Branson

Opportunism, luck, energy and genius created Sir Richard Branson, a man of the people, a man of conscience and a courageous adventurer. The same qualities also produced a man of controversy and cunning. Wilfully and repeatedly thrusting himself into the spotlight, the hero seeks public approval but complains about criticism. Proud to be a tycoon of our time, his appetite for profit and power created a conglomerate which he assumed empowered him to write his epitaph in his own lifetime. Instead, his future is jeopardised by his weaknesses. Almost forty years of self-glorification have taken a toll of a man seeking everlasting fame while occupying the shadows. The self-promoting blueprint for Britain’s economic regeneration offers a tawdry example of mixed blessings and unhelpful lessons. Those prying beyond his veil of secrecy find an entrepreneur unexpectedly contemplating an uncertain future. In a juggler’s career, a moment of reckoning periodically re-emerges. There was one in 2000, and another could be glimpsed on the horizon in 2008.

1 The crime

Back in 1969, money was a singular obsession although mention of the subject was impolite. The floppy haired, nineteen-year-old youth wearing black rimmed glasses held together by a plaster, was hunting for profitable ideas.

‘What can we do?’ groaned Richard Branson. Three teenagers sat in the smoke-filled basement of a shabby house in Bayswater, London. ‘We need some bread.’ His audience drew hard on their cigarettes. John Varnom and Tony Mellor regarded the younger man as a friend, host and employer. Living with Branson, a benign sovereign, was an enjoyable self-indulgence.

‘What about records?’ suggested Varnom desultorily. The twenty-four-year-old-writer and publicist was Branson’s Rasputin and jester.

‘We could try mail order,’ sighed Mellor, a hippie with a passion for music.

Branson jerked excitedly, his imagination racing. Mail order records: the idea would fill a gap in the market, a trader’s dream. There was also an angle. ‘They’ve dropped Resale Price Maintenance,’ he said.

‘What’s that?’ asked Mellor admiringly.

‘The record companies can’t fix the shops’ prices any more,’ gurgled Branson. ‘Costs nothing to put an ad in a newspaper,’ he continued, ‘and we could sell them cheaper than the shops.’

The Beatles, the Rolling Stones and the Kinks were just a blur of noise to Branson. Tone deaf and knowing little about music, he rarely listened to records. He was a doer, not a person to wait and listen. But selling cut-price records sounded as exquisite as Cliff Richard singing ‘Bachelor Boy’, his favourite.

The idea had been sequestrated. A new business shimmered. ‘We’ll put an ad in Student,’ he announced. His beloved magazine, tottering towards extinction, might beget his next enterprise. Readers of Student would be offered any rock record at 10 or 15 per cent less than the shop price.

‘What shall we call the company?’ he asked.

Varnom and Mellor brainstormed. Names tumbled out. ‘Slipped Disc’ was suggested and abandoned. Although he was silent, Branson’s demeanour implored his employees to produce more ideas. Varnom, lustfully contemplating the stream of nubile former public school girls who regularly passed through Branson’s squat, departing somewhat wiser about the world thanks to his attentions, laughed. ‘Virgin,’ he chortled. ‘Virgin,’ he repeated, delighted by his idea.

‘That’s it,’ gushed Branson, loving the combination of sex and subversion. ‘Great.’ The new name eventually inherited a new pedigree. ‘I thought of the name Virgin,’ explained Branson twenty-five years later, ‘while sitting in the crypt of a church surrounded by two coffins.’

Virgin Records, a mail order supplier of pop, started trading in April 1970. The advertisement in the last edition of Student magazine produced an encouraging trickle of orders with cash attached. Branson sensed the opportunity. Virgin bought whole-page advertisements in Melody Maker and other music newspapers. Dramatically, the number of orders exploded. Virgin, buzzed the bush telegraph, was cool. Supplying records at discount prices, breaking the record manufacturers’ rigid price cartel, was heroic; and selling bootleg records bought from ‘Jeff in the East End’ for 50 pence to punters for £3 was profitable. ‘I believe in competition,’ enthused the wannabe tycoon, ‘and I believe in helping the young.’ Branson deftly borrowed the language of the Swinging Sixties and student revolution to establish his principal sales pitch. His business was to be cheaper and therefore a service to mankind. Branson was emphatic about his motives: ‘There is nothing phoney about my idealism,’ he would later insist. ‘I had a genuine belief that I should be using my skills and the resources at my disposal to “do good”.’

