaid adviser to sell civil servants the idea of loaning the government money to settle its bills. The previous year, in 2011, he had left Citibank, where he was a SCF expert, to start his own company, Greensill Capital. A cache of leaked emails published in The Sunday Times this week showed that once the Australian got to the heart of government, he started to claim that he “spoke for the PM”.
So what happened?
The “big idea” was to be rolled out across all government suppliers of goods and services, and Greensill’s friends at Citibank initially got the gig. They ran it for the first five years before handing it back to Greensill in 2018. Meanwhile, the Aussie banker had been turbocharging this unglamorous corner of finance by packaging and selling company debts to bigger investors. His global company was valued at $7bn and early this year it had more than 1,000 employees in 16 global offices. In 2017 he was awarded a CBE for “services to the economy”.
How much money was Greensill making?
He kept his finances a family affair, but at one point he and his two brothers, Peter and Andrew, were estimated to be worth $1.3bn between them. Greensill loved a private jet and owned four, including a Gulfstream G650, which can carry 18 passengers. His head office in London was across the street from the Savoy hotel. He bought himself an estate in Saughall, a town in rural Cheshire, where he spent lockdown with his doctor wife, Vicky, and their two young boys. In earlier days there, the couple ran the dairy stall at the Saturday farmers’ market opposite their home, on behalf of local producers. Although Greensill told employees his company enjoyed “enormous” liquidity just three weeks before it collapsed, it’s unlikely he’ll end up broke. The family sold about $200m worth of shares in 2019.
Where does Greensill come from?
He was born in Bundaberg, New South Wales, and grew up on his parents’ sugarcane and sweet potato farm. From these self-described “humble beginnings”, he became a sugarcane farmer and was expected to enter the family business. A trip to Britain in 2001 changed all that, and within four years he was working for Morgan Stanley. But he never forgot how his parents had to wait up to two years to be paid for crops. They were the catalyst for his ill-fated SCF project.
When did Cameron come back into the picture?
In 2018, two years after leaving No 10, Cameron became an “adviser” to Greensill Capital. It’s claimed he told friends that his share options could be worth £60m. He and Greensill reportedly went on a desert camping trip in early 2020 to raise funds from Saudi Crown Prince Mohammed bin Salman, the man accused by the US of approving the assassination of journalist Jamal Khashoggi. Then the pandemic arrived, just as the business was going pear-shaped. Cameron privately texted the Chancellor, seeking a taxpayer-funded loan, and Rishi Sunak reassured him he had “pushed” officials to help. Ultimately, however, Cameron’s pleas were rejected, and Greensill’s insurance agents dealt the fatal blow – they refused to renew the company’s assets policy.
How big is the Greensill fallout?
It may hit 50,000 jobs worldwide – including 5,000 in the UK. About 3,000 of those are at Liberty Steel, Britain’s third largest steel producer, which was receiving what the FT calls “opaque” financial backing from Greensill. Steel mills and aluminium smelters in France and Spain also face potential shutdowns.
There’ll be less sympathy for the reputational losses suffered by Cameron or the bankers at Credit Suisse or the giant Japanese tech fund SoftBank, which in 2019 ploughed $1.5bn into Greensill Capital. Forensic accountant Stephen Clapham recently told Bloomberg: “There were red flags everywhere. If I were a professional investor, it would literally take me five minutes to decide that this was uninvestible.”
Greensill should have stuck to farming sugarcane. I see prices hit a four-year high in February.