The Pensions Regulator has admitted it first learned about the sale of BHS by Sir Philip Green to serial bankrupt businessman Dominic Chappell for £1 “in the newspapers".
Lesley Titcomb, the regulator's chief executive, told a Commons hearing that the body had been shocked to first learn from the media that the business had been sold.
She also revealed that the Pensions Regulator's investigation into the purchase of BHS last year would not be completed until the end of this year.
Titcomb was being questioned by a joint committee of MPs on the business, innovation, and skills and work and pensions committees, led by Frank Field and Iain Wright, who are investigating the collapse of BHS last month with a £571 million pension deficit.
Since then, questions have been raised over how much money Green, who owned the retailer for 15 years until selling it last year, and Chappell took out in dividends and interest payments.
After the hearing, Wright told BuzzFeed News the committee would need to “think seriously” about the relationship the regulator had with the trustees, management, and owners of BHS.
“They were saying they had a constructive relationship, but then finding out in the newspapers? We need to think seriously about that,” Wright said.
“The investigation that they’re doing will be something like 20 months by the end of the year. I mean, I know the feeling they have to get it right – but taking that long? I think that’s shocked the committee.”
MPs heard how the Pensions Regulator first opened a case into BHS in 2012 over its “atypical” and “extraordinary” proposal for a 23-year pension recovery scheme – twice the length of average recoveries.
The pension fund was brought to the regulator's attention after a subsidiary of Green's business Arcadia – which includes Topshop and Miss Selfridge – stopped acting as a guarantor for the BHS pension.
Titcomb told the committee of MPs that when the regulator heard about the sale to Chappell's consortium Retail Acquisitions last year, the body "immediately opened an anti-avoidance case". It was now digging through 70,000 documents related to the case that it hoped to report back on by the end of the year.
If the regulator had known about the sale to Chappell in advance, Titcomb said, it could have acted to ensure that provisions were made for the pension fund.
MPs repeatedly asked her if the regulator needed more power to enforce rules.
Conservative member Richard Fuller was particularly scathing. He said: “For good reasons or bad, you don't sound like much of a regulator."
He added: "Your belief in flexibility doesn't work because you don't have enough teeth until it's too late."
Wright told BuzzFeed News companies also have a “moral obligation” to employees. During the hearing MPs also accused BHS of showing the regulator little respect.
“You obviously want companies to play the rules of the game and for those rules to be as robust as possible,” he said. “But there’s also a moral obligation to those people who work for you.
“They’re not just pieces on a board; there’s a social aspect. Making sure you do right by people who do right by you is also really important."
The committee also heard from Alan Rubenstein, the chief executive of the Pension Protection Fund, who revealed that the 23-year recovery plan for the pension was more than double the average length for other funds.
He called for time limits to recoveries to avoid future long-term plans leading to problems. If the fund must take over the BHS pension scheme, it will cost £275 million.
Green, Chappell, and the pension trustees are set to be called in the next month.