How the mighty fall Article icon


When James Henderson, former chief executive of Bell Pottinger, walked into the agency’s Holborn offices on Monday 4 September, he pointed to an article in the Mail on Sunday and announced that he had averted the crisis that was swirling around the firm.

The article, which followed a three part expose in CorpComms Magazine, discussed Henderson’s bitter battle with Lord Bell, his sorrow at the revelation that Bell Pottinger’s work in South Africa had incited racial unrest and revealed he had fallen on his sword. His then fiancée Heather Kerzner, who with Henderson owned 37 per cent of the business, expressed her affection for South Africa. Henderson even bizarrely suggested that charities in South Africa might want to take advantage of Bell Pottinger’s expertise.

His colleagues looked at Henderson in astonishment, particularly when he was heard to describe his picture that accompanied the story as rather a good one. ‘It was utterly unbelievable,’ said one. ‘He had told the newspaper that he had resigned, but he was walking around the office like nothing had changed and nobody knew what to say.’

But Henderson’s resignation did not save Bell Pottinger. The release of an internal review by law firm Herbert Smith Freehills, which criticised the agency’s management, its expulsion from the industry trade body PRCA and Lord Bell’s car crash interview on Newsnight, when he expressed the view that it was ‘curtains’ for Bell Pottinger, caused the firm to implode.

The day after Lord Bell’s appearance, insiders claim £850,000 worth of business walked out the door. When clients quit, they are usually obliged to serve a notice period of at least three months. But many of their contracts included a force majeure clause, triggered in the event that the agency’s reputation had been damaged: the notice periods were null and void. When the agency’s biggest client, the Bahrain Economic Development Board, also cancelled its multi-million pound contract last Thursday, it effectively signed Bell Pottinger’s death warrant.

Internally, the mood has turned from sorrow to anger at the way the crisis has been handled so badly. Many believe that appointing a law firm to investigate the agency’s work in South Africa merely served to stoke the flames. ‘We had resigned the account. All Henderson needed to do was to announce that, say he had fired the lead partner, suspended others and draw a line under the matter,’ said one. ‘There was no need to appoint Herbert Smith, but I think James thought it would clear him of any blame.’ In the event, only an abbreviated version of the report was released. Some shareholders have demanded sight of the full report.

‘We had crisis management experts working in Bell Pottinger, and nobody thought to ask them for advice,’ said another. ‘We had former journalists who knew how the media worked. Instead, the senior management huddled together to sort out the crisis and only made it worse. They didn’t include anyone else.’ Unlike many agencies, Bell Pottinger also lacked an advisory board. There was no outside counsel to turn to.

When the PRCA announced it was launching an investigation into Bell Pottinger’s work for Oakbay Capital, some employees recommended that the agency immediately resign its membership. ‘If we weren’t members, they couldn’t reprimand us,’ said one. Ironically, insiders claim that Lord Bell had opposed joining the trade body back in 2010. Instead, the decision was taken to submit to the PRCA’s hearing, in part, insiders claim, to clear Henderson’s name. If that was the reason, the strategy backfired.


But the seeds of Bell Pottinger’s destruction stretch back further than its involvement with Oakbay Capital, and the controversial Gupta brothers. It began three years ago when Lord Bell gave an interview to the Financial Times in which he described bankers as ‘complete criminals’. With a client list that included some of the world’s leading banks, Bell Pottinger’s senior management were furious.  


The relationship between Henderson and Bell, which had been initially been cordial, started to decline. Both had completely different management styles. Where Lord Bell had been relaxed about staff winning new clients, Henderson was obsessed. With a sizeable debt underpinning Bell Pottinger’s management buy-out, he needed new business wins. ‘It was about client wins, not looking after the ones we had,’ said one insider. ‘The margins on some of the new client accounts were huge. Some were operating on a 56 per cent margin. If clients had known, they would have been apoplectic.’

Everything became about the P&L. Partners were set fee targets. Those who didn’t perform were invited to leave. Employees who elected not to invest were branded disloyal. Shareholders, including several of Henderson’s personal friends, who had bought into Bell Pottinger at £1 per share in 2012, received a dividend in year one, but nothing since.

Founding partners were also invited to help pay down the debt. Bell Pottinger would withhold their tax payments, but rather than ring-fence the funds in an escrow account, as is usual in such cases, they would be used to pay down the debt. At the end of the year, when the tax obligations fell due, those partners who participated in the scheme would receive their tax back to pay the Inland Revenue, plus an additional payment.

But Henderson’s approach failed to win him friends within the business. Insiders complain about his need to ‘micro-manage’, including his obsession with the agency’s corporate and financial side. It was where the rump of Pelham, the agency Henderson founded before selling to Chime Communications, had settled. ‘He was always looking over their shoulders,’ said one insider. ‘That’s why I find it hard to believe he really was in the dark about their work for the Guptas.’

Employees who left were warned that, if they said anything negative about Bell Pottinger, their careers would be ruined. ‘He was viewed as a bully,’ said a former colleague. ‘James is riddled with insecurities,’ said another. ‘And that plays out very badly when you are trying to run a business where many of the people are much more impressive than you.’

The enmity between Lord Bell and Henderson grew. ‘They were like two silver-backed gorillas facing each other down,’ said one. The atmosphere became toxic. Henderson accused the peer of failing to cover his costs, which included a Mayfair office. It is a claim Lord Bell refutes. Such was the animosity that, at a board meeting in August 2016 to decide his fate, Chime, then Bell Pottinger’s biggest shareholder, ordered its representative Mark Smith to vote against Lord Bell. Smith was appointed chairman. ‘They decided to back James,’ said one insider. ‘It was probably the wrong horse.’

Smith’s action hurt Lord Bell deeply. The two had worked together for years, and he saw the act as a betrayal of their friendship. ‘I saw Tim recently and he was obsessed with Henderson and Smith,’ said one PR professional. But Bell’s departure was costly. He was offered £1 million a year, payable until December 2017.

In March, Bell Pottinger took out a loan with Lloyds Banking Group. The funds were needed to buy out Lord Bell’s stake in the agency, but the news that he was able to sell back his shares angered past and present employees. They demanded the same right. ‘The shares have done nothing,’ said one. ‘We bought them at £1, and I think at one point they reached £1.40, but they’ve never really been above £1 for long.’ Lord Bell agreed to sell at £1.10. The initial bill crept up. It was at this point that Heather Kerzner invested in the business: her stake is now worth nothing. The engagement is off, and she is said to have consulted lawyers to seek ways to recover her funds.

According to its company accounts, Bell Pottinger had assets worth almost £6 million, including £1.4 million of intangibles, in December 2015. Its heavily leveraged position, coupled with the client exodus and the departure of key rainmakers, such as David Rydell, who is believed to be joining Buchanan, meant the end was inevitable. There are some that see the shadowy hand of Lord Bell at work. They claim media attacks against Bell Pottinger in South Africa gained momentum after his ousting, with emails and a video apparently released from the agency’s server, but have yet to provide hard evidence to back such suggestions. ‘This is a tale of greed, incompetence, vanity and revenge,’ said one. ‘He went on Newsnight with one thing on his mind: revenge.’