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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Former BHS owner Dominic Chappell denies threatening to kill CEO – as it happened

Click to watch a replay of today’s hearing on BHS’s collapse

Closing Summary: A tale of two Chappells

Dominic Chappell, the former bankrupt who bought retail chain British Home Stores in 2015 giving evidence today.
Dominic Chappell, the former bankrupt who bought retail chain British Home Stores in 2015 giving evidence today. Photograph: HANDOUT/Reuters

Now that the dust has settled from a genuinely gripping session, what have we learned?

MPs were presented with two different views of Dominic Chappell, but neither inspired confidence that he should have ever owned BHS.

The man himself admitted not paying enough attention to BHS’s pension problems, a mistake that had terrible consequences for the company’s current and former workers.

He had no retail experience, and had been planning to use his skills in the property game to generate profits. That gamble didn’t pay off, and BHS’s 11,000 staff are paying the price.

And as MPs picked away at the property sales at the heart of the BHS deal, a curious picture slowly emerged about how Chappell’s Retail Acquisitions (RAL) ever looked like a credible bidder. It all centres on an aborted plan to sell Marylebone House, generating a nice profit for RAL, and helping funding the deal.

When that sale unravelled, BHS sold another site to the Dellals, and eventually got £10m from Green as compensation.

So, a buyer without retail experience and without the funding needed to turn BHS around.

We also learned:

Chappell tried to deflect blame on Green, hinting that he might sue, claiming that the Arcadia boss expected him to fail -- and even saying Green sabotaged a rescue bit from Mike Ashley at the last minute.

That’s the same Mike Ashley who admitted yesterday that Sports Direct had become too big for him; we can only imagine how he’d have coped with BHS too....

The killer blow may have been the admission that he had to take a £150,000 personal loan, and has yet to repay half of it. Chappell blamed tax bills, citing profits he made at BHS. Having to deny that you’re heading for another bankruptcy must have stung Chappell. As must defending the £1.5m loan to a company that owned his father’s house.

Astonishingly, that is the more flattering picture of Chappell which the former racing driver painted himself.

BHS’s former management were scathing -- with one-time finance chief Michael Hitchcock memorably calling Chappell a Premier League class liar with his fingers in the till.

Hitchcock also argued that BHS could have been saved with a more competent and financially robust owner; so why did Green sell to Chappell?

And Darren Topp, former CEO, had the bombshell moment - claiming that Chappell threatened to kill him after the £1.5m transfer of funds to BHS Sweden was discovered.

Chappell insisted this was nonsense.

But this transfer is curious, especially as Chappell admitted that BHS Sweden was controlled by one of his directors - not BHS itself.

Topp claimed it was simply “theft” -- although the money has been returned.

So, there’s a lot for MPs to digest - and a lot for Philip Green to talk about when he testifies soon.

And that’s all for today. Thanks for reading and commenting. GW

Updated

ITV’s Joel Hill has tweeted the letter which Sir Philip Green sent in April, calling in his £35m loan, and triggering BHS’s administration.

This is what Chappell was referring to earlier, when he said Green had thwarted Sports Direct’s attempts to save BHS:

BHS’s former CEO, Darren Topp, was surrounded by reporters and snappers as he left today’s hearing - after his dramatic claims about Dominic Chappell.

Former BHS boss Darren Topp leaving Portcullis House following today’s select committee hearing.
Topp leaves Portcullis House Photograph: Jack Taylor/Getty Images

Chappell: I didn't threaten to kill my CEO

Despite quizzing Chappell for two hours, the MPs failed to ask the former owner of BHS about the allegation that he threatened to kill CEO Darren Topp.

But the British press pack are on the case....

Our own Sarah Butler, and the Telegraph’s Ashley Armstrong, collared Chappell in the media scrum.

And Chappell has denied that he made the threat after Topp discovered the £1.5m transfer of funds to BHS Sweden (as the MPs heard this morning)

Updated

Chappell apologises for his part in BHS's failure

Dominic Chappell
Dominic Chappell Photograph: Parliament Live

And finally.... the MPs ask Dominic Chappell about what he most regrets, with hindsight.

Chappell pauses, and then points to the pension black hole.

