Branson: Behind the Mask Read online

  Branson: Behind the Mask

  TOM BOWER

  To Sophie

  Contents

  Title Page

  Dedication

  List of Plates

  Introduction

  1 Blow-out

  2 Rebel Billionaire

  3 The Club

  4 Knife Edge

  5 Virgin’s Crime

  6 Virgin’s Saviour

  7 Printing Money

  8 Ghosts

  9 Turbulence

  10 Green Squib

  11 Virgin Speed

  12 Virgin’s Crime: The Trial

  13 Virgin Taxes

  14 ‘Virgin Dope’

  15 Galactic – Delays

  16 Slipping

  17 The Project

  18 The Last Jewel

  19 Resurrection

  20 Journey into Space – Postponed

  Acknowledgements

  Notes and Sources

  Index

  Plates

  About the Author

  By the Same Author

  Copyright

  Plates

  Branson with Governor Bill Richardson of New Mexico at Spaceport America, the base for Virgin Galactic, in 2010. © Bloomberg via Getty Images

  Branson with key allies in America: Bill Clinton and Al Gore, in 2006, and Arnold Schwarzenegger, then governor of California, in 2009. © Getty Images

  Branson bids for American stardom in the Fox TV series The Rebel Billionaire: Branson’s Quest for the Best. © WireImage for Fox Television Network

  Branson’s battle to protect Virgin’s privileges by preventing collaboration between British Airways and American Airlines in 2008. © Anthony Devlin/PA Archive/Press Association Images

  Virgin’s financial crisis in 2000 was overcome after the company embraced Tom Alexander’s idea to launch low-cost mobile phones. © REX/Stuart Clarke

  Branson’s success depended on his close relationships with politicians, not least Tony Blair. © Mirrorpix

  Branson with Jayne-Anne Gadhia, Virgin Money’s chief executive. © Mirrorpix

  The launch of Virgin Blue in Australia. © David Gray/Reuters/Corbis

  Branson with Gordon Brown in 2007 at the launch of a train powered by biodiesel. © Toby Melville/Reuters/Corbis

  American billionaire Vinod Khosla, whose ideology that businessmen could justifiably profit from ventures favourable to the environment attracted Branson to the ‘green’ cause. © Bloomberg via Getty Images

  Branson with Brawn’s winning Formula One team, which he sponsored in 2009. © Getty Images

  Virgin’s longstanding feud with BA: in 1991, Virgin staff redress BA’s iconic Concorde in Virgin livery, while Branson poses gleefully in the foreground. © Mirrorpix

  BA chairman Lord King. © Mirrorpix

  In 2006, Virgin executives admitted involvement in an illegal cartel with BA. Iain Burns and three other BA executives stood trial for price fixing. © Dominic Lipinski/PA Archive/Press Association Images

  Branson promotes Virgin Media with Olympic sprint champion Usain Bolt. © REX/Tom Oldham

  Virgin’s attempts to profit from privatised NHS services generated protests in 2012. © Demotix/Press Association Images

  Introduction

  The British love chancers. Tilting on the edge, they entertain the public by breaking rules, escaping blame and feeding gossip. Rich or poor, these rare personalities fascinate and excite. Few are more popular in Britain than Richard Branson. Celebrated as the nation’s most successful buccaneer, Branson once attracted more Twitter followers than President Obama, and nearly as many fans as David Beckham. Over the past forty-five years, his colourful exploits have earned him adoration as an English rebel entitled to his wealth. He is a self-made and self-deprecating man whose flamboyance endears him to aspiring tycoons, who snap up his books and flock to his lectures to glean the secrets of fortune-hunting. He is an entrepreneur idolised and lauded as a hero by ambitious young men and women.

  For others, Richard Branson is a scoundrel, a card player with a weak hand who plays to strength. Those who come off second best scorn the showman as a one-dimensional poseur who manipulates Virgin’s image through a wily media machine. For them, the mystery surrounding Branson’s businesses and wealth has grown over the past decade, but their criticisms remain ill defined. Branson’s contradictions are glaring but confused by a smokescreen.

