The UK Insolvency Service has accused Lex Greensill of misconduct in dealings that led to $440mn of losses for a Credit Suisse investment fund and of making “misrepresentations” in relation to his failed finance firm Greensill Capital’s insurance contracts.
The details of the agency’s lawsuit against Greensill emerged for the first time on Tuesday after the High Court ordered the partial release of a court document following an application by the Financial Times.
The Insolvency Service said in March that it had launched proceedings to disqualify Greensill from “running or controlling companies” for up to 15 years, the maximum possible ban, but did not detail its reasons at the time.
Greensill “caused or allowed” $440mn received in relation to the restructuring of a SoftBank-backed start-up to be used for reasons other than the repayment of Credit Suisse funds, the newly released court document alleged.
He also allegedly made a “series of misrepresentations and/or failed to provide information” to the boards of Greensill Capital (UK) and its Australian parent company Greensill Capital Pty about key insurance contracts.
Greensill’s spokesperson said: “Mr Greensill rejects these allegations, which are wholly without merit and will be robustly addressed in due course.”
They also noted that Greensill has sued the UK’s Department for Business and Trade for alleged misuse of private information “during the investigation that led to this action”. The business department sponsors the Insolvency Service and is the formal claimant in the disqualification proceedings.
Greensill Capital was established in 2011 and won backing from high-profile investors, including SoftBank and US private equity firm General Atlantic. Its advisers included former UK prime minister Lord David Cameron.
The firm collapsed in March 2021 after it failed to renew a critical insurance contract, which should have covered investors from losses on billions of dollars of financial products sold by Greensill Capital.
Greensill Capital’s clients included construction company Katerra, which was backed by Japan’s SoftBank. Greensill provided financing to Katerra, with the debt then sold on to a Credit Suisse-managed fund.
Credit Suisse, which shepherded some of its wealthiest clients into $10bn of funds linked to Greensill Capital, has claimed its investors were due money from a debt restructuring of Katerra.
SoftBank injected capital into the company that was apparently earmarked to repay the Swiss bank’s funds. Greensill did not advance the $440mn to the Credit Suisse fund, however.
The now-defunct bank, taken over by its rival UBS, last year filed a lawsuit against SoftBank in London’s High Court in a bid to pursue the money.
The Insolvency Service alleged in its court filing that Greensill caused three Greensill group entities “to enter into a series of transactions to the detriment” of the investors in financing products related to Katerra.
It added that Greensill did so without consent of these investors, “in breach” of “contractual” terms of financing agreements.
“The above matters have resulted in a loss of in excess of $440mn to the Credit Suisse (Lux) Supply Chain Finance Fund,” the Insolvency Service claimed.
The Insolvency Service alleged Greensill’s conduct breached sections of UK companies law that require directors to “exercise reasonable care, skill and diligence” and act in ways they consider “good faith”.
The Insolvency Service also accused Greensill of “failing to properly disclose” to the boards of Greensill Capital (UK) and Greensill Capital Pty that insurance policies in excess of $11.5bn were “subject to investigation” by its insurer, which had also served a “notice of non-renewal”.
“Mr Greensill knew or ought to have known of the risk of insurance cover being voided and withheld this information from GCUK and GCPty boards,” the filing claimed.
Australian insurance agency Bond & Credit Co, which is owned by Japanese group Tokio Marine, is currently engaged in litigation in Australia in a bid to avoid paying out on insurance contracts covering investors in Greensill Capital’s complex financial products.
Greensill is also alleged to have made, or allowed Greensill Capital to make, “misrepresentations” to BCC regarding a policy linked to financing for a company with a series of construction contracts with NHS hospitals.
For example, the Insolvency Service alleges that when seeking the insurance cover in 2018, Greensill “wrongly suggested” it was intended to fund construction costs, while he also “failed to disclose” that £10mn from the £15.3mn facility would fund fees for Greensill Capital itself.
Greensill opposed the FT’s open justice application for the court document detailing the Insolvency Service’s reasons for seeking to disqualify him as a director.
His lawyers argued the application would allow the reporting of one side’s case prematurely before a response had been filed or evidence considered for trial.
A High Court judge in June ordered the release of a portion of the document that summarised the basis of the Insolvency Service’s action, but refused access to the rest of the 300-page filing.
Greensill’s barrister Gavin Millar KC on Tuesday argued in court that the FT should be liable for more than £63,000 in legal costs Greensill had incurred in solicitors’ and counsel fees. Millar said the FT had made a “very wide application” that had not been successful.
Judge Mark Mullen said the outcome had been an “effective score draw”. He added that if Greensill had “engaged in a more constructive way with the Financial Times”, rather than adopting a “wholesale objection” to the document’s release, it was “very likely” the application would not have required a hearing.
Mullen added that as a result of “Mr Greensill’s conduct in that regard” he could not “condemn the FT” with paying his costs. An extract from the document was released following Tuesday’s hearing.
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