Lessons from failure: How Reuben Singh blew it
22 min read
05 July 2010
In an exclusive extract from 'How They Blew It', a brilliant new book about the CEOs and entrepreneurs behind some of the world's most catastrophic business failures, here's the amazing rise and fall of clothing entrepreneur Rebuen Singh.
The rise and fall of Reuben Singh is a salutary tale for all young and thrusting Asian entrepreneurs in the United Kingdom seeking to make a name for themselves. The rise shows how having youth on your side, being from an ethnic group and being wealthy can rapidly take you to the very heart of government and result in reams of positive press coverage. The fall shows how governments will back anyone they think will make them look good, how fickle a mistress the media can be, and that ultimately all the glitz, glamour and perceived opulence in the world is no replacement for sound business planning.
Singh’s parents came to London from Delhi in the 1970s. His father, Sarabjit, was a wealthy wholesaler who imported and sold fashion accessories via a company called Sabco. The family lived in Poynton, an affluent village in Cheshire, and Reuben, the eldest son, was born in 1976. The young Reuben was sent to the William Hulme Grammar School in Manchester, which has the Latin motto Fide sed cui vide, or ‘Trust but watch whom you trust’.
Singh was introduced to the family business at a young age, and by the age of 13 he was accompanying his mother on trips to East Asia to buy fabrics. When he was aged 16, his father paid him a regular salary to run the sales department of Sabco. While studying for A-levels, he set up his first business, called Miss Attitude, selling women’s clothing, accessories and cosmetics. It was the start of a stellar rise.
Singh opened the first Miss Attitude shop in Manchester’s Arndale Centre in 1995, opening another shop four weeks later. By the time he left school, Singh owned nine stores and employed more than 100 people. Ultimately his retail empire would grow to more than 40 shops, and in 1999 Singh sold the business to US financier Gary Klesch’s company, Klesch Capital Partners, in a deal worth a reported £22m.
Still in 1999, he launched AlldayPA in Manchester, ‘a 24/7 call answering service’. The business used custom software that enabled a team of personal assistants to handle calls, manage calendars, type letters, and perform other tasks for business owners, all from a central call centre. Singh said he invested ‘around £14m’ in the project, adding that he later sold a stake in the business to a consortium of US investors for £10.5m, valuing AlldayPA at around £116m. The plan was, he said, to launch the concept in the United States.
It is a common problem: an entrepreneur who has quickly achieved a measure of success becomes impatient to move on to the Next Big Thing. It is hard to say how successful Miss Attitude might have been had Singh stuck with it. We shall never know.
This incredible business success did not go unnoticed by the media, and the praise and accolades started coming. The Sunday Times dubbed him the ‘British Bill Gates’, and the Mail on Sunday’s Rich Report (2001) estimated he was worth more than £80 million. The Guinness Book of Records even had Singh down as ‘The world’s youngest self-made millionaire’. Fortune magazine named Singh as Europe’s richest entrepreneur under the age of 30, valuing him at more than £95m, while the Independent newspaper put him in its list of people ‘ahead of their time’. Singh spoke about his plan to invest some $50m in India, and in 2002 he was named Asian Entrepreneur of the Year at a ceremony attended by Prince Charles.
For his part, Singh was not shy about talking up his success. Always one for the soundbite, he came out with various rehashed pearls of wisdom over the years, from ‘you’ll never throw a six if you don’t roll the dice’ to ‘I don’t know anyone who has out-talked me.’ That is a strange claim by any standards. He summed up his business philosophy thus: ‘I’m not an easy person to do business with. I’ll count every penny but I’ll never deceive anyone. The golden rule in business is that you never upset your customers.’
Many entrepreneurs enjoy the limelight. It is part of the personality of entrepreneurs to want to show the world what they are made of. Psychologists might argue that this self-justification, or self-glorification, is part of an inner insecurity and inferiority complex. Others would say it is simply part of having a very big ego. For Singh, it was a combination of both.
Courting media attention can undoubtedly help to promote and grow an entrepreneur’s business interests. But while journalists sing the praises of up-and-coming entrepreneurs, it is important not to confuse that praise with friendship. The same journalist will be there on the way down, at which point there is little to be gained from complaining about the fairness of it all. Amid the hundreds of magazine and newspaper interviews Singh carried out, he confessed modestly that he did not want to be ‘too visible’. So his chosen mode of transport was? That’s right, a canary yellow £276,000 Bentley Continental Mulliner. The shy and discerning tycoon’s vehicle of choice!