  Just how a school drop-out became a billionaire has become the stuff of legend, repeatedly recounted by Branson but more accurately described by others. His self-portrayal as the defiant tycoon risking danger has generated endless free publicity. His reward is global celebrity.

  Inspiration, persistence and shrewdness have contributed to creating the Virgin empire. Plus, by Branson’s own admission, breaking the rules. ‘If I want to do something worthwhile,’ he wrote recently, ‘or even just for fun, I won’t let silly rules stop me.’ Without adequate shame, he has described cheating in his school exams, committing a tax fraud and lying to the police. Less publicised is his attitude towards maximising his wealth.

  ‘As far as I am concerned,’ wrote the exhibitionist, ‘[I] would do anything, however outlandish, that generates media coverage and reinforces my image as a risk taker who challenges the government.’ Sex, he continued, was one way ‘to promote Virgin’s image’. Over the years, Branson has never complained if he is painted as a philanderer. He has even publicly speculated about his son losing his virginity to a well-known singer. In his breathless quest for publicity, he has recycled unprovable stories, including the assertion that a senior French politician asked for a bribe of £1 million in exchange for permission to open the Virgin Megastore on the Champs-Élysées on Sundays. Branson’s colourful memories are rarely challenged. Over the decades, the cheers have grown and the doubts have subsided. The mystery is whether his business is still worth billions of pounds; the controversy is whether he deserves accolades for being Britain’s most successful businessman.

  Around 2011, the then sixty-one-year-old reached a crossroads. At the climax of a ‘seven-year journey’, he renounced raw capitalism. Branson had converted to green politics tinged with populist socialism. Virgin, he said, was set to undertake ‘a sea change on a journey to transform itself into a force for good for people and the planet’. Some speculated that Branson had experienced a hormonal change, while others assumed he was plucking at another opportunity, but insiders recognised that Virgin required rebranding.

  ‘My message’, he wrote, ‘is a simple one: business as usual isn’t working. In fact it’s “business as usual” that’s wrecking our planet. We must change the way we do business.’ Capitalism, Branson believed, had ‘lost its way a bit. The short-term focus on profit has driven most businesses to forget about the long-term role they have in taking care of people and the planet.’ His transformation into the caring people’s champion of the environment and its population was not pure altruism. Green, the billionaire realised, was a money-making opportunity. To recapture Virgin’s appeal, he was reinventing his corporation as a benevolent profiteer blessed with a social conscience.

  The 2008 economic crash had damaged Virgin. Although outsiders regarded the empire, ranging over trains, health and finance, as resplendent, his airlines had suffered a financial crisis. The sum of his disparate investments no longer added up to the billions certified by the rich lists published in the Sunday Times and Forbes. In his secretive world, the financial reality had been concealed. Among his problems was the brand’s fading appeal to the youth market. Virgin’s attraction was increasingly confined to an ageing generation sceptical of new ideas. In the inevitable momentum – either becoming bigger and more visionary, or smaller and parochial – Virgin no long
er offered innovation. Branson presented his personal dilemma as a social and environmental crisis that challenged all financial and political leaders. ‘While business has been a great vehicle for growth in the world,’ he wrote, ‘neither Virgin nor many other businesses have been doing anywhere near enough to stop the downward spiral we all find ourselves in.’

  The tycoon offered a solution, summarising his new philosophy in a book, Screw Business as Usual, published in 2011. He challenged those who weren’t afraid to follow the title’s standpoint to show they meant it. His message to corporations was subversive: ‘Profit is no longer the only driving force.’ Instead, he argued, corporations should be doing good for ‘humanity and the environment … Business needs a heart. In the past, business has been all about making money, which is fine, but it hasn’t been about being a responsible citizen.’

  His criticism of profits was matched by a condemnation of environmental vandalism: ‘Resources are being used up: the air, the sea, the land – are all heavily polluted. The poor are getting poorer. Many are dying of starvation or because they can’t afford a dollar a day for life-saving medication. We have to fix it – and fast.’ Even disbelievers, he said, ‘admit that people everywhere are mucking up things’.

