The Rise and Ruin of the Barclay Twins

[00:00:09] Morning folks and welcome to today's episode. It's called The Rise and Ruin of the Barclay Twins and for any of my American listeners who might be aware of these guys, you are in for some treat because this is the remarkable story of how David and Frederick Barclay, they went from being painters and decorators to owning the most prestigious hotels in London. We're talking about the Ritz, Claridge's, the Connacht, the Berkeley.

[00:00:38] They also bought the Telegraph newspaper group. They bought an island and they built a £100 million castle on it. Their fortune was estimated to be about £7 billion as late as 2020. But these two guys, they were just so secretive, so underhand. I mean, they pulled off some really, really sneaky stuff.

[00:01:04] And then, when it all came crashing down, when the twins turned on each other, it culminated in what became known as the Ritz Hotel Booking Scandal. I mean, this is a sensational story and it's also a cracking story. Enjoy. So, identical twins.

[00:01:22] So, identical twins. David and Frederick Barclay. They were born in Shepherd's Bush. That's in West London in 1934. And their father was a travelling salesman. Their mother was a housewife. Now, when the twins were just 13 years of age, their father died. So, like, their mother had to care and bring up 10 children in a cramped two-bedroom flat. The twins left school at age 16. And they had various jobs. But they started working together as painters and decorators.

[00:01:50] And then they saved enough money to get into property development. And they were making very, very good money from this from a very early age. People who knew them back then said that they always dressed immaculately. Throughout their lives, they almost always dressed exactly the same. And people could only distinguish them by their hairstyle. Frederick, he was left-handed. So, he had a right-hand parting on his hair. While David, he was right-handed and he had a left-hand parting.

[00:02:15] And David was also the older twin by about 10 minutes. And he was seen as the more dominant, the more risk-inclient. Throughout the 60s and early 70s, the twins, they expanded their property empire. And their timing, it couldn't have been better because London's property market was booming. Now, a crucial part of their success back then was their relationship with a government agency called the Crown Agency.

[00:02:45] So, this organisation, the Crown Agents, it had originally been set up by the UK government to manage the financial affairs for British colonies and for businesses that were involved in the British colonies. But, by the late 60s, large parts of the empire were declaring their own independence. The empire itself was essentially crumbling. And so, the Crown Agents' role, it was diminishing. Its funding was declining.

[00:03:10] And so, management, they approved a new financial division to make money on its own account. But, it was a complete shit show because these were bureaucrats. They had very little knowledge or expertise in the financial markets. And they were giving out loans to people without any real proper due diligence.

[00:03:33] And it would appear that plenty of shady stuff was going on between Crown Agents and the people it was lending to. It was all very murky. So, between 1968 and 1973, the Barclays were borrowing heavily from the Crown Agents. They were buying hotels. They were buying commercial properties across central London. And by 1973, they owed Crown Agents £9.5 million, which was a huge sum back then. About £120 million in today's money. But, massive back then.

[00:04:03] And then, in 1973, Britain's property market crashed. And the Crown Agents, they collapsed under the weight of years of reckless lending, mismanagement. And the scandal, it ultimately cost British taxpayers more than £175 million. That's about £1.2 billion in today's money. It became one of the biggest scandals in Britain in the 1970s.

[00:04:28] Now, the Barclays, they should have been one of the biggest casualties from this collapse. But, instead, somehow, they managed to walk away with £6.5 million of their debt, effectively wiped out. And that allowed them to avoid financial ruin. Now, for decades, there was no suggestion at all that the brothers had done anything wrong here.

[00:04:53] But, in 2024, the Economist magazine examined more than 10,000 previously sealed documents. And they argued that the official investigations had failed to uncover the full story. And according to the Economist's own investigation, that £6.5 million, it didn't simply disappear. The magazine alleged that the Barclays secretly used a company they effectively controlled

[00:05:20] to buy back their own debt from Crown Agents for a fraction of what they owed, effectively wiping out the debt in the process. Now, the Economist concluded that there was every reason to believe fraud may have occurred. However, I got his date as a small podcaster with very little resources. And also very mindful of the fact that the Barclays family are very quick to go to the courts.

[00:05:47] It's important that I know that neither brother was ever charged with any offence in relation to this. So, anyway, having survived the collapse of their biggest lender, throughout the 70s and the early 80s, the brothers, they were continuing to buy and sell property and they were doing very, very well for themselves. But they're not in the big leagues, yes. That all changed in 1983 with Ellermann Lines.

