CompaniesMar 17 2016

‘Marmite’ man takes flight

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‘Marmite’ man takes flight

One of the biggest figures in the mortgage industry fell to earth two weeks ago, representing the final nail in the coffin of the exuberance – and extravagance – of the mortgage boom pre-financial crisis.

Michael Bolton, who made his name as managing director of BM Solutions and head of specialist lending at HBOS, before setting up his own business, Edeus, was sentenced in his absence to two years in jail after being convicted of VAT fraud.

He had attempted to hang on to £125,000 of VAT payable to HMRC, citing incorrect VAT numbers on his invoices to Clayton Euro Risk.

Rather than face jail, he decided to make a run for it. He had been out on bail, and did not turn up to his trial. Now a UK arrest warrant has been imposed, and the authorities may issue a European arrest warrant.

Judge Graham Cottle speculated that he may have gone to Spain. Others suggest he has gone to Brazil, due to close family connections there.

One industry source said: “The big problem seems to be he’s going to have to be permanently on the run, and not doing things he’s used to.

“You’ve got a choice to stay and take the medicine – he would probably be out in less than a year – but for him to be in prison, he would probably find it more difficult than most. I’m not sure his decision is the most sensible choice.”

The sentencing marks the end of a remarkable career for someone who appeared to be loved and loathed in equal measure.

To many, he transformed the industry in specialist lending, introducing technology to speed up approvals. But he was also known as much for his extravagance, extreme self-belief and seemingly unlimited expense account.

John Wriglesworth, chief executive of Wriglesworth, a public relations consultancy, who knows Bolton well, said: “He is a larger-than-life, Marmite character. Something he once mentioned to me was that you either loved him or hated him. Very few people had average views about him.”

Bolton made his name at Birmingham Midshires, initially owned by Halifax, and then HBOS. Joining in 2001 from a marketing role at Future Mortgages – his career started out as a bond trader – he was part of a drive by the business to shake up the specialist lending market, and offer mortgages to borrowers with a poor credit history.

Ambitions

In an interview in 2005, Bolton’s career ambition was to “run the biggest specialist lender in the UK, perhaps the biggest in Europe”, and he worked hard to achieve this.

He launched an aggressive marketing campaign, excluding unhelpful intermediaries, such as packagers, from the frame, and introducing advanced technology, helping it to produce more accurate key facts illustrations (KFIs) than the sourcing systems.

The strategy worked. Lending rocketed under his leadership. In 2001, when he joined as head of mortgage marketing at Birmingham Midshires, the business was lending £11bn. By 2005, when he was HBoS head of specialist lending, this had more than doubled, to £28bn.

He drove many of his rivals crazy. One former executive at a rival lender said: “As a competitor I watched with jealousy, but a lot of it was due to Michael, and the drive was him.

“When he took the reins at BM, he ratcheted up a gear the work he and his team did on technology. If you look at it today, almost all the mortgage business is transacted electronically, and BM was certainly one of the forerunners of that. It also had a reputation for good service.

“Michael Bolton was extremely well-liked in the market; a lot of top brokers were very happy to sit at his table. He listened to what they said, and he brought it to fruition. From that point of view he had a very powerful impact.”

But it was how he went about doing that business that drew criticism. His entertainment was extravagant in the extreme. There were frequent invitations to international sports events, with the best corporate hospitality trips to Wembley and the opera, as well as constant partying.

It is perhaps telling that in an interview about his life ambitions, two of the roles he considered for himself were to be a nightclub owner and wine connoisseur. Some of the more lurid tales emerged of his entertaining, involving lap dancing clubs and scantily clad golf caddies, and there was always the de rigueur promotional women in hot pants.

Famously, there was a party, ostensibly for HBOS, to be held at the top of the Gherkin, but unofficially it was Bolton’s 40th birthday party. Entertainment was a performance from girl band Girls Aloud, followed by a rendition of Happy Birthday, in the breathy style of Marilyn Monroe, by a female member of staff from Birmingham Midshires.

Many have questioned how HBOS allowed him to get away with it. The former rival lender said: “He was being massively successful, and blasted all their targets. Why should they shoot the goose who lays the golden egg?”

Edeus

By 2005, however, it was clear that Bolton wanted something bigger. He and his long-time number two, Alan Cleary, the quiet introvert to Bolton’s extrovert, decided to launch their own specialist lender, Edeus.

In 2006, they did this in spectacular style, with a party at Home House, a private members club in the West End, followed by a party into the night at 50 St James Club, at that time a members only club in Mayfair.

The business was backed by Oakwood Group, a private equity firm run by a former colleague of Bolton’s from Future Mortgages, Mike Culhane.

The launch started off in typically exuberant fashion. The Edeus team poached much of the top talent from Birmingham Midshires. This was helped, no doubt, by the lure of a share in the business, but also by siting the company in Wolverhampton, where BM was also based, so that it was even easier to say ‘yes’ to Bolton.

Unfortunately, the timing was wrong for Bolton and Edeus. Soon after launch, the credit markets dried up, and the executive team was left high and dry. Rather than having the benefit of a richer parent company to bail them out, they were dependent on wholesale funding to source the mortgages.

On 8 October 2008, KMPG was called in as administrator, saying that despite Edeus’s attempts to change its business model to focus on credit assessment, the tide had turned against them. At that time, the business employed 26 people. It was eventually liquidated.

Since Edeus, Bolton never made quite the same splash again. He joined Clayton Euro Risk, a credit risk analysis business, becoming co-chief executive in 2013. He left two years later, although he was still charging them fees, which later became caught up in the VAT fraud. Even a year ago, he was talking publicly about making new moves in the market, potentially getting into peer-to-peer lending.

Instead, his latest headline is for sailing too close to the wind, and getting caught, and not being able to face up to the consequences.

However, as the former lender executive said, while being “astonished” at the latest news: “He was one of the most talked about people in the industry; colourful in the extreme. And he did liven it up, you’ve got to give him that.”

Melanie Tringham is features editor at Financial Adviser

Key points

Michael Bolton was jailed for two years last week, in absentia.

Bolton made a dramatic impression on the specialist lending market, making a lot of money for Birmingham Midshires.

He was also known for his extravagant entertainment account.