We should have spend more time looking at the pension issue before the deal, and ensured that Philip Green was contractually committed to helping with trade insurance.

Q: And would you like to apologise to anyone?

I am very upset that there are 11,000 people directly, and many thousands more indirectly, who have lost their jobs, says Chappell.

It is a travesty that it happened. I am very upset that it happened, and it was avoidable.

Q: For the record, is that an apology?

It is an apology, Chappell confirms.

Q: So, are you to blame for the collapse of BHS?

Chappell says he is partly responsible:

I must stand forward as majority shareholder and say we were part of the downfall of BHS.

And that’s the end of the hearing.....

Interesting.... Chappell reveals that BHS Sweden was solely owned by one Retail Acquisitions director, Lennard Henningson, when £1.5m was transferred from BHS.

Ie:, it wasn’t incorporated into BHS. But that was always supposed to happen, Chappell insists, but RAL hasn’t had time to do it. They were difficult times.

MP: Chappell should have been on the bridge, not a yacht

Q: What sort of message does it send about capitalism that you were in the Bahamas on the day when BHS went into administration?

This is a sideshow, fumes Chappell. He tells MPs that he can show them details of the meetings he had with potential investors who could have saved BHS.

The MPs aren’t impressed, saying “Captains should be on the bridge of the ship, not a yacht.”

Chappell says that the administrators, Duffy Phelps, made it clear that we were not allowed back in the building.

Chappell defends £1.5m transfer

Q: At last.... the committee ask about the £1.5m which Chappell tried to transfer out of BHS to Sweden (as CEO Darren Topp revealed).

Chappell claims he did this to protect funds, as he believes Topp was working to a different agenda. He says the money was needed to pay various fees, such as insurance, and to JP Morgan and KPMG.

Q: So why did you put it back?

Chappell says he was reassured by Topp, so brought the money back (minus £50,000 in fees which have now been repaid too)

Mr Topp is sitting in the gallery, shaking his head, points out Iain Wright MP. Perhaps we should hear from him again before this session ends.....

The committee ask for details about various BHS property sales...

The gloves are coming off.... Frank Field MP tells Dominic Chappell that his grandmother would call him a “Walter Mitty” character, but one who can get money for himself.

That’s very personal, Chappell replies.

Chappell: £1.5m loan is a sideshow

The MPs now demand more details about the £1.5m loan that Retail Acquisitions gave to the company that owns Chappell’s father’s house.

Chappell says that the loan was agreed by RAL’s board – he voted in favour, although one independent director abstained.

It might have been better if YOU had abstained, the committee suggest, then the independent directors could vote on it. Where was the corporate governance?

Chappell doesn’t like this line of questioning - claiming that £1.5m is “a sideshow” compared to what BHS is all about.

This is not a sideshow, he’s told, as gasps echo around the room. This goes to the heart of what went wrong at BHS.

Chappell: I'm not going bankrupt again

Iain Wright MP asks Chappell about a personal loan of £150,000 he took out recently, at 1% per month, repayable after two weeks.

Only £75,000 has been repaid, and the other half has now been formally demanded (by the Dellal family, who had been involved those complicated property deals)

Q: Mr Chappell, are you going bankrupt again?

No, says Chappell, giving a vey short laugh (and not looking amused at all).

He says that he had a tax bill to pay.

Q: But you’ve told us that you’ve made money on BHS.

Yes, but when you make a profit, you incur tax, Chappell explains.

Dominic Chappell.

Updated

Q: Did you lend £1.5m from BHS to a property company connected to your father?

The loan came from Retail Acquisitions, Chappell says, not BHS, from money generated by the business. It went to a company that owns his father’s house.

Updated

Dominic Chappell is adamant that he’s not to blame for the deadlock over BHS’s pension black hole.

It’s argues that its Philip Green’s fault, for failing to co-operate with the pension regulators.

In another dizzying trip down the rabbit hole, Chappell says he wasn’t allowed to speak to the Pensions Regulator about BHS before he had actually bought the company.

Dominic Chappell continues to blame Sir Philip Green for BHS’s collapse.

He repeats his complaint that the Arcadia boss didn’t deliver on his promise to sort out BHS’s credit insurance (which drove up costs)

MPs aren’t impressed...

Q: You bought this company, and had a cash crisis within three months of buying the business.

