M&S: The sleaze and the greed

THE LAST thing that Marks & Spencer needed, as it seeks to repel the advances of the Monaco-based entrepreneur Philip Green, was a full-blown share-dealing scandal all of its own.

But suddenly the nation's favourite store finds itself at the centre of a tale of sleaze and greed as a result of its rushed appointment of Stuart Rose to be its new boss.

The M&S board was so anxious to have a credible new management team capable of seeing off the threat from Green that it installed Rose despite not investigating his recent share-dealing record.

Had it thoroughly checked him out, it would have discovered that, in the month leading up to his appointment, he had been engaged in a high-stakes game to take control of the company.

At the time, he had been working with a number of leading City figures. Of course, this would not have mattered at all if Rose and his friends had resisted the temptation to deal in M&S shares, acting as they were on the well-informed assumption that a change in ownership might be on the way.

The scraps of information available to Rose, and to some of those he met, tempted them into the stock market where they all made fabulous profits. Meanwhile, M&S's army of 330,000 small shareholders were blissfully unaware of events.

Today, the circumstances which led Rose, City money broker Michael Spencer (despite his name, no relation to M&S) and perhaps others to buy M&S shares are now the subject of a major investigation by City watchdog the Financial Services Authority (FSA).

The decision by the FSA to go public - in the past it has conducted its investigations behind closed doors - underlines the political and financial sensitivities of the affair.

The basic facts are not disputed. On 7 May at 1.47pm (20 days before Philip Green's offer for M&S), Stuart Rose took a mobile phone call from Green in which they agreed to meet five days later.

That afternoon, Manchester stockbroker Brewin Dolphin Securities, acting for Rose, ploughed into the stock market and bought 100,000 shares in M&S.

Evidence

ROSE and Green say that M&S was not discussed during their original conversation. But the evidence suggests that, with the recent announcement of the departure of Belgian chairman Luc Vandevelde from M&S, there would have been only one subject on the agenda when the two men subsequently met.

Indeed, how much M&S was on Rose's mind is clear from subsequent events. On 10 May, he met City money broker Spencer at the George Club in Mayfair and, over lunch, M&S was mentioned.

That afternoon Spencer, often described as the richest man in the City, took a punt on two million shares in M&S.

The next day, I personally held a private meeting with Rose, 24 hours before he was due to meet Green who, it transpires, would offer him a position on his M&S takeover team.

In the course of his meeting with me, Rose made it clear that he was interested in becoming the next chairman of M&S but discounted his chances.

He also acknowledged that, in a separate capacity, he had sought meetings with Vandevelde, M&S's departing chairman, to discuss the company's future in connection with the British Fashion Council.

Most important, he intimated that he believed Green would bid for the company. However, he did not tell me that he would be meeting Green the following day, nor that he had himself recently been dabbling in M&S shares.

In strictly legal terms, neither Rose nor Spencer has done anything wrong in buying shares.

Neither knew for certain that Green would make an offer for the company, nor had they any precise knowledge of who was to be asked to become the next leadership team at M&S.

But the truth was that Rose was making no secret of his belief that significant change was on the way.

In such circumstances, the proper behaviour for Rose was to keep the information he had private and not discuss it with a City figure with the instincts and financial capacity of Spencer.

As experienced City hands, both men are fully aware of the intense scrutiny made into share dealing involving firms at the centre of possible takeover bids and they should have desisted from dealings which might subsequently yield them a substantial profit.

But despite their huge personal wealth and experience at running public companies, where full disclosure is the mantra, both disregarded the normal ethics and piled into the stock market.

Rose now sits on a paper profit of £86,000 and Spencer on a potential gain of £1.7m. This saga reflects badly on the City at a time when confidence is already very low in the wake of the dotcom crash and the bear market.

The whole affair reeks of privileged people swanning around in Mayfair clubs and other social gathering places to discuss confidential commercial matters.

Meanwhile, M&S's interim chairman, Paul Myners, and the board have rushed to Rose's rescue. In a formal statement, the company states that when he bought his 100,000 shares, 'he did not know that either Philip Green would make a bid for M&S or that he would be asked by the company to become its chief executive'.

Little choice

BUT the truth is that they have been sidelined while the boss and his associate made a killing.

At this stage, they have little choice but to stick by Rose. In the past five years, no fewer than five different people have held the job of chief executive as the company has sought to reverse a sales nosedive for its core womenswear business.

M&S dare not jettison another boss, especially one appointed in the emergency circumstances of a takeover approach.

Above all, to kick out Rose now would be to run up the white flag and give Green a free hand to march in and take control.

But on the other hand, by sticking with the tainted chief executive, the M&S board has sullied the company's reputation for integrity and damaged the trust between the firm and its regiment of loyal investors and customers.