The man who thought he could sail to riches at BHS

The business came crashing down last Sunday evening, when a cash crisis forced BHS’s novice owners –  led by two-time bankrupt Chappell – to finally throw in the towel, following a last-ditch and ultimately doomed attempt to negotiate a rescue deal with Mike Ashley’s Sports Direct.

Chappell, a 49-year-old former racing driver with a chequered business record, emailed 10 members of staff to deliver the crushing blow that administrators would be appointed the following morning.

“I would like to say it has been a real pleasure working with all of you on the BHS project,” he wrote. He signed off: “Bonne chance, mon ami.”

Tellingly, Topp did not receive the final missive from Chappell, a sign of the rift between the two. Adding to the insult, Chappell was not present at BHS’s head office on Monday morning when administrators were appointed.

Instead, he flew to Boston, initially on the pretence of an eye operation and later claiming he was also holding meetings with US investors to buy back the business. Philip Duffy, a partner at Duff & Phelps, the administrator, issued a stern warning to Chappell not to return to the company’s headquarters.

Topp and Duffy held a meeting at the retailer’s HQ to confirm fears that BHS was buckling, and staff directed their anger towards Chappell. A sign briefly appeared in the company’s lift that read “Where are RAL [RAL Ltd], the thieving s––––”.

When Sir Philip offloaded BHS to Chappell and his partners, he described it as “an honest deal” with “no skeletons in the cupboard”. But within weeks, there was growing unease about BHS’s financial health.

Individuals who say they have had previous dealings with Chappell have told The Sunday Telegraph they were amazed the businessman had bought BHS.

“Whatever ventures he has been involved with have ended up in tears,” said one.  Sir Philip claims to have met Chappell, when his outfit was called Swiss Rock Venturs, just once before offloading the business he had owned for 15 years.

The sale, he says, was handled by “his team”. “I think Chappell thought that if he bought BHS, he’d also be buying Sir Philip’s lifestyle,” said another source close to the deal. Since the deal, he has bought two yachts, a new Range Rover and luxurious holidays.

A former racer in Formula 3, Chappell declared himself insolvent in 1996, and has twice been declared bankrupt, in 2005 and 2009, the latter following the collapse of an ambitious property and marina development on the Isle of Wight.

Chappell also has links to Paul Sutton, a convicted fraudster in France who claims he introduced him to Sir Philip, although both the Topshop tycoon and Chappell deny this.

It also emerged that Chappell had made his uncle, Kevin Smith, chairman of his consortium. Smith, a former stockbroker, helped to float Langbar International, infamous for being one of the biggest implosions on London’s Aim market.

Topp’s confidence in Chappell is said to have plummeted after he learnt that within 24 hours of owning BHS, RAL had extracted £8.4m from it.

More than £6m remains overdue. During its 13 months of ownership, RAL charged £5m in management fees and salaries.

Where the money went is unclear as RAL has still to file any accounts at Companies House. A separate £1.3m loan to pay off the mortgage on Chappell’s father’s house raised eyebrows, especially as it was co-signed for by just one other director, Chappell’s friend, former colleague and RAL board member, Lennart Henningson.

“He’s incredibly slippery,” one source said. Tempers over Chappell’s siphoning of money out of the business reached a climax, resulting in group lawyer Eddie Parladorio smashing up furniture in a meeting room at BHS head office, when it emerged Chappell had tried to extract the VAT from the sale of BHS’s Oxford Street store without any approval from the retailer’s board.

BHS already owes HMRC £2.6m. Chappell continues to claim the money taken out of BHS was for legal and advisory services, and has launched a blistering attack on Topp, accusing him of mismanagement.

“If he was focused on running the business rather than interfering, then BHS wouldn’t have been haemorrhaging money,” he told The Telegraph. Chappell also claims the company ran into troubles after Sir Philip reneged on a contractual agreement “to sort out creditor insurance”.

Sources said this was not true, and lawyers would have held the Topshop boss to the agreement.

Sir Philip now faces being hauled in front of MPs in two separate select committee inquiries into the collapse of BHS.

The pensions regulator is also investigating why money was extracted despite the pension deficit, and the Insolvency Service, which has the power to strike off directors and mount criminal prosecutions, is preparing to launch a probe. It is estimated that the Green family extracted between £780m and £1.2bn from BHS during their ownership.

However, sources close to him claim he ended up walking away with significantly less after funding the chain’s losses for years, writing off hundreds of millions in debts, and leaving cash in the business when it was sold to Chappell. 

Chappell’s unsual behaviour may have gone unnoticed in a thriving business, but loss-making BHS desperately needed cash. The company was struggling against historic rents of 65pc above the market rate, which it had tried to persuade landlords to cut.

In March, it took drastic action, launching a company voluntary arrangement (CVA), warning landlords if they did not back the proposal, which would slash rents by as much as 75pc at 87 shops, it would collapse, with debts of £1.3bn.

The CVA was conditional on the company raising £160m, which Chappell assured BHS could come from the sale of some properties, and a £60m loan from debt fund Gordon Brothers. Michael Hitchcock, a respected business consultant, quit the business in protest at Chappell’s claims.

However, with Chappell banished from BHS, Hitchcock is understood to have returned and is helping administrators find a new buyer. Neither the loan nor the property deals came close to what Chappell had promised. 

“He said he had agreements, but it appears they were just a couple of emails,” says one source. Mike Ashley’s Sports Direct was supposed to buy eight properties for £30m, while the sale of its Oxford Street store was due to bring in £70m.

Instead, just £52m was delivered when the sale was agreed in April.

Chappell insists Sir Philip’s fractured negotiations with the Pension Protection Fund caused the company’s downfall, while those close to the business say the property sales failed to achieve the necessary capital.

After the board declared a loan with Gordon Brothers “unworkable”, Chappell tried to transfer £1.5m of BHS money into an unconnected company called BHS Sweden. Chappell’s actions were the final straw for Topp, who accused the BHS owner of putting his yachts ahead of the interests of thousands of workers who were on £7.20 an hour.

In return, Chappell has claimed Topp had “deliberately misled to angle himself into a position where he could do a management buyout of the business.”  

Sources close to Topp deny this and emphasise he has no interest in running the business. 

Chappell has since said that he is working with a club of US investors to raise funds to buy back BHS and even mooted the astonishing idea that he could relist the business in America. “He is a fantasist,” a BHS spokesman said emphatically.

With over 50 expressions of interest lodged and potential bids coming once again from Sports Direct, Poundland, Edinburgh Woollen Mill, B&M Bargains and South African billionaire Christo Wiese, BHS could be saved in some form.

But any bidder would have to have a strong stomach to ride the ensuing storm.