Wickham's musings from Chalke

 
Railtrack Private Shareholders Action Group (RPSAG) has spent about three years preparing a case against the government alleging misfeasance in public office and breach of human rights because we think that Stephen Byers as Secretary of State misused his powers to bring about the collapse of Railtrack plc.

Stephen Byers held secret meetings with Tony Blair and others about bringing Railtrack back under state control without paying for it. Stephen Byers announced late on a Friday that he was stopping any further drawing of a loan which Railtrack had available but had not in fact asked to draw at the time as the accounts were showing a profit.

He went to court on the following Sunday (how do some people manage to get courts to sit at short notice?) and convinced the judge that as Railtrack had no loan facility from then on they would soon be insolvent and the judge put Railtrack into administration.

The company directors and the Regulator were caught unawares and could not muster any form of defence in such a short time. We think that the directors capitulated (possibly because they were offered jobs in the not-for-profit company Network Rail which was to be set up to take over the running of the rail network).

The Independent Regulator was apparently very annoyed that he had been kept in the dark and has said that he could have started a financial review to discuss alternative funding or fare structure but of course the government wanted to kill off Railtrack as a private company.

Most people including RPSAG members admit that at a future date Railtrack would have required additional funding so why didn’t Stephen Byers just wait until the current loan had been fully drawn? There would not have been much chance of raising more cash on the market at good rates, if at all. Instead he used devious tactics with the knowledge of Tony Blair and has, in our view, broken a contract. We don’t want to live in a society where the government can ride roughshod over the law to achieve its political ends. This is what third world dictators like Mugabe do.

The major financial institutions set up the Railtrack Shareholders Action Group (RSAG) which negotiated 97p from the government which with other assets owned by Railtrack will generate about £2.60 per share eventually. However, the institutions held Railtrack bonds and shares in the ratio of about £6 of bonds for every £1 of shares. The bonds have been repaid in full so they were reasonably happy with the 97p from the government.

Private shareholders do not own bonds and have in many cases been Railtrack employees who in addition to buying shares at issue bought more shares in the share option scheme to boost their savings. We think £2.60 per share is much too low. Some people argue for £3.50 which was the issue price, but most say that what has happened is a re-nationalisation and there is a European Community principle that governments should pay the average of the last three year’s share price. Railtrack’s share price had been much higher in previous years and had Railtrack been formally and properly nationalised in 2001, shareholders may have received £8 - £10 per share (the average of the previous 3 years' share price).

Recently the government asked the court to demand that RPSAG pay a security into court before the case starts of £2.7m which we cannot afford as we have raised £2.4m and have our own legal costs. The government reduced this demand to £2.25m which the judge has approved. RPSAG now have to raise another £900k before about 6 June and it may be impossible as many members will feel unable to contribute more than they have already. Perhaps a white knight will emerge at the last minute to make up the balance.

The legal process of disclosure has unearthed some amazing emails between ministers, government departments and No. 10’s advisors. Some extracts from newspapers or the emails are shown below.

Advisers' e-mails, which speak of "triggering" and "engineering" Railtrack's insolvency, pose fresh questions about the honesty and integrity of Tony Blair's Government - a major issue for next Thursday's election.

The next day, Shriti Vadera, a special adviser to the Treasury, wrote an email to Martin Wheatley, a Treasury civil servant. "I was thinking we need a trigger to insolvency that we decisively pull," she wrote.

The handwritten minutes for one Whitehall meeting end with the question: "What can we do with grannies - compensation? eg travel pass?"

'PM wants Regulator out of it,' Mr Byers said.

On August 23, Dan Corry, a special adviser to Mr Byers, sent an email saying: "I have spoken to SOS [Secretary of State]. He asked me to pass on the following views. He is very attracted to the option of pushing them [Railtrack] into administration. It does not cost too much. He imagines making a statement towards end of September."

The whole matter of the government engineering the collapse of Railtrack raises the issue of creating a false market in the shares which is illegal.

One other matter which has not been given any special attention in the claim is the valuation of Railtrack’s stations. These were only given a very rough valuation in the annual accounts and many stations over fifty years old were valued at nil. Even though there was a restriction in the Privatisation document that Railtrack could only benefit to the maximum of £200,000 in any redevelopment works, this still means that most stations could benefit to this extent. Most have spare sidings, railway arches or spare space for retail outlets. We should be due more from HMG just on this issue alone.