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NATHAN HUNT: This is the Essential Podcast from S&P Global. My name is Nathan Hunt. Greensill Capital should really be a feel-good story. Founded by Lex Greensill, the son of Australian farmers, Greensill Capital's stated aim was to help small suppliers by putting money in their pockets when they needed it. Greensill provided supply chain finance, paying companies, most of what they were owed based on their receivables and then collecting the difference when their clients eventually paid up.

This was about helping the little guy and making a few bucks in the process. But Greensill is not a feel-good story. By March 18, 2021, when Greensill finally filed for insolvency protection, billions of dollars had been lost, reputations had been destroyed and lawyers who were left to pick over the detritus. My guest today is Duncan Mavin, a reporter for Dow Jones Publications and the author of The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal. Duncan, welcome to the podcast.

DUNCAN MAVIN: Thanks, Nathan.

NATHAN HUNT: Duncan, you've been following the Greensill story for years. I'm wondering how early did you know that this story wasn't going to end well?

DUNCAN MAVIN: That's a great question. So I -- yes, you're right, I've been following this for probably about 4 years now, maybe a little longer than that. And at the time -- I've been a financial journalist for a long time. I was a chartered accountant before that. So just so you know where I'm coming from. But at the time, I wasn't writing an awful lot. I was doing a bit more editing and managing people. And a source -- a longtime source of mine came to me and said, hey, are you paying attention to this company called Greensill Capital? And I said, no, never heard of them.

And this source said to me, well, you really should and sort of provided me with a little bit of documentation, and I started to look into them they were connected to a scandal that was kind of emerging at a company called GAM, a Swiss asset manager, somebody called a hedge fund. And Greensill was sort of part of that story, but a very minor part of it, at least that's how it was portrayed in most reporting on it.

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.

NATHAN HUNT: There is no Greensill Capital without Lex Greensill. So who is this guy? Where did he come from? And what motivated him to get as far as he did?

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.

So he grew up in a fairly remote part of Australia, a place called Bundaberg, which is a farming community. His grandfather had started a farm there in the 1940s. And Lex was kind of second, third generation, who was running this farm, mostly farming, sweet potatoes and water melons and things like that. He was clearly kind of a bright guy, a little bit nerdy possibly at school and a sort of fairly rough macho environment that meant he stood out a little bit.

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.

In truth, I think he was -- that may have been part of the driver, but certainly, he was just personally very ambitious. He wanted to be a powerful financial figure. I don't think this is unfair at all. I think he was also driven by a bit of a chip on his shoulder. So he eventually ends up in London, and he's kind of Australian guy from the outback, and he doesn't really fit in with the culture of the city.

He desperately tries to fit in, he kind of addresses the right way. He changes his accent a bit. He joins all the right establishment, societies and things like that. Really, really clearly desperate to be part of the scene, in fact, more than part of it to be right at the top of it.

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?

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.

So supply chain finance, yes, I mean, in its simplest form, it is suppliers of goods want to get paid immediately, buyers of goods want to pay for the goods or services when it suits them, which could be months down the line. And supply chain finance is the idea that you can bank or some other financial services company can insert itself into that transaction and say, okay, well, I'll fund it. I'll provide the payment upfront to the supplier, and I'll get paid later from the buyer. And I'll take a cut of that deal.

And as you say, in one form or another, it's been around for a long time. In the last I guess, now 25 years or so, there have been various forms of this that have developed that fund it in different ways. In particular Lex's particular slant on this was that he would fund it through selling these loans essentially to investors. So unlike a bank, which is funding this from its own balance sheet, Lex doesn't have a balance sheet. So he goes out to investment funds and says, look, I can provide you with some kind of yield by funding these transactions.

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.

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: That is also a very, very good question. So Lex comes across the government. He makes his government connections from around about 2011. He had met a very senior former Civil Servant named Jeremy Heywood, when he was at Morgan Stanley. They both worked together there. At that point, Lex was a pretty junior guy and Jeremy Heywood was a very senior guy, very high-level Civil Servant who'd moved into the bank temporarily.

And Jeremy Heywood was very interested in new, exciting projects. And Lex sort of had one of those in the supply chain finance business. And so when Heywood went back into government, there was a call at that time for ways to make the economy run more smoothly in the aftermath of the financial crisis. And Heywood turned to Lex Greensill and said, well, this guy knows something, and so he gets access to the government. So Lex ends up in Downing Street, and he works there really, really hard.

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.

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.

I mean in the end, I think you made several million pounds. It's unclear exactly how much Cameron was paid, but certainly a substantial amount of money. I think there was also, for Cameron may be, an appeal that this was a fast-growing fintech in theory. And so that's a bit more exciting than going to work on the Board of an established company. A bit cooler, a bit more kind of future of Britain. And so I think there's an appeal. What's interesting to me is that the red flags around Greensill were pretty easy to spot by then.

