Double trouble

I think the Barclay brothers want a quiet life, do not want any aggro, want it all to be nice and smooth and that is all very well but you should not own a newspaper if you do not want any aggravation. It is the wrong line of business.

Dominic Lawson, former editor of the Daily Telegraph

Sir David (left) and Sir Frederick Barclay outside Buckingham Palace after receiving their knighthoods from the Queen (31 October, 2000).
Source: AFP/Getty Images.

In August 1990 Andre Gardes, an unemployed French nuclear physicist, invaded the Channel Island of Sark in an ambitious bid to establish himself as the ruler of its 610 inhabitants. Just as the Germans had done during the Second World War, Monsieur Gardes helpfully posted notices warning of the impending invasion a day beforehand. While most residents thought the proposed takeover was merely a good joke, the local volunteer constable – the island’s only law enforcement – decided to take the threat seriously. He went looking for the attacker, whom he found sitting on a park bench wearing army fatigues. As the constable approached, Gardes loaded his gun. The constable persuaded the Frenchman to remove the magazine and hand him the gun, so that he could better admire it. Having done so, the constable then gave him a swift punch in the nose. The invasion was over.

Three years later another invasion party landed on the island. A Chinook helicopter swept down onto the neighbouring island of Brecqhou. It did not carry soldiers, but rather building materials to construct a magnificent Gothic castle. The owners would be identical twins Sir David and Sir Frederick Barclay who count the Daily Telegraph as one of the treasured possessions within their £1.8bn business empire. They are estimated to have spent £90m building the castle, outbuildings and gardens and more than 1,000 workers were involved in constructing their imperious new home and landscaping the 158-acre island with trees, bushes and flowers.

The cliff top fortress – resplendent with spires, gilded turrets, giant twisted chimneys, battlements and the obligatory moat – was designed by Prince Charles’s favourite architect, Terry Quinlan, and took three years to complete after 120,000 tons of material was carried in by boat. Nestled within the 3ft-thick granite walls of ‘Fort Brecqhou’ are an 80-metre long banqueting room with a gold leaf ceiling and a library with a hand-painted ceiling inspired by the Sistine Chapel in Rome. The motto ‘Aut agere aut mori’ (‘Either do or die’) is carved above the front door and two shields displaying the family coat of arms, featuring Celtic crosses and ships, adorn stonework beneath the Latin inscription.

Where once there was only poor soil, today the island boasts an olive grove, vineyards, a carp pond with a bridge modelled on Monet’s Giverney, a football pitch and an organic market garden. Dozens of employees roam the grounds, some in golf carts, wearing a uniform of navy shorts and light blue polo shirts with the Brecqhou insignia. At precise intervals 22 cannon are fired to mark special occasions, most recently the Queen’s Jubilee. A thicket of security cameras keeps any prying eyes at a distance.

Building the vast complex of ‘Fort Brecqhou’ cost the Barclay brothers an estimated £90m. Source: Kevin Lajoie.

This magnificent complex, which also includes two swimming pools and a helipad, is the largest private home built in Britain during the previous 200 years and a worthy testament to the power and wealth of the Barclay brothers accumulated with great cunning and determination over 50 years. Unlike the hapless Monsieur Gardes, these new arrivals were clearly going nowhere soon.

Sons of a west London-based travelling salesman and candy store operator, the brothers now own more than 50 companies in the UK, Japan and Sweden, with stakes in at least a dozen more. In the UK alone, they employ more than 20,000 people. Nowadays they split much of their time between Brecqhou and their official residence in Monte Carlo, where they own English-language Riviera Radio and the four-star Hotel Mirabeau, a seven-minute helicopter ride along the Côte d’Azur from Nice’s airport.

It is easy to imagine the twins, on a chilly midwinter’s day with the dark clouds hanging heavy with rain above, looking down from their Gothic fortress at the churning waves of the English Channel and dwelling on how they arrived at this opulent outpost. They were born within 10 minutes of each other in the London borough of Hammersmith on 27 October, 1934, to Scottish parents Frederick Hugh Barclay and Beatrice Cecilia Taylor who had 10 children altogether. Their house was so close to a railroad that the windows rattled whenever a train passed by. The Second World War, which ended when the twins were 10, disrupted their education.

John Peyton, a Conservative member of the House of Lords who once chaired the brothers’ charity foundation, believes that such humble origins shaped their attitude to money. ‘They have memories,’ he says. ‘They were once very poor themselves. They don’t waste money; they spend it with care.’

There was nothing to suggest they were destined for success, though perhaps the death of their father when they were only 12 years old proved a driving force as it thrust more responsibility onto their young shoulders. In 1950, four years after their father died, they left school to work in the account department of General Electric before later setting up as painters and decorators.

David Barclay married ballet dancer Zoe Newton who, in spite of being only 4ft 11in tall, pursued a successful modelling career and became the most photographed and highly paid model of the time. She often appeared on the front cover of popular magazines such as Picturegoer and on television as the ‘drinka pinta milka day’ model for Dairy Council advertisements.

Zoe Newton, the wife of David Barclay, was a hugely successful model in spite of being less than 5ft tall.

As for Frederick, he worked with his younger brother Douglas at Candy Corner, a tobacconists and confectioners on the edge of Kensington. This venture did not turn out sweetly, however, when the landlord seized the shop and the brothers were deemed to have breached the terms of the lease. A notice in The London Gazette (November 1960) announced their bankruptcies and listed a former business interest of Frederick, then aged 26, and Douglas, two years his junior, as a builders and decorators called Barclay Brothers.

London Gazette

David stepped in and paid the creditors. By the early 1960s he was working as a director of Hillgate Estate Agents, with his wife Zoe as a co-director (at this stage she had given up modelling to bring up her young sons, Aidan, Howard and Duncan). In the years that followed Frederick joined David at the estate agents, eventually replacing Zoe on the board. Whereas Frederick’s partnership with Douglas had ended in debt and disappointment, this new partnership would go from strength to strength. Business rivals would later find the identical twins to be a formidable pairing, especially when it came to hard-fought negotiations.

