A year after Greensill Capital’s collapse

This is an audio transcript of the FT News Briefing podcast episode: A year after Greensill Capital’s collapse

Marc Filippino
Good morning from the Financial Times. Today is Monday, April 18th, and this is your FT News Briefing.

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We’re going to hear about long Covid in the workplace, something employers are starting to pay attention to. And do you remember Greensill Capital? The sprawling financial group unravelled last year. One of our reporters who investigated the company and its founder, Lex Greensill, is back on the show for an update and other thoughts.

Robert Smith
I think he had a slick pitch around quite a complicated thing, and people were sort of bamboozled by it and didn’t want to put their hand up and go, wait a minute.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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Many people who have caught Covid recover and then go on with their lives. But an estimated 100mn people worldwide suffer from something called long Covid. It’s when symptoms either physical or cognitive or both, last 12 weeks or more. And it affects people’s ability to do their jobs. Delphine Strauss is our economics correspondent. She’s been reporting on how long Covid is affecting the workforce. Hi, Delphine.

Delphine Strauss
Hi there.

Marc Filippino
Delphine, did you speak to anyone with long Covid? And if you did, what were their experiences like?

Delphine Strauss
We spoke to several people who had quite different experiences. There were some people who two years on are saying that, you know, they might leave the house once a week for a short walk around the block. That doesn’t stop them working from home, but it makes it extremely difficult as workplaces reopen to go back to what they were doing before. And then there were other people who said they actually had no fatigue and sort of fewer physical symptoms, but much more lasting cognitive effects with memory and concentration and so on, which might mean that they, you know, for example, had to be really careful about planning a long phone call because that would drain away the energy from other tasks they needed to do in the day.

Marc Filippino
So in the article you wrote, Delphine, you say that policymakers think long Covid is actually contributing to the labour shortages in the US and the UK. Is it really that serious?

Delphine Strauss
So this is really uncertain at the moment. What we know from surveys of people who were the most seriously affected by Covid initially and also surveys of those who went on to develop long Covid, is that a significant proportion have left work, cut their hours, changed job or there in other ways, struggling. A lot of that is under the radar. People don’t necessarily tell their employer because they’re worried it’ll affect their position. And then quite a few of them may be muddling through as long as they’re able to work from home. But then finding it’s harder when they have to go back in person. And there are also surveys showing that employers are increasingly seeing it as an issue. So a quarter of companies in the UK say it’s now one of the main causes of long-term sickness absence, which means it’s equivalent to anxiety and depression and some other mental health issues.

Marc Filippino
So then how are company handling this if they do see it as a problem?

Delphine Strauss
It’s very varied. So I’ve spoken to consultants who are, you know, advising big companies on this, and they say that some multinationals are taking it very seriously indeed. They’re worried about the long-term effects on productivity, not just in the developed countries we’ve been talking about, but, you know, throughout their global workforce in emerging markets that were very hard hit by Covid. So in Brazil and India and so on. It’s certainly a huge issue for the NHS in the UK. We’ve seen that health workers are disproportionately likely to have developed long Covid. The NHS has been developing policies to try and help retain these people, but all of this doesn’t necessarily translate into good practise on the ground. There are lots of reports even in the NHS, from doctors and nurses who found it hard to go back to work because they weren’t given the flexibility they needed.

Marc Filippino
Delphine Strauss is the FT’s economics correspondent. Thanks, Delphine.

Delphine Strauss
Thanks very much, Marc.

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Marc Filippino
One of the biggest financial scandals the FT has exposed over the past couple of years is the story of Greensill Capital. It was a British-Australian company that specialised in supply chain finance. That’s the financing between companies and their suppliers. After the FT revealed Greensill’s shaky business model, one of the group’s big backers, Credit Suisse, froze billions of the company’s assets, and Greensill began to unravel. As this was happening early last year, we talked to one of the reporters on the story, Rob Smith. He’s back today as we check in on Greensill. Hey, Rob.

Robert Smith
Hi, Marc.

Marc Filippino
OK, so I wanna start with a clip of Greensill’s founder, Lex Greensill. He was talking up the company on Bloomberg TV back in May 2019, and it was right after the company received $800mn in funding from the Big Tech investor SoftBank. I’m going to play right now.

Lex Greensill
The reality is that we’ve harnessed technology, our AI driven delivery of finance, plus the capital markets to deliver credit to over eight million customers around the world over the year, over the last eight years.