With the media hype machine in full swing, it was not long before Singh came to the attention of UK politicians – always on the lookout for a business success story that might rub off on them. Singh was gold dust. Young, British, Sikh, successful, wealthy – and the political top brass made a beeline for him.
In 1999 the then prime minister Tony Blair set up the Competitiveness Council, a government advisory panel stuffed with the great and the good from UK plc. Alongside the CEOs of British Petroleum, British Telecom, Diageo, PricewaterhouseCoopers, IBM (UK) and GKN, and sat around the table with the then director general of the Confederation of British Industry and head of the Trades Union Congress, was none other than Reuben Singh.
In December that year, then chancellor Gordon Brown launched the National Enterprise Campaign, the latest in a seemingly endless procession of well-meaning initiatives aimed at ‘encouraging entrepreneurship’ in the United Kingdom. Among those ‘business heroes’ who signed up for the campaign were Richard Branson, Simon Woodroffe, Alan Sugar, James Dyson, Martha Lane-Fox and, yes, the 23-year-old Reuben Singh. It is hard not to be cynical and believe Singh was there to tick a couple of boxes and make up the numbers. While the other entrepreneurs around the table remain successful business people, it did not quite turn out that way for Singh.
But there was more to come. In May 2000 Singh was appointed to the government’s Department of Trade & Industry’s now defunct Small Business Council, because ‘he showed a very good entrepreneurial spirit and the success of his companies gave us the view that he was a successful businessman’. Singh was described by the Treasury and the British Chambers of Commerce as ‘one of a cadre of successful entrepreneurs spearheading a more entrepreneurial culture’. And the ever-bashful Singh told the Financial Times in 1999, ‘I have instant access to most ministers, most politicians, and most pioneers of industry. I have met Tony Blair many, many, many times and I think he is listening and acting.’
To top even his intimate relationship with Tony Blair, in 2003 Singh was selected by the Davos-based World Economic Forum to take part in its ‘Global Leaders for Tomorrow Program’. Singh had made it. Cue the downfall.
The supposed £22m deal for his Miss Attitude_company had always raised eyebrows in the City, and an investigation by the Manchester Evening News later discovered that £22m was something of an overstatement. It was actually bought for £1 – and had debts of more than £1m. Gary Klesch, who bought the business, was blunt in his appraisal. ‘The business was an absolute shambles, and I mean a shambles,’ he said. ‘Mr Singh is a supreme self-publicist and a very naïve guy, not typical of the type of person we do business with. We have a saying in America – all show, no go – and that sums up the guy completely.’
Klesch wasn’t finished there. ‘He had a very fancy Mercedes but it turned out it was leased by the company and not owned by him at all. He ran around saying that I paid £55m for Miss Attitude. Although at the time I knew it was a lie, I couldn’t say anything. The deal was subject to a confidentiality clause so I could not say a word. But as he has abused the confidentiality clause, I feel I should tell the truth. If he denies that I bought the company for a pound, let him sue me for libel and a judge can decide who’s right. The only reason I bought the company was for its High Street sites.’
At the time, perhaps wisely, Singh declined to comment.
This was not the last of Singh’s many business ventures to hit the buffers. His health food business, Robson & Steinberg, went bust owing more than £250,000 after trading for less than a year. One company owed money by Singh said, ‘There was always a new excuse. They said that the accounts department was in a different building.’ Singh brushed off the difficulties, and supporters said it was part and parcel of being a successful serial entrepreneur: some you win, some you do not. Meanwhile Singh ploughed on. He was soon being referred to as the owner of the Reuben Singh Group of Companies, an organization consisting of 12 trading entities involved in a variety of sectors, from currency trading to property, to retail and construction. Yet newspaper investigations at Companies House found no evidence this corporate entity even existed. Of the seven directorships he was supposed to have held, five of the firms had never filed accounts and the two that had only showed net assets of £1,000 and £100 respectively. Curiouser and curiouser.
It is surprising that the normally sceptical and ever-resourceful British press had allowed such blatant bragging and showmanship to go unchallenged for so long. Then, once the clear fabrications and anomalies came to light, it is equally surprising that no one really pursued them to any great extent. Singh was undaunted by the negative headlines, and they were either dismissed by friends and associates as petty jealousy, or the rather more serious accusation was made that the criticism had racist undertones. Of course it was neither.
But the real trouble had not even started. It did once Singh’s parents decided to call in a loan they had made to him. At this point the Bank of Scotland demanded the £1 million-odd it had loaned Singh. He did not have it, but how he came to secure such a big loan from the bank is a tale worth retelling.