Together they redeveloped old boarding-houses across London and transformed them into hotels. From 1968 to 1974 they received large loans from the Crown Agents, a government agency established to help the colonies and developing countries do business in Britain. During this period they bought Gestplan Hotels, owner of the exclusive Londonderry House Hotel in Park Lane, from a group of Lebanese bankers. However, with the collapse in UK stocks and the Middle East oil embargo in 1974, the Crown Agents was faced with £212m of losses. They called in their loans, including £9.5m to the brothers who defaulted on the loans and almost lost everything. But somehow they survived. ‘The brothers were close to going broke, but they were cleverer than me,’ says Ramon Greene, a property developer who knew the twins and went bankrupt after the Crown Agents collapsed. ‘I don’t know how they managed it.’

In the mid 1970s Frederick married Hiroko Asada, a familiar figure among Japanese society in London, who brought with her a son from a previous marriage. The brothers continued to build up stakes in a myriad of businesses, including breweries and casinos. In 1975 they bought the Howard Hotel, overlooking the Thames at Temple Place. By the early 1980s they had established themselves as successful businessmen, especially in the hotel sector. Yet this was just the beginning.

In 1983 the Barclays embarked on a highly ambitious deal that would become the cornerstone of their vast fortune in the years to come. It also displayed traits that became their trademarks in future deals: an almost obsessive insistence on secrecy, and an uncanny ability to gain the ‘inside track’ on their target business. Charles Sherwood, a partner at London-based Permira Advisers Ltd, manager of Europe’s biggest buyout fund who has since crossed swords with the brothers on major acquisitions, observes that privacy is a useful weapon for them. ‘They are very effective stealth buyers,’ he says. ‘They come out of nowhere and move quickly.’

This was certainly the case when the shipping and brewing giant Ellerman Group came onto the market. Through contacts in Monte Carlo they had become aware that the trustees wished to sell the business. Always keen to operate in secrecy whenever possible, the brothers approached the group’s non-executive chairman, Sir David Scott, a career diplomat and former ambassador to South Africa. Sir David recalls in his memoirs, Window into Downing Street, how he tried to discover more about the mystery bidders:

In the time available I was able to discover very little, apart from the fact that, in addition to their hotel in Monte Carlo, they owned the Howard Hotel on the Thames Embankment and had recently acquired several of the recently privatised British Transport hotels at the London rail termini. Less promisingly, the latest published figures for their British registered company, Barclay Hotels Ltd., showed an annual turnover of less than £5 million, compared with the Ellerman Group’s turnover of £176 million, so it was by no means self-evident how they would be able to finance a bid for the Group.

Nonetheless, he agreed to meet the brothers in Monte Carlo. His description of this meeting is worth quoting at length, since it casts light on several intriguing aspects of the brothers’ approach to business:

Punctually at 9 the next morning the doorbell of the flat rang and two almost identical small men dressed as for yachting appeared, looking for all the world like a pair of not-so-young juvenile leads from The Boy Friend … David, who throughout took the lead in our negotiations, asked me a number of searching questions about the structure of Ellermans, its indebtedness and its overall mix of activities, showing particular interest in the breweries which he believed would have a useful synergy with their existing hotel interests. They appeared content with my answers, David going so far as to comment that it was a pleasure to meet a non-executive chairman with such a detailed knowledge of the affairs of his company. He then asked me point-blank what would be the minimum price the shareholders would expect for the group as a going concern. Bearing in mind Morgan Grenfell’s valuation of £77 million – though we had so far not received an offer approaching that amount – I quoted that as the sort of price we were looking for. David Barclay made no comment, but said that they wanted to reach a decision quickly and that he would like his son Aidan to carry out an assessment of the company the following week … He insisted that the assessment should be conducted in complete confidence and that, apart from the trustees and the two directors I had named, no-one should be told who Aidan was or what he was doing. He also asked that until the assessment was complete he and his brother should have an exclusive option to purchase the Group.

This was my introduction to the Barclays’ obsession with secrecy which became such a feature of the subsequent negotiations.

So clearly the brothers wasted no time. They could see how the brewery side of Ellermans could fit well with their hotel interests, displaying an eye for meshing together compatible businesses that would be repeated in many other deals. Also, they wanted to act swiftly and decisively, garnering as much information as they could about their target business. And finally, they demanded secrecy, knowing that any deal might be scuppered if rival bidders were alerted. David Barclay’s son Aidan, not yet 30 years old, was already becoming a key lieutenant of the twins, trusted to carry out vital due diligence before any formal bid.

Two weeks later they invited Sir David Scott for lunch at the Howard Hotel in London. During their meeting the brothers confirmed that, subject to a final audit of the accounts, they were prepared to make the trustees an offer. They also expressed a hope that Sir David would stay on as non-executive chairman for at least a transitional period. As the former ambassador wrote in his memoirs:

As I left, he [David Barclay] presented me with an envelope which I found when I got into my car contained a copy of a formal letter addressed to the Trustees offering a sum of £46 million for the group. With it was enclosed a personal covering letter from David Barclay to me which said inter alia, ‘I am afraid the offer is not what I originally had envisaged but, after looking into the shipping company further, we feel that this offer reflects a fair market price for the group overall.’

It was extraordinary, but perhaps characteristic, that they should only have informed me of the offer when our meeting was over and they could no longer receive a first-hand reaction. It was also remarkable that the figure of £46 million was almost exactly at the lower end of the range the trustees had privately agreed to accept. This led me to wonder whether they had had inside help in arriving at this figure, though it would have been virtually impossible to have proved that there had been a leak.