[00:06:12] So, for a bit of background, Ellermann Lines was over 100 years old and it was involved in shipping and brewing. But by the early 80s, it was in big trouble. Global shipping was in a deep slump. And the losses from the shipping business, that was dragging down the rest of the company. So, it was making the company look far less valuable than it actually was. And also, very, very crucially, a lot of the property that Ellermann owned

[00:06:39] was valued on the company's books at historic or outdated values. So, in essence, where the Barclays saw this struggling shipping company, the Barclays saw a profitable brewery with hundreds of pubs, lots of other very, very valuable property in its portfolio. They saw huge opportunity. Now, at this time, the brothers, they're living as tax exiles in Monaco. And that's another thing about the Barclays.

[00:07:06] They spent their lives avoiding paying any tax. And it just so happens that one of their neighbours in Monaco is Lady Esther Ellermann. She's the founder's daughter, major shareholder, and the Barclays befriend her. And then, through their friendship with her, she arranges a private meeting with David Scott. He was the non-executive chairman of Ellermann Lines.

[00:07:31] And now, this is where we get a really good idea of how the twins operated. So, they offer David Scott around £45 million for the company and promise him that he'll remain as non-executive chairman of the company once the deal is done. But, he has to follow two conditions. First of all, he must grant them exclusive negotiation rights.

[00:07:56] And second of all, he has to keep the talks strictly confidential. In other words, the rest of the Ellermann board is kept in the dark about these negotiations. Scott agrees. But, the moment the deal is completed, a lawyer, acting on behalf of the Barclays twins, hands Scott a letter demanding his resignation because they accuse him of indiscretion and breach of confidentiality.

[00:08:26] Okay, so, let's just get our head around this. Because the twins were sacking Scott because he'd conducted secret, unauthorised negotiations behind his own board's back. Which is wrong, of course. But, it's exactly what the twins had asked him to do. So, in other words, they'd engineered the very conditions they were now using to remove him. I mean, that is just sneaky as hell.

[00:08:55] Now, once they get control of the company, the twins, they move very fast. The shipping operations, they sell them off to the management and this paid off some of the debts. But, it also, of course, got rid of what was the heavy loss-making division of the company. Then, the property portfolio, that gets redeveloped and sold off piece by piece. And then, in 1989, they sold the brewing division of the company for £248 million. That's more than five times what they paid for the entire company.

[00:09:25] So, they make a net profit in the hundreds of millions of pounds. And so, this was the deal that not only made them their first really huge windfall, but it also announced them to the City of London. In other words, this was the deal that built their reputation. And other lucrative deals followed. There was a guy called Octave Botner. He's this very, very colourful guy. I'm definitely going to try and do an episode on this guy. Anyway, Botner had built one of Britain's biggest car businesses,

[00:09:55] importing Nissan cars. But then, in 1994, the Inland Revenue, they accused him of a £97 million tax fraud. And Botner fled to Switzerland. Now, most other people wouldn't touch a business caught up in a tax investigation and owned by a fugitive. But not the Barclays. As one observer said of them, and I love this quote, I think you could say they specialised not in distressed assets, but in owners in distress.

[00:10:24] And so, the Barclays, they travelled to Switzerland, and they negotiated a deal with Botner that's been shrouded in secrecy. The final price tag that they paid is anything from £75 million to £200 million. No one knows the exact figure. And again, the Barclays did what they did with Ellermann. They broke it apart. They sold off individual dealerships and plots of land piece by piece. Then they packaged up the actual dealership business, selling it off a few years later. And overall,

[00:10:54] while the profits from this deal are unknown, it's believed they got a massive return on their investment. So by now, the twins, they built a reputation as very private, very secretive, but also very, very savvy. And they would now go on to leverage this reputation to go on a spending spree, but mainly using borrowed money. But before we get to their business empire that they built after this, and how it all came crashing down,

[00:11:23] we need to take a bit of a tangent. We need to look at how the brothers lived at this stage, because it's all a bit strange. So I already mentioned that they were living in Monaco. The twins were married already at this stage. David had three sons. Frederick had a daughter. And both families lived in the same penthouse in Monaco. And also both twins worked out of that same penthouse. And then in 1993, they spotted an ad in the Country Life magazine

[00:11:53] for a small private island called Breckow. This is just off Sark Island, which is a larger island in the Channel Islands. And despite the islands being under British crown, it still allowed the brothers to retain their non-UK tax taxes, so they still didn't have to pay any tax. So they bought the island and they built this sprawling castle with like 100 foot granite walls, with battlements, with two swimming pools, a helipad, there were 20 decorative cannons,