Doing well by doing good was a beguiling explanation except to the four men isolated in a locked room in St Mary’s Hospital, Paddington. From there they scrutinised Virgin’s new premises in South Wharf Road through binoculars. ‘Dead as a dormouse,’ cursed Mike Knox, the senior investigator for Customs and Excise.

In February 1971, ten months after Virgin advertised cut-price records, Mike Knox knew that Richard Branson’s expanding enterprise was being financed by a crude fraud. Posing as an unassuming government tax clerk, Knox had invited himself into Virgin’s new warehouse. The introduction aroused no suspicion. In that era, it was normal for Her Majesty’s Customs and Excise to provide a clerk every three months to calculate each company’s purchase tax, a 33 per cent levy on all sales. Sitting in Branson’s congested first floor office, watching attractive girls flitting around their unsuspecting tousle-haired employer, Knox glanced through Branson’s accounts, especially those of Caroline Exports trading as an unregistered company. Branson, the director, was too excited by that day’s postbag containing hundreds of cheques, postal orders and cash to care for the grey man as he sifted through the PT 999s, Caroline’s purchase tax returns. His new business, Branson often chortled, was amazing. Punters’ cash was being banked for records he still did not possess. Imported American records, bought for pennies, were sold for pounds. ‘Cash flow,’ he enthused, ‘is great.’ But his aspirations were not financed entirely by conventional means.

The genesis of his fraud, Branson would say, was accidental. Soon after Virgin Records’ birth, Branson himself had driven a van to Dover with a consignment of records for export. After a Customs officer had placed the official stamp on a PT 999 confirming that the records had been exported and were exempt from purchase tax, Branson had boarded the ferry for Calais. Unexpectedly, the sailing was cancelled because the French port was closed by a strike. Branson had driven off the ferry and, unhindered by officials, returned towards London. During the drive, he realised that the records could now be sold through his mail order company to British customers without adding purchase tax. The extra money would belong to him. Two tax agencies could be deceived. Customs would not receive the 33 per cent purchase tax and the Inland Revenue would be denied the tax on his additional profits.

On his return to Paddington, Branson had confided his discovery to his inner cabal of six. ‘The Customs office is not near the port,’ he explained, ‘so the forms get stamped but they don’t have any barriers or checks to see if you’ve gone on to the ferry or driven back to London.’ His audience was transfixed.

Branson’s conscience was untroubled by the dishonesty. Gambling against discovery was exciting. A pattern had been established that he would later describe with evident pride: ‘I have always thought rules were there to be broken.’ He had cheated in school examinations; he had repeatedly deceived the Church Commissioners, the landlord of his home in Albion Street, by disguising its use as an office; he had defrauded the Post Office by using the telephone without paying; now he was selling bootleg records; and he had just been convicted for poaching game in a magistrates court.

The recent conviction for poaching had been particularly revelatory. Branson had driven in his white Mini with Mundy Ellis, his bubbly, blonde girlfriend, to stay with Caroline and Rob Gold, a music publisher, in a rented cottage in Suffolk.

Branson liked the Golds and the sentiment was reciprocated. The Golds lived on a houseboat in Little Venice and Caroline had become Branson’s paid assistant, although she had become wary after Branson had unsuccessfully invited her father, Frank Gold, a shipping forwarder who owned warehouses, to become involved in his purchase tax operation. Nevertheless, the Golds felt sympathy for the young man whose twin laments were, ‘I didn’t get enough love from my mother’ and ‘How can I make money?’

Rob Gold had told Branson there was ‘some shooting in a public wood’ and Branson had brought two shotguns, an inheritance from his grandfather, Sir George Branson. Gold had never shot before but nevertheless took one of the guns as they walked in the countryside with the women trailing behind. Soon after the two started shooting, they heard yells. A gamekeeper was running from one direction and the landowner from another. Branson realised immediately that they were trespassing and ran off with the women. Gold fell and was caught. Both were charged with poaching.

Two months later Branson and Gold returned to Suffolk by train to attend the Sudbury magistrates court. During the entire journey, Branson carefully read The Financial Times.

At the hearing, Rob Gold noticed the clerk approach Branson. ‘I understand your father’s a magistrate?’ asked the clerk, confirming information which Branson had earlier supplied. ‘Yes,’ nodded Branson gravely. Seconds later, the clerk was whispering in the ear of the Suffolk magistrate. Watching with awe, Gold understood the social chasm separating himself from Branson, and the essence of his friend’s fearlessness. The fine was only £10 and the confiscation of the guns. Branson smiled. This nonchalance was confusing for those unaware that behind the awkward reticence was an acutely self-confident young man, a master of exerting influence.