While there is no evidence that the brothers had any help from an insider at the company when deciding their offer, the size of their bid was certainly uncanny. As negotiations to buy the group dragged on, board members became increasingly concerned about the Barclays’ intentions, fearing (correctly, as it turned out) that they would break up Ellermans. Sir David recalls how the brothers responded to his urgent requests to alleviate these concerns:

The only result was that they gave a cocktail party at the Howard Hotel on 14 October for members of the board and a small number of senior executives. This was a successful occasion insofar as it demonstrated that they were civilised hosts and did not eat babies, but no business was discussed and it did little to reassure the board about their long-term intentions. Indeed, during the month which followed, their demand for secrecy became increasingly embarrassing.

Eventually their patience and persistence worked. The board approved the deal and the day of signing the final agreement arrived at last. It was not, however, the joyous occasion that Sir David had expected, having worked so hard to help the brothers secure the company:

The Barclays were not directly involved in the signing, but I knew that they were in the building to hear the result and, I assumed, to join the board for a celebratory drink when the signing was complete. However, that was not how it worked out. After we had signed the last of a series of documents, the solicitor acting for the Barclays handed me a sealed envelope. All I wanted at that moment was a stiff whisky, and my immediate reaction was to ask whether I needed to open it then or let it wait until the Barclays had joined us for a drink. The answer was that perhaps I should read it straight away. It took the form of a reply to my letter … in which to my amazement David Barclay now accused me of a breach of confidence in disclosing to the board the texts of the submissions to the OFT and the Inland Revenue. The letter ended:

In the circumstances I have no alternative but to ask for your immediate resignation from the Board of Ellermans and any of its subsidiary companies. Failing your resignation, I will have no alternative but to call a shareholders’ meeting to remove you as a Director and Chairman.

     In any event, I would like you to leave the offices of Ellermans as from today.

Up to that moment I had been given no hint that the Barclays did not intend to honour the oral offer they had made me at the beginning of September to remain as non-executive chairman for an interim period. After a hard day’s work which, up to then, in spite of the delays, had apparently ended in success for all concerned, the letter came as a real shock and I read it with a mixture of incomprehension and rage.

The reclusive Sir Frederick, left, and Sir David Barclay are renowned as steely businessmen.

The battle was bloody and hard fought, but the brothers had prevailed. Six years later Brent Walker Group bought Ellermans breweries and 855 taverns for £239m – a deal which brought the brothers more than five times what they had paid for the entire company. These funds would later help them to purchase the world famous Ritz hotel of Piccadilly in 1995.

One might have expected the twins to restrict their business dealings largely to the hotel and shipping sectors. After all, they had built their fortune in renovating old boarding-houses and selling them on at a profit, eventually allowing them to buy some of London’s most established hotels. As we shall see later in this chapter, their enthusiasm for this sector remains undimmed as they continue to expand their hotel empire. Shipping is also a natural fit; it is an industry where a lot of money resides in relatively few hands, thereby allowing for greater secrecy and discretion – a means of doing business that clearly suits the brothers.

So with all this in mind (and especially their determination to keep out of the limelight), buying the Telegraph Group appears to have been an improbable gambit. Surely they would have been wary of how such a high-profile foray into the highly visible world of newspapers might impinge on their cherished privacy? No doubt such savvy businessmen would have been well aware of the dangers awaiting them on Fleet Street. The answer might well rest in what billionaires so often value more than money – namely power and influence.

At the time of their successful bid for the Telegraph Group, they had already established a firm foothold in the sector, snapping up The European in 1992 after Mirror Group chairman Robert Maxwell had drowned after falling from his yacht and his newspapers came up for sale. The Scotsman followed and former Sunday Times editor Andrew Neil was appointed to oversee their publishing interests. During their ownership of The Scotsman the paper went through seven editors in nine years before the brothers sold it to regional newspaper giant Johnston Press for £160m.

In May 2003 an opportunity finally arose for the brothers to buy the Telegraph Group — comprising the Daily Telegraph, Sunday Telegraph and The Spectator magazine — 17 years since they had first approached Conrad Black. This time they would not be swayed. The situation was different; the brothers were billionaires, with a formidable reputation, and Black was in serious financial and legal difficulty. Shareholders of the newspapers’ owner, Hollinger International, were furious about $275m that Black, his wife Barbara Amiel, and four associates had embezzled.

David Barclay wasted no time. He faxed Black a letter from his house in Monaco, with ‘Private and Confidential’ stamped on it, writing: ‘I wish to register our interest should you contemplate any serious change in your UK interests.’ Black replied in equally blunt fashion: ‘Conditions are quite manageable. No assets are for sale.’ But David would not refrain. In November, when Black was ousted as chief executive of Hollinger, he finally relented and agreed to discuss an offer. A deal was forged to pay Black $326m for Hollinger Inc., the company Black used to hold his 30 per cent stake in and voting control over Hollinger International. A press release was issued by the Barclays on 18 January, 2004, declaring they had bought the Telegraph Group. This came as a real shock to the board members of Hollinger International, who had been pursuing their own sale of the company. So the stage was set for a fractious and highly revealing court case.

This culminated on 26 February when US Judge Leo Strine blocked the sale at Delaware Chancery Court, forcing the Barclays to join an auction to buy the coveted newspaper. Competitors included the publisher of the Daily Mail; and a joint bid by 3i Group, Europe’s largest publicly traded capital venture firm, and Veronis Suhler Stevenson LLC, a New York-based buyout firm that manages more than $1.5bn. As a result, the Barclays were pushed into paying £665m to secure the newspaper — three times what they would have paid Black and £9m more than the next highest bidder. In his court ruling, Judge Strine intimated why the brothers were so willing to pay above the odds:

The ‘trophy’ nature of the Telegraph Group means that there are some buyers — including, I discern, the Barclays, who run a private, not public, company — who are willing to pay a higher price than expected cash flows suggest is prudent, in purely economic terms, in order to own the Telegraph and to enjoy the prestige and access to the intelligentsia, the literary and social elite, and high government officials that comes with that control.