Chappell claims it was more like a short-term pinch point - and he sorted out a loan to cover it.

Dominic Chappell claims that BHS’s landlords were very hard to deal with, after years of being yelled at by Green.

There was a perception that we were Philip’s boys... brought in to take this problem child of Arcadia’s hands, he adds.

Chappell: Sports Direct were prepared to save BHS

Today’s hearing
Today’s hearing Photograph: Parliament Live

Boom! Dominic Chappell has told MPs that BHS could have been saved from liquidation, because Mike Ashley of Sports Direct was prepared to step in.

Chappell says that Sports Direct was a “willing buyer” for BHS, if it could have avoided the pension liabilities.

We worked for 24-hour straight, says Chappell. “Mike would have saved the business”

But Green didn’t want the deal to go through, so he called in the administrators by triggering the £35m charge that he still held on BHS.

According to Chappell, Sports Direct would have given BHS the capital injection it needed. That would have left Greens’ £35m loan “in the long grass”.

But SPD would only do the deal if the pension regulators agreed that Sports Direct would be “found harmless” for the pension liabilities.

The Pension Protection Fund worked almost all night, looking for a solution, but then said he needed more time - and then Green served the notice that forced the administration, Chappell claims.

Yesterday, Mike Ashley told the BIS committee that he “100%” wanted to buy BHS, but didn’t reveal what went wrong.

Updated

Chappell: I made a profit on BHS

Iain Wright, chair of the BIS committee, turns to the money which Chappell’s Retail Acquisition took out of BHS.

Q: Given BHS needed working capital, why were you taking money out?

These were fees that we had incurred in the course of the deal.

Q: How much have you taken out?

I’ll give you a full outline on a spreadsheet

Q: Give us a flavour now, please

No. You can have it as soon as practically possible....

Q: So have you made a profit?

Yes, I have made a profit, Chappell confirms. But he did work on this business for the last 13 months, incurring substantial fees. So he feels he earned the profit.

Q: How do you feel about the 11,000 people who are losing their jobs?

Devastated, Chappell replies.

He then promises to also give details on how much he received personally.

Reminder, you can watch Dominic Chappell’s testimony at the top of this blog. It’s also being streamed here.

Here’s a video clip of the jaw-dropping moment this morning, when the CEO of BHS claimed Chappell had threatened to kill him after he spotted a £1.5m transfer out of the company.

Chappell talks about the “enormous lack of investment” at BHS during Green’s tenure - saying some stores had no heating.

And he blames the rows over BHS’s pension deficit for scuppering his hopes of recruiting a chairman who actually understood retail.

On the negotiations with Green, Dominic Chappell says he told the Arcadia boss about his past - including that he had been declared bankrupt in the past (twice, I believe...)

Q: Did he know about your lack of retail experience?

I was very open, Chappell insists. We know nothing about retail.

Chappell: Green thought we'd fail

Q: Do you think Sir Philip Green set you up to fail by selling BHS?

Philip genuinely thought we would fail, Chappell claims.

He claims that the Arcadia boss was hostile to the property CVA which was agreed this year, which lowered BHS’s rental costs.

He also takes a pop at Michael Hitchcock (who called Chappell a premier league liar this morning), claiming the former finance officer didn’t deliver.

Hitchcock came in and made a lot of noise that he’d deal with the landlords....He’s a man of many words and very little delivery.

Chappell: We're considering suing Sir Philip Green

The committee insist that Chappell releases documents related to the BHS sale.

Frank Field MP isn’t happy that Chappell’s lawyers are claiming that ‘privilege’ means they can’t answer some questions.

Chappell says he is currently looking at whether legal action could be brought against Arcadia/Sir Philip Green.

Our insurers have asked that we do not release any documents at this time - it could violate out insurance, he claims.

We’ll make documents available once we have decided what to do, he adds.

Updated

Chappell blasts Green over property deal

Chappell takes another swipe at Sir Philip Green, saying the Arcadia boss had sold BHS’s Ealing store to a related party - his stepson - and had to issue a clarification to the pensions regulator.

I was shocked, Chappell says, and shocked that £3.5m profits that should have gone to BHS went elsewhere.

Q: Did you raise it with Green?