‘Do you realise who you are dealing with?’ Branson challenged a police officer when, shortly after, he was stopped speeding in Glasgow. A growing sense of invulnerability fed his appetite for recklessness, developed as a boy at Stowe, the public school where he was educated. Lacking any signs of self-doubt or fear of retribution, Branson showed remarkable ability to speedily bypass the truth. For him, the plot to defraud Customs and Excise was just another whacky prank.

‘It’s a great wheeze,’ he buzzed. Cheating Customs, he urged his employees, would be effortless. For a child from Surrey’s stockbroker belt evading taxes imposed by the confiscatory socialist government was an act of principled defiance. The Establishment’s rebels were sure that rules could be ignored, bent or broken. Doubters were swayed by Branson’s enthusiasm for the role of Robin Hood. Helping impoverished students hear their music despite the ogreish government’s taxation, he urged, would constitute a blow for justice. None of Branson’s merry group had ever committed a serious crime but all were mesmerised by Branson’s persuasiveness that his interests and theirs were identical, even if the scheme was illegal. Chris Stylianou, the Charterhouse-educated manager of Caroline Exports, was wary until others nodded agreement. Branson’s genius was to disguise his impatience for fame and fortune by championing the struggle of down-trodden youth.

The white Transit van was driven regularly to Dover. The documents for the export of records were proffered and, after securing the official stamp on the PT 999 form from the Customs officer, driven unseen back to London. The van rarely transported the records specified on the consignment. Instead, a batch of worthless recordings of the Band of the Irish Guards was loaded. Over a period of months, Virgin’s mail-order business attracted gratitude from a growing army of music fans.

By the time Mike Knox reported to his superiors – ‘Virgin looks dicey. It’s worth an operation’ – about twenty young employees, enjoying the permanent party atmosphere encouraged by Branson, were dispatching the ‘export’ records by post from the warehouse in Paddington. Among the thousands of customers were Mike Knox and Dick Brown, his deputy in the Customs investigation team, ordering records as normal customers from their home addresses.

Their investigation had started after a visit to EMI’s head of security in Hayes, west London. Knox had confessed his bewilderment to the record producer’s head of security about Branson’s ability to sell his records cheaper than the shops. The former policeman employed by EMI admitted his own suspicions that ‘Something’s fishy’.

‘I’ll look at his PT 999s,’ thought Knox.

Reading through the thick wodge of Customs certificates accumulated by Branson over the previous ten months, Knox noticed the official stamps at Dover testifying to his regular export of records in batches of at least 10,000 to every country in Western Europe and to the United States. Knox was particularly intrigued by two certificates. On both occasions Branson had, according to the certificate, exported 30,000 records in a Land Rover. Amid the clatter of Branson’s office, no one heard the staid ‘tax clerk’ murmur to himself, ‘You can’t load 30,000 records on to a Land Rover.’ Shortly afterwards, a surveillance unit had been established in St Mary’s Hospital, overlooking Branson’s offices.

Every night at 3 a.m. over the following three weeks, Dick Brown arrived at EMI’s headquarters. Neatly stacked in the record producer’s loading bay were boxes marked for delivery to Virgin, invariably with a note on the invoice: ‘For export’. Regularly, Branson was ordering two hundred copies of ‘She’s a Lady’, Tom Jones’s hit, apparently for export to Switzerland. To monitor the fate of those records, Brown marked on each record a letter of the alphabet with an ultra violet pen, invisible to the naked eye. ‘A’ was given for the first day and consecutive letters were marked on each successive day’s consignment. The copy of ‘She’s a Lady’ delivered by post to Brown’s home from Virgin bore the ultra violet mark.

At the end of the three weeks’ surveillance, Knox gazed down at the building forlornly. No Land Rover had appeared at the warehouse and no large consignment had been loaded on to the white Transit. The report sheets were blank. The only unusual activity was Branson’s departure early that morning by taxi and his return by taxi late in the afternoon. ‘I’ll phone Dover,’ groaned Knox. Unknown to Knox, Branson had refined the mechanics of his fraud. To maximise his profits, he had searched for ways to save costs. Since the frequent passage through Dover had not aroused any suspicion, Branson had avoided the expense of sending the Transit to Dover by dispatching someone to the port by train. Knox’s telephone call to Dover exposed the refinement. That same morning, Branson had presented in Dover an export certificate for 10,000 records. ‘Cheeky chappy,’ smiled the Customs investigator. ‘He went cheap, on an away-day.’

