FACE THE FACTS
Property Company Collapse
Presenter: John Waite
TRANSMISSION: Friday 11th August 2006 1230-1300 BBC RADIO 4
This week on Face the Facts we investigate a man who's said to be worth more than £100 million. An entrepreneur with a penchant for expensive cars and antiques. A man with addresses in Monaco and London, where grand embassies are his neighbours, although on one occasion his residence was a prison cell. A man who liked to be called Lord but whose business dealings appear to be more about debts than Debretts. He's distanced himself from two companies, which both collapsed in unusual circumstances owing millions of pounds, we'll show however, that he was involved in their operation. And we'll hear from a string of people who've been left out of pocket and out of patience with the colourful Mr Edward Davenport.
Flamboyant. He couldn't resist the need to show the trappings of wealth.
I suppose some people would say he was like plum in the mouth, titled, hooray Henry but very, very polished.
The big cufflinks, the watch, large cigars.
Very clean cut, slicked back hair, very smartly dressed. But on the other hand he was a bit too smooth.
The tailored suits and the title.
Today's is a sorry tale of investors taken in by glossy corporate brochures, which contained as much fiction as fact, business deals tangled up in a complicated web of Caribbean offshore trusts and companies. A story, like Edward Davenport's career, that begins on the dance floor.
In 1987 Edward Ormus Sharington Davenport was something of a party animal because having spotted the business potential of putting on disco parties whilst still in his teens, he set up an organisation called Gatecrasher, which laid on balls and parties for teenagers from public schools. But it wasn't long before Gatecrasher came unhinged amid lurid tabloid headlines, claiming the teenagers at the events were out of control.
PRESS CLIP Would you let your daughter go to a ball like this?
Orgies at wild child ball. Don't tell mum.
Mr Davenport played down the excesses of the Gatecrasher balls and played down too how much money they were racking in, during a television interview with Sue Lawley.
SUE LAWLEY INTERVIEW LAWLEY Come on, it's all about money isn't it - £14 a ticket, 3,000 kids at each do?
DAVENPORT Well there's a lot of expenses in organising a teenage party and all the entertainment. I did my first one for free and when everyone wanted me to carry on, unfortunately, I spoke to the bank manager, but I had to charge after that.
At the end of the '80s however, the party was over and Gatecrasher had itself crashed. Allegations followed of unpaid tax on ticket sales and in November 1990 Mr Davenport was sent to prison for nine months for tax evasion, which was later reduced on appeal to a suspended sentence.
Mr Davenport moved on to bigger and brighter projects. By 1996 he was taking out leases on pubs and nightclubs in Central London and then in turn renting them out at a profit. The tenants in the building paid Davenport's company, whose responsibility it then was to pay the actual owner - the so-called head landlord. That was the deal Colin Taylor agreed to, through a company called Euro King Leisure Ltd and involving the lease of the Guinness Toucan Bar in Central London. A deal Mr Davenport seemed keen to close.
Very relaxed about the whole deal. Threw a contract across the table and said: "Well if you've got the money and you want to sign this, you can take over now." I thought that was a bit quick for me. Went back to see my solicitor and he crossed lots of things out. Took it back to Eddie the next morning and without really looking at it properly he just said: "Yeah, that seems fine by me."
And all did indeed seem fine for a while, with Colin's rent on occasion being collected in a Bentley. However, in the contract Colin had signed was a clause explaining that if either party got into difficulty the lease would be terminated. Colin had presumed that that referred to his business, in order to protect Mr Davenport's. But he had a surprise in store.
We were told that the whole company that Eddie ran was in administration. And then after about six months I got a phone call saying that the company had come out of administration and they were giving us two weeks to leave. We thought we were going to lose the place, so we didn't quite know what to do.
But Mr Davenport did. He said, if Mr Taylor paid an extra £10,000 a year in rent he could stay. And with little other option Colin reluctantly agreed. It was a lot of money to him but not apparently to Edward Davenport, as by now he was expanding his property interests and had restyled himself Lord Edward Davenport - a title he'd simply purchased. But a title that did him no harm when he came into contact with top flight diplomats and dealings over a prestigious London building belonging to a country in revolution.