Yes. He said “that’s showbusiness,” Chappell replies.

Dominic Chappell claims BHS failed for three reasons:

1) “Continuous bashing” from the pension regulators and Sir Philip Green - and the regulators inability to reach a deal with RAL separate to Green

2) Trade credit insurance had gone - Green had already said he’d liquidate BHS if he didn’t find a buyer.

If we didn’t buy it, he would have liquidated it for sure

3) Green made a clear pledge that he would provide help with the trade insurance. He didn’t, so we had to find an extra £30m.

Good grief. Chappell claims that he only realised the true scale of BHS’s pensions problem after he bought the company (for one shiny pound coin).

Oh Dominic, you should have know, sighs the committee - saying it’s a clear failure of due diligence.

After probing a few more figures, Jeremy Quin MP has totalled that Chappell only had cash assets of around £25m, not the £94m he claimed.

Chappell denies this....

We’ve not heard anything about BHS’s actual day-to-day operations yet:

Updated

Chappell adds that he received £5m from the Dellal family of property developers (as part of the sale of BHS’s North West House to their ACE company), on top of the £10m from the Green family.

That means the £15m that Retail Acquisitions put into BHS didn’t actually come from his own pocket.

Chappell outlines BHS property deals

Jeremy Quin MP is probing how much cash Dominic Chappell actually had when he bought BHS.

The official documents also show £94m of cash.

That includes £35m in an Olswang account - where did that come from?

Chappell explains that it is to do with the plan to buy Marylebone House from Sir Phillip Green, and then sell it to the Dellal family of property developers (as we heard earlier).

[Ie, the Dellal’s had loaned him the £35m, expecting to buy Marylebone House once the deal went through].

Chappell claims that Arcadia knew about this - something they denied....

But Green then came back and said he had a better offer, so he’d compensate me....

Q: Quin: The accounts show you expected £8.5m from Green as compensation. Did it show up?

It did not, says Chappell, despite being agreed. We eventually received £10m from Green, two months later.

Chappell also confirms that a second property, called North West House, was sold to the Dellals.

And £7m of that sale was transferred to his Retail Acquisitions company.

Q: Why did it leave BHS?

Chappell explains that RAL paid £10m into BHS shortly afterwards.

He also confirms that £3.5m of this £10m came as a soft loan from Tina Green.

That’s Lady Green -- Sir Philip’s wife, who actually owns Arcadia.

Chappell: We planned to buy BHS without debts and pensions

Dominic Chappell tells the committee that the original plan, discussed with Arcadia, was to buy BHS “debt free and pension free”.

Those talks started in August 2014.

But RAL was disabused of that notion in January 2015, and realised that it would have to take on the pension liabilities.

Chappell also confirms that Goldman Sachs were Arcadia’s ‘gatekeeper’ -- he had to persuade GS that he was a credible buyer before he could do any due diligence.

Q: Were you the victim of a classic ‘bait and switch’, asks Conservative MP Jeremy Quin....

Chappell suggests this isn’t the case.

Updated

Another jab at Sir Phil:

Q: Do you think Sir Philip Green is a successful businessman?

He’s very successful at getting rich by taking huge sums of money out of companies, Chappell shoots back.

[That’s a reference to the £400m of dividends that BHS paid to the Green family]

Chappell’s strategy is pretty clear....

Dominic Chappell blames Sir Philip Green for forcing the closure of BHS.

If Philip had assisted us, we could have saved BHS. We were in the process of moving forwards, Chappell claims.

He says Green still had a financial claim on BHS (despite having sold it), while the pensions minefield was addressed.

Q: Was it a Sword of Damocles?

It was a stick that we were continually beaten with, Chappell replies.

He also claims that Darren Topp tried to ‘wiggle his way’ into the ownership of BHS.

Remember, Topp claimed this morning that Chappell threatened to kill him, over that £1.5m movement of cash out of the company.

DOMINIC CHAPPELL HEARING BEGINS

Dominic Chappell has taken his seat before MPs to answer (a lot of) questions about the collapse of BHS.

Q: How did you meet Sir Philip Green?

Chappell explains that he met the Arcadia boss (and former owner of BHS, of course) through a gentleman called Paul Sutton (who is a convicted fraudster).