David Barclay’s son Aidan was appointed as the chairman of Telegraph Media Group and Murdoch MacLennan, 62, formerly managing director of Associated Newspapers (owners of the Daily Mail), took the reins as chief executive with a remit to haul the newspaper into the 21st century. Aidan Barclay was adamant that radical action was needed:

When we bought it [the Telegraph Group], it was a business seemingly in long term decline. It had been starved of investment. Its culture was defeatist: there was no will to win and to be the best … There had been no attempt to embrace the digital revolution that was already beginning to transform the newspaper industry.

There is no doubt that major restructuring was needed at the newspaper, especially as the brothers urgently needed to invest £150m in new printing presses. MacLennan appointed Will Lewis, the newspaper’s ambitious and innovative 37-year-old City editor, as editor and cheerleader for the new wave of changes. He fully embraced the digital revolution, helping to design the remarkable ‘hub and spoke’ office at the newspaper’s vast open office near Victoria railway station. For many of the staff, the upheaval was too much and too fast. But the changes were unrelenting and in 2006 alone some 100 journalists and 200 support staff were made redundant, prompting the National Union of Journalists to consider strike action.

Some of those who left during this tumultuous phase complained bitterly that commercial values were overriding sacred traditions. Among these was Dominic Lawson, brother of chef Nigella, who was removed as editor of the Sunday Telegraph after a decade in the role. He later bemoaned the impact of the brothers’ changes on the newspaper’s ethos and quality of journalism:

Since I left, the management of the Telegraph remind me of a chimpanzee that has captured a Swiss watch. In its clumsy attempts to try and understand what makes it tick, the brute completely destroys it.

In evidence to a House of Lords select committee, Lawson also touched on the irony of reclusive billionaires owning a major newspaper:

I think the Barclay brothers want a quiet life, do not want any aggro, want it all to be nice and smooth and that is all very well but you should not own a newspaper if you do not want any aggravation.  It is the wrong line of business.

Nonetheless, the twins and Aidan Barclay had succeeded in their goal of revitalising the newspaper, so that by the end of March 2012 the Group reported pre-tax profits of £55m for the 2011 financial year – a remarkable achievement in tough economic conditions and after significant investment in digital technology.

Although several Telegraph stalwarts were made redundant in the aftermath of the Barclay purchase, the newspaper was still able to lay claim to an extraordinary exposé that, as Will Lewis suggested to the Leveson Inquiry, might be described as ‘one of the most important bits of public service and public interest journalism in the post-war period’. The newspaper paid £150,000 for a disc containing the expenses details of MPs and the revelations were so shocking that several MPs and even the Speaker of the House of Commons were forced to resign.

Although the newspaper was accused by some of stretching out the scandal for commercial gain, the Barclay brothers and Will Lewis deserve great credit for the impartial and informative manner in which they presented the expenses scandal. The newspaper’s closeness to the Conservative Party counted for nothing when it came to naming and shaming those MPs who had fiddled the books.

However, the newspaper’s relationship with the Conservative Party — and indeed its public reputation — would be thrown into stark relief through another scandal, this time entirely of its own making. Chancellor George Osborne described Rupert Murdoch’s bid for a complete takeover of satellite broadcaster BSkyB as ‘a political inconvenience’. With the Daily Mail forging an unlikely alliance with more liberal media outlets such as the Guardian and the BBC, the government was clearly in an awkward situation. Blocking the bid would have run the risk of angering News Corp, whereas its approval would have caused a storm of protest from virtually the rest of the media.

James Murdoch, the former News Corp chairman, was understood to be particularly upset at the failure of the Barclays to back the bid, since he expected them to empathise with risk takers such as the Murdochs who, just like the brothers, deservedly reap the rewards of the high-stakes gambles they make. So why did the brothers abandon James Murdoch and his father in their hour of need? The reason might simply be commercial. They could have perhaps been hoping that the bid would only have been approved on the condition that News Corp sold their Times titles. It would be fair to assume that no other owner would prop up the loss-making titles with as much investment as Murdoch has provided. The reason could be more personal though: shortly after they had purchased the Telegraph Group, The Times ran a series of pieces investigating their finances. Lawsuits were fired off as a result and the brothers sued the newspaper in the French courts, resulting in a clarification being printed. This acrimonious dispute might well have tipped the scales against the Murdochs when the brothers contemplated whether or not to back their BSkyB takeover bid.

In July 2012 this fraught relationship came under public scrutiny. Telegraph reporters Holly Watt and Laura Roberts (both formerly of The Daily Mail) illegally taped Business Secretary Vince Cable while they posed as constituents. The result was a front page story headlined ‘I could bring the coalition down’. While embarrassing to Dr Cable, and indeed the government at large, further comments that were not reported proved to be far more damaging. When the reporters probed about his views on Murdoch, the minister had robustly declared that ‘I am picking my fights … I have declared war on Mr Murdoch and I think we are going to win.’ As the arbiter of the News Corp-Sky bid in a ‘quasi-judicial’ role, such comments were clearly unacceptable — even if they were illegally recorded. What is more curious, however, is why the Daily Telegraph did not include these comments in its supposedly ‘full’ transcript of the recorded comments published in the newspaper. After all, the editor Tony Gallagher had enthusiastically backed the story, so it seems strange that the most revealing remarks by the Business Secretary were excised. It was not until someone inside the newsroom leaked the story to the BBC business editor Robert Peston that the story came out.

Conspiracy theorists took to cyberspace in their droves, suggesting that the Barclays had intervened to suppress the comments, since it was in their commercial interests for the Business Secretary to block the bid. While there is no clear evidence to support such a claim, the brothers certainly reacted with fury to the leak. They called in the leading US detective agency Kroll, run by the eponymous Jules Kroll, a feared investigator who once worked as a private eye for Bobby Kennedy. Kroll interviewed several Telegraph journalists, examining their email and phone records, but failed to find the culprit.

