ULSTER Bank forced viable Irish businesses to default so it could profit "like vultures" from the assets, one of its former executives alleges today.
The Sunday Independent can reveal that a whistleblower inside Ulster Bank was part of the spark for a damning report by a senior British Government adviser on how Ulster's parent company, Royal Bank of Scotland (RBS), closed down businesses that definitely could have survived if they had been supported with "normal risk-acceptable management".
Lawrence Tomlinson, a self-made businessman reputed to be worth €500m, is the Entrepreneur-in-Residence at Britain's Department for Business. He reports directly to the UK Business Secretary, Vince Cable, who commissioned a report from him that made damning findings on how enterprises had been put out of business.
Mr Tomlinson said businesses were closed, staff lost their jobs and lives were "ruined" by RBS.
The Irish whistleblower, a former senior Ulster Bank executive, went to Westminster for face-to-face talks with Mr Tomlinson five months ago. That meeting led directly to the investigation.
Mr Tomlinson will fly to Ireland in the New Year to meet business people who allege that they too were victims of forced defaults by Ulster Bank.
In his first-ever interview, the Ulster Bank whistleblower told the Sunday Independent how his former employers operated here.
"I saw good businesses being driven to extinction and some others which just about survived the Ulster Bank work-out," he said.
"Basically, if Ulster Bank saw an opportunity to enforce a default which it could profit from, it did it.
"The bank put a business into a special unit. A business would be moved along to another section of the bank and overnight all the credit terms would be changed.
"For example, one businessman with large assets and good profits was told he was on a work-out. The loans were transferred and a charge placed on the move. The charge could be anything from €10,000 to €50,000 per month and the money had to be paid weekly. Other fees and charges were added as time went on.
"Eventually, the business runs out of cash, the assets are seized and sold on and all the money went on the Ulster Bank bottom line.
"I have to stress that there was no default even likely in many cases. It was simply outrageous what went on."
The whistleblower questioned if Ulster Bank duped businesses when setting loan agreements.
"A 'repayable on demand' clause was inserted into commercial loans," he said.
'I saw good businesses being driven to extinction and some others just about survived the Ulster Bank work-out'
"These were never properly explained to the customer but what it meant was that Ulster Bank could literally demand payment of an entire loan overnight.
"No matter how big you are, very few businesses can pay a multimillion-euro loan overnight. But that's what Ulster Bank did. It didn't always win. In some cases, business owners took legal action and successfully prevented their businesses from going under but that was rare."
The whistleblower says he decided to contact Tomlinson and speak out today in a bid to force an end to the practices of Ulster Bank.
"Mr Tomlinson's report looked at Britain and it is a damning report of RBS, but my own experience inside Ulster Bank tells me the practices here in Ireland were even worse," he said.
"People lost everything. Of course, in a recession businesses do go under. But there were so many that I know about which should never have been in the firing line."
Mr Tomlinson – representing the British government, which owns 82 per cent of Ulster Bank – has been invited to meet Irish business people here next month. Many have already expressed an interest in meeting him to discuss their cases. They come from all over Ireland.
Mr Tomlinson said in his damning report: "There are circumstances in which the banks are unnecessarily engineering a default to move the business out of local management and into their turnaround divisions, generating revenue through fees, increased margins and devalued assets.
"Much evidence was received about the practices of RBS's turnaround division, Global Restructuring Group (GRG), which typifies this behaviour. Once in this part of the bank, the business is trapped, with no ability to move or opportunity to trade out of the position – they are forced to stand by and watch another otherwise successful business be sunk by the decisions of the bank.
"The bank extracts maximum revenue from the business, beyond what can be considered reasonable and to such an extent that it is the key contributing factor to the business' financial deterioration.
"This is not an open and transparent process, nor is it a proportionate response from the bank. During the process, businesses are completely in the dark as to what is happening until it is too late.
"Most worryingly, the businesses affected are often perfectly viable and, but for the action of the bank, would have been able to positively contribute to UK growth.
"If businesses had more options for moving their banking facilities and there was more transparency prior to entering this process, businesses would be better protected from the bank's opportunistic behaviour in which they manipulate the businesses' financial positions for their own gain."
RBS has ordered a review of its operations as a result of the report.
The whistleblower says the Irish Government needs a Lawrence Tomlinson to look at all the banks here.
"We need someone like him who can go directly to business people in the Republic and report back to the Government," he said.
Last night, Mr Tomlinson told the Sunday Independent that Ulster Bank was "definitely on the radar".
It is understood that he did examine cases involving the bank as part of the RBS review, but plans to expand that inquiry in the New Year.
Ulster Bank had claimed in a press statement last week that it wasn't part of the Tomlinson report.
However, this newspaper learnt that the businessman has now examined at least two cases, sparking his interest in a further inquiry.
In a statement, Ulster Bank insisted that it was not part of the RBS review.
The Sunday Independent asked the bank's Dublin HQ if it would welcome an investigation here.
In an email sent in error to us, John Holohan, media relations manager at Ulster Bank, asked his boss Pauline Dooley: "Re: below. Is there a prepared statement for any similar media queries?"
Ulster Bank refused to say if it would welcome an investigation here. It also refused to comment on allegations from the whistleblower that it had behaved in a similar fashion to RBS.
Ms Dooley instead re-issued a statement that had been sent out to the Irish media six days ago in the wake of the Tomlinson report.
It reads: "We are committed to working with customers who find themselves in difficulty and work with customers who engage with us to help them find a sustainable solution on a case-by-case basis. Ulster Bank understands the importance of a thriving and successful business sector.
"In Northern Ireland, we were the first local bank to join the Bank of England's Funding for Lending Scheme in September and we have already agreed over £100m in new lending to more than 800 companies under the scheme.
"In the Republic of Ireland, we provide significant support and financial resources to the sector, including the provision of over 4,000 start-up packages to customers in 2012.
"We place considerable importance on business and Ulster Bank is committed to doing everything it can to support the economy and businesses. We will continue to provide affordable finance to support business development and job creation."
The Department of Finance said it was not aware of any allegations of Ulster Bank forcing businesses to default so that it could profit from the assets. Nor was there any investigation planned in this area.
In the events of allegations coming to light, it would be up to the Central Bank to investigate as part of its regulatory functions, a spokesman said.
But the spokesman pointed out that the British authorities had a greater level of oversight over Ulster Bank.
"The UK would have a different relationship to Ulster Bank, given that they are the majority shareholder. We don't have that same level," the spokesman said.