The US bank was rapped in a report by MPs for its involvement in the sale of the store by billionaire retail mogul Sir Philip Green for £1 to former racing driver Dominic Chappell, who had no major retail experience, in March 2015.
BHS fell into administration in 2016, threatening 11,000 jobs and sparking a controversy that has drawn in politicians, high-profile retail magnates and a number of City advisers including Goldman Sachs.
Senior Goldman Sachs bankers were twice called to give evidence to MPs and to explain their relationship with Green, which dates back to 2004 when the bank advised on his failed bid for Marks & Spencer. While Goldman Sachs said it did not directly advise on the sale of BHS due to its small size, the US bank instead offered informal, free advice to a longstanding client.
While the joint report from the Work and Pensions and Business, Innovation and Skills Committees laid much of the blame with Green and Chappell, it also criticised Goldman’s role in a saga that MPs called “the unacceptable face of capitalism”.
The MPs said Goldman Sachs enabled its prestigious name to be cited as gatekeeper to the transaction, which added “lustre to an otherwise questionable process”. They added that the lack of clarity over the bank’s status confused some parties involved, adding that Goldman “should have been either ‘in’ or ‘out’ of the deal” – and demonstrably so.
Green had told MPs that he relied on Goldman as a “gatekeeper” to assess Chappell’s suitability to buy the firm, while Goldman said it provided only informal advice.
In the report, published on July 25, MPs wrote “expert advisers are an important part of business transactions. They should, however, be there to advise, not to provide an expensive badge of legitimacy to people who would otherwise be bereft of credibility.”
The report added that Chappell was able to use the bank’s involvement to give his bid credibility to others, indicating to his board that he was progressing the deal directly with Green “via Goldman Sachs”.
MPs said Goldman was aware it had been described as a gatekeeper to the deal and as advisers to Green, but did “not seek to disabuse those involved of the limited nature of their role”.
However, the report also said Green could not pass responsibility for going ahead with the deal onto Goldman Sachs, which has taken on around 25 transactions and offers of assistance for him informally.
The bank’s vice chairman Michael Sherwood said in his June appearance before the committees: “I wish that we had more clearly documented our role in writing so that we could not have the subsequent confusion that we are going through today.”
A spokesman for Goldman Sachs said: “As the report recognises, we identified risks to Arcadia [the retail Group run by Green] but did not provide advice or recommendations, and our informal work should not have been relied upon in any decision to proceed with the transaction.”