The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal

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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. Pyramid of Lies charts the meteoric rise and spectacular downfall of Greensill and his company. He had a simple idea - democratising supply chain finance - and disrupted a trillion dollar industry in the process. But a staid business model concealed dubious practices as Greensill made increasingly risky loans to fraudulent companies using other people's money.

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. 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. Cameron was an authentic member of the upper class who might polish him up. After he destroyed his career and the country’s prospects by taking the UK out of the EU by mistake, Cameron yearned for a comfort Lex Greensill could offer him: obscene amounts of money. 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. DUNCAN MAVIN: Yes, sure. Yes, he comes across that very early on in his career. So in his early 20s, in Australia actually working for a businessman there who had ideas about supply chain finance and the technology that could really sort of drive supply chain finance at that time, and he sort of developed his ideas around it through his career in Morgan Stanley and Citigroup and also working for the U.K. government as an adviser there.

The Prime Minister, the Banker and the Billion Pound Scandal

DUNCAN MAVIN: Yes, I think that's right. I think this is -- it's tempting sometimes to see these big kind of corporate scandals in terms of big systems and institutions. But at the heart of this one, is the guy Lex Greensill. And he's fascinating, a really divisive character. Some people I talked to said Lex is really charismatic and a genius. And other people I talked to said, stay away from Lex, things are going to go wrong. He gets business cards with Downing Street that [indiscernible] (00:09:13) and that kind of thing. He holds meetings in Downing Street, really kind of pushes it beyond -- his role beyond what it really ought to have been. But it seems to work for him. And certainly, when Cameron leaves office, he leaves having left Lex with a much higher profile than he had previously. 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. 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?

Modern corruption is a refined process for sophisticated people. Urbane actors enter the political equivalent of a “buy now, pay later” (BNPL) agreement. Politicians or civil servants grant a shady financial institution or incompetent arms manufacturer access to decision-making and public money. No agreement needs to have been reached. No wads of cash change hands. But after the civil servant retires or politician leaves parliament, he can expect an immensely rewarding job. The sole benefit of the multibillion collapse of Greensill Capital in 2021 was that it illuminated BNPL politics as no other scandal has. 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? PDF / EPUB File Name: The_Pyramid_of_Lies_-_Duncan_Mavin.pdf, The_Pyramid_of_Lies_-_Duncan_Mavin.epub DUNCAN MAVIN: Yes, that's right. So many of these supply chain finance assets, the biggest insurers in particular, the pension funds and so on, they can't invest in them because they're not investment grade. And so the way you make the investment grade is you take out trade credit insurance, and that makes them investable for a much broader group of investors. The trouble for Lex was a lot of the big trade credit insurers wouldn't work with him. They met him over the years, and they dealt with them over the years and found they didn't like the way we did business. Greensill achieved its rapid growth by becoming, in effect, a lender of last resort. A handful of risky borrowers came to dominate its business, the largest of which was Sanjeev Gupta’s steel group, to which Greensill kept lending long past the point where it was obvious there was no ability to repay. As time went on, more and more loans started to go sour, and the insurers started to pull out. The business finally collapsed when the new Japanese owners of its last insurer (a small, bamboozled Australian outfit) called time.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. And so that's part of what he's doing. The other piece of it is to say, hey, I've got this super duper new technology, which will make this thing run a lot more smoothly. The reality actually was slightly different. The technology mostly wasn't Greensill Capital, there was very little technology at Greensill at all. And he was relying largely on third-party technology platforms. And the other reality that was different was that much of Greensill's business was not supply chain finance at all. It was just lending, unsecured lending usually to risky companies.

Many of them, they are never going to see the amount that they had put into it,” Guth said. “But they will be able to benefit from some of it. And some of it may be better than nothing at all.” 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. 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? The wood-panelled, chandeliered dining rooms of the Savoy hotel across the road became the office canteen NATHAN HUNT: I have to wonder what on earth was the former Prime Minister of the U.K. David Cameron doing wrapped up in Greensill Capital. Why was he involved in this?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. 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.