NEWS CLIP There's been a military cue in the West African state of Sierra Leone. The army has overthrown the elected government of President Tejan Kabbah.
In 1998 Sierra Leone was suffering severe economic problems as a result of its coup d'état. Economic problems that were even being felt at the government's prestigious high commission building in the West End of London - 33 Portland Place.
You walked in, it had this really huge high roof, it had a huge dome above it, it really was grand in the way that people would expect a high commission building to be.
Addi Darami [phon.] is a journalist from Sierra Leone and remembers the pride his countrymen took in their impressive London headquarters. But by the late 1990s 33 Portland Place was in a bad state of repair and in urgent need of refurbishment. So noblesse oblige up stepped Lord Edward Davenport, offering a solution to the then high commissioner. Who was very impressed, according to Paolo Ghirardani from the law firm Stephenson Harwood, which later acted on behalf of the government of Sierra Leone.
He believed him to be a high society figure, a Lord, he was signing off on the paper with Lord Davenport. A man of wealth, a man of great experience in the property industry. I think the former high commissioner was probably impressed by the Bentley with the driver, which we subsequently discovered was leased.
And so the high commissioner thought perhaps just the man to see the high commission refurbished in the right way?
Yeah. The high commission would be moved to temporary accommodation, he'd do the building up, he'd bring it back to its former glory and then the government would move back in, they'd occupy the ground floor and the basement and Davenport would have the use of the rest of the building.
For this to happen the lease for 33 Portland Place was transferred to Edward Davenport through a company called Capricorn Financial Investments, for the agreed price of £50,000. But seven months later instead of refurbishment getting underway, a newspaper profile of Mr Davenport revealed that he had an altogether different plan for 33 Portland Place, a building which the Daily Mail claimed had helped make him one of Britain's most eligible bachelors.
DAILY MAIL CLIP Entrepreneur Edward Davenport has a business portfolio of £100 million from his dealings in nightclubs and property. Added incentives: a convertible Bentley, a 160 foot yacht and a new 24 bedroom home being converted from the old Sierra Leonian high commission.
Which came as news to the government of Sierra Leone. And fearing therefore that it was going to lose the building to Davenport it took legal action. A dispute that was to be resolved in the High Court. At one point in the case that followed Davenport informed officials at the high commission that the refurbishment had been completed and invited them to take up a lease for a part of the building. And when lawyer Paolo Ghirardani went to take a look he discovered that some ground floor rooms had been touched up. But then he looked round the rest of the property.
It became apparent that all he'd done was make the roof watertight and then the rest of the upper floors were in an appalling condition with all of the problems that were there before. He'd claimed that he'd spent £1.3 million doing up the building but there was absolutely no sign of it at all.
Nevertheless Edward Davenport insisted that for the commission to return to 33 Portland Place that seven figure sum had to be paid. What's more to prove the work had been done he produced invoices.
But when we went through them we were flooded with duplicates and it turned out that most of the invoices were just household expenditure - light bulbs, hairdryers, batteries - and that he'd put in a lot of quotations from people for work which when we phoned round all their offices they all said they hadn't done.
In fact Paolo Ghirardani tracked down the builder who had done the work in the mansion and who confirmed his total bill had come to £100,000 not £1.3 million. In the case the government of Sierra Leone had originally accused Edward Davenport of fraud, a claim that was eventually dropped. However, it continued to pursue him for breach of contract and so the entrepreneur was far from in the clear. That's not what he was telling the press however.
PRESS CLIP Edward Davenport is claiming victory in a High Court case against the government of Sierra Leone after they accused him of swindling them out of their £5 million London headquarters.
