MONDAY night’s BBC Panorama documentary exposed the operations of HC-One, which, with 265 facilities and a bed capacity of 16,116, is the UK’s largest care home operator.
HC-One is owned by a company run by millionaire Saudi Olympic showjumper Kamal Bahamdan.
The UK social care system is facing collapse, with a mounting staffing shortage and rising costs, with residents in England paying the full cost of social care until their assets – including the value of their own home – fall to below £23,250, with many forced to raid their life savings to fund care in their final years.
Panorama reported that Bahamdan, 50, has run the Bahamdan Group since 2002, with investments in telecommunications, education, infrastructure and retail in the Middle East and North Africa.
The Bahamdan Group controls Safanad Ltd, of which Bahamdan is also founder and chief executive, and which is the majority owner of HC-One.
On the board of Safanad, Bahamdan has Abdul Kareem Abu Al Nasr, a former chief executive of Saudi Arabia’s National Commercial Bank, and Lubna Olayan, a member of a family ranked by Forbes magazine in 2016 as the wealthiest in the Middle East, with a fortune of over £7.6 billion.
According to a report by the Centre for International Corporate Tax Accountability and Research (CICTAR), the companies in the HC-One structure have loaned money to each other via complex accounting, with very high interest rates.
These high-interest payments reduced taxable profits in the UK and let the company shift money to the Cayman Islands as interest income – where it is tax-free. HC-One stresses it pays full tax in the UK.
Jason Ward, principal analyst at CICTAR and author of the report, claimed in the programme: ‘You have the wealthiest families in Saudi Arabia ripping money out of cash-strapped care homes in the UK, while workers and residents are suffering, to make some of the world’s richest people even richer off of the backs of government funding and people’s life savings.
‘A significant chunk of (care home costs) is not going to provide care for granny or grandad, it’s going to the Cayman Islands.’
As the pandemic took hold, HC-One asked councils for financial help. The firm then received £18.9 million of taxpayer-funded government support.
Former health secretary Jeremy Hunt told Panorama the CICTAR report exposed ‘the Wild West’ of the current social care landscape.
‘To me, it is the unacceptable face of capitalism, because this is a sector that is under enormous pressure,’ he told Panorama.
‘It is wholly inappropriate given that the purpose of the sector is to look after literally the most vulnerable people in our society … It’s the Wild West out there.’
Commenting on the findings of the BBC1 Panorama programme, broadcast on Monday, Unison general secretary Christina McAnea said: ‘The public expects all new investment in social care to be spent improving the crisis-ridden care sector.
‘But there’s a real risk significant amounts of much-needed cash will be siphoned off to line the pockets of investors overseas.
‘The government must not allow this to happen. Social care already requires significantly more money than ministers are prepared to give.
‘What little is on offer must go on improving the quality and amount of care available, and on boosting pay for the dedicated workforce.’
Panorama Crisis in Care: Follow the Money, was based on a report by the Centre for International Corporate Tax Accountability and Research (CICTAR) called Death Deception and Dividends: Disturbing details of the UK’s largest care home operator which was also released on Monday.
It reveals details of how the UK’s largest care home operator shifted profits offshore to private investors, while appearing to report artificial losses allowing it to dramatically reduce or eliminate tax payments and justify millions more in government funding.
The report found that the owners of operator HC-One siphoned millions in tax-free profits to the Cayman Islands during the pandemic, while receiving an additional £18.9m in government payments for Covid-19 costs.
It also details how HC-One, which is heavily reliant on public funding, appears to have created a pattern of artificial losses over many years through dividends, lease payments and excessive interest on related party debt paid to offshore owners.
As the troubled social care sector recovers from the impact of Covid-19, the Death, Deception & Dividends CICTAR report, calls for transparency and accountability before any proposed increases in public funding.
HC-One denies that the arrangements highlighted by the report have any impact on the quality of care.
CICTAR is a global corporate tax research centre set up to untangle corporate tax webs and provide case studies on corporate tax avoidance.
It is a collective global resource to facilitate broader and effective public participation by workers and communities in tax debates.
The report’s executive summary is as follows:
‘An additional £18.9m in government payments for Covid-19 costs allowed the owners of HC-One, the UK’s largest care home operator, to continue to siphon millions in tax-free profits to the Cayman Islands.
