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MG Rover: how the Phoenix Four hit the jackpot
Report into demise of car manufacturer reveals owners

Evidence Eliminator" computer software, a tax avoidance plot called "Project Slag", six-figure bribes and an office affair were just some of the more outlandish ingredients revealed today by the long-awaited investigation into the MG Rover scandal.

The 850-page report lays bare the breathtaking lengths to which its former owners, the so-called Phoenix Four, went to enrich themselves before the company – Britain's last large car manufacturer – collapsed in April 2005 with the loss of 6,500 jobs.

The four local businessmen and former MG Rover chief executive Kevin Howe paid themselves a total of £42m during their five-year ownership of the company, which they bought for a token £10 and left with more than £1bn in debts. The report concluded their financial rewards were "excessively large" despite the fact that the businessmen invested no money in the group after they bought it and took risks which were "relatively insubstantial".

The most extraordinary behaviour comes from Peter Beale, one of the Phoenix Four. According to the report, at 10.05am the day after the government appointed inspectors in June 2005 to investigate Rover's collapse, Beale purchased "Evidence Eliminator" software enabling him to wipe the hard drive of his computer.

According to its website, the software "quickly and professionally deep cleans your computer of 'sensitive material', leaving you with a clean PC, a clean conscience and instant peace of mind". The company also promised users the program would enable them to "purge [their] PC of hidden computer data which could later be recovered with Forensic Software to be used as evidence against [them]". At 12.20pm that same day, Beale installed the program on his computer.

When investigators examined the computer about a week after Beale ran the program, they discovered that he had deleted a sub-folder called "MG Rover" from his hard disk. They later found that one of these files contained details of the income and benefits received by John Towers, one of the four businessmen, from MG Rover.

When Beale was questioned by inspectors he changed his story several times, originally saying that he could not remember whether he had downloaded the software and that he frequently used similar programs, despite inspectors finding no evidence to support this claim. Later he claimed that he only wanted to delete personal documents.

The names given to some of the businessmen's tax benefit schemes are equally bizarre. "Project Slag" – short for "stock lending agreement" – was one such scheme cooked up by Techtronic (MG Rover's holding company), Deloitte (MG Rover's auditors and advisers) and Barclays in the summer of 2000. The scheme would have earned £60m for MG Rover and £42m for Barclays but was blocked by the Inland Revenue, despite the best efforts of Towers to persuade them not to. In a recording Towers is heard promising officials that "Barclays would commit to never doing this again" and says "we are asking you not to challenge, and then you can change the law", according to the report.

Two years later, they were at it again when Barclays approached Deloitte with "Project Aircraft", a scheme where MG Rover would acquire the share capital of a company leasing two Boeing 767 aircraft. The idea was that the car company's losses would be used to eliminate the leasing company's tax liabilities. This time, the scheme went ahead, with the Phoenix Four's holding company earning £10.6m from the arrangement. Much of this money was paid into the Guernsey Trust, an offshore account used mostly to fund the pension schemes of the Phoenix Four and Kevin Howe.

The report also accuses Brian Parker, a former director of Techtronic, of receiving a bribe from St Modwen Properties over a real estate deal involving the company's Longbridge site in the Midlands.

The inspectors also criticised how one or more members of the Phoenix Four made business decisions on an ad hoc basis, with no board meeting being held or minutes produced. They also criticised them for employing Dr Li, who received £1.6m in consultancy services over 15 months before MG Rover collapsed, even though one of the Phoenix Four – Nick Stephenson – had a "personal relationship" with her. Inspectors said that her fees were "excessive" and that apart from translation, she "didn't seem to add much".

The inspectors said that Phoenix had used its income to support Edwards Cars, which was owned by John Edwards, the final member of the Four, and his wife, without which they said it would probably have had to stop trading. The level of financial support to the dealership was "not commercially justified" they said.

The Phoenix Four started out with plans to pocket a total of £75m over five years. They still own £11.6m of assets.

But the Seri

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2009-09-21 17:13:53 by Dancelove101 ((M))

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