Personality clashes and the poisoned client: The inside story of Bell Pottinger’s collapse
From the outside, the demise of iconic public relations firm Bell Pottinger appeared to unfold at a dramatic and surprising pace.
On Monday 4 September, the company published the findings of a report by lawyers Herbert Smith Freehills (HSF) concluding that the firm’s campaign for the Gupta family’s Oakbay Capital in South Africa “was potentially racially divisive and/or potentially offensive and was created in breach of relevant ethical principles”. That same day, Bell Pottinger was kicked out of the Public Relations and Communications Association (PRCA) for “bringing the industry into disrepute”.
Three days later, following an exodus of clients, staff were informed at a hastily arranged meeting that the firm was set to collapse into administration. By the following Tuesday, Bell Pottinger’s fate was sealed: BDO administrators had taken control and staff were gathered at another all-hands meeting where the names of those affected in the first wave of redundancies were read out to a stunned room.
Eight days between the publication of a three-page report and a collapse of this magnitude does not seem like a very long time.
But insiders spoken to by City A.M. trace the roots of Bell Pottinger’s collapse much further back – beyond the HSF report, beyond the unprecedented sanction of the PRCA, beyond the sacking of Oakbay Capital’s account executives, beyond the first “white monopoly capital” tweets sent out by Bell Pottinger on behalf of the Guptas, and even beyond former chairman Tim Bell’s trip to South Africa to visit the Gupta family.
Bell Pottinger was founded in 1987 by Lord Bell, Margaret Thatcher’s former adviser, and Piers Pottinger. The firm developed a reputation for specialising in international political affairs and working on behalf of controversial clients.
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The Gupta family have sparked protests in South Africa (Source: Getty)
Shock headlines
However, in late 2011, Bell Pottinger looked set to change course after the Independent newspaper shocked the PR industry with a front-page story based on an undercover investigation. Posing as agents from the government of Uzbekistan, journalists from the Bureau of Investigative Journalism secretly recorded Bell Pottinger senior executives boasting of their access to ministers, suggesting they could “drown” out negative coverage on Google and “sort” Wikipedia entries.
Insiders say the scandal upset Bell Pottinger’s then-owner Chime, which was a listed entity at the time. Around six months later, in May 2012, Bell led a £26.5m management buyout of Bell Pottinger. Peel Hunt noted at the time that, for Chime, it was a “good price for a business that has attracted considerable adverse commentary”.
James Henderson was thought to be instrumental in the deal, although Lord Bell disputes this assessment. As well as buying a 25 per cent stake himself, Henderson also became chief executive. In addition to transforming Bell Pottinger into a limited liability partnership (LLP), with around 50 members of staff opting to become partners, Henderson also sought to reposition the firm. Insiders describe it as a shift in focus from geopolitical work, which did continue through Bell at the firm’s Mayfair office, to more traditional financial PR, run from its Holborn headquarters.
Despite a setback or two (chairman Lord Bell described bankers as “complete criminals” in a 2014 interview) Henderson’s plan to firmly establish Bell Pottinger in financial PR appeared to be heading in the right direction. In early 2013, Bell Pottinger had one FTSE 100 client, Imperial Tobacco. By 2016, before the Oakbay rot set in, this figure had risen to five, according to Adviser Rankings figures.
What, therefore, made Bell Pottinger pursue its deal with the Guptas, a family with strong links to South Africa’s controversial President, Jacob Zuma? The answer, according to numerous insiders, is money. Former employees claim the firm was setting itself high monetary targets as it sought to pay down debts. The account is believed to have been worth £100,000 a month. In comparison, according to a senior PR source, the average listed UK company would pay £5-10,000 a month.
After an introduction was made by Chris Geoghegan, the father of then-Bell Pottinger partner Victoria Geoghegan, Bell himself travelled to South Africa to meet the Guptas and help pave the way for the deal. He claims that he later strongly advised the firm against the contract, citing conflicts of interest.
Some insiders say they informally became aware that the account was in the pipeline as early as 2015, and started to raise concerns about why a campaign of this nature was being taken on by the financial practice. Their concerns later intensified as it became apparent that the work was indeed likely to conflict with Bell Pottinger’s work for other companies with South African links, such as Investec and Richemont, whose chairman Johann Rupert wrote to Lord Bell warning him against the account. These were among the first firms to sever ties with Bell Pottinger in 2016.