Chappell says Sutton had been working on a deal to buy BHS. And Chappell and his team subsequently began work on the deal -- but found that he didn’t find Sutton credible.

We believe Sutton was hood-winking people, Chappell says, making claims about his links to Sir Philip Green which weren’t true.

(Eddie Parladorio is one of the Retail Acquisition directors we heard from earlier)

Dominic Chappell at the BHS hearing
Dominic Chappell at the BHS hearing. Photograph: PA

Dominic Chappell

Updated

If you’re just joining us, then hello :)

Here’s our news story about the remarkable revelations from the current CEO of failed retail chain BHS, and the former finance chief:

The session with Dominic Chappell’s former directors at Retail Acquisitions has ended.

Next up, Chappell himself.

Committee chairman Iain Wright says it could take a long time.... so calls a brief suspension to proceedings. We reconvene at 11.25am.

Frank Field MP asks about BHS’s pension liabilities.

Stephen Bourne says that the original proposal that RAL would buy BHS without its pension liabilities was floated before Christmas 2014.

He denies that the property deals were a later ruse to boost Chappell’s credibility; why would Sir Philip Green need to build up Chappell’s credibility, to himself?

Because it would allow Green to present Chappell as a credible buyer, Field suggests.

Stephen Bourne tells MPs that “nothing improper” occurred during the negotiations to buy BHS last year.

Dominic Chappell was running around, trying to find the money, talking to Philip Green, while we focused on other aspects of the deal, Bourne says.

The MPs are now asking the former Retail Acquisitions (RAL) directors why several “jumped ship” and left RAL at the same time, shortly after the BHS deal

One, Stephen Bourne, says he wasn’t comfortable about new directors chosen by Chappell.

A second ex-director says he hadn’t planned to stay on after the BHS deal. There’s talk of pressure of work from other responsibilities.

Updated

The key issue in these complicated property deals is that Dominic Chappell appears to have used the promise of a future profit on Marylebone House to get a loan (from property dynasty ACE), to suggest that he was a serious buyer for BHS, who could have turned the business around.

And that property deal would have been signed off by Sir Philip Green, raising questions about how much he knew about Chappell’s actual financial muscle.

Amazingly, no-one seems to know who owns Marylebone House today.

This -->

The MPs are trying, hard, to get to the bottom of an £8.5m payment that Sir Philip Green allegedly promised to pay to Dominic Chappell’s Retail Acquisitions as part of the BHS deal.

The former RAL directors aren’t completely clear about what happened, so I’m frankly confused too.

But I think the story is that the money – which would have given Chappell a guaranteed profit on Day One of owning BHS – didn’t arrive when expected.

There were then conversations, culminating in a £10m payment from Arcadia in June 2015. This is instead of the £8.5m profit that Chappell was expecting to make on the aborted property deal involving Marylebone House (see earlier post)

Updated

Here’s Graham Ruddick’s news story about the remarkable evidence session from BHS’s management this morning:

The committee are kicking the tires on one of the property deals, the sale of Marylebone House.

It’s devilishly complicated. But Retail Acquisitions (RAL) directors are explaining that Dominic Chappell had planned to buy the property for £35m and then sell it to ACE (the property dynasty who had lent him funds) for £45m, and to receive £8m in return.

But Sir Philip Green changed his mind, selling the property to someone else, and promising to compensating RAL instead.

Oliver Shah of the Sunday Times (who’s done some great reporting on BHS) has tweeted the key points:

Q: So, BHS wasn’t sold for £1, it was sold for minus ten million quid?

Apparently it’s not as simple as that....

Updated

The committee are now taking evidence from former directors of Retail Acquisitions.

Retail Acquisitions directors
Retail Acquisitions directors Photograph: Parliament TV

They are explaining that Goldman Sachs was the “gatekeeper’ to Sir Philip Green, of the Arcadia Group.

Updated

That was the end of the session with BHS’s management. These tweets sum things up.

Highlights start here.

Topp also confirms that Dominic Chappell wasn’t even in the office on the day BHS went into administration.

He told staff he was having an eye operation in America; but actually he was on his yacht in the Bahamas.

That’s unacceptable, Topp says.