And for a form of Prime Minister who really only has his reputation to sell his credibility and his reputation to have put it all on this company, which was already showing some serious red flags, that was a really strange move.

NATHAN HUNT: One of the strangest parts of the book for me was the -- and it's a minor point, but it was the fact that when Lex Greensill had attained his position in Downing Street, he nonetheless, also chose to misrepresent his relationship with the Obama administration in the United States. He apparently had been in a meeting in the White House on an occasion, but he turned that into sort of a formal advisory relationship. Why on earth would he lie about something that doesn't give him any additional benefit beyond the Downing Street relationship he already has?

DUNCAN MAVIN: This is also kind of really key to Lex Greensill, right? So you and I might call out a lie. He might say, well, look, I was in the White House, and I gave some advice. So is it really a lie? I think this is also -- you're getting to the heart of one of the real problems with exactly this sort of business. And by this sort of business, I mean, fast-growing tech businesses with kind of visionary founders where there is a reward for them to saying -- making outlandish claims, pushing their reputation and their ambitions as far as it will possibly.

And Lex, like some of the others in Silicon Valley, he was very keen to be seen as a visionary, very keen to sort of align himself with very important global politicians and financiers and so on because he knew that there was a lot of value in doing that. And I think if you look at what he claimed with the Obama White House, it was -- that was part for him of saying, look, I'm a really big, important powerful player. I mean in the end, right, like Lex Greensill's company was valued at several billion dollars. And part of the reason for that was because he was making these outlandish claims.

NATHAN HUNT: Let's talk about Sanjeev Gupta. What on earth led Lex Greensill to keep backing this guy when so many of the loans looked so shaky even to the point where it ended up costing him his own business?

DUNCAN MAVIN: Yes. Well, the relationship between Lex and Sanjeev Gupta is critical, really. Take one step back a bit. One of the things about supply chain finance is really important is actually, it wasn't very profitable. It just didn't make much money. So Lex was able to work with some really big companies, some really big clients, big blue-chip names, but wasn't making any money on that. So trying to find a cut that will pay the investors in his funds, will make sure he gets some money, will pay all the other kind of administrative costs and so on, there just wasn't much money in it.

And so to make some profit to show that he was indeed a fast-growing startup company, you have to make these loans to other businesses. And that's where Sanjeev Gupta comes in because Sanjeev Gupta is a steel magnet who's trying to develop this global steel business, but he has a problem in that nobody will lend money to him because he doesn't have a track record. So Lex is looking for somebody to lend money to who's riskier and therefore, will pay a bit higher yield.

And Sanjeev's looking for somebody who lend them some money and the 2, they have this kind of symbiotic relationship. So much so that at one point, Sanjeev Gupta is a major shareholder in Greensill Capital. So the 2 become really kind of intertwined and they start to really lean on each other, right? Like Greensill can't really grow without the revenue it gets from Sanjeev Gupta's businesses. And Sanjeev Gupta's businesses known as the GFG Alliance, they can't really grow without the money that Greensill is providing to it.

And so they're kind of leaning on each other. And if you take one -- takes the other away, then it all collapses. At Greensill Capital, absolutely Lex and the other executives know that this is a problem. They discuss it all the time in management meetings, how are they going to kind of get out of this problem. Lex being the optimist at all these management meetings will say, leave it to me, I've got it sorted, we'll outgrow this. Of course, they couldn't.

It just became too big. And such a major part of Greensill's business was heavily reliant on what Sanjeev Gupta was up to. And that business now is under investigation by the SFO in the U.K. And so clearly, there was a problem there.

NATHAN HUNT: Let's talk about investors. A bunch of people backed Greensill over the years. In your book, you make it clear that some of the backing saved Greensill from an earlier reckoning. Beyond P.T. Barnum's, "There's a sucker born every minute", what drew investors to Greensill the company and Greensill the man?

DUNCAN MAVIN: There was 2 major investors in Greensill Capital. One is General Atlantic, which is giant private equity fund, which is known for being a really smart, credible investor, puts about $250 million into Greensill just as its facing a major problem and essentially kind of bails Greensill out, although they don't quite know that's what they're doing. And then not long after them, SoftBank Vision Fund comes in and puts another several hundred million dollars in, ultimately puts about $1.5 billion in very, very quickly.

So both those investors have staked an awful lot on Greensill, and they, again, lend a lot of credibility like the politicians have done. What attracted them? I think General Atlantic was looking at Greensill because General Atlantic in general was interested in tech-driven payments businesses. And so this was sort of a theme for them. They were looking for tech-driven payments businesses around the world. In the aftermath of the financial crisis, they thought this was a real growth area.

And so we are tracking a number of these kind of businesses. Lex, in particular, had come to their attention because he was probably one of the most charismatic founders of any of these businesses and because you had these personal connections into influential politicians and some banks, too. He was really interesting to them. I think they realized he was potentially problematic. They realized there were some red flags, but the view inside General Atlantic seems to have been, hey, we're a big investor. What we do is we take young businesses that need some guidance, and we show them how to grow and to be a much better run businesses, and that makes them bigger and we sell them some more money.