Robert Smith
(Laughs) It’s very funny because obviously, yes, so at that point, he bagged the big investments from SoftBank’s Vision Fund, which is one of the biggest investors in technology around the world. So he was having to give a sort of technological sheen to the company, you know, you heard him there talking about AI and machine learning and all this stuff. But the thing was there wasn’t really any technology at Greensill. It was a lot of risky lending sort of dressed up as something sexy, I guess, would be the easy way of describing it. He’s supposed to do something quite boring, which is invoice finance, which is when you, you know, a company has an invoice saying it needs payment. He would lend you money before you got the payment and then he’d be repaid when the invoice got paid. But the thing was like instead of using AI and machine learning to do all this, he was basically doing a load of stuff that wasn’t really linked to the invoices at all. And then as we kind of unravelled at the FT for some of his key clients, so particularly a guy called Sanjeev Gupta, who’s a big metals magnate, we got our hands on some of the invoices and we called some of the companies named on them and they said, well, we’ve never even done business with this guy, Sanjeev Gupta. And yeah, Sanjeev Gupta is now under investigation by the Serious Fraud Office in the UK. It’s sort of to give you an idea of how serious it all is.

Marc Filippino
Rob, did you know at the beginning of your investigation that so much of Greensill’s business was bogus?

Robert Smith
Yeah, I mean, I remember I actually said, Paul Murphy is our, he’s the head of the investigations team here, and he led or he was behind the scenes leading the Wirecard scandal coverage to Dan McCrum. But I remember talking to him about this in 2019, and he said, he had a great phrase where he said the thing about houses of cards is they tend to look like houses of cards, which I just thought was a wonderful phrase. And yes, this did look like a massive house of cards. And so it proved to be.

Marc Filippino
You know, Rob, the amazing thing is that Greensill didn’t just sweet talk regular investors. He got former UK prime minister David Cameron on board as an adviser. I mean, how do you think Lex Greensill was able to, you know, kind of pull the wool over the eyes of so many people?

Robert Smith
Yeah, so I think there’s a few things going on, so like there’s a thing around complexity, right? Where a lot of the things that Greensill were doing were quite niche bits of finance, and it’s not an area that’s well known even to a lot of people in finance, right? And then he was combining it with insurance. He sort of told investors in these like invoice-backed sort of investment products that they were super safe because of the underlying insurance. And when you meld the two together, give it this kind of tech sheen, you know, you’ve got a very complex proposition and people don’t tend to like to say like, hang on, I don’t quite understand that, you know. People just like to go, oh, yeah, OK, yeah, I guess that figures.

Marc Filippino
Yeah, nobody likes to feel stupid, I mean.

Robert Smith
Nobody likes to feel stupid. People don’t like asking difficult questions. So I think he had a slick pitch around quite a complicated thing, and people were sort of bamboozled by it and didn’t want to put their hand up and go, wait a minute.

Marc Filippino
First of all, excellent use of the word bamboozle. Love it.

Robert Smith
(Laughs)

Marc Filippino
(Laughs) Fast forwarding to today. What kind of shape is Greensill Capital in and where is Lex Greensill?

Robert Smith
Well, those are two very good questions. So like, so in terms of what shape Greensill Capital’s in, so it filed for administration, which is like the UK version of bankruptcy.

Marc Filippino
Right.

Robert Smith
It had a German bank which has done the same and is also under criminal investigation, its management. So that’s not great. But in terms of like all this money Greensill has lent out and it wrapped into these investment products, as I said, Credit Suisse was a big investor. So when it collapsed, there were nearly $18bn of this stuff outstanding. And there’s still about $9bn unpaid to this day.

Marc Filippino
Just a massive amount of money.

Robert Smith
Mind boggling. It’s actually far higher than I would have guessed when the company collapsed. And then the other key thing is I keep explaining about how insurance was really important to the model. Greensill was one of its main insurers in Japan has just publicly accused it of fraudulent misrepresentations.

Marc Filippino
Yeah.

Robert Smith
And it said it’s not going to pay out on any of the insurance as a result. So this is really bad for people like Credit Suisse who are hoping to claim on these insurance claims to make up their losses. So there’s going to be a massive fight that Credit Suisse has said it could take five years now to recover some of this money. It’s gonna have to basically sue this insurance firm. And then in terms of where Lex himself is, well, he’s been keeping a low profile, like he, he lives up in Cheshire, in the north of England, in a very nice house. I guess it will be interesting to see if he tries to relaunch a new venture, right? I think this has been a theme of these kind of frauds and alleged frauds and big scandals is you think these people will never come back from it, but give it a few years and they always seem to pop up with some kind of new project, new venture, sort of Greensill 2.0. So I guess it’ll be interesting if in five years, Greensill will be on TV again, talking about AI and machine learning and how it’s revolutionising some other weird bit of finance that not many people know about.

Marc Filippino
Rob Smith is the FT’s capital markets correspondent. Thanks, Rob.

Robert Smith
Thanks.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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