Meet The People Who Say Their Firms Were Destroyed By RBS

    "They are the great white sharks of RBS – they chose to screw over 100-plus families and 30 staff, just to make a profit.”

    by Tom Warren, Jane Bradley, Richard Holmes, Heidi Blake
    BNPS / Will Wintercross / Supplied / BuzzFeed News

    Thousands of leaked documents revealed by BuzzFeed News and BBC Newsnight show how RBS's troubled business division, Global Restructuring Group (GRG), systematically crushed thousands of businesses after the financial crash by draining them of cash and stripping their assets. The files reveal 16,000 firms were sucked into GRG in the recession – including hundreds of farms, care homes, schools and nurseries, and hotels. RBS denied that it systematically destroyed businesses for profit but admitted that "a number of our customers did not receive the level of service they should have done".

    These are some of the people who say RBS ruined their livelihoods.

    This school was forced to close in the middle of exams after GRG halved its value overnight.

    Jane Bradley/Supplied

    Britain was in the grip of its coldest winter in 30 years, with snow and ice sweeping the country, but the assembly hall of Sheffield’s Brantwood School radiated warmth. Soft strains of young voices in song drifted from the Edwardian building, more like a large home than a school with its tall windows, turrets and tree-lined garden. Inside, a cluster of four-year-old girls dressed in the school’s navy uniform were singing "Catch a Falling Star". It was this memory which caused the school’s former headteacher Lynn Marriott to break down in tears.

    “I just felt like I’d failed those girls,” she told BuzzFeed News. On that February evening in 2010, the 108-year-old independent school held its final assembly before closing its iron gates on its 128 pupils and 30 staff for the last time. Its students, some of whom were in the middle of their GCSEs, had just nine days to find new places after GRG put the school into administration. “The whole thing was Dickensian,” Marriott said. “Children were being thrown out on the street in February.”

    The school had been struggling to fill its £3,000 a year places after the financial crash, and needed extra funds to pay staff and cover its overheads till the end of the academic year. After that, the governors had accepted that the school would have to close, but they were determined to keep it open long enough for all the pupils to finish their exams and find new places elsewhere. The governors had the school building valued independently at £1.05 million and hoped that RBS would extend an existing loan to £900,000 to tide the school over till the end of the year when the property would be sold to repay the bank.

    Marriott travelled through the snow to RBS’s London headquarters with Brantwood’s chair of governors, James Boyington, to ask for help just before Christmas. But instead of agreeing to the loan, RBS threw the school into its notorious troubled business unit, GRG. In January, the unit produced an informal valuation claiming the school was worth between £500,000 and £600,000 – around half the value it had been given a month earlier. Boyington was angry: “They’d rejected a legitimate valuation for something written on the back of a fag-packet.”

    What happened next is a common thread in the stories of hundreds of businesses that were swept into GRG. The unit’s property division, West Register, swooped in and offered to buy the school at the reduced price recommended by its own valuation. The RBS Files reveal that West Register was “used by GRG to acquire property assets from distressed situations” and sought "to exit properties via a future commercial sale in order to extract maximum economic value”. They also show that the bank's auditors had raised concerns about GRG's tendency to “over-ride or ignore third party information (such as third party valuations)”.

    The governors were not prepared to sell the school to West Register for so much less than they believed it was worth. When they refused the offer, the school was put into administration and given nine days to vacate its building. School places had to be found for 128 pupils, some of whom were in the middle of their GCSEs, and 30 staff were made redundant.

    “I don’t think they brought in GRG to help us,” Boyington said. “I think they brought them in to make money. They are the great white sharks of RBS – they chose to screw over 100-plus families and 30 staff, just to make a profit.”

    For Marriott, the fallout was devastating. “They were like a tsunami – in one great wave they had wrecked the lives of 128 children," she said. "I tried to tell RBS that this isn’t a factory – we’re not making boxes, these are people’s lives.

    “It’s a David and Goliath story, and Goliath won.”

    RBS said in a statement that “this was a deeply regrettable situation" and said the bank had continued supporting the school for as long as possible but "the decline could not be halted". It said it would not have been in the interests of taxpayers to loan the school more than the informal valuation it had obtained by Knight Frank had found the building to be worth.

    The studio where Susan Boyle recorded her music was shut down by RBS's troubled business unit.

