GS Goldman Sachs Group Inc

By Lucy Burton and Philip Georgiadis 

A U.K. parliamentary inquiry has criticized Goldman Sachs Group Inc. over its role in the sale of a major British retailer that later collapsed, saying a lack of clarity over the Wall Street bank's involvement led to it having "authority without accountability" on the ill-fated deal.

The U.S. bank was rapped in the report for its involvement in the sale of department-store chain BHS by billionaire retail mogul Philip Green for a symbolic GBP1 ($1.30) 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 igniting a controversy that has drawn in politicians, high-profile retail magnates and a number of advisers, including Goldman Sachs.

Mr. Green had told lawmakers that he relied on Goldman as a "gatekeeper" to assess Mr. Chappell's suitability to buy the firm, while Goldman said it provided only informal advice to a longstanding client.

The report, published Monday, said Goldman Sachs enabled its name to be cited as gatekeeper to the transaction, which added "lustre to an otherwise questionable process."

They said the lack of clarity over the bank's status confused some parties involved, and that Goldman "should have been either 'in' or 'out' of the deal"--and demonstrably so.

Lawmakers wrote that "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."

They said Goldman was aware it had been described as a gatekeeper to the deal and an adviser to Mr. Green, but did "not seek to disabuse those involved of the limited nature" of its role.

However, the report also said Mr. Green couldn't pass responsibility for going ahead with the deal on to Goldman Sachs, which has taken on around 25 transactions and offers assistance to him informally.

Senior Goldman Sachs bankers were twice called to give evidence to parliament and to explain their relationship with Mr. Green, which dates back to 2004 when the bank advised on his failed bid for Marks & Spencer.

The bank's vice chairman, Michael Sherwood, said in his June appearance before U.K. lawmakers: "I wish that we had more clearly documented our role in writing so that we couldn't have the subsequent confusion that we are going through today."

A spokesman for Goldman Sachs said, "As the report recognizes, we identified risks to Arcadia [the retail group run by Mr. 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."

The report was also sharply critical of Mr. Green, who was knighted by the Queen in 2006. Frank Field, chairman of the Work and Pensions Committee, said, "The final responsibility for up to 11,000 job losses and a gigantic pension fund hole is his. His reputation as the king of retail lies in the ruins of BHS."

A spokesperson for Mr. Green declined to comment, and Mr. Chappell couldn't be reached for comment.

Write to Philip Georgiadis at philip.georgiadis@wsj.com

(END) Dow Jones Newswires

July 25, 2016 11:46 ET (15:46 GMT)

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