The whole affair was painfully embarrassing for both the Telegraph Group and the government. But the ties between the newspaper and Conservative Party remain strong; as Aidan Barclay told the Leveson Inquiry, the Telegraph titles are conservative with both a ‘small and a capital C’. Indeed, the chief executive Murdoch MacLennan had sent David Cameron a handwritten note before the 2010 general election, stating that ‘we desperately want there to be a Conservative government and you as Prime Minister’. As Judge Strine had rightly surmised when the Barclays purchased the newspaper, they were more likely to benefit in terms of power and influence rather than commercially. So just how do they wield their influence? Certainly not through the editor, accordingly to Telegraph chairman Aidan Barclay, who told the Leveson Inquiry:

Once they are appointed, I like to have a relationship with an editor – as I would with a senior executive in any of the businesses – but I always make clear to them that I regard this relationship and any expression of views as being those of an avid reader.

Yet obviously no readers (however avid they might be) can expect to ring up the editor at will and have their undivided attention. In all fairness, though, there is no clear evidence to suggest that they interfere with editorial policy.

By contrast, the relationship between the Barclays and leading politicians is, as with other press barons, considerably more complex and their influence more subtle. Aidan Barclay certainly sees nothing wrong in forging close links with senior MPs; on the contrary, as he explained to the Leveson Inquiry, he considers it ‘my duty’ to develop and sustain such close relationships:

Just to put it in some context, we have about 20,000 people working for us in various businesses in the UK, about 1,000 of those in the Telegraph. It seemed to me it was always my duty — and is indeed my duty, as I think it is of most businessmen — to get to know the politicians that make rules and regulations that affect their businesses, and so that’s been my philosophy: to make sure I try and understand the drift and the ideas and what motivates the politicians who are making rules and regulations that change our lives, as business people, primarily.

This is well demonstrated in his frequent meetings with former prime ministers Tony Blair and Gordon Brown, as well as with the prime minister Mr Cameron whom he has known personally since the 2005 leadership campaign and sometimes invited for breakfast at the Ritz. Their relationship was sufficiently close that he felt emboldened enough to suggest to Mr Cameron that, while campaigning during the previous general election, he should call Daily Telegraph editor Tony Gallagher on a daily basis.

In a text message sent to Mr Cameron on 24 May 2011, the scion of the Barclay business empire offers his musings on the government’s economic policy:

Suggest, therefore, Bank of England announce extension to liquidity scheme. Allow banks, say, five years to implement Basel III, and if you can scrap talk at bank tax. Other countries won’t go along with it anyway. Best, Aidan.

Seven minutes later he expounded his suggestions for sound economic governance:

David, I’m sure you’re aware that the credit markets are not good and are likely to get worse, as they all err on the side of caution faced with combination of more regulation Basel III, more liquidity losses from sovereign debt, the end of Bank of England support and potential tax, all at the wrong time for economy given also government cuts. I hope you don’t mind me mentioning it. Regards, Aidan.

Aidan Barclay (centre) attending The Leveson Inquiry.

There is, of course, nothing wrong in itself with offering advice. The problem (often noted by Lord Leveson during the hearings) is when those offering it are also the proprietors of hugely influential newspapers that can sometimes make or break government policies with one stringent editorial. Is a proprietor providing guidance out of an altruistic desire to help, or is there an inference that unless such advice is followed the next day’s headline will be far from flattering? The line is blurred, and most likely always will be.

At the same time Aidan Barclay was giving evidence to the Leveson Inquiry, another court case was underway elsewhere in the Royal Courts of Justice that neither the Telegraph chairman nor the twins would agree to attend, in spite of being intimately involved.

The defendant was Patrick McKillen, a Belfast-born international property developer. In 2004 he became a shareholder in the Savoy Group (later renamed Coroin), comprising the prestigious Savoy Hotel, Claridge’s, the Connaught and Berkeley hotels.

With a group of fellow Irishmen (riding a tide of easy and cheap debt which would later come back to haunt them), the daring developer borrowed heavily to take a stake in the company. Describing himself as ‘horrified’ with the state of the Savoy, he agreed with fellow shareholders to sell it and reinvest the sale proceeds in the three remaining hotels.

The global economic crisis wrecked their ambitions and by 2009 the situation had turned sour. A number of the shareholders had exited and, as the court heard, ‘things were not looking so rosy’ after the Irish banks that funded the deal had ‘gone bust or been nationalised’.

As they have done so often in the past, the Barclay twins were on hand to pick up the pieces. They made their initial move in January 2011 by buying one of the shareholders, Misland, for £70m. During the court case it was revealed that the Barclays then gave £3m to the family of Derek Quinlan, another shareholder, in the space of just over a year as they sought control of the hotel group. Whether or not their intention was ‘to open the possibility of acquiring Mr Quinlan’s shares in the face of competing offers’ (as suggested by counsel for Mr McKillen), the brothers were certainly able to rely on the support of Mr Quinlan at Coroin’s board meetings soon after the payments began. Lord Grabiner, acting for the Barclays, described the payments as ‘charity to a friend in need’.

Eventually the twins were able to acquire the debt secured on Mr Quinlan’s shareholding from NAMA (the Irish ‘bad bank’ tasked with recouping defaulted loans). This gave them a 64 per cent share in Coroin. Mr McKillen, who owned the remaining shares, then sued the brothers on the basis that he should have had ‘first refusal’ on buying Mr Quinlan’s stake.

The trial was marked by accusation and counter-accusation, bitterness and allegations of foul play. Lord Grabiner, acting for the Barclays, poured scorn on Mr McKillen’s ‘grand plans’ to refurbish the hotels, arguing that these could only be realised ‘with other people’s money as he hasn’t really got any of his own’. The twins, on the other hand, had paid more than 800m euros (£695m) to purchase the hotel group’s debts.

Mr McKillen claimed the billionaire brothers will ‘stop at nothing’ in attempts to cripple his financial position. One of the key figures in the struggle to wrest control of the hotel group from its Irish shareholders was Richard Faber, a former son-in-law of David Barclay and director of Ellerman Investments. During the trial he was accused of allowing data on his laptop and mobile phone to be deleted – even though he had been asked to preserve all emails and text messages as part of a legal claim.