    Supplied/BuzzFeed News

    A successful Scottish music studio that recorded top-selling artists including Susan Boyle, Belle and Sebastian, and the Fratellis was forced to close by GRG. The owner, Stuart McCredie, told BuzzFeed News his studio was pushed into the feared unit after he told RBS he wanted to take his business to another bank. McCredie, who had spent 23 years building the business, says he had never missed a loan repayment and was given no reason for his transfer to restructuring, but was immediately hit with fines, extra fees, and additional interest running into six figures. The RBS Files reveal that companies could be pushed into the restructuring division just because of a “breakdown of customer relationship”, or if the customer came up with “any proposed exit strategy” to end its deal with the bank.

    McCredie continued trying to refinance with Clydesdale Bank but he told BuzzFeed News that GRG scuppered the deal by refusing to hand over crucial documentation relating to his accounts. After three years of accruing extra fees, McCredie's original £1.7 million loan had swelled considerably, and he said the extra charges were so opaque that, without access to his financial records, he lost track of how much he owed. Emails show he begged the bank to give him a full and final settlement figure so he could try to repay his debt and escape the restructuring unit, but he said GRG obstructed all his attempts at repayment. Instead, it put him into administration in the summer of 2010. Fifteen jobs were lost and the busy studio was shut down.

    McCredie is now preparing to sue RBS for losses of £5 million as part of a group action on behalf of hundreds of business owners who say their livelihoods were destroyed by the bank’s restructuring unit. “They damaged me as much as they possibly could,” he said. “They took away my potential to earn, they took away my business, they put me and my wife under immense stress and strain. I don’t want it to happen to anyone else, and I don’t want them to get away with it.”

    RBS did not comment on McCredie's case.

    GRG tried to claw back money from this man's dead wife after it shut down his care home business.

    BNPS

    As his wife lay dying of cancer, James Glanville watched the care home business passed on to him by his parents crumble under the weight of crushing fees imposed by the family’s trusted bank, RBS. Earlier this year, widowed and financially ruined, Glanville received a letter addressed to his wife, Frances, demanding immediate payment of a £245,000 personal guarantee she had signed in a vain attempt to save the business before her death. “This was a family business and it was destroyed by RBS,” he told BuzzFeed News. “I lost my wife as well as the company. I don’t know if I’ll ever really recover."

    Glanville’s family care home business in Bournemouth had boasted healthy revenues and growth for years, and, in 2007, he decided to expand. He took out a new loan from RBS for £4.4 million to buy a new building for elderly residents. As a condition of the deal, the bank required he buy one its interest rate hedging products – one of the notorious “swaps” that promised to protect businesses if rates went up, but generated crippling fees when rates plummeted after the financial crash. That was when the trouble began.

    Glanville said those swaps cost him an extra £15,000 a month after rates were slashed and began to starve his companies of cash. He said it became increasingly difficult to fund high-quality care for his residents and the homes began to fail their inspections. He scrimped and saved to avoid missing any loan payments but, in September 2009, he was told he was being forced into GRG because of concerns about his cashflow. RBS said he was transferred into restructuring after the local authority put a "bed block" on his homes, preventing him from taking new residents.

    Glanville told BuzzFeed News that, as soon as he was inside GRG, he was hit with “risk fees” amounting to £9,500 a month on top of a slew of other punitive charges that drove his companies further underwater. “We got the full hurricane of RBS’s ‘support network’,” he said. “They weren’t interested in helping our business, just making money from it." Glanville is convinced that the stress caused by the rapid decline of his business exacerbated his wife’s illness. Frances passed away in 2011, at the height of the trouble with GRG, aged just 42, leaving behind three teenage daughters. “Your wife is dying in front of you and all you can think is, Why did I sign that [swap] document?” he said.

    As the care home business spiralled towards insolvency, GRG offered a solution. It would extend Glanville’s loan to £5.2 million if he signed over a 40% stake in his care homes to its property arm, West Register. In desperation, Glanville agreed to the deal, and the bank extended his loan. This kept the wolf from the door for the next two years but then, in 2013, he says, GRG told him he was in too much debt again and demanded a further stake in the properties to continue his loans. He was unwilling to sign over an even greater chunk of his business, and so GRG demanded he repay the debt.

    By now, Glanville said, the unit’s crippling fees were making it impossible to take proper care of his elderly residents. There was no money for special bathing equipment for those who needed help washing, and the homes were shedding staff. He felt he had no choice but to close one of the homes, Greenbushes, uprooting all the residents and making 28 staff redundant just before Christmas in 2013. Glanville used the money from the sale to pay off more of the company’s bank loans and the hundreds of thousands of pounds he owed the taxman and creditors. He hoped he had done enough to give his other two care homes open, but his debts continued to spiral. In April 2014, his other two homes went into administration.

