Ousted CEO and mounting debts: the lawyers behind £36bn BHP lawsuit
The law firm behind the most significant litigation to ever hit the English High Court has been lighting up headlines recently due to allegations around internal issues at the group.
Back in 2018, in Liverpool, barrister Tom Goodhead and US lawyer Harris Pogust founded a law firm using an alternative business structure that focused on large-scale group litigation against multi-billion dollar corporations.
SPG Law (entity of US firm Sanders Phillips Grossman), rebranded in 2020 to PGMBM after splitting from the US firm, as it began to focus on the Latin America market.
PGMBM was one of the law firms in the headlines in 2022 after securing a £193m settlement with VW over ‘dieselgate’; the firm, along with Slater and Gordon, was a key firm representing thousands of claimants.
In the same year, the firm was among those launching additional claims against prominent car manufacturers and authorised English dealerships over the dieselgate emissions scandal. One of these group actions kicked off its trial at the High Court this week.
Landmark £36bn trial against mining giant
However, it was its multi-billion pound case against Anglo-Australian mining giant BHP that really brought the firm into the spotlight. The firm stated it represents more than 620,000 people affected by the deadly Samarco dam disaster.
On 5 November 2015, the Fundão dam in the south-east of Brazil, operated by Samarco, a 50:50 joint venture owned by BHP and peer Vale, failed and unleashed a deluge of thick, red, toxic mud that wiped out the village of Bento Rodrigues. Known as the worst environmental disaster in Brazil’s history, it killed 19 people.
The firm launched a group claim in England in 2018 against the owners. Over a few years, the cases went through several trials over jurisdiction. In 2020, the High Court struck out the case, but in a twist, the Court of Appeal overturned the ruling in 2022.
In the midst of this, the firm had been rebranded from PGMBM to Pogust Goodhead.
The trial on liability, which kicked off in October, concluded on 13 March. The parties are still waiting for the judgment from Mrs O’Farrell.
Trunmoil across the headlines
However, since then, Pogurst Goodhead has found itself in the heart of headlines over significant financial losses, leadership changes, and reported tensions with the firm’s hedge fund backer, Gramercy.
Morning Wire reported in May that the firm was being sued for £2.2m over alleged unpaid legal bills by another law firm, Seladore Legal. Seladore worked on two retainers for Pogust Goodhead, but alleged in the claim that it had not been paid any of the outstanding bills.
Then, at the end of the Summer, the headlines intensified. In early August, it was reported that Goodhead was no longer the CEO of the firm, with internal memos stating he was “on leave”. He still appeared on the firm’s website and was listed as its CEO a month later. However, according to Companies House, Goodhead was terminated as a director on 11 September.
The company’s chief operating officer, Alicia Alinia, was appointed as its interim CEO. No reasons were provided for Goodhead’s departure.
Around the same time, chatter was growing over reported internal concerns regarding US hedge fund, Gramercy Funds Management, its primary funder and the source of a £500m investment in 2023.
Following key departures, the FT revealed that around 30 lawyers wrote to the firm’s board expressing concern “over a lack of communication and transparency” about the reasons behind the leadership upheaval.
It was also reported that some concerns in the letter to the board related to an alleged funding agreement between Gramercy and Pogust Goodhead, as the hedge fund was reported to have provided a new $65m (£48m) credit facility to the business last month.
Howard Morris, chairman of Pogust Goodhead, said on this report: “The new board has acted decisively to strengthen the firm’s governance and to ensure a robust, transparent leadership team is in place. Our priority is to safeguard the best interests of our team and, above all, our clients.”
“Any suggestion that our funders, including Gramercy, determine the firm’s strategic decisions or case strategy is entirely false. We remain fully independent, with complete control over the strategy and direction of every case we bring,” he pointed out.
Then, nearly a year late, the most updated view of its financial situation was revealed in its accounts, up to December 2023, which were published last Thursday.
Losses mount
The accounts, published on Companies House, revealed the group made a loss of £91m in 2023.
The company’s net current liabilities increased significantly from over £2.5m in 2022 to over £93.1m in 2023. The amount the group owes has also increased significantly, from £11m in 2022 to over £97.5m in 2023.’
In its ‘Going Concern’ section, the business stated it can continue operating, but the auditors at MHA highlighted a “material uncertainty” due to the unpredictable nature of their income.
A spokesperson for the business said: “The recently filed accounts for PGMBM Law Ltd cover 2023, and don’t present the full financial position of the PG UK Group; it doesn’t present the group’s financial and commercial validity.”
“We remain fully confident in the firm’s financial strength and long-term stability, which have been thoroughly validated through a comprehensive 12-month cash flow forecast. PG continues to enjoy the full support of all our funders, who have reaffirmed their confidence in the firm’s leadership, strategic direction, and long-term success,” they added.
The Companies House system shows its accounts for up to December 2024 are already over a month late, highlighted by the red ‘account overdue’ warning.
As Pogust Goodhead awaits the outcome of its landmark BHP litigation, the legal business will likely continue to attract attention beyond its high profile cases.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.