The Conservative party’s new treasurer could make millions of pounds from the controversial takeover of the pensions and insurance mutual LV= by an American private equity firm.
The proposed buyout has enraged some Conservative MPs – and could put them at odds with Malik Karim, an investment banker, who was named Tory treasurer in September, responsible for building the party’s election war chest.
Conservatives see the takeover as another sale of a cherished British mutual institution, and it has drawn the wrath of former Conservative deputy prime minister Michael Heseltine.
Karim is the founder and chief executive of City investment bank Fenchurch Advisory Partners, LV=’s longstanding financial adviser. Fenchurch is believed to have made millions of pounds of fees by advising the member-owned firm on its gradual dismemberment in recent years.
Karim, a Tory donor who earns the lion’s share of Fenchurch’s profits, stands to make one last payday by advising LV= on its £530m sale to Bain Capital – the US private equity giant that was co-founded by Republican politician Mitt Romney.
But the deal has provoked outrage because it will end LV=’s status as a member-owned firm after 178 years, hand a paltry payout of about £100 to each of its 1.2m members, and has led to fears over asset stripping.
It has whipped up a political storm among MPs, by placing another British institution into US private equity hands. Karim’s involvement is likely to further anger Tory MPs, who are reeling after a string of revelations about standards in public life.
LV= refused to say what it will pay Fenchurch. Advisers on other insurance buyouts have made millions of pounds in fees.
Karim said there is “absolutely no conflict between Fenchurch’s role as LV=’s adviser and my personal political activities”.
“Our appointment to advise LV= on its strategic review significantly predated my appointment as Conservative party treasurer,” he said.
“As a regulated business, we have a process to approve any new mandates and this appointment was approved by our new business committee in the normal way. Fenchurch continually monitors any potential conflicts of interest extremely carefully and the firm is clear that we have none in relation to this mandate.”
“We have acted for LV= on several matters since Fenchurch was established. Importantly there is no way that I would – or could – influence government in any way in this matter, or indeed in any matter.”
City regulator the Financial Conduct Authority (FCA) last month said that it did not intend to block the takeover or plans to demutualise the firm. The FCA does not consider ownership structures when assessing takeovers, meaning the decision is now in members’ hands.
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