The business practices of Stephen Dorrell have been called into question after a business partner accused the former health secretary of leaving him with nothing. Dorrell used a controversial insolvency procedure to move a publishing company into a new corporate entity owned by himself, making shares owned by his business partner worthless and allegedly thwarting an unfair dismissal claim against the company.
Dorrell is the chairman of the NHS Confederation and was health secretary between 1995 and 1997. He served as a Conservative MP for 36 years until he stood down at the last election.
Project Viva, which published specialist health and motoring magazines, called in administrators last month and was immediately bought by Dorrell’s investment vehicle Dorson Transform through a pre-pack administration. Pre-pack administration is lawful but controversial because it allows a company effectively to walk away from its debts.
Project Viva was 35% owned by Dorrell’s wife, 30% owned by financier Paul Meier, and 35% by Kate Rogers, whose husband Matti is a publisher and helped to set the business up. Matti Rogers claims he and Kate were pushed out of their roles at the company last summer after opposing Dorrell’s proposals to take over Project Viva. Dorrell said their positions had been made redundant.
The Guardian has seen emails from Dorrell showing that he proposed moving Project Viva into Dorson with Rogers and his wife remunerated as employees, rather than shareholders. Rogers and his wife, Kate, launched an unfair dismissal case against the company, but that is now effectively worthless because their claim is against Project Viva, whose assets have been bought by Dorrell’s vehicle.
This is not the first time that Dorrell has been caught up in controversy. His behaviour was branded “completely immoral” seven years ago after a South African company was left with worthless paper shares after selling Dorrell its UK clothing business. LA Group sold its clothing operations for £1m of shares in Wensum, a company that Dorrell chaired and had a major stake in.
However, a month after the deal the assets of Wensum were moved into a new business through a pre-pack administration. While LA Group ended up with nothing, Dorrell had a 15% stake in the new business and collected a £200,000 salary as a director.
He also faced calls to resign as an MP in 2014 after taking on a lucrative role as a health consultant with KPMG, the accountancy firm. Critics claimed it was conflict of interests because KPMG was looking at bidding for a £1bn contract with the NHS.
Dorrell’s behaviour has drawn criticism from staff at Project Viva. An editor of one the magazines it published, Andy Hornsby, sent an email to suppliers and customers saying he was leaving the company on the back of the pre-pack.
In the email from Hornsby, seen by the Guardian, he claims that Dorrell had told him the company was going through the pre-pack administration to avoid the unfair dismissal claim and that he expressed his “disapproval”. Hornsby wrote: “I really should try to write it as a script for a sitcom, except a lot of the stuff between the lines is frankly too implausible.”
In another email directly to Dorrell, the former health secretary is told the reason for the pre-pack administration is morally objectionable.
Rogers said the pre-pack administration showed that the insolvency system in Britain was “flawed”. In a statement, he said: “Despite the Graham Review recommendations instigated by Vince Cable and endorsed by the government, it is still possible for the directors and/or owners of an insolvent business to emerge the other side of an insolvency process at the expense of selected creditors and minority shareholders.
“Yet again, to requote another of Stephen Dorrell’s former shareholders, the process was like a spider eviscerating a fly it has caught, taking all the good bits, then dropping the useless carcass, which is the creditors, the shareholders and of course the taxpayer.”
When contacted by the Guardian, Dorrell said that Project Viva was placed into administration “because the board concluded that it was unable to meet its obligations”. He denied he had proposed moving Project Viva into Dorson Transform through a pre-pack of administration in July 2015 and said that Rogers and his wife had left the company because “their positions were declared redundant”.
When asked whether he regretted what had happened and whether it was morally acceptable, Dorrell said: “I believe the directors’ actions secured the interests of creditors and protected the jobs of nine staff.”