Knox decided to raid the premises after Branson submitted his next purchase tax returns. After a three-month investigation, his schedule, covering dozens of pages, listed ‘hundreds of phoney exports’ which had profited Branson the equivalent of £370,000 in the year 2000. ‘It’s a big case,’ he concluded.

An anonymous telephone call the night before the raid sparked frantic activity inside Virgin’s warehouse. The caller was a disgruntled Customs officer, jealous of Knox, warning about the plan. Before daybreak, Branson and two co-conspirators had transferred the ‘export’ records from the warehouse to the new Virgin shop in Oxford Street. Virgin’s employees arrived the following morning unaware of any tension. Even John Varnom, a member of the ‘family’, would remain oblivious about the tip-off and the night-time transfer. Branson felt no compunction to say more than necessary. He already understood the importance of secrecy in creating successful businesses.

Cool nonchalance greeted the team of determined Customs investigators waving a search warrant at 10 o’clock in the morning. The ‘gangly, laid-back, long-haired lad’ with a mop of fair hair, affecting the nasal tone of Mick Jagger to suffocate his natural upper-class twang, betrayed no hint of concern. He was even, Mike Knox reflected, rather welcoming.

Act One of the performance was perfect. ‘It’s all legal,’ Branson smiled benignly, showing the Customs forms stamped at Dover. ‘You won’t find any export records here.’ The same bluff used successfully at the magistrates court to minimise the prosecution for poaching, he hoped, could disorientate the investigators.

‘We personally bought these records from your mail order company,’ snapped Dick Brown waving his copy of ‘She’s a Lady’. ‘They were marked for export. Here’s the paperwork. And here’s your signature on the PT 999. There’s no doubt. Now where’s the stock?’

‘Oh fuck.’ Branson was stunned. Public humiliation provoked tears. Discovery was not part of the plot. Tears dripped from his cheek on to his blue jumper. For once, his weakness could not be turned into a virtue. The performance was terminated. ‘We hid them in Oxford Street.’ A gulp. ‘Can I phone my mother?’

‘There’s a bit of a problem,’ choked Branson on the line to Shamley Green, deep in the Surrey Jag and gin belt.

‘He’s as good as gold,’ decided Brown as he listened to Ricky explain his plight on the telephone. Their catch was a vulnerable, public schoolboy, ‘not the usual toe-rag but an entrepreneur, and a good bloke’.

‘Look upstairs,’ ordered Brown over the telephone to the team searching through the stock in Oxford Street. Within the hour, Branson was shown the ultra violet markings on the records brought from the West End. ‘If only I’d known,’ he spluttered, secretly angry that the records had not been destroyed the previous night.

‘You’re under arrest,’ announced Brown. ‘We’d like you to come with us now to Dover.’

‘Oh God,’ blabbed Branson, suddenly aware of his plight. But his good humour soon revived. Searching through his desk, an officer had pulled out a half empty packet of condoms. Glancing at all the pretty young girls in the building, the officer sighed. These were not villains, he realised, but sex-obsessed hippies living on a different planet from Customs officers. His prisoner smiled. The ‘scene’ – sex, music and friendship – mitigated the gravity of his crime. His charm undermined any remaining barriers.

‘I’m starting out in my career,’ explained Branson, as the Customs official’s car crossed the River Thames heading towards the Channel port. ‘I’ve just opened one shop and I’m building a recording studio in a manor I’ve bought in Oxfordshire.’

‘You should open shops in Bristol and Birmingham,’ suggested Brown, warming to the young man. ‘Paying your staff such low wages, you’ll be a millionaire one day.’

‘Do you think so, Dick?’ replied Branson, breaking down another barrier. ‘My bankers are the problem. We’re always short of cash. I need a couple of guys like you in suits to work for me.’ The charm was natural.

The joviality continued during an unscheduled lunch stop in a pub. Distracted by Branson’s manner, Brown allowed his prisoner to drink alcohol, a breach of regulations. An unusually warm relationship had developed despite the Customs officer’s realisation of the fundamental dishonesty of Branson’s financial accounts. Not only were the extra profits which Virgin had earned on the ‘export’ records concealed, but their American imports were deliberately undervalued to diminish import duties.

‘I just want to protect my business,’ soothed Branson, glossing over the dishonesty. ‘I’m just starting. How can I put all this right? We’re all human beings.’ In that strange British guise, his disarming performance and his social confidence bestowed a veneer of decency.

The officers’ procedure could not be changed. Fearful that a hippie would disappear, they had decided upon an arrest rather than a summons. Once in Dover, there was no alternative but to place Branson in jail overnight before his appearance in court the following morning.