Well we can reveal that the case had a very different outcome. Mr Davenport opted to make a substantial out of court settlement to the government of Sierra Leone by way of compensation. They got the money, he kept the building. Although he risked seeing the inside of another prison cell when the court placed a freezing order on his assets and called on him to make a full disclosure of what those assets were. By refusing to comply he was found in contempt of court. The freezing order was eventually lifted and Mr Davenport awarded costs, however, one judge commented during the case:
JUDGE'S STATEMENT On his own admission most of his assets are held in companies which he controls through offshore entities, the method by which Mr Davenport exercises control over these companies and other entities is not clear. And Mr Davenport did not give any coherent or comprehensible explanation.
These offshore entities also characterised Edward Davenport's more recent dealings in the property market in Central London. Through a network of trusts, many registered in the Caribbean island of Nevis and a tangled web of associated companies, with subsidiaries in the UK, we have traced Davenport's involvement in two controversial companies. The first started attracting attention in 2001.
CAPRICORN PROMO Capricorn's UK property portfolio, predominantly consisting of office and licensed premises, has a current rent role in excess of £6 million a year. Despite global recession fears continued strong income growth is confidently predicted.
An extract from a glossy brochure, produced by a company called Capricorn Group Holdings Plc., the accounts of which boasted that it had a net worth of £53 million. A major part of its business was providing serviced office space through subsidiary companies. Giles Barry is the editor of the magazine Property Week.
First you have a landlord, he's speculated money to put up a building, then Capricorn comes along and says I will lease this building from you for 10 years but I won't pay you any money for a year. The landlord thinks fine, any tenant is better than no tenant. Capricorn, having leased the building for nothing, effectively, for the first year finds little tenants to come in for a year or six months at a time.
And once again and for a time all involved in office deals conducted through Capricorn were happy. However, by the summer of 2001 tenants had concerns.
All of a sudden we felt that the wheels were coming off. The air conditioning stopped working, the toilets weren't being cleaned, the lights weren't being replaced, it was very dingy.
You know when you pay the rent you expect these services to be provided and nothing was being provided, it was a total shambles.
Chartered surveyors Tony Gerber and Michael Freeman rented an office in Central London, just one of many properties listed as interests in Capricorn's glossy corporate brochure. They complained to Capricorn's West End HQ and then received a visit from Edward Davenport.
And he said well the rent is going to go X and I said that is ludicrous, and you'll have to pay the rates separately. So it was trebling the rent plus the rates.
It wasn't anywhere near market value, it was like double market value.
We've also spoken to landlords who leased their buildings to Capricorn subsidiaries and in which other serious problems arose. Although tenants in the properties were paying rent, bills the Capricorn Group should have covered were left unpaid. Which is odd seeing that Capricorn had claimed to be such a rich company. And when landlords chased money that was owed some ended up dealing directly with Edward Davenport at Capricorn's offices. Which is also odd given that, officially at least, Mr Davenport has never been identified as someone involved in the running of the company and was never listed as a director of it. Companies House records do show, however, that a major shareholder in the company was the Davenport Family Trust. A trust which, according to documents we've seen, was represented by Edward Davenport.
ACTUALITY - DANISH LAUNDRY
Indeed so involved was Edward Davenport in the company that even his personal laundry ended up being cleaned and charged to the Capricorn account. Charged but not paid for because Capricorn's star was fading, leaving Melvin Epstein, proprietor of Mayfair's Danish Laundry, waiting for his bill to be settled.
We got a phone call that Mr Davenport had some dry cleaning he wanted collected, he needed it back the same day. We collected all the work, we did all the work, cleaned his suits and we delivered it back and the next thing we knew is they'd gone.
They'd gone bust?
They'd gone bust. And I cannot believe that that man couldn't have afforded to pay us the £58 that his personal bill came to because if he'd had any guilt about what had happened he would have made sure that that bill was paid.
Well for the record three years on that bill has just been paid, within the last week in fact, since we informed Mr Davenport's solicitors that we were investigating their client's business affairs.
Affairs which in August 2003 saw Capricorn liquidated at the High Court with creditors claiming debts of £4 million. And when the liquidator took a closer look at the glossy brochure and Capricorn's reassuringly impressive list of advisors:
ADVISORS Solicitors Herbert Smith, Dunbar Bank PLC.
