The Greedy & The Gullible
Monday 6th June 2011
GMB REPORT SHOWS THAT MAJOR
UK AND US
FINANCIAL INSTITUTIONS AND
THEIR ADVISORS WERE INVOLVED IN BUYING INTO “SALE
AND LEASE BACK” MODEL FOR SOUTHERN CROSS
WHICH HAS BLOWN UP
GMB Congress told that many of
those who organized the mess that is the care sector in private
hands are still in senior jobs in the City employed as highly paid
financial experts and it is necessary to expose the
reality that they are either greedy pigs or gullible
fools
A new GMB report on Southern Cross called “the
Cross we have to bear – the greedy and the gullible” shows that
major UK and US financial institutions were involved in buying into
the sale and leaseback model for Southern Cross which has now blown
up. The report was published at GMB Congress in
Brighton as the fate of 31,000 vulnerable and elderly residents in
750 Southern Cross care homes all across the UK hangs in the
balance. See copy of report at the base of this
release.
Royal Bank of Scotland, Alliance Trust
Savings, UBS, Bank of Ireland, Bank of New York Mellon Corporation,
Barclays Plc, Blackstone, Blackrock Inc, BT Pension Scheme, Banco
Santander, JPMorgan Chase UK, Credit Suisse Group AG, Davy,
Citigroup Inc, Euroclear PLC, Investec, Goldman Sachs
Group, BNP Paribas, Hargreaves Hale Ltd, Hargraves Lansdown,
HSBC Holdings, Lloyds Banking Group, Railtrust
Holdings, Bank of America, Morgan Stanley Smith Barney, Royal
Bank of Canada, Societe Generale, State Street and WH Ireland Group
Plc were amongst the institutions involved in buying the shares.
The debacle even involved Jeremy Haywood Permanent Secretary to
David Cameron who was co- head of UK Investment banking at Morgan
Stanley who acted as financial advisors and lead managers during
the sale.
When Blackstone floated the company in 2006
their advisors published a 364 page pathfinder prospectus.
This set out in full all the risks that those subscribing for share
at £2.20 per share were running. Because of either greed or
gullibility the risks were ignored. The greedy and the gullible
piled in to the shares for 225 pence each which are today worth
less than 7 pence.
The report spells out that such is the
gullibility and greed among company analysts, the media, and
shareholders that they completely ignored the risks set out in the
prospectus about the lethal ‘sale and leaseback’ model that they
drove the share price up to £6.06 before reality began to dawn. The
graph in the report shows the share price from the IPO on 7 July
2006 (225p) until 3 June 2011 (6.3p). This charts the “irrational
exuberance” that has attended this issue in the City.
At the top of the market the company which
today is worth less than £11.9 million was valued at over £1.2
billion. In 48 pages GMB name the senior directors of the
major UK and US companies that bought the shares at £2.25 per
share. The report set out some of the risks they ignored.
The US private equity firm Blackstone is
estimated to have made £600 million on secret financial dealings in
a four year period on the care homes that are now run by Southern
Cross. They top the list of the greedy in the sorry saga that is
Southern Cross.
Others near the top of the greedy list are
former executives of Southern Cross who profited when they sold
share in the company in late 2007: Phillip Scott the former Chief
Executive made £11.1 million; John Murphy, Chief Operating Officer
who made £10.2 million; Graham Sizer, former Chief Financial
Officer who made £7.9 million and William Colvin former chairman
who made £6.6 million.
Justin Bowden GMB National Officer told
the GMB Congress “What happened at Southern Cross must
inform not only Labour Movement policy toward social care and
health care but also the Labour approach to economic policy and to
the role of the State. Never again should trade unionists be
lectured by people either inside our movement or by the greedy and
the gullible outside it, about the necessity of rolling back the
State and letting the market rip. The British labour movement
founded a political party that sought election to government to
deal with the perennial flaws of capitalism. The most obvious of
these flaws are the tendencies towards excess and monopoly
exhibited by private equity and banking.
Southern Cross should serve as a
warning of what happens when we forget our basic approach to
economic policy and the role of the state. The Labour Movement need
to proclaim the merits of this approach and cogently and
relentlessly put the case for it, not apologise or hide it. The
best guide to theory is practice as the antics of the greedy and
the gullible show.
What is really galling is that many of
those who organized the mess that is the care sector in private
hands are still in senior jobs in the City employed as highly paid
financial experts. Most are no friends of our
movement. We need to expose the reality that they are
either greedy pigs or gullible fools. “
End
Contact: Justin Bowden 07710 631 351 or GMB
Press Office on 07974 251823 or 07921 289880
