Pyramid of Lies: The Prime Minister, the Banker and the Billion Pound Scandal

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When the victims started comparing notes, they realized the basis of this scam was implausible,” said Lovell, referring to the sheer volume of tractors Gentry would have needed to sell to justify what he promised investors. “The victims can see in hindsight how ludicrous it was to believe that this scheme was true.”

When I started to look into it based on this documentation I received, I realized Greensill was the story. And it didn't really take an awful lot of digging to figure that out. In the centuries since, factoring became part of the supply chains that grew around the world, oiled by liquidity. As these operations became faster and more complex they needed not just factoring but reverse factoring, in which people sell their debt, rather than their credit, and each agent in the chain is paid straight away. The process became computerised, and modern global trade now runs on a silent river of digitised debt. NATHAN HUNT: One of the things that Greensill focused on, very early on in his career was the idea of supply chain finance, the possibilities of supply chain finance. Certainly, Greensill didn't invent this. It's been around for a long time. I'm wondering if you can tell me a bit about what is supply chain finance? To its founder, Greensill Capital is more than a business: his whole new identity depends upon it. As the story unfolds, we see his drive and determination evolve fatally into messianic ambition and a blinkered disregard for differing views. And for a form of Prime Minister who really only has his reputation to sell his credibility and his reputation to have put it all on this company, which was already showing some serious red flags, that was a really strange move.

The Prime Minister, the Banker and the Billion Pound Scandal

And as you say, in one form or another, it's been around for a long time. In the last I guess, now 25 years or so, there have been various forms of this that have developed that fund it in different ways. In particular Lex's particular slant on this was that he would fund it through selling these loans essentially to investors. So unlike a bank, which is funding this from its own balance sheet, Lex doesn't have a balance sheet. So he goes out to investment funds and says, look, I can provide you with some kind of yield by funding these transactions. 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. The Pyramid of Lies is not elegantly written. The breathless tone of some descriptions verges on comical: the Savoy, where Greensill holds a breakfast meeting, is “a 130-year-old art deco masterpiece, dubbed London’s 'most famous hotel’ and renowned as a favoured haunt of kings and presidents, Hollywood stars and fashionistas”. It is nonetheless worth reading as a meticulously researched and enjoyably lively account of this major financial scandal. And interestingly, as soon as he gets a role at Greensill Capital, which lends a lot of credibility to the firm to have a former Prime Minister working for you is really a stamp of approval. Why David even did it is really interesting, right? So I think what's the upside for him of his relationship with Greensill Capital: one, is potentially a huge payout. So he gets paid a decent salary, and he gets paid a good bonus, but he also gets options, which had they paid off, he would have got tens of millions of pounds. It just became too big. And such a major part of Greensill's business was heavily reliant on what Sanjeev Gupta was up to. And that business now is under investigation by the SFO in the U.K. And so clearly, there was a problem there.

NATHAN HUNT: The book, once again, The Pyramid Of Lies: Lex Greensill and the Billion-Dollar Scandal. Duncan, thank you for joining me today on the podcast. Duncan Mavin of Dow Jones joins the Essential Podcast to talk about his new book "The Pyramid of Lies: Lex Greensill and the Billion Dollar Scandal". Duncan discusses Greensill Capital and its collapse, which damaged the reputations of a former U.K. Prime Minister, prominent venture capitalists, and Credit Suisse. He also talks about the bizarre experience of reporting on a company where the red flags were obvious, and yet thoroughly ignored by investors. DUNCAN MAVIN: That's a great question. So I -- yes, you're right, I've been following this for probably about 4 years now, maybe a little longer than that. And at the time -- I've been a financial journalist for a long time. I was a chartered accountant before that. So just so you know where I'm coming from. But at the time, I wasn't writing an awful lot. I was doing a bit more editing and managing people. And a source -- a longtime source of mine came to me and said, hey, are you paying attention to this company called Greensill Capital? And I said, no, never heard of them. NATHAN HUNT: In the end, it was actually a small insurance company that collapsed the house of cards that was Greensill Capital. How did that come about? So he grew up in a fairly remote part of Australia, a place called Bundaberg, which is a farming community. His grandfather had started a farm there in the 1940s. And Lex was kind of second, third generation, who was running this farm, mostly farming, sweet potatoes and water melons and things like that. He was clearly kind of a bright guy, a little bit nerdy possibly at school and a sort of fairly rough macho environment that meant he stood out a little bit.NATHAN HUNT: Sadly, the losers from Greensill's collapse extend beyond just a few venture capitalists and private equity investors. What was Credit Suisse's role in spreading the exposure to Greensill? NATHAN HUNT: Duncan, you've been following the Greensill story for years. I'm wondering how early did you know that this story wasn't going to end well?