It turns out that on one occasion, Singh took the banker handling his account in a chauffeur-driven Mercedes, complete with television in the back, to the Lowry hotel, Manchester, where the banker was treated to the hotel’s specially printed ‘Reuben Singh menu’. For another meeting Singh had decorated his office with press cuttings about his business successes, including a picture of him meeting best friend Tony Blair, to impress the bank representatives. It worked! A Bank of Scotland employee later admitted he had relied on the press articles in making his decision about Singh.
It was around this point that Singh crossed the blurred line between entrepreneurial showmanship and self-confidence, and misrepresentation. People tend to buy from people or companies that know what they are doing. Entrepreneurs, as a breed, are more aware of this than your average Joe, so naturally they exploit it. But at what point this exploitation goes beyond confidence and boastful showmanship into lying and fraud is open to question.
With the bank now demanding its money back, Singh faced a court appearance, and the full extent – or rather limit – of his business prowess soon came to light. It was not pretty. On 30 October 2007, Manchester County Court judge Michael Kershaw said Singh had deceived the bank to procure the loan. He accepted that Singh had also invented a bank account in Bermuda to help maintain the impression of immense personal wealth.
Details of Singh’s financial affairs were laid bare. He owed his father Sarabjit £778,813, and had fallen £12,000 behind in payments for one of his cars. He had also run up debts of around £140,000 on nine credit cards, owed the Inland Revenue £32,500 for a penalty payment and had yet to settle a HM Customs & Excise bill for £60,000. The largest part of Singh’s debt was £9m he owed to a Kuwaiti business, Badr ITK General Trading Company.
In summing up, Judge Kershaw was scathing. ‘Mr Singh deliberately and flagrantly deceived the bank about the extent of his personal wealth and ability to honour a guarantee if necessary from cash or realizable securities in the UK,’ he said. ‘He also liked to keep his own staff in awe of him and in ignorance of the truth of his past and present business activities.’ Referring to the former bank employee who had agreed the overdraft with Singh, the judge said the banker was ‘to some extent a victim of Mr Singh’s personality as well as Mr Singh’s lies’.
Singh was declared bankrupt at Manchester County Court with debts estimated at more than £11m. It was only once the details of the financial arrangements started leaking out that the full picture started to emerge. Accounts from AlldayPA, published in 2003, showed losses of £115,000, debts of £2m and a £2.6m payment to Singh that auditors could not account for. On 7 November AlldayPA issued a debenture to Mr and Mrs Singh giving them a claim over an undetermined amount of money from the company. In 2004 Singh, as sole shareholder of ADP Call Centres, decided to increase the capital of the company by issuing more shares. Around 8,000 of these were allocated to Singh’s parents, with another 2,000-odd granted to GNDJ Venture Capital Fund of Ontario, Canada, also owned by the Singh family.
Ultimately AlldayPA went into administration, and Singh’s parents then bought the company from its receivers. They then installed their own management team at the Salford company, with Reuben reduced to serving as a ‘consultant’ or ‘non-executive chairman’. Speaking at the time, Sarabjit Singh’s solicitor said that Reuben ‘does not wish to be involved in its day-to-day administration’. He was well and truly on the naughty step.
It is questionable to what extent Singh really was an entrepreneur. For one, he does not appear to have ever made any money. And he seems to have preferred to hang on to the coat tails of his family. Yet they could not save him. The downfall was complete. The press, once so full of praise, were vitriolic. They said Singh was ‘exposed as a charlatan’ and that he ‘proved himself to be a brilliant self-publicist’. ‘Singh has managed to convince the business establishment, the Blair administration and the world’s financial press into believing he is a multi-millionaire,’ exclaimed the Mail on Sunday newspaper. ‘In reality, he is little more than a fantasist.’
There is a common complaint in the United Kingdom that the British media ‘build people up and knock them down’. It is something people would recognize in many countries. But it is an over-simplification, and glosses over the fact that the vast majority of the people who receive positive press coverage work extremely hard to get it, employing batteries of eager public relations executives to generate the headlines and features.
The press do not seek out random business people and build them up, yet entrepreneurs like Singh, caught out and found out, do not appear to appreciate that the media are a double-edged sword. They are looking for stories, headlines and angles. If someone new comes along, someone young, Sikh, successful, wealthy, it is little wonder the press trip over themselves to put that face on their covers. But it comes at a cost. As soon as business people court the media, they need to watch out. And if they’re up to no good, they should not court it at all.