[00:12:22] and it's estimated to have cost them about 100 million pounds. And every morning at 11 o'clock, each twin had his own butler dressed in white gloves and a white jacket who would like their cigars before serving them drinks in crystal glasses engraved with their initials. And there were stories of marble roads, of a Rolls-Royce driving them the 200 metres from the front door of their castle to their helipad. Now, their move to Breckow

[00:12:50] was all about privacy, about control and power. I mean, basically, they wanted to be literally the kings of their own islands, you know, all powerful in their own little kingdom. But the problem was that although they owned Breckow, the tiny island was governed by its much larger neighbour, Sark, which still operated under this centuries-old feudal system. And that didn't really sit well with the Barclay twins.

[00:13:20] So, they leveraged their wealth. They bought up most of the commercial property on Sark, including four of the six hotels and up to hundreds properties overall on the islands. And they spent years trying to free themselves from Sark's authority. They argued unsuccessfully in court that Breckow wasn't really part of Sark. They repeatedly tried to buy the island's feudal lordship. And they also repeatedly took local residents to court

[00:13:49] over disputes that many saw as really petty and vindictive. And then, when Sark eventually decided to get rid of its old feudal government system and hold its first democratic elections in 2008, the twins put a lot of money into backing their own hand-picked candidates. But after every single one of their candidates that they backed failed to win, the Barclays, they responded by shutting down their hotels and all their other businesses on the island

[00:14:19] and putting around 140 locals out of work before later rehiring many of them. But it just shows how petty and vindictive and just mean they were. Like it was pure bully boy tactics. And I really recommend that you Google Panorama Barclay twins. And there's this great documentary just 30 minutes long that gives you a really good idea as to how the twins operated in Breckow

[00:14:48] and the damage they caused to the locals. It's just, it's mind-boggling. Anyway, back to business on the mainland. They bought their first real trophy asset in 1995 when they bought the Ritz Hotel in London for £75 million. And it was this purchase that really announced the twins to the public. In 2002, they bought Littlewoods, this is a Liverpool-based retail company for £750 million and then merged it

[00:15:17] with the GUS cash-out business that they bought for £590 million. They also bought property and hotels all around London and Monte Carlo. And then we come to another great example of the Barclays buying a distressed owner not a distressed business. So the owner in this deal is Conrad Black and the business is the Telegraph newspaper group. So this is in 2004 and Black had been forced out of the media empire

[00:15:46] that he had built up and he was under investigation for allegedly siphoning off millions of dollars from the company and I will do an episode on Black. Anyway, his legal fees were growing and growing and the threat of criminal charges were hanging over him so he needed cash and he needed it fast and this is exactly the type of situation or opportunity that the Barclays thrived on. So they approached Black and they struck a secret backroom deal but instead of buying the Telegraph

[00:16:16] itself they agreed to pay £260 million for Hollinger Inc. This was Black's own holding company which controlled the Telegraph and that's important because by buying Black's company Hollinger Inc. rather than a Telegraph directly the £260 million would go to Hollinger Inc. The company Black controlled and this of course would help solve his own financial problems but meanwhile the Telegraph's other shareholders who would have benefited from

[00:16:46] a normal sale of the newspaper they were effectively bypassed but fortunately the scheme it unravelled because Black's boards discovered what was going on and they sued to stop the deal and a Delaware judge then blocked the transaction and in his judgment he criticised the Barclays for being in his own words less than fully candid over their role in the negotiations. So as a result the Barclays were forced

[00:17:15] into the very auction that they had tried to avoid now they eventually won the bid for the Telegraph group but they had to pay £665 million remember they had offered Black and had agreed a deal with Black for £260 million so a massive increase. Now once the Barclays twins got control of the Telegraph a lot of people in the media business they were kind of scratching their heads wondering what were these guys doing buying this business they weren't like Rupert Murdoch they weren't newspaper men

[00:17:45] they didn't really seem particularly interested in journalism either and to be fair they really did keep out of the newsroom editors were given free reign although everyone did know where the brothers stood politically they were staunch Thatcherites in fact when Margaret Thatcher left Downing Street with according to one advisor no money in the bank the Barclays gave her a house to live in after she was diagnosed with cancer they later offered her a permanent suite in the Ritz where she lived until her death

