Farewell to Applegarth is £750,000

Mar 31 2008 by Adrian Pearson, The Journal

THE man responsible for Northern Rock’s disastrous business plan has received a £750,000 payoff.

Former chief executive Adam Applegarth left last December but received a separation package which sees him paid a monthly “wage” provided he does not accept any work paying more than £20,000.

The 45-year-old will also be allowed to use a pension pot of £2.5m when he turns 55, bring him a retirement benefit of about £200,000 a year.

Mr Applegarth left the bank after the decision to ask for Bank of England loans totalling £25bn.

Earlier this month, Northern Rock’s Government-appointed executive chairman Ron Sandler announced 2,000 job losses at the bank as a direct result of February’s nationalisation.

Newcastle North MP Doug Henderson, in whose constituency the bank’s Gosforth headquarters is located, said the decision to award Mr Applegarth the pay-off was insensitive.

He said: “I don’t think the board have acted very responsibly here. This news will stick in the gullet of anyone who is fearing for their job at the bank.”

And Newcastle Central MP Jim Cousins said: “In the present situation this payment does not look right, and I think people would have a lot more respect for him if he made a considerable donation to the [Northern Rock] Foundation.”

Applegarth joined the bank as a graduate trainee almost 20 years ago. He was criticised by the House of Commons Treasury Select Committee for an aggressive business model which left the bank vulnerable to global credit problems.

The “golden goodbye” is due to be outlined in Northern Rock’s annual report today, which will also include the bank’s long-awaited results for 2007.

Outraged union leaders have called for an inquiry into Mr Applegarth’s business plan and pay-off. Graham Goddard, deputy general secretary of Unite, said: “Those who contributed to the failure of Northern Rock must be held to account.

“Unite cannot accept that anyone whose actions contributed to the problems in the bank is able to walk away without any questions being asked of their conduct, or any form of reward.

“The failures which resulted in the crisis in Northern Rock mean that some 2,000 jobs will be lost. We want to see a full investigation into the events which led to the troubles of the bank.

“An inquiry must take a broad perspective of all those involved, including the previous management. The hard-working staff deserve to know what went wrong and that lessons will be learnt.” Liberal Democrat Treasury spokesman Vince Cable said it was “outrageous that someone who brought the bank to the brink of destruction and subjected taxpayers to liabilities worth billions of pounds should be rewarded for failure”.

The annual report will show that Northern Rock forked out more than £55m in fees to legal, banking and accounting advisers in the strategic review that led to its nationalisation last month.

Northern Rock is expected to say it has gone into the red because of bad debts and interest payments made to the Bank of England.

Meanwhile, senior officials at the Government’s financial watchdog are under pressure not to accept their annual bonuses. The Financial Services Authority released a report last week in which FSA bosses admitted they had failed properly to supervise the bank’s activities.

Northern Rock declined to comment yesterday.