The rise and fall of Riverbourne

The end was in sight when bailiffs came knocking at the door of Riverbourne Insurance Group in February this year. They had been sent by firms owed money by the Surrey-based broker in the week prior to the company’s spectacular fall into administration. Rumours had been swirling around the market about the broker’s precarious financial position in the months and weeks prior to its collapse.

Now Insurance Times uncovers the chain of events that led to the broker’s fall from grace.

The first report, published by the joint administrators, Stephen Grant and Anthony Cork of Wilkins Kennedy, two months after they were appointed on 19 February 2012, disclosed a series of astonishing details. These included 130 known creditors owed a total of £2.3m, including insurers Aviva, NIG and LV=, brokers, banks and Crystal Palace Football Club; allegations of fraudulent loans obtained from Close Premium Finance Ltd (CPF); an alleged shortfall of funds in the broker’s client account and suggestions of mishandling; and the company’s use of high-end vehicles.

As the detailed report filed at Companies House reveals, the Riverbourne story began in 2002 when joint managing directors, Jamie Coyne and Nick Plowman, founded the company. It traded in a number of markets, but specialised in writing construction risks through Lloyd’s, and commercial business for the SME sector through the company market. It also had a small book of high net worth business.

Shortly after launching, eventual shareholders Nick Jamieson and Dan Lane joined the company, and an operation in Leeds was launched. A further three hires - David Garrad, Charlotte Martin and Jeanne Claremont - also came on board. The broker’s ambitious young team grew quickly and opened a city office in 2006, based in the Gherkin in St Mary’s Axe, with gross written premium peaking at about £12m.

Resignations
Then in 2007, the following events took place: Garrad, who had been appointed a non-shareholding director, resigned with six months’ notice to found Square Mile Broking (SMB) with another ex-Riverbourne employer, Dominic D’Inverno.

Then, Coyne negotiated the sale of his 45% stake, but remained at the company to service a client account. The broker also moved out of the Gherkin after 17 months.

Then in January 2010 Riverbourne became the Cobra Network’s 159th member, and the network’s then managing director, John Lincoln, gave the business a glowing reference.

He said: “Riverbourne is a highly professional commercial brokerage that has seen rapid growth over the past eight years and is a perfect fit for our membership profile. The management team at Riverbourne are commited to further growth and I know their decision to join Cobra Network is part of their aggressive plan for the business.”

However, Lincoln had spoken too soon. Key employee departures, including Claremont in June 2010 to join SMB, resulted in a number of major accounts being transferred to SMB. Riverbourne had lost business and the top line was hurting -but it wasn’t going to give in without a fight.

Legal wrangle begins
Riverbourne began legal action against Coyne, Claremont and SMB in June 2010 for £400,000 plus costs. Plowman was advised by solicitors that Riverbourne should expect to win the case by early 2011.

Plowman had been left with ultimate ownership of all Riverbourne shares and he agreed to a refinancing deal with Macquarie Bank in August 2010.

With Plowman now in control and negotiating deals, Riverbourne was looking solid to the rest of the market, but in reality it was losing clients as the recession took hold.

We became so obsessed with bringing justice against ex-employees that we lost track of what was happening in the business’

Nick Plowman, former Riverbourne director

It was also racking up large costs on legal bills in its dispute with SMB.By the summer of 2011, the dispute had still not been settled and new solicitors were appointed.

The big cards Riverbourne had to play were that it was banking on the prospect of almost £500,000 from the legal action. It was also relying on additional incentives, usually realised from CPF at the end of the financial year, to also help it through financially, but Riverbourne continued to suffer fresh blows.

Its revenues were hurt further when Jamieson and Lane left the business to join Northern Alliance Ltd and were followed by a number of Riverbourne clients.

The final nail in the coffin came when CPF cash and legal settlement money failed to materialise. The CPF money did not come in because Riverbourne had written less business than anticipated during the year.

Nominal settlement
Plowman was still banking on the legal settlement to save the company, but then he learnt it now only stood a 50% chance of winning. With £100,000 already spent on the case and a further £250,000 estimated to take the claim to court, Riverbourne eventually accepted a nominal settlement of just £15,000.

In an emailed response to Insurance Times shortly before going to press, Plowman, who now works for Smart Witness Vehicle CCTV, says: “If you add into the mix rate softening, recession, and clients going into administration themselves, along with the fact that Riverbourne as an expanding company since inception had no real assets to rely on in the event of such circumstances arising, then you have a pretty good picture of my version of events.

“If I’m honest, myself and senior officials became so obsessed with bringing justice against such ex-employees that we completely lost track of what was happening in the business.”

The final stand In a last-ditch bid to save the business, the Leeds operation was put up for sale, but a deal failed to happen. As the business was disintegrating, the report says a number of personal issues had distracted Plowman from running the company.

By now, even the FSA was involved, having been told of concerns over the handling of client money at the brokerage, the report says.

Safeguarding jobs
The joint administrators traded the company for nine days until a sale was completed. Thirty-eight firms expressed an interest in the business and 14 offers were received. The assets were bought by Aston Scott and The Insurance Partnership, safeguarding the jobs of 15 employees.

The joint administrators are continuing their investigation into the company. Responding to the alleged shortfall in Riverbourne’s broking account, where the administators’ report claims a number of “improper withdrawals” were made, Plowman denied Riverbourne held client money. In response to the alleged fraudulent CPF loans, which according to the administrators’ initial investigations totalled £395,334.58, Plowman said the figure includes advanced over-riders of at least £100,000.

The administrators are also investigating the conduct of company directors active in the three years up to its administration to decide if any civil proceeding should be taken. It is understood that the FSA is awaiting the results of the administrators’ report before deciding whether it should take action.

Plowman also claims he is owed £600,000, which he had injected into the business in the last three years.

“In good faith, I signed personal guarantees for all suppliers,” he says, “and therefore I can confirm that I am being expected to reimburse for all shortfalls but again cannot comment at this time on any particulars.”

The joint administrators, who are expected to publish their next report in October, declined to comment.

Market views

THE BROKERS

Anonymous: “It’s a real shame. It was a growth business: good reputation, fast-growing, very sales-driven. But it flew a bit close to the sun, because it didn’t really have the business acumen behind the front door to keep it up, and it all came unstuck, unfortunately.”

Anonymous: “If the allegations in the administrators’ report are ever found to be the truth, then presumably this is something the FSA should have picked up on earlier than it did. If this recession continues, it will have a bad effect on the small broker.”

THE BUYERS
Aston Scott chief executive Andrew Scott: “The attraction was that we could simply buy the portfolio of business from the administrators. So from my perspective it was a very clean acquisition and I didn’t have to worry about anything that had gone on in Riverbourne prior to the administrators being involved.”

The Insurance Partnership director Richard Tuplin: “We acquired a solid book of SME business. It complemented our existing Leeds operation and gives us a small business proposition in the Leeds area.”