And I think they looked at Lex Greensill and said, yes, this guy -- there's some challenges with this guy. Yes, he tends to double down on risky things. He tends to make every loan we can rather than be a bit more discerning. But that's our job, right? Our job is to invest in these people and then shape them the way that we think they should be running their businesses. In this case, they couldn't do that, right? And so that was an error on their part. That's my view anyway.

What happens next is once General Atlantic had put their money in, the SoftBank Vision Fund, which is this $100 billion fund and takes huge bets fairly quickly and lots of them, it looks at the General Atlantic investment and says, okay, well, if they're in, we're in. And so they do their due diligence incredibly fast, 8 weeks from start to finish. They look at Greensill. They see that as somebody else that they think is credible has put money in and they say, right, we're in too. And so suddenly, Greensill going from near catastrophe where it almost collapsed before General Atlantic came in, suddenly, it's got billions of dollars of capital and valuation that is beyond Lex's wildest dreams.

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?

DUNCAN MAVIN: Yes. I mean I think that's also another really important point. And I think it's always very tempting with these kind of white collar scandals to think that there are no victims, but there are victims here, not least the 1,000 or so Greensill employees who lost their jobs. So Credit Suisse's role was to provide the funding for these supply chain finance transactions and other loans, although they might argue they didn't know that's what was happening.

Lex, he had a small bank in Germany, but he wasn't a bank. He needed to find funding from somewhere to pay for these supply chain finance transactions. And so he was looking for investors for that. And Credit Suisse came along and became the biggest investor in those funds. So Lex had sort of latched on to them around 2017, found a couple of portfolio managers, persuaded them that supply chain finance was a great asset class. It paid a little bit more yield than money market funds, but done properly, it could be just as safe or just a little bit riskier.

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.

And in that case, there's a few million dollars of maybe somebody who has got a little bit more than that has been poured into these funds, which have been sold as ultrasafe, but in fact, they aren't really. They're full of risky loans. And so Credit Suisse played a really important role in fueling Greensill Capital growth, but also spreading the risk to people who didn't understand what they were getting into.

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?

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.

So the biggest trade credit insurers said, no, we're not going to work with you. That left him with a bit of a problem, which he solves by going to a very small Australian insurer called The Bond & Credit Co. And The Bond & Credit Co. ended up providing billions and billions of dollars of insurance to the Greensill business. And it was startling to me, looking at it as a journalist to say, this can't be right, how can this tiny company be so critical in these billions of dollars worth of funds.

And it's a question I took to Credit Suisse, and I took to SoftBank as a journalist many times. It was so startlingly problematic. In the end, The Bond & Credit Co. was taken over by a company -- Japanese insurer, Tokio Marine. And when Tokio Marine got involved, they looked at The Bond & Credit Co's exposure to Greensill and the Green -- the funds that were investing in Greensill assets. And they said, hey, this is too much. We don't want to do this anymore. And that really spelled the end, right, because without that insurance, the funds that have invested in Greensill's assets, they're no longer able to go out to the same pool of investors.

And so that means they've got to start selling down the assets quickly. And that means you're going to have to acknowledge pretty fast that some of these loans are not recoverable. And so it really undermines everything Greensill has been trying to do and exposes the problem at the heart of the business. It feels like a technicality. It feels like a sort of offshoot of the real Greensill story, but it's not as critical. The insurance aspect of it is the inability to get trade credit insurance is critical to the demise of Greensill.

NATHAN HUNT: A final question, Duncan. You also became a character in the Greensill story, an unwilling character, but a character. As you were investigating Greensill for Dow Jones and for your book, what was your experience with them?

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.

And there would be some sort of implausible excuse given. A very, very difficult firm to deal with. And I suppose that was probably one of the biggest red flags, right, that if somebody is so desperate not to tell you the truth, not to answer your questions, even questions which seem pretty straightforward, then that's a real red flag. If you've got a genuine business that's genuinely growing faster that is being done in a very honest and well organized and well structured way, then you're probably fine answering difficult questions from journalists. But if you've got a business which fundamentally is not doing what it's supposed to, then that's always going to be a difficult relationship.

NATHAN HUNT: The book, once again, The Pyramid Of Lies: Lex Greensill and the Billion-Dollar Scandal. Duncan, thank you for joining me today on the podcast.

DUNCAN MAVIN: Thank you, Nathan.

NATHAN HUNT: The Essential Podcast is produced by Kirk Burger with assistance from Kyle May and Camille McManus. At S&P Global, we accelerate progress in the world by providing intelligence that is essential for companies, governments and individuals to make decisions with conviction. From the Majestic heights of 55 Water Street in Manhattan, I'm Nathan Hunt. Thank you for listening.