    Before she died, Glanville’s wife had signed a personal guarantee to persuade the bank to continue supporting his business. Earlier this year, RBS began repeatedly sending threatening letters addressed to Frances, demanding that she pay up. After being reminded that she had died, RBS wrote to Glanville to apologise for its error. But it is still pursuing him, and his elderly parents, for £345,000 it says they owe.

    RBS said it had to write off millions of pounds of Glanville's debt after his business failed.

    GRG took out a loan in this man’s name to pay its own legal fees as it demanded a stake in his farm development.

    Will Wintercross

    Paul McKenna's Aberdeen barn conversion company was thrown into GRG in 2011 after RBS became concerned that it may not be able to pay its debts. The businessman said that though he had not missed a payment, the restructuring unit seized control of all his accounts. Correspondence shows he was forced to beg for funds to pay his bills, while GRG hiked his interest rates and charged him additional fees that he said ran to seven figures. "They were acting like gangsters,” he told BuzzFeed News. “GRG in particular seemed to take pleasure in really turning the screw.”

    The restructuring unit told him that he would have to hand the bank a stake in an ongoing property development if he wanted RBS to continue his lending, documents show. McKenna wasn’t happy with the terms but says he was “backed into a corner” because the unit now controlled all his accounts and he felt powerless. He handed over the stake in his development and eventually sold the whole thing to repay his loan, leaving him with just £700 for himself.

    It was after he had repaid the bank, in 2014, that McKenna made the discovery that enraged him the most. GRG had taken out another RBS loan in his name to pay legal fees of £3,500 it had racked up in negotiating the stake it had taken in his property. The developer fired off a furious email to the restructuring unit asking: “How someone in your bank can set up a loan account in someone else’s name without any approval or signature to suit their own purposes?” RBS replied stating: “This is a purely internal process and does not require the signature of a customer." McKenna appealed to the regulator to no avail because of small print in the loan contract he signed in 2012. A spokesman for RBS said the money was thought to have been written off as a goodwill gesture because the bank had forgot to charge it when it was due, but maintained there was nothing wrong with taking out a loan in McKenna's name. The businessman says he was forced to pay off the loan.

    McKenna said the experience in RBS had shredded his confidence. “I’m not a shrinking violet but RBS nearly destroyed me. You felt like at any minute you could be thrown out of your house.”

    This farmer says RBS killed his business and made his family homeless.

    Will Wintercross

    Kenny Riddoch was made homeless along with his wife and four small children this summer after GRG shut down his business. The farmer was pushed into the restructuring unit in 2008 after asking for more money to finish a property development. The bank gave him some extra finance, but then GRG hiked his interest rates and, he said, hit him with monthly fees of £10,000.

    Riddoch struggled through five years in the unit, fighting to save the business by selling off thousands of livestock to keep up with charges that he said spiralled into millions of pounds and starved his business of cash. "It's obviously not fair at all because it's obviously what's killed our business," he said.

    The bank said GRG’s fees were limited and added to Riddoch’s debt rather than ever being paid. But GRG finally pulled the plug on his loan in 2013 and sent in the administrators to seize his land and all his properties. "I think the purpose of the restructuring unit is basically to get as much money out of a company as they possibly can before they put it into administration and take all their assets off them," Riddoch told BuzzFeed News.

    Riddoch clung on till this year, refusing to leave his farm until, finally, he and his family were finally forcibly evicted this summer. Now the administrators are pursuing him for £176,000 in backdated rent they say he owes the bank for continuing to live on his farm. The family are having to stay with relatives, and only last week, RBS got an order to freeze all of Riddoch’s bank accounts, leaving him unsure how he will feed his family through winter. "It's turned our lives upside down," he said.

    RBS denied deliberately destroying businesses for profit but admitted GRG let customers down.

    In a statement, RBS said it had lost £2 billion on its loans to small and medium-sized businesses during the financial crisis. It said the bank did not make an overall profit from GRG’s activities – the restructuring unit’s revenues did not exceed the losses the entire bank suffered on business loans gone bad after the crash. But its statement acknowledged, for the first time, that “a number of our customers did not receive the level of service they should have done” in GRG.

    “We could have managed the transition to GRG better and we could have better explained to customers any changes to the prices or fees we were charging,” its statement said. “We also did not always handle customer complaints well. As a result, a number of our customers did not receive the level of service they should have done or, importantly, that they would receive now.”

    But RBS still insisted “GRG’s role was to protect the bank’s position, where possible by working with distressed businesses to return them to financial health”, and said it had seen “nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail”.