BHS CEO: Chappell threatened to kill me over "£1.5m theft"

Darren Topp
Darren Topp Photograph: Parliament Live

Q: Is it true that Dominic Chappell tried to move £1.5m out of BHS to a company called BHS Sweden?

That is true, BHS CEO Darren Topp confirms. And Topp’s first response when he discovered the money had moved was to call the police.

Topp explains that he phoned Chappell, and told him, “that’s theft”.

And – “between expletives”, apparently – Chappell told Topp not to kick off about it.

If you kick off about it, I’ll come down there and kill you.

Apparently Chappell had claimed to be ex-SAS....

Chappell said that the money was to “look after the home team” (ie, his Retail Acquisition colleagues).

The next day, a board meeting was called to discuss firing Topp and another director - another lawyer, who explained to Chappell that the transfer was theft.

The money was then returned, minus £50,000 for “fees”, but Topp believes the money has all been recovered.

Those funds were meant to pay staff, Topp explains. It’s “disgusting” that it was ever moved.

Updated

Q: Why wasn’t the turnaround plan delivered?

CEO Darren Topp argues that BHS’s sales performance was actually better than Marks & Spencer, but agrees that targets weren’t hit.

Michael Hitchcock jumps to Topp’s defence, saying Topp is a good retailer - but obviously performance suffers if you’re spending most of your time trying to tackle a disfunctional owner.

And he then lays into Chappell’s Retail Acqusition again:

You can’t have the uncle as the chairman, the family’s best friend on the board, and Dominic Chappell on the board of BHS... then you’ve already got a majority of friends and family on the board [breaking best practice].

Back to the pensions issue......

Former CFO Michael Hitchcock says that there were “credible solutions” to BHS’s pensions deficit on the table, more than once. That could have prevented the fund going into the Pension Protection Fund, meaning pensioners lose some of the benefits.

And he put some of the blame on the PPF and and the TPF (The Pensions Faculty).

They are cumbersome...not commercial.. and not operating in the best interest of the pensioners.

Former BHS CEO Richard Price says he learned on 26 January 2015 that Sir Phillip Green was planning to sell BHS.

And Green apparently told them that Chappell’s £1 bid was credible.

The committee are focusing on BHS’s pension liabilities.

Darren Topp explains that a plan was being drawn up, that would have involved a 7% cut to pension entitlements. It would have included a contribution from Green’s Arcadia Group.

But that plan was turned down by the pension regulators, so Arcadia’s contribution was never agreed.

Updated

Darren Topp admits that he was “honoured” to be asked to run BHS by Chappell in 2015. But he swiftly realised that all wasn’t well, so engaged Michael Hitchcock to cover the role of finance director.

Hitchcock clearly found the whole experience quite remarkable.

He talks about meetings which were more like tea parties, packed with executives, so nothing could get agreed on the pension liabilities.

Hitchock sums it up:

It was like a Mexican standoff, everyone was dancing around the handbags...

Updated

Q: Tell us more about Dominic Chappell’s lies....

If someone stands up in front of you and says they’ve put £10m into the business, and got a property expert to turn things around, and they don’t deliver. That’s lying in my book, says Michael Hitchcock.

Q: So how much money did Retail Acquisitions take out?

RAL took £17m out of the business, fact. Arguably it put £10m back in, fact, replies Hitchcock.

He adds that you could argue that a lot more came out (mentioning a £45m figure) -- but those are the simple facts.

No-one wanted BHS to fail, he adds, including Chappell - who presumably wanted to keep using it as a revenue stream for his other operation.

Q: Were you aware of Dominic Chappell’s lack of retail experience?

CEO Darren Topp explains that it was blatantly obvious. So the BHS board needed to be shaken up, with new directors with solid experience.

Chappell kept promising to bring in some heavy-hitters, but...

There was always a reason why it didn’t happen. And it never did.

Chappell argued that his expertise was in property, and in deals -- to raise the finance that BHS needed, explains Topp.

Former CFO Michael Hitchcock then chips in - saying that he believes there was enough value on the BHS balance to raise the funds needed to turn it around, if handled properly.

Updated

Former CEO Richard Price, who resigned just after BHS was sold for £1, is explaining that the company had struggled despite close attention from Sir Phillip Green.

Thus the need for a turnaround plan.