Pyramid of Liescharts the meteoric rise and spectacular downfall of Lex Greensill and his company. He had a simple idea that disrupted a trillion dollar industry and drew in Swiss bankers, global CEOs, and world leaders, including former British Prime Minister, David Cameron. But a staid business model concealed dubious practices, as Greensill made increasingly risky loans to fraudulent companies using other people’s money. And so suddenly, you see sort of vast amounts of assets pouring into these Credit Suisse funds. In truth, just to echo what I said a little bit earlier, in truth, it wasn't just supply chain finance assets. It was, in fact, kind of loans to risky businesses, some of them complex steel businesses run by Sanjeev Gupta. And so this is Credit Suisse's clients' money. Some of it's pension fund money, some of it's big sovereign wealth fund money. Some of it's money from individual private clients. And Sanjeev's looking for somebody who lend them some money and the 2, they have this kind of symbiotic relationship. So much so that at one point, Sanjeev Gupta is a major shareholder in Greensill Capital. So the 2 become really kind of intertwined and they start to really lean on each other, right? Like Greensill can't really grow without the revenue it gets from Sanjeev Gupta's businesses. And Sanjeev Gupta's businesses known as the GFG Alliance, they can't really grow without the money that Greensill is providing to it. Lex Greensill had a simple, billion-dollar idea - democratising supply chain finance. Suppliers want to get their invoices paid as soon as possible. Companies want to hold off as long as they can. Greensill bridged the two, it's mundane, boring even, but he saw an opportunity to profit. However, margins are thin and Lex, ever the risk taker, made lucrative loans with other people's money: to a Russian cargo plane linked to Vladmir Putin, to former Special Forces who ran a private army, and crucially to companies that were fraudulent or had no revenue. DUNCAN MAVIN: Yes. They were a very difficult group of people to deal with because Lex had this tendency to say things that weren't true. It's unusual in my experience that people will outright lie to your face as a journalist. In this case, there were people around Greensill who were doing that regularly. And not just Lex Greensill, not just his PR person, his spokesperson, but also lawyers who were acting for Greensill Capital and so on, would tell me things that later turned out to not be true or deny things that I took to them and tell me that I was wrong, only for it later to become apparent that I wasn't wrong.And he was clearly really, really ambitious. In his retelling later, and he told this story many, many times, what motivated him to get into supply chain finance. This is his version of events, was watching his parents struggle to get paid on time. So producing their agricultural produce and selling it to supermarkets who then failed to pay until 3 months later or 9 months later or [ over ] a long end. And that sort of left his parents short for a while. And so that in his retelling was that motivated him to say, I'm going to do this in a little guy. I'm going to sort this problem out.

NATHAN HUNT: A final question, Duncan. You also became a character in the Greensill story, an unwilling character, but a character. As you were investigating Greensill for Dow Jones and for your book, what was your experience with them? See also: Inside Jason Miller’s plan to turn the Big Lie into a big business – and a second term for Trump]

Pyramid of Lies: The Prime Minister, the Banker and the Billion Pound Scandal

And there would be some sort of implausible excuse given. A very, very difficult firm to deal with. And I suppose that was probably one of the biggest red flags, right, that if somebody is so desperate not to tell you the truth, not to answer your questions, even questions which seem pretty straightforward, then that's a real red flag. If you've got a genuine business that's genuinely growing faster that is being done in a very honest and well organized and well structured way, then you're probably fine answering difficult questions from journalists. But if you've got a business which fundamentally is not doing what it's supposed to, then that's always going to be a difficult relationship. Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework. A few years ago, I made it into an intimate meeting at the "top table". Just me and the top brass. I had prepared copious notes to discuss the large deal that was imminent. But I hadn't prepared to discuss horse racing, the ownership of horses, or the best dogs to keep at stables. What distinguishes the Greensill saga from other corporate scandals such as the Guinness share-trading fraud of the 1980s or Robert Maxwell's misappropriation of pension funds is the way in which it encompasses, and taints, figures from the highest levels of politics and officialdom, most notably David Cameron and the former Cabinet Secretary Jeremy Heywood. And in that case, there's a few million dollars of maybe somebody who has got a little bit more than that has been poured into these funds, which have been sold as ultrasafe, but in fact, they aren't really. They're full of risky loans. And so Credit Suisse played a really important role in fueling Greensill Capital growth, but also spreading the risk to people who didn't understand what they were getting into.