Modern corruption is a refined process for sophisticated people. Urbane actors enter the political equivalent of a “buy now, pay later” (BNPL) agreement. Politicians or civil servants grant a shady financial institution or incompetent arms manufacturer access to decision-making and public money. No agreement needs to have been reached. No wads of cash change hands. But after the civil servant retires or politician leaves parliament, he can expect an immensely rewarding job. The sole benefit of the multibillion collapse of Greensill Capital in 2021 was that it illuminated BNPL politics as no other scandal has.
Lex Greensill and David Cameron were so made for each other they wanted to be each other. Greensill grew up on a sugar cane farm in northern Queensland. He escaped to a job in Sydney’s financial sector and then to Morgan Stanley’s London office. He stood out even in that world. His colleagues called him “the demon” and “the psychopath”. He told them he wanted “to make billions and billions of pounds”.
But the boy from the outback also yearned to adopt the manners of the English upper class: that famous polish, that effortless superiority. When he founded Greensill Capital in 2011, he ordered its headquarters in central London to be decorated in the baronial style. The wood-panelled, chandeliered dining rooms of the Savoy hotel across the road became the office canteen. His Savile Row suits and country retreat on the Welsh borders screamed that here was a man desperate to acquire a touch of class.
Cameron was an authentic member of the upper class who might polish him up. After he destroyed his career and the country’s prospects by taking the UK out of the EU by mistake, Cameron yearned for a comfort Lex Greensill could offer him: obscene amounts of money.
As early as 2014, Greensill had a desk in Cameron’s Downing Street with a brief to pitch ideas on “supply chain finance” across Whitehall. He claimed he was a democratising “disruptor” who could bring all the benefits the big businesses enjoyed to small pharmacists awaiting payment from the NHS, and potentially all the public sector’s other suppliers as well.
Supply chain financing addresses a problem as old as trade. Farmers, for example, want a supermarket to pay for their goods on delivery. But the buyer wants to delay payment until they have sold the goods, maybe 90 days later, maybe longer if the buyer is unscrupulous. The financial institution intervenes. It pays the supplier most of the bill at once – perhaps £99 out of £100. It takes the £1 cut and then collects the full £100 from the supermarket when it is ready to pay.
The problem is that a sensible bank would only want to deal with large, reputable corporations that would pay their debts. A sensible bank would also be a boring bank because the profits from its cuts on the deals are so small. Often there is no profit at all. Banks offer supply chain financing as a loss leader for corporate clients, in the hope the goodwill gesture will drum up more trade.
Greensill used the hucksters’ language of the 2010s to pretend that he could blow this staid market open. Low interest rates and quantitative easing left investors searching for high returns. Greensill Capital posed as a company that could dominate its sector as Google and Amazon dominated theirs. It was a force for justice and democracy that wanted to give small businesses everywhere the same advantages the big boys enjoyed. No buzzword was ignored. Greensill claimed to be a “fintech” business, even though it used other people’s technology. With new technology and new ideas, it boasted, it could be worth tens of billions.
It was not just the Cameron government. Credit Suisse and SoftBank fell for the patter and piled in billions.
The great merit of Duncan Mavin’s terrific book is that he shows the emptiness behind the bombast. Lex Greensill was not a tech tycoon in the making. He could not turn supply chain finance into a vastly profitable industry. It was the same boring business it had always been. Greensill looked for profit as other bankers looked for profit by lending to clients. But in Greensill’s case they were too often risky clients. He thought insurance would cover him if the loans turned bad. If it didn’t, he was a great salesman, who could always persuade investors to pump in more money.
Mavin, who covered the story for the Wall Street Journal, is a meticulous reporter. But he argues there is a simple fact behind the scandal’s complicated details. Greensill Capital was an “outlandish Ponzi scheme” (though Greensill has denied this) that relied on paying existing investors with funds from new investors as surely as any other racket.
The Cameron government’s endorsement mattered commercially. Whitehall awarded Greensill contracts “for projects Greensill had proposed when working in Whitehall”. Greensill used the CBE the Conservatives gave him as a quality assurance mark, and in 2018 bagged the former prime minister himself.
Greensill gave him hundreds of thousands of pounds in salary. He added stock options he could cash in before the company floated that ran to millions, and offered the prospect of an estimated $60m when Greensill Capital eventually went public. Greensill got the class, Cameron got the money, as the two went round the world attempting to woo European and Asian investors. An easy, lazy job for an easy, lazy prime minister.
I, and I suspect many others, think that scandalous financial projects can’t last. But Bernie Madoff ran the largest Ponzi scheme in history from the early 1990s until the financial crash of 2008 blew it apart. The pandemic performed the same destructive function for Greensill Capital. As investors withdrew or tried to withdraw their money, insurers announced they would no longer provide cover, and Credit Suisse froze its funds. The final pages of The Pyramid of Lies are grimly comic as they cover Cameron’s frantic lobbying of the government to extend Covid bailout facilities to his benefactor. To their credit, Rishi Sunak, Sir Jon Cunliffe at the Bank of England, and Sir Tom Scholar at the Treasury refused. The government was already bailing out businesses, why did it need Greensill?
It was a good question that should have been asked years before.
• The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal by Duncan Mavin is published by Pan Macmillan (£20). To support the Guardian and Observer order your copy at guardianbookshop.com. Delivery charges may apply