Mr Faber admitted that he had changed both his laptop and mobile phone in late 2011, but insisted he had done nothing wrong. It was suggested that Mr Faber had replaced his iPhone with the intention of deleting text messages between himself and David Barclay pertaining to the hotels. He was also accused of approaching Tim Lloyd-Hughes, of Deutsche Bank, for information, even though he knew the bank was advising the Irish shareholders and taking a leading role in refinancing its £660m debt. He denied any wrongdoing.

In spite of his close alliance with shareholder Mr Quinlan, a former Dublin tax inspector, Mr Faber was clearly hedging his bets. He also forged a solid relationship with the Qatari royal family (with whom a deal over the hotels was then in the offing). The court heard details of an email sent by Mr Faber to the Qataris’ lawyer, Fady Bakhos, in which he discussed how to handle Mr McKillen’s refusal to sign an agreement with the Barclays and Qataris. He wrote: ‘I can give you my Paddy plan which I have dreamt up.’ When it was put to him by counsel for Mr McKillen that this ‘Paddy plan’ would see a new company, controlled by the Barclays and the Qataris, buying up McKillen’s debt from creditors with a view to squeezing him out of the hotel group, Mr Faber didn’t disagree. ‘That is possible, yes,’ he replied.

During the trial Mr McKillen unsuccessfully attempted to gain access to two email accounts opened by David Barclay’s wife, even though the court heard evidence that the media tycoon had used the accounts – dubbed the ‘Lady B’ and ‘Preciosa’ accounts – on at least 40 occasions during the brothers’ campaign to seize control of the hotel group. Mr Justice Richards rejected the claim that Lady Barclay was effectively acting as her husband’s agent by sending and receiving occasional emails on his behalf. To spice up the intrigue even further, Tony Blair Associates — the consultancy group set up by the former prime minister — featured during the trial in their role as advisers to the Qatari royal family.

The judge ultimately ruled that he saw no evidence suggesting advances of £1.86m and €1m from the brothers, between late 2010 and early 2012, were part of a contract struck with the Quinlans.

At the time of writing an appeal against this decision is under way. Lord Goldsmith QC, Blair’s former attorney general, is acting as counsel for McKillen and accuses Sir David and Sir Frederick of deploying a clever, but ultimately illegal, strategy to dominate the hotel business. In court he described the flurry of complex deals struck by the brothers to gain a controlling stake in the £1bn Mayfair hotel group behind Claridge’s as a ‘quite astonishing, even grotesque’ attempt to freeze out major investor Paddy McKillen.

So the Barclay brothers will need to wait a little longer to see if their daring business dealings have secured them ownership of Claridge’s and other landmark London hotels.

Claridge’s in London is at the centre of a legal tussle as the Barclays seek to add it their portfolio of hotels, which includes the Ritz in Piccadilly.

All this proved highly embarrassing to the twins. As we have already seen with their purchase of The Ellerman Group, they can draw criticism for their uncompromising takeover tactics. However, the family stress that they are responsible guardians of their acquired businesses. This theme of ‘stewardship’ was keenly espoused by Aidan Barclay in his written evidence to the Leveson Inquiry:

My family’s business interests are relatively diverse, but one central philosophy has underpinned our approach to acquisition and growth. As a family we believe in stewardship – it is something I am passionate about – and over the last few years we have acquired assets or institutions that were unloved, underinvested and in decline, and sought to resuscitate and renew them to face the intense challenges of the 21st century and global competition.

While there is certainly a case for arguing that the family has done much to revive the tired and undervalued institutions of the Telegraph titles and the Ritz hotel, the fact remains that much of their money has nonetheless been generated through the acquisition and eventual break-up of undervalued companies.

One such hostile takeover attempt ended badly. Three years after securing Ellermans, the brothers embarked on an even more ambitious deal — only this time they had raised their sights too high. Their target was London-based Imperial Continental, a leading British gas utility operating across Europe and a member of the FTSE 100.

They had taken an 11 per cent stake in the company through their purchase of Boston-based Gulf Resources & Chemical Corp. After they had offered to buy Imperial for £750m, they were invited by its vice-chairman Michael Rendle to discuss their plans over tea at their London offices. ‘I said, tongue in cheek, that it’s always good to welcome big shareholders,’ Rendell recalled. ‘David, who was very charming, smiled and said he had other things in mind.’

Imperial rejected the brothers’ offer. Eighty members of the House of Commons signed a motion opposing the ‘Wall Street-style leveraged break-up’. A further 120 MPs demanded a review of the offer by the UK Monopolies and Mergers Commission. Up against the might of the establishment, the brothers were forced to retreat, consoled by a paper profit of £27m on their shares.

The break-up of Sears in 1999 proved much more successful. Then the UK’s fifth largest retailer, the firm had businesses ranging from women’s wear to mail-order shopping. Teaming up with their friend and Monaco neighbour Sir Philip Green, the billionaire retail magnate, the brothers lined up financing to buy the company for £548m. Green and the Barclays recouped the purchase price in less than 12 months by selling some of Sears’ real estate and its three retailing units, earning them an impressive £729m.

Since their dogged pursuit and conquest of Ellermans in the early 1980s, the brothers’ ambitions have mushroomed. They have signed more than 15 multi-million pound deals without tapping public debt or equity markets. Investment bankers are used sparingly and they borrow from only a small group of lenders such as Edinburgh-based HBOS. This strategy dovetails well with the twins’ desire for secrecy; the banks don’t widely syndicate or sell off the loans, therefore limiting the flow of information about their finances to potential rivals.

Their business empire continues to flourish. In 2002 the brothers purchased the Liverpool-based retail company Littlewoods from its founders, the Moores family. They merged the business with an earlier purchase, Shop Direct, to create Littlewoods Shop Direct Home Shopping, which now lays claim to a majority share of the country’s home shopping. Only Amazon boasts a larger share of this market. Their foothold in this sector was further strengthened in 2009 when they bought the Woolworths and Ladybird brand names for an undisclosed amount.

