Sir Philip Green is threatening legal action against Dominic Chappell, the former owner of BHS, over the collapse of the department store chain. Green has been described as the “unacceptable face of capitalism” and blamed for the demise of BHS in a damning parliamentary report into the scandal.
However, the billionaire tycoon has fought back by sending legal letters to Chappell and the other members of his consortium, Retail Acquisitions. Green ran BHS for 15 years until he sold it in March 2015 for £1 to Retail Acquisitions, which is 90% owned by Chappell.
Green alleges that Retail Acquisitions misused BHS funds and that Chappell falsely represented his business credentials in prior to the deal. The legal letter, sent by Green’s solicitors at Linklaters, warns Chappell and his associates that they could be sued.
Although Green was heavily criticised by MPs in their report on BHS, Chappell is accused of having had his “hands in the till” and exploiting the retailer for his own personal gain. Retail Acquisitions took out at least £17m from BHS, including £11m in salaries and fees.
Green’s legal threats revolve around £7m that Retail Acquisitions took out of BHS and the lack of money it put in.
The tycoon claims that Retail Acquisitions breached the terms of its deal to buy BHS by diverting funds raised by the sale of the retailer’s property into its own bank account. The consortium pocketed £7m from the £32m sale of the BHS headquarters in London just days after buying the chain. Retail Acquisitions had previously agreed that all funds raised by the sale of BHS assets would remain in the business.
Green alleges that Chappell again broke the terms of their agreement by not pumping any of his own money into BHS. Instead, Chappell injected £5m into BHS through a loan that was secured against the retailer’s warehouse in the Midlands. This loan was paid off when Retail Acquisitions sold the warehouse in August.
Furthermore, Green believes that Chappell exaggerated his own business credentials during the negotiations to buy BHS, such as the success of an oil venture in Spain. The Guardian has found that Chappell was forced out of a company called Olivia Petroleum after taking around €400,000 (£315,000) from the company for his personal use.
Green declined to comment about the legal action, while Chappell did not return calls or emails seeking comment.
The Insolvency Service is understood to be examining whether there are grounds to disqualify members of the Retail Acquisitions consortium from being company directors in the future. It is exploring the conduct of Chappell and his associates as part of its investigation into the collapse of BHS. The Serious Fraud Office is also conducting a preliminary inquiry, but is yet to announce a formal investigation.
The scandal has led to heavy criticism of Green and Chappell by other business leaders. The Institute of Directors (IoD) said the collapse of BHS “casts a long shadow over British business”.
Oliver Parry, head of corporate governance at the IoD, a lobby group for business leaders, said: “The business community will be very worried about the damage this episode will do to public faith in capitalism. Now is the time to take a fresh look at how large privately owned companies are governed. Just because a company is not listed on the stock market, it does not mean there is no public interest in how it is run.
“After damning reports into BHS, and last week Sports Direct, there is a pressing need to work out how to raise levels of trust in how British companies are overseen.”