In 2020 alone, £4.8m in dividend payments were shifted to the Cayman Islands. Related party interest payments of £17.7m and £24.7m in lease payments also flowed offshore in 2020.
These figures follow from years of even larger dividend payments and other forms of financial extraction.
While operators cry poor, millions flow from heavily publicly subsidised UK care homes to affluent offshore investors via shady entities in the Caribbean.
Meanwhile residents and workers suffered, and thousands died.
HC-One, the UK’s largest care home operator, wields enormous power and influence over public policy and the lives of thousands of vulnerable people and front-line care workers.
HC-One also provides the clearest possible example of the need for greater transparency and accountability across the entire UK care sector.
The operator’s overseas owners, appear to have prioritised extracting profit – underpinned by both public funding and private payments from residents – over the care of the elderly and vulnerable residents.
Investments by the same owners in major US nursing home chains reveal a similar pattern.
Covid-19 exacerbated the impacts of existing, dangerously low, levels of staffing and pay for the predominately female workforce.
At least one HC-One facility in Scotland has been taken over by NHS Highland as a result of Covid-19 deaths.
Other transitions to public control may be under consideration.
In March 2021, HC-One announced that it was closing four homes and selling 52 others, leading to calls for HC-One facilities to be taken over by local authorities.
Meanwhile, HC-One and other private for-profit care home operators continued to lobby for billions in additional public funding.
In April 2021, HC-One’s owners invested additional capital and re-financed existing debt with a £540m loan.
Welltower, the new lender and a large owner of UK and US care homes, expects to make remarkably high annual returns from its lending to HC-One.
Like other large UK care home operators, HC-One appears to have created a pattern of artificial losses.
This allows it to dramatically reduce or eliminate tax payments, justify more public funding, and suppress wages and staffing levels.
HC-One is controlled through an extremely complex global structure, involving well known tax havens such as the Cayman Islands, Jersey and the Isle of Man.
Companies within the group are engaged in borrowing and renting from one another in transactions designed to shift profits offshore.
As demonstrated by HC-One, private equity business models further enrich some of the world’s wealthiest people at the expense of vulnerable care home residents, their families, and the exploited – predominately female – front-line workers.
Improving social care will require additional funding.
However, the immediate priority must be to ensure appropriate staffing and high-quality care for residents from all existing funding and any additional future funding.
Funds allocated to pay for care should be used for care and not shifted offshore.
HC-One and other large care home operators must be required to be transparent on corporate structures, finances, staffing and the quality of care as a condition of receiving public funding.’
The Death, Deception & Dividends – Disturbing Details of the UK’s Largest Care Home Operator also provides details of how the millions flow from heavily publicly subsidised UK care homes to affluent offshore investors:
HC-One: Key facts for 2020
The UK’s largest operator has:
- 328 homes with more than 15,000 residents;
- 22,300 care staff;
- 86% female front-line workforce, 100% male board;
• £705.3m in annual turnover;
• £770 average weekly resident fee (payroll cost £510/resident);
• £8,369 in annual earnings per occupied bed;
• £12.2m in reported operating loss.
Financial Extraction Examples:
• £4.8m in dividend payments;
• £17.7m in interest payments to related parties;
• £24.7m in lease payments, substantially to related parties;
• £162.5m owed to related parties, primarily due within a year.
• £18.9m in additional government funding for Covid-19 response;
• £6.2m cost for Personal Protective Equipment (infection control);4.4% decrease in occupancy to 85.6%;
6.0% (1,416) decrease in average monthly care staff;
2,141 reported Covid-19 deaths in HC-One facilities source, including local authorities.
The report concludes: ‘All care home operators must be held accountable for public and private payments intended to provide care for some of society’s most vulnerable people.
‘HC-One and other care home operators spin a rarely challenged narrative of losing money and poor care primarily due to a lack of funding.
‘As the Covid-19 pandemic hit, HC-One wrote to all relevant local authorities asking for additional funding and support.
‘However, while residents and workers suffered tragically through the pandemic, the wealthy offshore investors were well protected. The pattern of shifting profits offshore persisted, even as millions in additional government funding were made available in response to the pandemic.
‘The pandemic has exposed broad structural problems in the UK care sector.
‘Reforms and regulation are urgently needed. Operators that are deemed unsuitable must be removed and replaced.
‘Prior to any substantial increase in public funding, greater transparency and accountability across the sector are essential to ensure dignity for the elderly and to protect and support front-line care workers.’