Prestigious names but with one thing in common - they were astonished, they told the liquidator, to learn that they'd turned up in the Capricorn brochure.
And what of the assets? The brochure claimed Capricorn was a rich company and had reassuring comments for anyone intending to do business with the firm.
CAPRICORN BROCHURE The process has now commenced to transfer all the group assets into Capricorn Group Holdings PLC, with a proposed fully paid up share capital of £15 million.
A claim apparently backed up by Companies House records which stated that the Davenport Family Trust and Capricorn chairman and director, a man called Bruce Anderson, had purchased £15 million worth of shares in the company, assets that would more than cover what was owed to its creditors. But, as it turned out, the funds didn't exist. Documents notifying Companies House that the shares had been purchased had been filed "in error" the liquidator was informed. The liquidator also discovered that the supposed £50 million company had no bank account. So Capricorn collapsed, with debts but no traceable assets. And yet, within months, there was a new business star on the horizon, an almost identical business in fact.
SOUTHERN CROSS GROUP PROMO South Cross Group - a dynamic player. The priority is growth!
Once again Southern Cross Group PLC, which is unconnected to the well known care home operator of the same name, was characterised by a complicated web of offshore entities. Again Bruce Anderson was installed as chairman. It used the same business model with an array of subsidiaries and again there was a remarkably similar glossy brochure. Landlords, including Geoffrey Doltice [phon.], were impressed.
Well it presented audited accounts showing that the company had net assets of £50 million, in other words it was a very wealthy company. Southern Cross were saying they were going to occupy a part of the premises themselves and they were explaining to me which Aston Martins were going to be parked in the garage and which Porsche was going to be parked down the side of the yard. To us it looked like a very sound and safe deal.
So safe and sound that Mr Doltice granted a rent free period of six months. But he wasn't so impressed when small utility bills at the property went unpaid.
Messages were not returned. I became quite concerned at why a company that was so big and so powerful couldn't pay a crummy little £50 gas bill.
Across London other landlords were also having problems with Southern Cross Group PLC. David Marcel granted Southern Cross a rent free period on an office block he owned in Holborn. Southern Cross, in turn, charged smaller tenants to rent out the building and so made an income. But towards the end of the 18 month rent free period, just like Geoffrey Doltice, David Marcel discovered that bills connected to the property were going unpaid. He couldn't reach Southern Cross by phone so he paid them a visit. But the first address he'd been given turned out to be an empty office.
We'd also been given an address in the heart of Mayfair and we went in there and went up to the first floor where their offices were and they were locked and there was a big sign on the door saying: If you want to get in touch with us, ring us - with no phone number.
Although Southern Cross had pocketed rents both David Marcel and Geoffrey Doltice would never receive a penny from the company. And they weren't alone. A string of landlords was chasing debts. Coupled with money Southern Cross owed to credit card companies, car hire firms, travel agents and banks its debts amounted to nearly £6 million. And last August a High Court judge ordered the company to be liquidated. The £56 million worth of assets, described in the glossy brochure, never materialised.
So where did Edward Davenport fit into the latest collapsed company? Well according to the Mail on Sunday's 2004 Rich Report, a dossier of Britain's wealthiest citizens, right at the company's heart.
DAILY MAIL CLIP Fast Eddie. Property dealer worth £133 million lives with five women. His Southern Cross Group shows assets of nearly £56 million.
A flattering financial profile. And anxious to keep his name in the limelight Mr Davenport employed a public relations firm to lobby for his inclusion in the Sunday Times Rich List. Letter headed documents were produced claiming that Southern Cross Group PLC was indeed his company. But the glamorous dossier failed to impress the list's compiler Philip Beresford.
He wanted us to believe that he was in the mould of the 1980s, 1990s, entrepreneurs mould breaking, taking risks, getting rich. My impression was that this was a chancer trying desperately to seek the seal of approval that the Rich List would give him in a perverse way because it would be amongst a lot of very solid businessmen. And I knew it would be the kiss of death for my credibility if I let him in.
