Law-breaking government calls Insolvency Service in to investigate Thomas Cook

The irony of this government making a big noise before the Supreme Court’s devastating ruling on the lawfulness of its own actions is rich indeed, writes James Moore

The government has called in the Insolvency Services to look into the collapse of Thomas Cook (PA)

The Insolvency Service was always going to have to look into the events leading up to the spectacular collapse of Thomas Cook.

But the irony of this government making a big noise about calling it in shortly before the Supreme Court’s devastating ruling on its unlawful decision to suspend parliament is rich indeed.

The company’s management are now squarely in the cross hairs. Ministers have good reason for attempting to keep them there because it takes the heat off them and their decision not to step in to save the company when they had the option to do so.

The odds of the investigation digging anything up would seem to be long, however.

Ben Klinger, a partner at City law firm Brown Rudnick, cautions that while the bonus packages Cook executives were on look high, investigators will have to prove that they either pushed the firm into insolvency (which I think we can safely rule out) or were made when the firm was insolvent. And again, that looks doubtful.

There are other things they can look at. But the bar they will have to clear to take action against the company’s directors and bosses is a high one.

It’s not as if the collapse came from out of the blue. This is not an RBS or a Carillion where we were told everything was more or less fine until, suddenly, it wasn’t. The travel company started issuing profit warnings in September of last year. They’ve been arriving like London buses since then, just in a more timely fashion.

I’m told Cook’s bosses also kept in regular contact with both the government and the Civil Aviation Authority to keep them appraised of the situation throughout its troubles.

As for the vexed issue of those bonuses and the packages Cook executives were on, the £8.5m CEO Peter Fankhauser made during his nearly five years isn’t quite as juicy as it looks given that about half of it was paid in now worthless shares. It’s still silly money, but it bears repeating that there was a poll conducted on the Thomas Cook remuneration report at the last AGM in February. It was opposed by only 1 per cent of the company’s shareholders, despite voting advisor Pirc calling for a vote against.

Pirc has since done an analysis of shareholder turn out at the company’s recent meetings. It stood at 83.6 per cent for the AGM of February 2017, falling to 82 per cent in 2018 and then to 70.6 per cent in February. At the EGM held in April it was down to 63 per cent.

I suppose it’s possible that investors popped some sleeping tablets as the company was hurtling towards a cliff. But there’s another possible explanation for the marked decline in turnout. It is that, for a fee, some of them decided to let hedge funds and other traders borrow their shares for the purposes of short selling Cook and failed to recall them for voting purposes.

There’s been a lot of shorting going on and some hedge fund managers are sitting very pretty as a result.

So where am I going with this? The events at Thomas Cook once again demonstrate that some big shareholders simply can’t be trusted to effectively steward the companies they own.

It is the system that stinks to high heaven as much as anything else.

A responsible business secretary, working as part of a responsible government, might care to meditate on that because we’ll surely be here again. But of course…