  His best-selling book, a catalogue of Virgin’s good deeds and famous names, placed Branson on a pedestal: ‘We must change the way we do business. Do good – and the rewards will come.’ Part of the cure, he wrote, was to eliminate a ‘false dilemma’ from business talk. ‘It is becoming more and more clear that there is no incompatibility between doing business in an ethical and transparent manner and achieving good financial results.’

  His appeal for transparency was written on Necker, his sun-kissed Caribbean island, which he bought for £180,000 in 1978 and which he was to use as his tax haven. Throughout his career, Branson has sought to avoid taxes: first illegally in a purchase-tax fraud, and later legitimately by carefully structured corporate pyramids, which ultimately led to his permanent move to the Virgin Islands as a tax exile from Britain after 2006.

  In the opening pages of his book, Branson anticipated the day when ‘No governments or businesses will be able to hide behind secrecy and jargon any longer.’ Indeed, he urged his readers to appreciate the transparency of his own conduct. In his relations with business and the public, he wrote, ‘If you’re open and honest with them and if they know there are no secrets, then they trust the brand.’

  His advocacy of ethical transparency is shared by campaigners for a fairer world. His obedience to his own sermon can be judged by the ownership of his flagship airline, which runs through eleven companies. Virgin Atlantic Airways (GB) is owned by Virgin Travel Group (GB), which in turn is owned by Virgin Atlantic (GB), which is owned by Bluebottle Investments (UK) Ltd (GB), which is owned by Bluebottle UK Ltd (GB), which is owned by Virgin Holdings Ltd (GB), which is owned by Classboss Ltd (GB), which is owned by Virgin Wings Ltd (GB), which is owned by Bluebottle USA Mobile Inc. (BVI), which is owned by Virgin Group Investments Ltd (BVI), which is finally owned by Virgin Group Holdings Ltd (BVI).

  Virgin Group Holdings Ltd, incorporated in the British Virgin Islands, is owned by trusts whose principal beneficiary is Branson and his family. But to prevent any tax charge ever arising against the Bransons, the legal documents make it absolutely clear that trustees and not the Branson family actually control Virgin Group Holdings. As usual in tax havens, the identity of all the trustees is not disclosed.

  Running a business from Necker is much easier now than when Branson bought the deserted island. Keeping in touch by telephone, email, Skype and video-conferencing while gazing across a blue ocean is the dream of many people. No one should begrudge Branson the foresight to make a dream come true. But the reason his airline is owned by eleven successive companies, ending in the British Virgin Islands, is not so its owner can enjoy the sunshine. Rather it is to avoid scrutiny and taxes. Or, more bluntly, to achieve the opposite of the transparency that Branson advocates.

  Among Virgin’s strengths, Branson wrote, is that it ‘stands for something beyond making money’. Virgin, he believes, is ‘about making a difference in the world’, which has been elevated by capturing ‘a new level of responsibility’.

  The agency for dispensing wisdom and money is Virgin Unite, Branson’s charity for transforming the planet. ‘Our vision’, he wrote, ‘is a world where business is a force for good, helping people to thrive in balance with our planet. Our mission is to be a leading catalyst and an incubator for innovative Global Leadership Initiatives.’ Every year, the billionaire’s charity donates at least £1.5 million in cash to chosen causes.

  For the majority, Branson’s generosity confirms his heroic status. They are attracted by his fame and undoubted achievements. They do not distinguish celebrity from greatness. The riddle appears contrived. The challenge is to discover the truth behind the mask.

  1

  Blow-out

  The explosion was deafening. Without warning, a thunderous blast flashed across the parched scrub. Over forty engineers, seeking protection behind a chain-link fence, fell like match-sticks on to the dirt. Swirling dust blocked out the Californian sunshine. As the sand drifted away, the silence of the Mojave desert was broken by screams and the grating sound of a hiss. The temperature at 2.34 p.m. on 26 July 2007 was over 100 Fahrenheit – dangerously high, even for an uncomplicated test.