It doesn't say much for Mr Davenport's credibility that since the demise of Southern Cross Group PLC he has strenuously denied that it was ever his company. He was never listed as a director, claiming only to have been involved initially as an investor. So why then, just months before the company's collapse, was Mr Davenport approaching property auctioneers to sell buildings that were leased to Southern Cross. Auctioneers like John Barnett, who was invited to the company's Mayfair office.
As I went up the stairs were photographs of him in various poses, situations, whether he was skiing, with a polo pony, picture of him maybe at a dinner and dance with a tuxedo. And then eventually in came Edward Davenport who then was like the prime leader of the meeting.
And when that meeting got under way there was no doubt as to the subject matter.
The meeting was clearly about the activities of Southern Cross or particularly their property activities and there was no doubt in my mind that at this meeting Mr Davenport, whatever title he happened to have, it was being run by him, led by him and he was the principal concerned.
So his role in the company you believed was right at the top of it?
Right at the very, very top, no doubt at all.
John Barnett turned down the offer. But 12 properties leased by Southern Cross Group PLC went on to be sold at other auctions. The new owners impressed by the glossy brochure would eventually discover there was to be no rent from Southern Cross. They lost hundreds of thousands of pounds. And there were other reasons why Mr Davenport might want to distance himself from the company. A closer look at the business raised serious questions. The auditors Southern Cross claimed had signed off its £56 million accounts denied they had ever done so. A cast of impressive advisors including KPMG, Rothschild and Jones Lang LaSalle, listed in the Southern Cross brochure, also deny involvement with the company. In court it quickly became apparent that despite its glittering boasts the company had no money.
Giles Barry from Property Week again:
The big landlords, the big pension funds, the income they were hoping just wasn't there. For the small investors, the people who'd bought these properties at auctions, again the rent just wasn't being paid. Things were really, really worrying.
In making this programme we've been in communication with Mr Davenport's lawyers who've made it clear that he does not welcome our investigation and indeed they threatened to have the programme injuncted to try to prevent it from being aired. We also received a rather bizarre statement from the office of Edward Davenport which didn't comment at all about his role in Southern Cross Group PLC, Capricorn Group Holdings PLC, Gatecrasher or Euro King Leisure Limited. Instead of answers we were told that he lives in the fast lane, enjoys partying, has a policy to always be polite and is never relaxing and his brain is always thinking about business. After a couple of pages about his business philosophy the letter concludes with Mr Davenport's views on the debacle over the former Sierra Leonian high commission.
STATEMENT Mr Davenport was under an obligation to negotiate the best deal possible for his companies. He struck a hard bargain and has no regrets in doing so. He successfully fought all the legal issues and won the substantive case.
In further correspondence from his lawyer Mr Davenport denies playing any role in the day-to-day activities of Capricorn Group Holdings PLC and Southern Cross Group PLC, aside from the fact that he was an initial investor in Southern Cross. Letters to that effect have been sent to us by former directors of the companies, including Bruce Anderson, who also declined requests for an interview. In a statement Mr Anderson insisted there was nothing untoward with the running of either company and claimed the disputed accounts were signed off. A comment we put to the firm of auditors in question who told us:
AUDITORS' STATEMENT We did not sign off the group consolidated accounts of Southern Cross Group PLC and what is more we did not know of their existence.
As for the Southern Cross auction sales Mr Davenport accepts he was involved in the sale of the properties but he says he wasn't acting for Southern Cross Group PLC when he did so.
But the story of that company doesn't end there because earlier this week and in an extraordinary turn of events we were sent a joint statement on behalf of Mr Davenport and the liquidators of Southern Cross Group PLC. It's good news for the creditors owed money because following amicable negotiations they've confirmed that Edward Davenport has agreed a financial settlement, which we understand to be substantial. Mr Davenport explains that despite not being a director or shareholder of the company he had simply been happy to assist when asked.