At daybreak, the lobbying of Brown and Knox was resumed by Eve, Branson’s forty-eight-year-old mother, and the dominant influence in his life. Sitting with Ted, her husband, introduced as a barrister and stipendiary magistrate, Eve Branson glanced at her dishevelled and depressed son. ‘Now officers,’ cooed the former air hostess, ‘how can we sort this out?’ Eve’s dignity and class confirmed Knox’s and Brown’s opinion that this was an exceptional case. ‘We’d like to arrange bail,’ said Eve, ‘and settle this amicably. He’s only twenty years old. He’s been very foolish and it’s unnecessary that his life should be ruined by a criminal conviction. He’ll repay the taxes and any fine but we’d prefer to keep it out of the court.’ The absence of an aggressive solicitor and the impressive honesty of the Branson family persuaded the officers to consider a deal. ‘Have you got the money for bail?’ asked Brown.

‘No,’ replied Eve, ‘but we’ll put up our house, our only home.’

The normally cynical officers were impressed. ‘And we’ll guarantee the repayment of the taxes and the fine,’ continued Eve, ‘even if we have to sell our home.’ After a suitable pause, she added, alarmed that twenty years of loving ambition were on the verge of disintegration, ‘He’s very young. He should be given a second chance.’

Knox and Brown agreed. This was a genuine, one-off error. There would be a brief court appearance to set bail at £30,000 secured on the family home. The young Branson would be released without further prosecution. ‘No publicity?’ urged Eve.

‘Absolutely,’ promised Knox. Customs were always discreet.

In the following weeks, meeting Branson on the Duende, his houseboat just purchased for £200 and moored in Little Venice, Brown set out the terms of the settlement proposed by his superiors. The investigations had by then revealed the sophisticated nature of Branson’s fraud. Contacting the customers across Europe and America listed on Branson’s export certificates, the investigators discovered that none of those named had ever bought records from Caroline. ‘The scam’s enormous,’ a Customs official declared.

‘You owe us £40,000 in back taxes and we are charging a £20,000 fine,’ announced Brown. Just after Branson’s twenty-first birthday, he owed the modern equivalent of over £500,000.

‘I can’t afford that,’ said Branson. ‘Can I pay by instalments?’ After negotiations interrupted by tea, it was agreed that Branson would pay £15,000 immediately and £45,000 in monthly payments of £3,000.

His crime was too well-known to be concealed, so over the years Branson has presented his illegality as an early watershed in life. The sackcloth and ashes version is: ‘One night in jail teaches you that sleeping well at night is the only thing that really matters. Every single decision since has been made completely by the book.’ That interpretation, however, belied one of his life’s principal credos: ‘I have always enjoyed breaking the rules.’ His prescient headmaster at Stowe had noted that trait, predicting on the eve of the seventeen-year-old’s premature departure from school that Branson would either become a millionaire or go to prison. By twenty-one, he had achieved the latter, albeit briefly. ‘He appears modest,’ Mike Knox would reflect at the end of his investigation, ‘with a disarming personality offering to help everybody. But he’s got this ruthless ambition.’

Once Branson had begun to court celebrity as a millionaire tycoon, he progressively introduced distortions to minimise the gravity of the fraud. In 1984, he mentioned that he was ‘only eighteen’ when the embarrassment occurred rather than nearly twenty-one. The following year he described his ‘eighteen-year-old fraud’ as occurring ‘only three times’ before his arrest at the port on the third occasion. In 1986, he told the Sun that he escaped imprisonment, ‘by convincing the court that he didn’t know it was illegal’. Two years later, in 1988, he chose another variation for Mick Brown, his first biographer, recounting that he personally drove four times through the Customs post at Dover before he was caught. His version in 1992 conjured a sophisticated tale about shipping worthless titles and empty boxes to the Continent for ‘one month’ after discovering himself to be penniless after investing in his mail order business, his shops and the new manor recording studio in Oxfordshire. In truth, the shops and the recording studio were partly financed by the fraud. ‘I had a pile of debt and no real money,’ he truthfully admitted. By 1994, as the owner of a famous international airline, Branson excused himself from the whole enterprise saying: ‘I had not realised the rules.’ In his autobiography in 1998, Branson offered another explanation: there were only three trips, he wrote, starting in spring 1971 to cover debts of £35,000 and ‘big operators’ were far worse. All those variations were a smokescreen. He had simply played the game and, unforgivably, he had lost.