One might safely assume, therefore, that the twins would allow themselves some well-earned leisure time in the luxurious confines of their Channel Island fortress. They have, after all, secured a reputation as two of Britain’s richest and most formidable businessmen; been appointed as knights of the realm at the turn of the century for services to charity (having donated at least £40m to medical research); and as for securing a legacy, David Barclay’s son Aidan appears to have justified the twins’ confidence in his management skills, especially by turning around the Telegraph Group in a challenging economic climate. So are they enjoying a tranquil retirement, sipping the sparkling wine from the vineyards they have planted on Brecqhou and neighbouring Sark?

Far from it. Instead they are engaged in open warfare with the islanders. In the tranquil outpost where motor cars are banned and horse-drawn carriages are the preferred mode of transport, the arrival of the Barclays and their open flouting of such traditions have angered many in the close-knit community.

Sark is the smallest of five self-governing crown dependency jurisdictions, just three miles long and a mile wide, and about eight miles from Guernsey. It has a unique place in the British constitution: it is part of Britain, but not the United Kingdom, and is still held as a fief on behalf of the Queen who is responsible for its citizens. The current feudal lord — or ‘Seigneur’ — is Michael Beaumont. In theory, he manages the freehold of Sark, which is split into 40 leaseholds. The neighbouring island of Brecqhou, on which the Barclays built their castle, is connected to one of these leaseholds or ‘tenements’. Consequently the leaseholders must abide by the laws of Sark.

The twins think otherwise. Battle commenced when they took umbrage with Sark’s ancient law of primogeniture that decreed all assets had to be left to the eldest child. David Barclay has two sons in addition to Aidan (Howard and Duncan), while Frederick has one daughter, Amanda. ‘The feudal rights of primogeniture inevitably tend to disrupt a harmonious family life,’ the brothers complained to the Strasbourg-based European Court of Human Rights in 1999. The following year the dispute ended in a draw, with the Seigneur agreeing properties may be left to a single child of the parents’ choice, man or woman. In turn, the brothers recognised Sark’s authority over Brecqhou. Ironically, considering their vast wealth, the Barclays also successfully campaigned for exemption from Sark’s wealth tax — a maximum of £3,500 per year — on the basis that they do not use the island’s services.

Locals fear a takeover. The brothers have bought four of Sark’s six hotels and some islanders believe they wish to turn the island into an exclusive resort, with regular helicopter flights from Guernsey and the mainland.

A showdown was inevitable. The brothers won a campaign for the island to have its first democratic election after 450 years of feudal rule. So on 11 December 2008 the residents of Sark awoke to a day blessed with a bright blue sky and full of hope. Two factions had emerged in the tense run-up to the election. One sided with the Barclays, approving of their investment in the island’s hotels and other properties; whereas the other side was happy with the status quo and sympathetic to their besieged feudal lord, who was set to lose many of his powers and rights.

For an island ruled under a feudal system, the level of turnout was impressive: almost 90% of 474 eligible voters made their voices heard, and one in eight of voters stood for election. The problem, at least for the Barclays, was that most of them were voting to keep things as they were. Only two of the nine candidates identified as a ‘safe pair of hands’ by the brothers’ mouthpiece the Sark Newsletter were elected. Most humiliating of all, Kevin Delaney, the divisive editor of the newsletter and Barclay lieutenant, failed to win a seat. Of the 12 ‘establishment’ candidates that the newsletter claimed would ‘destroy’ the island, nine were elected. These included Edric Baker, scathingly described by the newsletter as a ‘feudal talibanist’, and Jan Guy, criticised by Mr Delaney for her ‘socialist streak’. Entirely underwhelmed by such an historic switch to democracy, the Chief Pleas simply moved on to their next order of business (whether electric bicycles should be allowed on the island).

The twins’ response was swift and decisive. Only 12 hours after the election result, Sark Estate Management — the company that administers the brothers’ properties on Sark — closed down two hotels, a restaurant and other commercial premises, sacking most of the 140 workers (or one in six residents). Advocate Gordon Dawes, the Barclays’ Guernsey lawyer, did not mince his words when explaining why the brothers had reacted so aggressively:

Sark doesn’t appear to want or appreciate the Barclays’ investment and so it doesn’t have it. The island cannot at the same time treat the Barclay family in the way that it has and expect them to continue investing large sums of money into the economy. Sark will go back to what it was before the Barclays came and invested. The people of Sark have sent the Barclays a clear message and they feel they cannot work in a place where there is such an anti feeling against them.

The true sadness of it all is that the real loser will be Sark and, in particular, its workforce. But the Barclay family cannot be expected to continue investing at the rate of £5m per annum. I find it very hard, particularly at this time of year, not to wonder about the old saying to do with turkeys and whether or not they would vote for Christmas; well it seems we have our answer. I am genuinely saddened. The people of Sark have spoken.

Fortunately for the residents, it was not long before the BBC had also spoken and their critical news reports encouraged the brothers to cancel their draconian plan. But this was only a temporary reprieve. It is no exaggeration to say that the brothers have created a climate of fear through their vitriolic Sark Newsletter which is delivered free to residents. The newsletter’s logo — ‘Campaigning for the end of 450 years of feudal rule and for a full democratic process of government’ — leaves no doubt whose side they take. While the newsletter is owned, published and edited by Mr Delaney, it is based at the Barclays’ Sark Estate Management offices and the brothers refuse to condemn its relentless and outspoken attacks on Sark officials and residents.

