The founder of Metro Bank who has handed £21million to his wife’s business was hounded out of US finance for doing the same thing a decade ago.
Billionaire Vernon Hill was thrown off the board of Commerce Bancorp, which he founded in the US in the 1990s, after he gave his wife Shirley £36m in payments to design branches.
The bank had been ordered by Federal investigators to stop doing deals with businesses run by family members and faced the threat of having all business put on hold.
Ban: Metro Bank founder Vernon Hill was thrown off the board of Commerce Bancorp, which he founded in the US in the 1990s, after he paid his wife Shirley $50m to design branches
To avert a crisis board members, many of whom had been appointed by Hill, organised a coup and voted him out of the business.
But the payments are identical to the payments he is now making to Shirley’s firm in the UK – and have sparked shareholder outrage.
Her firm Inter Arch has been handed £21million for branding and designing Metro branches.
Hill yesterday survived a crunch vote at Metro’s annual meeting, but shareholder Royal London and advisory firm Glass Lewis launched a scathing attack.
Hill, who made his first fortune running Burger King outlets, set up Commerce in 1973 and built it into a major player using skills he learned from fast food.
The lender even featured drive-thrus for customers. It made Hill a rich man and allowed him to build New Jersey’s largest mansion, the 45,854 sq ft estate Villa Collina – which features two 30-car garages and a helipad and a fitness room.
But while winning praise for its innovation, the bank attracted attention for Hill’s business dealings – with critics claiming he ran it as a personal fiefdom.
A state grand jury began to investigate whether Shirley’s business was wrongly given work in 1993. No charges were brought.
But then, in 2005, two Commerce executives were convicted of conspiracy over claims they gave loans to the Philadelphia city treasurer in exchange for contracts.
The treasurer was found guilty of fraud and conspiracy.
Hill was never charged or accused of wrongdoing. Hill’s brother and one of his sons ran a real-estate firm which Commerce used for property deals and the pair earned commissions worth around £800,000 in 2006, according to company documents. Meanwhile, Hill and two close relatives also had stakes in firms which leased land to Commerce.
And the US bank paid a New Jersey golf course principally owned by Hill £460,000 in 2006.
By 2007 the payments to Shirley’s business totalled around £36million. As anger grew over the deals, Federal bank regulators ordered the lender to stop signing contracts with businesses run by board members or their families.
The Office of the Comptroller of the Currency launched an insider dealing probe although Hill was never found to have done anything wrong.
This investigation was disclosed when Metro floated on the stock market.
In July 2007, the board voted him out while facing a Federal threat of being banned from opening any more branches.
Within three years Hill set up operations in the UK and launched Metro in 2010 to great fanfare, declaring war on the existing high street names.
Almost immediately he began employing his wife to design branches – of which there are 56.
There is no suggestion he has broken any rules in this country.
But yesterday, around a fifth of investors voted against, abstained or did not vote on his reappointment as Metro’s chairman.
Chief executive Craig Donaldson defended Hill. He said bosses at Royal London told him they were too busy to meet to discuss the payments.