[00:18:15] so I mean through that action alone you can see that you know these weren't totally heartless guys now politically they were also deeply Eurosceptic they threw their weight behind the Brexit campaign so owning the Telegraph Group it wasn't really just as an investment it was a trophy I suppose much like the Ritz and it gave the Barclays a seat at the very heart part of Britain's conservative establishment and they continued to buy other trophies especially hotels like in 2011

[00:18:44] when they spent £700 million to buy Claridge's the Connacht and the Berkeley hotels in London so by now the Twins were very very well known publicly and they had become regulars in the Sunday Times Rich List and look I know I mention the Sunday Times Rich List a lot it's because when I was growing up I used to love it I think it might have been one of the drivers that got me interested in business because I just loved reading about how the people

[00:19:14] on these lists made their money the businesses they were involved in and the stories and an awful lot of the time the scandals and the strategies behind these businesses anyway in 2012 the Rich List had the Barclays net worth at £2.25 billion and now everything up to this point in the story is about two brothers who were joined at the hip building an empire together but as we shall see it wasn't all hugs and kisses between them because what comes next

[00:19:43] is the story of how it all falls apart and the roots of the fallout they go back to the mid-1990s because up until this point the Twins effectively own everything 50-50 but they're getting a bit older they're thinking about succession and David's health at this stage it starts to decline and he was worried that he might not have long left to live and so he asks Frederick to do something for him before he dies he asks Frederick

[00:20:13] to give half of his 50% share to David's three sons Aidan Howard and Duncan so the idea was simple when the brothers were gone the family empire would be divided equally between the four heirs Frederick's daughter Amanda would have 25% and David's three sons would each have 25% so for Frederick this wasn't an easy decision giving up 25% of his stake in the business and apparently things got very heated

[00:20:43] during these discussions and according to a witness they actually ended up punching each other on one occasion while they were discussing this but as previously mentioned David he was the elder twin by 10 minutes he was the more dominant one and he eventually gets his way and Frederick agrees to his proposal he would later call it the biggest mistake of his life because by giving away half of his share Frederick he'd effectively handed David's side

[00:21:12] of the family control while his daughter now at 25% David's side of the family his three sons had 75% so now we jump forward to 2013 and David who didn't actually die in the mid 90s in fact he went on to remarry and he had another son called Alistair from his second marriage and naturally enough David now wants Alistair included in the family business and he wants to redistribute some of that 75%

[00:21:41] held by his three older sons so that Alistair his new son gets a share as well now just to be clear David wasn't asking for Frederick and Amanda his daughter to give any of their share any of their 25% her share wouldn't change at all he simply wanted to redistribute the 75% on his own side of the family but see there's a problem here because the twins had structured their family trusts so that neither brother could make a major change

[00:22:11] like this without the other's approval so in effect Frederick had the power to veto David's want to redistribute the 75% between his three sons and Frederick said no to this proposed change I mean why since it didn't affect him or Amanda's 25% at all well some people suggest that Frederick probably still resented how David coerced him into handing over 25% back in the 90s

[00:22:41] other people close to the family say that Frederick was just very close to his older nephews because he had worked alongside them for years because by this stage in 2013 the nephews were running the business Frederick and David had retired from the business and Frederick didn't have a close relationship with David's newer younger son his nephew Alistair whatever the reasons as to why Frederick said no this is the moment that the relationship between the twins really starts to

[00:23:10] deteriorate because a year later in 2014 at 80 years of age Frederick left their castle in Breckow moved to London and for the first time in their lives the twins were no longer living together now around the same time their businesses start to come under pressure their logistics business is losing over 100 million pounds a year Little Woods their retail business it gets caught up in this PPI mis-selling scandal this was a huge consumer scandal in the UK

[00:23:40] it involved banks and retailers and Little Woods ended up having to pay more than half a billion pounds in compensation profits at the Telegraph newspaper group they're falling every year and it forced the family to pump 390 million pounds into the business and while Frederick isn't directly involved in running the businesses now it's mainly David's sons he starts asking questions about the debts and the more he digs into this the more he suspects he's not being told the full story

[00:24:09] and look with all these types of family disputes it's very difficult to know who's telling the truth like Frederick said that he was shocked by the level of debt businesses had and I find that kind of surprising given that he and David had built much of the empire on borrowed money anyway he's concerned enough to get involved again and although David's side of the family now controls three quarters of the family businesses the governance of the Ritz Hotel hadn't been