Q: So how much fresh capital money did the turnaround plan show was needed?

It didn’t, Price explains, as we only had a week to draw it up (before the sale to Chappell)

Michael Hitchcock is now explaining that BHS managed to cut £12m in costs once it was split away from Sir Philip Green’s Arcadia Group (which had supplied various services to BHS).

The point being; a turnaround plan could have been possible, under a competent owner.

Accountancy group Grant Thornton have some questions to answer - they advised Chappell on this secret plan to split off BHS’s assets.....

The committee are now hearing that Dominic Chappell had a secret plan to hive off profitable parts of BHS, rather than engaging with the Company Voluntary Arrangement drawn up to save the company.

Q: Is that typical of a company trying to restructure itself?

It’s typical about conditions at the time, frowns Michael Hitchcock (who was effectively working as BHS’s finance director).

Hitchcock also says that he sniffed out Chappell as a fantasist within two weeks.

Another damning assessment from Michael Hitchcock:

Financial advisor: Chappell was a Premier League liar

Michael Hitchcock, former financial advisor to BHS, is being absolutely scathing about Dominic Chappell.

Hitchcock is explaining how Chappell’s claims steadily unravelled, calling him:

A Premier League liar, and a Sunday Pub League retailer, at best.....

Then he adds, sorrowfully:

So many people believed him, but he was a liar.

Hitchcock then explains that Chappell’s Retail Acquisitions had proposed taking profitable assets out of BHS, at a time when it desperately needed support.

Q: Why on earth would you do that?

Hitchcock replies:

I question his intelligence. He wasn’t a retailer.

But he also suggests that the motivation could have been to use BHS has a “lifeboat”.

Updated

Michael Hitchcock, former financial advisor to BHS
Michael Hitchcock, former financial advisor to BHS Photograph: Parliament TV

Updated

The committee are seeking more details about the £7m which Chappell’s Retail Acquisition (RA) took from a property deal.

They hear that North West House, the property next to BHS’s HQ, was sold for £32m. But only £25m went into BHS, with £7m going to RA in a loan.

Darren Topp says he first met Dominic Chappell in February 2015, when the company was looking to develop its turnaround plan.

He explains that he met regularly with Sir Phillip Green, and flagged up his concerns about Chappell.

Topp is explaining how Chappell took funds out of BHS, rather than putting cash in as promised.

That includes a £7m contribution from sales of BHS property, plus a £1.8m payments from the sale in 2015.

BHS CEO: Chappell had his fingers in the till

Darren Topp also explains that it was hard to turn BHS around given the large rent costs. So breaking away from Sir Phillip Green’s Arcadia group could make sense.

Q: So how did conditions change after March 2015?

Chappell explained that he was a turnaround expert, and had just pulled off a deal at an oil company in Spain.

Q: And was that true?

Topp explains that Chappell had promised to bring in turnaround experts, and £10m of his own money.

But promises didn’t come to fruition.

And then Topp sums up how things unravelled:

It became clear towards the end that rather than putting money in....he’d got his fingers in the till.

Topp
Topp Photograph: Parliament TV

The session begins, with MPs taking evidence from Darren Topp, chief executive of BHS, former CEO Richard Price, and Michael Hitchcock, former financial adviser to BHS.

Topp begins by explaining that BHS lost money during his seven years at the company.

We didn’t respond quick enough, or fast enough to the changing market place, Topp explains. When we were competing with the likes of C&A (the Dutch chain), we did well, but conditions got harder as retail changed.

The hearing is underway now. You can watch it live here.

DId Dominic Chappell believed he was buying BHS for just £1 without taking on the pension deficit?

That seems extraordinary. But that what investment bank RiverRock told MPs yesterday....

Joseph Dryer of River Rock, which advised Chappell prior to his takeover of BHS, said Chappell had given the impression that he had been led to the BHS deal as he knew the Greens and had attended parties on their yacht.

Chappell had told his advisers that he had agreed a deal with Green that included the settlement of the pension deficit by the billionaire. When it emerged that no such deal had been agreed and the pension was still to be resolved River Rock resigned. Dryer suggested there had been a break down in relations.

As Dryer put it:

“At that point we had been working [with Chappell] over three weeks. Normally when you work with someone you build confidence levels with them. But that wasn’t exactly the case.”