The newsletter can make tabloids appear moderate. In January 2012 the publication criticised Dr Peter Counsell for transporting Diana Beaumont, wife of the Seigneur, to neighbouring Guernsey by using a marine ambulance after she suffered a stroke. Mr Delaney argued that he should have used the Barclays’ private helicopter instead, thereby saving precious time. The doctor was so upset by the criticism that he resigned and left the island with his young family, later lambasting the newsletter as ‘a dangerous propaganda sheet’. On hearing of his impending resignation, a petition calling for him to stay was signed by 200 islanders within 36 hours. More than 100 residents also gathered outside the Island Hall in a silent demonstration, holding placards such as ‘Stop Sark Newsletter’. But the damage was done and the island had lost a well-respected doctor and his young family. The newsletter also singled out the Seigneur Michael Beaumont for criticism at a time when he would have been most concerned about his wife’s health:

Like all autocratic leaders throughout history, Michael Beaumont is the architect of his own destruction.
Mr Beaumont’s big mistake was for the first time to be seen to be the one who makes the decisions on Sark, namely the decision about the welfare of Mrs Beaumont and refusing an airlift which would have brought her to hospital in minutes … Mr Beaumont has now been seen to be a ruthless, uncaring and unforgiving character and his big concern is that the Sark Newsletter has exposed his abuse of power, the Island’s inherent culture of bullying and intimidation and its lack of laws to protect the innocent and the vulnerable … Free speech and the free press have arrived on Sark after 450 years of silence under feudal rule, and there is no going back. The game is up and Mr Beaumont knows it.

The brothers stand by such personal attacks. Through their Guernsey lawyer, they stated that: ‘The Newsletter is entitled to express an opinion and to express it forcefully … [its] tone is proportionate to the importance of the reforms and the intransigence of the feudal establishment.’

More than 100 people gather outside the Island Hall at a silent demonstration against the Sark Newsletter. (15 February 2012).

Such relentless attacks on islanders opposing the Barclays have not gone unnoticed by the authorities. On a visit to the island in June, justice minister Lord McNally condemned the tone of the newsletter and ensured islanders that he will not allow the billionaires to make Sark ‘a company town’. The brothers responded by accusing the minister of being ‘poorly informed’ about the political situation. McNally, however, also questioned why the Barclays were taking such an aggressive stance. ‘One of the things I think is interesting which I can’t answer, is exactly what the Barclays are at,’ he said. ‘There is a matter of reputation here. And if, reputationally, they are willing to defend their role and their intentions – fine, let them do so.’

No doubt the Barclays would argue they are simply continuing a long love affair with the island that enchanted them when they visited it as children. Their investment has created 150 jobs and opportunities for many others; they have allowed the Sark emergency services to use their helicopter and rescue boats for evacuations (though not without controversy) and donated £200,000 to a local school; and nothing but a lone farmhouse existed on Brecqhou before their arrival, whereas now it boasts a magnificent castle.

The Sark Newsletter

Notwithstanding these worthy efforts, the fact remains that for the genteel residents of Sark the financial and legal clout of the Barclays can be very intimidating. When Private Eye published a spoof Daily Telegraph front page headed ‘Expenses Scandal Day 94’ in July 2010, which jokingly suggested that the Telegraph owners were deriving tax benefits by living on Brecqhou, the Sark postmistress thought she would share the joke by pinning the page on her noticeboard.

Shortly afterwards she received a robust letter from the Barclays’ solicitors who instructed her to remove the notice. They even advised her to replace the notice with another one explaining that the Telegraph owners ‘are not tax dodgers’. Private Eye also received a complaint from the solicitors. The magazine claimed it was the first time it had been sued over a spoof article appearing in its joke pages and strongly defended its decision to publish, noting that ‘The law of libel recognises that statements made in jest are not actionable’.

Whether they are navigating their way through various obstacles in their quest to take over a business, or demanding reform of an ancient constitution, the twins are clearly used to winning. This direct and uncompromising approach might work well in a City boardroom, but it clearly tarnishes their reputation when dealing with Sark residents who are content with a more leisurely way of life. The words of their former editor, Dominic Lawson – that they are in ‘the wrong line of business’ if they want a quiet life – certainly ring true in this instance. For if they were only mere billionaires, rather than also owners of a national newspaper group, their troubles on Sark would receive nothing like as much publicity. Only time will tell if they can work in better partnership with the islanders or if the relationship deteriorates even further. One thing is certain: the Barclays are going nowhere and will keep fighting for greater control and influence over the island’s affairs.

Newspaper barons are often colourful characters and the Barclays do not disappoint. Robert Maxwell was also a hugely controversial figure, but it was impossible not to admire his achievements from humble origins. Similarly, the brothers have built a huge business empire, overcoming innumerable financial and legal difficulties on their journey. David Barclay’s son Aidan, the scion of the family, looks set to be a worthy successor to their admirable legacy. But he will have to wait a while yet. As we have seen in the fractious legal battle to buy more of London’s landmark hotels, the brothers remain as active and defiant as ever. So what motivates them? ‘Why do they go on? It’s the thrill of the chase, the thrill of doing a deal,’ suggests Max Kingsley, who once worked with the Barclays on a major buyout. ‘That’s where they got their buzz and still get their buzz. It would eat up most people’s adrenaline, doing deals the size of theirs.’

Half a century of accruing wealth while scorning publicity has endowed the twins with an almost mythical status. They even have a band named after them: The Reclusive Barclay Brothers, one of whose electro-pop hits is called ‘We Could Be Lonely Together’. Yet for all the conspiracy theories they inspire and islanders they upset, they have done a commendable job turning around the flagging Telegraph titles and launching them into the digital age. While the newspaper unsurprisingly conforms with their Eurosceptic, anti-tax and pro-business philosophy, there is no substantive evidence that they meddle in editorial decisions — even though the Vince Cable affair has left nagging doubts. As demonstrated clearly through its impartial handling of the MPs expenses scandal, the newspaper remains a cornerstone of our democracy, holding the rich and powerful to account. Since their ownership of the newspaper, the twins have increasingly discovered that they too are being held to account for their actions — and even on their island retreat, they can no longer easily hide from public view.

 

© Robert Wilkinson 2013

COMING SOON(ISH): The gripping and expletive-laden story of how Daily Express and Daily Star owner Richard Desmond turned from porn impresario into press magnate.