[00:24:39] updated to reflect this so it left a loophole that Frederick exploited and using this loophole in June 2019 he appointed his daughter Amanda and a close advisor to the Ritz boards while David's sons were removed so it was effectively a boardroom coup then just three months later reports emerged that the Ritz is going to be sold I'm guessing this was because Frederick needed the money because his wife had just left him that year and had started divorce proceedings

[00:25:08] but look whatever the reasons David's side of the suddenly had no say over the future of the Ritz Hotel one of the family crown jewels they were now finding out that Frederick was probably in the process of trying to sell it and if you're thinking man these family rows in business they can really get nasty it's about to get much much nastier because at the Ritz Frederick had this private room called Servitory and this is where he'd spend his afternoons smoking cigars

[00:25:38] holding confidential meetings in late 2019 his nephews plant a bugging device disguised as a plug adapter in the room and then they hire a private investigations firm to transcribe the recordings over the next two months they record and capture more than 94 hours of Frederick's private conversations with bankers lawyers trustees and friends and Frederick then starts to notice

[00:26:08] that his nephews seem to know things that they shouldn't so he gets people to install hidden cameras into the conservatory and bingo the footage which you can see on YouTube it shows one of his nephews caught red-handed handling a bugging device now initially Frederick and Amanda decide to keep the whole thing within the family so they don't go to the police but that proves to be pretty costly because

[00:26:37] unknown to them David's sons had quietly taken legal control of the company that owned the ritz and within days of Amanda revealing the bug to them they used the power that they just now have to remove her from the board and so of course Frederick and Amanda are furious and so they sue their nephews and others involved in the bugging and this is a civil case and as this is rumbling on Frederick's nephews who now have control of the Ritz

[00:27:06] they sell it for 800 million pounds and this leads to another huge and very public row with Frederick telling the press that he had lined up bids of over a billion pounds anyway just as the Ritz was sold in March 2020 COVID hits and now the twins estranged by the lawsuits and separated by lockdown restrictions these guys who are once inseparable they never speak in person or never see each

[00:27:36] other again because on January 10th 2021 David died of pneumonia brought on by COVID-19 and Frederick didn't attend the small funeral service in Bracow instead he released a really sad and I think a very poignant public statement it was a great journey in everything we did the good the bad the ugly we were twins from the beginning until the end he was the right hand to my left

[00:28:06] and I was the left hand to his right we'll meet again and look as I'll probably say at the end of this show it's hard to feel much sympathy for the twins but I really find that statement and the fact that they never made up I just find it heartbreaking now thankfully for the family in June 2021 a truce was declared the civil case was settled and both sides issued a joint statement we are pleased that

[00:28:36] as a family we can put this difficult period behind us and now look forward to our future together but in fairness there was very little to look forward to because by 2023 Frederick and the entire Barclay family were in dire straits financially Frederick was threatened with a prison sentence for failing to pay his ex wife a court ordered £100 million divorce settlement and he managed to avoid jail by arguing that the family businesses were

[00:29:05] running out of money and that he just didn't have the funds like how could this happen how could laid bare the fact that most of the Barclays empire had been built almost entirely on this and since then since 2023 the banks and the

[00:29:35] lenders they have been aggressively calling in their loans over the past two years the family has lost control of virtually every business in their portfolio bankruptcy proceedings were issued against them falling into disrepair they've been on the market for years now they're not even able to sell them today Sir Frederick is 91 years old and the empire that he and David had spent more than 50 years

[00:30:05] building it's gone and of course also gone is Davis his twin who he'd been joined at the hip with for most their lives and their last few years consumed by a bitter feud and look I want to feel sorry for them but it's hard to because here's the thing about the Barclay twins because they were so private because they gave no interviews it's almost impossible to get a handle on who

[00:30:48] pretty picture like secretly and underhandedly buying back their own debt at a heavily discounted rate from the Crown agents in 1972 and in doing so screwing over the British taxpayer double crossing the non-executive chairman of Ellermann lines to land their first major deal intimidating and suing the residents of Sark in a bid to control the island and then shutting down the businesses on the when their candidates lost the election like so petty so vindictive

[00:31:18] trying to buy the telegraph group behind the boards back and then building their fortune on businesses based mainly in Britain like proclaiming themselves to be as British as beef by paying not a penny of tax to the country they claimed to champion so I mean yeah the Barclay Twins and their story it is one of tragedy but as I said I find it very hard to feel any sympathy for them

[00:31:47] anyway whatever your thoughts on the twins they do make for a great business story and that brings us to listeners emails and this story story you story email me

[00:32:17] at info at gbs pod dot com all the best folks