According to the Daily Mail, a senior Tory official looks poised to profit from the sale to US private equity predators of British mutual insurance LV.
Malik Karim, co-treasurer of the Conservative Party, is founder and chief executive of Fenchurch Advisory, the investment bank advising LV on the £530million deal.
LV bosses are backing the takeover by Bain Capital – and using members’ funds to force it through, though they refuse to reveal the costs. It is not their obligation to. The fee would need to be revealed if it were a public takeover.
The deal is likely to prove highly lucrative for Fenchurch, with City sources estimating its fees could be worth more than £5million.
Malik Karim (pictured), co-treasurer of the Conservative Party, is founder and chief executive of Fenchurch Advisory, the investment bank advising LV on the £530million deal
He is expected to benefit as the boss of the private investment bank.
According to Companies House filings, Mr Karim was also a member of Ingenious Film Partners 2 between 2006 and 2011 – a controversial film investment scheme accused by HMRC of being a means of avoiding tax.
Karim stated that his financial adviser advised him to sign up for the scheme.
The sale of LV will also bring in money for lawyers from magic circle law company Clifford Chance as well as spin doctors at City PR firm FTI Consulting. It is thought the spoils shared by bankers, lawyers, PRs and other advisers could be close to £10million. When the AA was bought by private equity firms last year for less than Bain is spending on LV, fees to third parties were around £50million. The figure for the Bain deal is shrouded in secrecy – despite the fact the fees will be paid by LV’s 1.2million members.
Tory peer Baroness Altmann explained that members’ money was being used to alter terms without them having a say. It should not be secretive, but proper disclosure. Are LV bosses concerned that the amount might seem inappropriate?
Rachel Reeves, Shadow Chancellor of the UK said that transparency is lacking and it was troubling. Rachel added: It would be totally unacceptable if senior Conservatives were to make a personal profit off the possible asset-stripping. [of LV]’.
This is the latest secrecy row surrounding the controversial buyout. Chief executive Mark Hartigan was this week accused of trying to “hoodwink” members into backing it.
Both he and LV Chairman Alan Cook were criticised for not sharing details on rival bids and job security of its 1,500 employees, as well as how much they would earn in the takeover.
Mr Hartigan is in line to make millions while Mr Cook will hang on to a £205,000-a-year chairmanship for at least two years. The pair have been accused in a’misleading’ of members, claiming that neither one will receive a penny from the sale. Since 1843, LV has been in the hands of its customers. Bain’s sale would make it more profitable.
Gareth Thomas (Labour MP) is chairman of the cross party group on mutuals.
He said, “It is an insult to the injury that members are being requested to fork out their hard-earned cash to polish this terrible deal and force its passage.” LV stated that its board unanimously concluded that the deal with Bain Capital provides the best outcome for everyone, including the future of LV and its employees.
Karim denies any conflicts of interest in his role as Tory Party advisor to LV. Fenchurch refused to comment.
Labour MP Gareth Thomas (pictured), chairman of cross-party group for mutuals said that it was a ‘beggars belief” that member’s money is being given out to ‘incredibly rich businesspeople’.
Why will members get only £100?
Daily Mail: By Correspondent from the City
The paltry £100 that LV members will get for giving up ownership of the insurer falls thousands short of some windfalls reaped in previous deals.
In return for their right to Bain Capital’s buyout of the company, LV customers are asked to agree to pay the money. Many of the LV customers opposed this deal because it would lead to higher insurance costs and lower service.
Even members of with-profits who have more comprehensive policies will only see a slight increase in their payout. The payout will equal 0.1% of the annual value of each policy they hold. For most with-profits members, this will come to a grand total of just £52 on average.
The paltry £100 that LV members will get for giving up ownership of the insurer falls thousands short of some windfalls reaped in previous deals (file image)
Martin Shaw, chief executive of the Association of Financial Mutuals, said: ‘The one-off payment of £100 is low compared to previous demutualisations.’
When Scottish Widows was demutualised and bought by Lloyds in 2000, the average windfall was £6,000. And Friends Provident handed out £1,200 in 2001.