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Lord Bell, left, stepped down last August (Source: Getty)
“Every chance they had to fuck it up they grabbed with both hands…”
The “economic emancipation campaign”, so called in the HSF account of the scandal, included a social media and press campaign that used terms such as “white monopoly capital”. The HSF report said: “Certain material that we have seen that was created for the campaign was negative or targeted towards wealthy white South African individuals or corporates and/or was potentially racially divisive and/or potentially offensive and was created in breach of relevant ethical principles.”
Soon after the campaign began in 2016, management in the firm’s financial practice, headed up by John Sunnucks, started to face questions from partners and staff about the Oakbay work. Some senior figures walked away from the company, with this work playing on their minds. “The uproar internally was phenomenal,” said one source.
Lord Bell himself also stepped down with immediate effect in August last year. He and Henderson were said to disagree on the strategy the business should be taking. Lord Bell has said he walked away due to his concerns over the Oakbay contract.
The flow of departing staff, many of whom have told City A.M. their exits were linked to concerns over the Oakbay account, continued into 2017. Meanwhile, media coverage of the Bell Pottinger scandal was growing in South Africa and spread further.
The deal ended in April 2017. Bell Pottinger said it had terminated the contract “because of increasingly strong social media attacks on our staff and our business from South Africa”, which it said were “unfair”. On 6 July, Bell Pottinger began to concede fault, sacking Victoria Geoghegan and suspending Nick Lambert, another partner on the account. It also commissioned the HSF report – “about a year and a half too late”, said one employee of the time.
Henderson said in a statement in July:
These attacks on, and criticisms of, our staff continued and were clearly the result of strong and sincere anger. Most seriously, it was said that we had supported or aided campaigns to stir up racial division in South Africa.
The chief executive has said he was not made aware of the Oakbay account until January 2016. He had said that he was assured the South African media criticism was untrue, and even hired lawyers from Schillings to defend the firm against the accusations.
At this point, many partners and employees intensified their efforts to leave Bell Pottinger. Though no one seemed to anticipate quite how dramatically and suddenly the company would collapse.
Henderson resigned as chief executive on the eve of the publication of HSF’s report, though he was in the office the next day finishing up his work. Following publication of the report, the PRCA booted Bell Pottinger out, saying the firm had “brought the PR and communications industry into disrepute with its actions, and it has received the harshest possible sanctions”. Further high-profile people at the firm departed, and it emerged that Chime had handed back its 27 per cent stake in the business. Critically, clients including the likes of St James’s Place, Carillion and Unite Group, began to distance themselves from Bell Pottinger.
Early in the week, staff were gathered for a meeting in their open-plan office, and told the firm was looking for a buyer and would be rebranding. However, they were called together again at the end of the working day on Thursday and told the game was up, and that Bell Pottinger was likely to fall into administration early the following week. Staff immediately began to fret that they might not be paid for their work in September.
To their credit, insiders say Friday was business as usual (albeit with a few calls to recruiters). Many individuals still had clients to work for at this stage.
Work continued at the beginning of the next week before Bell Pottinger officially went into administration on Tuesday afternoon (12 September).
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Administrators from BDO gathered staff for another all-hands meeting, for those still around, and reeled off a list of names of those who no longer had a job.
BDO said in a statement that the firm’s “losses, compounded by the inability of the business to win new clients, was such that remaining management were left with no option but to commence the process to place all UK Bell Pottinger entities into administration”.
The great irony for insiders is how badly Bell Pottinger managed its own reputation throughout this period. They believe the account should not have been considered. Warnings from other South Africa-focused clients should have been heeded. The South African media attention should have been taken seriously. There should have been more communication on the HSF report. Henderson and Bell should not have taken part in a “public pissing match” over its findings.
“Every chance they had to fuck it up they grabbed with both hands,” said one departee. Another said:
No experienced PR adviser would ever have advised a client to manage the situation the way Bell Pottinger did.
Today, thanks to the actions of a few senior figures within Bell Pottinger, around 180 PR partners and employees look to be out of a job. Fairly or unfairly, they will to some extent be tarnished by their association with the firm.
Bell set up a new, international-focused PR firm, Sans Frontieres, since leaving Bell Pottinger last summer. Henderson is also understood to have had conversations about setting up a new firm, though has not made firm plans to do so as yet.
The overriding attitude of the former staff spoken to by City A.M. is of anger and frustration that a once mighty business was brought to its knees by internal disputes, poor judgement and a divisive, controversial client that should never have been taken on.