  Confused and shocked, Al Cebriain, a mechanical engineer, struggled to stand up, but collapsed back on to the ground. Seventy feet from the detonation, he looked across the scrub at a deep crater where seconds earlier a six-foot metal tank containing compressed nitrous oxide had rested on a concrete block. Shifting his gaze from the debris, he spotted that a jagged hole had been ripped across a steel shipping container and the chain-link fence was bent. Near by was the cause of the persistent hiss: gas was escaping from a toppled cylinder.

  Cebriain could see shredded clothing, baseball caps, bandannas and men’s glasses, all covered by splinters of metal and concrete carried by the blast. Above that flotsam was a ghastly sight. Arms and legs lay like garbage on tufts of brown grass. The screams of fellow rocket engineers injured by the blast ripped through the dry heat.

  There had been no warning. Just minutes earlier, Luke Colby’s familiar voice on the loudspeakers had issued the last command from the safety of a control vehicle parked a hundred yards away. Those inside the truck were monitoring the experiment through cameras located around the test site. All the images were being recorded. Most members of the team had preferred to watch the experiment ‘live’, sitting cross-legged on the sand behind the chain-link fence. They had done so many times, and no one had ever voiced concern for their safety. An engineer had said, ‘OK.’ But when the gas was released through a valve designed for the rocket engine, the explosion was instant.

  Al Cebriain staggered towards the twisted fence. Two colleagues were obviously dead. One was dying. His head was being cradled by a friend staring tearfully at the limbless torso. All three had been sitting in front of the fence, much closer to the test than anyone expected. Later, insiders would acknowledge that the three, intimately involved in the use of nitrous oxide to power the rocket, had darted at the last moment around the fence to get a closer view. Shards of metal from the exploding tanks had ripped through their bodies.

  The deaths occurred at an unusual airport. Located on a soundless plateau over 4,000 feet above sea level, the 2.3-mile runway across the Mojave desert is both a parking lot for abandoned jumbo jets, the graveyard of reputations and fortunes, and the home of ambitious private corporations building spaceships, rockets and equipment for futuristic travel. The remoteness added secrecy to the location’s advantages. Clustered along the runway’s apron, the occupants of the hangars appeared eerily immune to the tragedy unfolding about a mile away. The only visible movement came from the 5,000 wind turbines along the Tehachapi Pass overlooking the airport.

  Ten minutes after the explosion, the local sheriff a
rrived. The medics followed. After making sure that the injured were dispatched to hospital and the corpses and limbs sent to a mortuary in Bakersfield, the sheriff ordered the survivors to move away while he spun tape around a wide area to prevent anyone meddling with a potential crime scene.

  News of the catastrophe sparked bewilderment. Insiders knew that the engineers employed by Scaled Composites were pumping nitrous oxide gas through the valve which would be used to propel Virgin Galactic’s rocket into space. Until then, progress on Richard Branson’s expensive investment appeared to be unproblematic. The ‘cold-flow’ test had been executed safely many times. No one could explain the cause of the fatal explosion.

  Some engineers, however, were not completely surprised. ‘Nitrous oxide can be dangerous,’ they had warned their colleagues. ‘It’s cheap, but you’ve got to be careful with this stuff.’ The warning was ignored by Glenn May, one of Scaled’s experts, who had just returned from extended leave. May treated nitrous oxide as a harmless plaything, even propelling his bicycle around Mojave using a rocket fuelled with the gas. ‘He’s comfortable with nitrous oxide,’ thought an engineer, dispassionately. During the countdown to the disaster, May had enjoyed the carnival atmosphere around the fence and encouraged his two colleagues to join him and get a closer view. Now, a pathologist was assembling his body parts for examination, and an undertaker had been summoned to deliver three coffins.

  Burt Rutan, the Scaled director responsible for developing Virgin Galactic’s rocket, was attending a conference in Palm Springs. ‘I didn’t know that nitrous oxide was that dangerous,’ he later said. Taking risks, he added, was normal for pioneers. His British partner was less sanguine. ‘It’s not considered a hazardous material,’ said Richard Branson in a measured statement. ‘We just don’t know why the explosion occurred.’ The owner of 50 per cent of Virgin Galactic did not mention his prediction three years earlier that the rocket would blast into space with six passengers during 2007 itself.