Dominic Kennedy Investigations Editor, The Times
Last updated at 5:07PM, September 30 2012
Police are investigating a claim of fraud against the taxpayer-backed Royal Bank of Scotland for allegedly engineering the takeover of a multimillion-pound hotel from its own borrowers.
Detectives have requested interviews with bank executives in a case that shines a light on how RBS moved a fortune in clients’ assets into its own property division. The bank has a growing conflict of interest between its roles as a lender to property developers and a purchaser of their assets when businesses fail.
RBS has bought £1 billion worth of its former borrowers’ property, but City of London Police is trying to establish whether a crime was committed when the Coniston, a four-star conference hotel in Sittingbourne, Kent, came into its ownership.
The previous owners, Chris Richardson and Innes “Ernie” Berntsen, were longstanding customers of NatWest, which is owned by RBS. The bank used them on a brochure boasting how it had provided a multimillion-pound package to redevelop an old hotel, but the pair now claim to have lost savings of £4 million.
In February 2010, four months before it was due to open, the property agent Savills valued the Coniston at £7.7 million on completion. Internal RBS documents suggest the bank estimated its value on opening would be even higher, exceeding £9 million.
But nine days before the scheduled opening, the bank said that the business had run out of funds.
The hotel’s owners, described on internal bank papers as “excellent customers”, were perplexed. They understood that all lending had been agreed. The RBS Global Restructuring Group, which handles “problem lending situations”, wanted a further valuation. RBS-appointed valuers then put the hotel at “less than £2.5 million to £3 million”. Among those in a conference call where the valuation was given was a representative of West Register, the RBS property wing. The owners were not party to the call.
With no more cash available from RBS against an asset now so poorly valued, the hotel went into administration with a guide price of only £3.95 million. A member of staff at RBS Global Restructuring Group e-mailed the administrators: “Please keep me advised on the second highest bidder’s position.”
The bank is entitled, as a creditor, to be informed about offers for customers’ assets, although RBS insists that it erects “Chinese walls” to stop its property staff getting this sensitive information. The bank, which wins a third of its bids, won the Coniston by offering £4.24 million cash, beating the next best offer by just over £300,000.
RBS said: “We only bid once. If anyone is capable and wishes to outbid us they are well able to.”
The hoteliers complained to police under the Fraud Act because newly disclosed internal bank documents suggest that they still had funds available when RBS claimed that they had run out of cash. The bank says the documentation is a mistake.
The High Court has struck out a claim by the hoteliers for breach of contract, fiduciary duty and duty of care, misrepresentation and negligent mis-statements. The hoteliers are seeking to appeal. RBS said the customers had “already articulated these allegations in High Court proceedings. NatWest and West Register are happy to co-operate with police inquiries.”
Elsewhere, RBS bought Charters in Sunningdale, Berkshire, which was used by the Duke and Duchess of Windsor and where Sir Cliff Richard has an apartment, after the developer John Morris ran out of money. RBS placed the developers into administration and allegedly refused a £30 million offer from Mr Morris to buy the property. West Register then bought it for £16 million.
Robin Sidebottom, a Shropshire farmer, had to sell his prizewinning herd of pedigree Hereford cattle when RBS imposed tough lending terms. Mr Sidebottom says that RBS rejected an offer of £400,000 for part of his housing land in Knighton, Powys, then bought it all itself for £400,000.
RBS says that West Register targets properties that are currently hard to sell but might increase in value.
Aubrey Adams, the head of property at Global Restructuring Group, said: “Anyone who knows anything about banking would know as soon as you go into default the loan is classified in a different way, the bank has to hold a lot of capital against it. The intention of West Register is not to build up a property portfolio. The bank would rather have the cash.”
Comments (8)
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Ian Fraser
October 1, 2012 5:46 PM
I am glad that the police have finally woken up to the allegations of skulduggery inside RBS's global restructuring group. I understand that Tayside and other Scottish forces are also on the case.
I have covered aspects of the scandal here:- http://www.huffingtonpost.co.
http://www.ianfraser.org/has-
I have covered aspects of the scandal here:- http://www.huffingtonpost.co.
http://www.ianfraser.org/has-
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