MPs need to dig into some property transactions today.

Chappell borrowed £35m from the Dellal family, a dynasty of property developers, before the takeover of BHS was conducted. Once the deal was done, the Dellals turned a nice profit on a property deal.

My colleague Graham Ruddick explains:

Allied Commercial Exporters (Ace), which is controlled by father and son Guy and Alexander Dellal, provided £35m to Chappell, allowing him to demonstrate to Arcadia he was a credible businessman.

Ace then bought a BHS office building next to its headquarters, called North West House, and sold it for a profit just weeks later. Ace also lent to BHS at such a fierce interest rate that it was known by the retailer’s management as the “Wonga” loan. These transactions made millions of pounds for Ace.

MPs must try to establish whether the property deals and loans were connected to Ace putting up the £35m.

Angela Eagle MP.

The Labour party want Dominic Chappell to apologise for his role in BHS’s collapse.

Angela Eagle MP, shadow secretary of State for Business, Innovation and Skills, says the 11,000 workers facing likely job losses deserve answers.

“The former management of BHS have apologised to staff, blaming Chappell - a former racing driver with virtually no experience of retail - for failing to deliver on his promises. He owes staff an apology too.

“But he might owe more than that. Chappell’s company took millions of pounds out of the business as it veered into administration, leaving a huge pension deficit. He has serious questions to answer.”

BHS managers blame Chappell for collapse

Nine senior managers at BHS have piled fresh pressure on Dominic Chappell before today’s hearing, by firmly blaming him for the company’s demise.

In a letter to BHS staff, they say that Chappell simply failed to deliver the financial support he promised.

They write:

“We, the management team of British Home Stores, would like to apologise to you and all our colleagues for the very sad situation we find the business in.

“The inability of RAL [Retail Acquisitions] to raise sufficient funds and dispose of key property assets, hindered the management team in delivering the turnaround plan.

“Any sums of financing raised or property disposals appeared to fall short of expectations. Under challenge, Dominic Chappell continuously assured us he would deliver on raising funds, this was not the case.”

Something for the MPs to raise this morning....

The agenda: MPs investigate BHS collapse

Good morning.

After yesterday’s unforgettable hearing with Mike Ashley, another tarnished businessman is being quizzed at parliament this morning.

Dominic Chappell, former owner of BHS, is appearing before MPs, to explain his role in the retailers’ collapse which is costing 11,000 jobs.

And he has a lot of explaining to do. How and why did Chappell pick up the chain for £1, how much money was taken out by his Retail Acquisitions during his 13 months in charge, and why he wasn’t able to prevent its collapse last month?

And why did he take on a retailer with a pension deficit that has now ballooned to £571m?

The former racing driver has a rather chequered business record – including a couple of bankruptcies – and with no obvious expertise to run such a large company. And he’s never appeared before a select committee before, so this session could be seriously interesting.

Yesterday, the BIS committee got Mike Ashley to agree that conditions at his firm were unacceptable. Today, they (in partnership with the Work and Pensions committee) need to dig into the complicated financial transactions around this deal, and try to find out how much Chappell benefitted personally.

Back in April, the Guardian reported that Retail Acquisitions took £25m out of BHS during their ownership. Chappell, though, insists that he also put £10m into the company, plus a £5m loan secured against BHS’s assets. Where did that money come from? And where did it go?....

The committee will also hear from former top executives at BHS, who will also give crucial insights into Chappell.

The session begins at 9am. Here’s the batting order.

  • Witnesses: Darren Topp, Chief Executive, and Richard Price, Former Chief Executive, BHS
  • Witnesses: Mark Tasker, Eddie Parladorio, and Stephen Bourne, Retail Acquisitions Ltd
  • Witnesses: Dominic Chappell

Also coming up today....

Financial markets could be edgy, after new data showed Chinese exports fell by over 4% last month.

Supermarket chain Sainsbury is reporting results, showing total sales falling 1% in the last three months. Not great, but rather better than feared.

Advertising giant WPP is holding its AGM, where shareholders could revolt against the £70m pay deal granted to CEO Sir Martin Sorrell.

We’ll be tracking all the main events through the day...

Updated

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