by Harry Browne
Lest the gutsy campaigners who drew U2’s tax avoidance to the public’s attention have been in any doubt about where they stood with Bono’s high-profile ONE campaign, its executive director Jamie Drummond wrote to the Irish Times from London, spelling out his views (without mentioning, for the benefit of those who might not be aware of the provenance of ONE, that Bono was effectively his sponsor). In a short letter defending both Bono and the Netherlands, he managed to call the protest ‘utterly wrong’, ‘misguided’, ‘deeply unfair’, ‘deeply inaccurate’ and an example of ‘self-defeating PR stunts’.84 Hard-pressed activists and the struggling NGOs behind them would have been forgiven for reading ‘self-defeating’ as a threat from such a big player in the global anti-poverty business.
Tax avoidance has, nonetheless, attached itself to Bono like no other negative, as when protesters at Britain’s famed Glastonbury music festival in 2011 inflated a giant balloon with the question ‘U Pay Tax 2?’ A spokesman for the Art Uncut campaign said: ‘U2’s multimillion-euro tax dodge is depriving the Irish people at a time when they desperately need income to offset the Irish government’s savage austerity programme. Tax nestling in the band’s bank account should be helping to keep open the hospitals, schools and libraries that are closing all over Ireland.’85 The protest was quickly shut down by festival security, with Bono offering a typical response: ‘I’m all for protests. I’ve been protesting all of my life [sic]. I’m glad they got the chance to have their say. But, as it happens, what they’re protesting about is wrong.’86 Presumably he meant they were wrong to protest.
In 2012, when Burmese leader Aung San Suu Kyi came to Dublin, Bono was at the forefront of the welcome, leading Bob Geldof to joke from the stage at a welcoming concert that after an afternoon with Bono she might prefer to revert to house arrest. But this sort of joking gave way to a more bitter attack on Bono from singer Sinead O’Connor, who blamed Bono (whom she called ‘Bozo’) and Geldof for inviting her to sing ‘Nothing Compares 2 U’ at the Aung San Suu Kyi concert only on the condition that she refrain from making any statement from the stage. (There was no evidence, she admitted later, that this silencing instruction came from either or both of the men.) O’Connor refused to appear at the concert, and one of her many angry tweets on the subject declared, as her ultimate punch-line: ‘I pay my taxes in Ireland Bozo.’87
PROPERTY BARON: THE CORPORATE BONO
Again, U2’s defenders would be quick to correct the implication of the idiosyncratic O’Connor: ‘Bozo’ and the rest of them did indeed pay taxes in Ireland. Still, it is striking that, in all the controversy that has dogged Bono on this issue since 2006, he and his advisers have not seen fit simply to document the extent of his annual contribution to the Irish exchequer. (Bono’s personal taxes, like his charitable contributions, are obviously a private matter, to be made public only if he chooses to do so, and have never been revealed by any journalist.) Perhaps one reason for silence on this question is that such documentation would be far from simple, and might entail explaining exactly why the most profitable band in the history of popular music has been involved in such a litany of loss-making companies; all that red ink coincidentally minimises the profits to be subjected even to Ireland’s internationally low 12.5 per cent rate of corporation tax.
The most common words used again and again by journalists who have attempted to research U2’s ‘financial architecture’ are ‘opaque’ and ‘web’.88 The most well-known company associated with the band is Paul McGuinness’s profitable Principle Management, which has handled the band’s contracts and tours (and those of very, very few other acts) for decades. The key company for the band members for most of U2’s history is another one – not, apparently, the one called U2 Ltd, but its parent company, a holding entity called Not Us Ltd, whose directors are the four band members. Not Us makes payments to the band members and has been described as ‘at the centre of the U2 money web … but only manager Paul McGuinness and a few clever accountants could understand how it functions’.89 The oddly named Not Us first came to prominence in 1995 when the Irish regulator, the Companies Office, threatened to strike it off the companies register for failure to file returns: it was one of several U2 companies thus threatened, including Mother Records, and ‘[t]he band were known to be embarrassed by the publicity surrounding this lapse’.90 In the 1990s, Bloomberg has reported, ‘U2 used nonexecutive directors who were resident in an offshore tax haven to limit the amount paid by the four band members’.91
Bono has had a long list of other company directorships in Ireland, most but not all in conjunction with his bandmates. Some of them, such as his spell as a director of Media Lab Europe – a trendy millennial attempt, funded by the Irish state, to import a version of Nicholas Negroponte’s academic-business partnership for high-tech innovation, the MIT Media Lab, to a location near Dublin’s Guinness brewery – may be largely symbolic and PR-oriented. (In the case of Media Lab Europe, the PR turned ugly quite quickly, but Bono wasn’t really caught in the crossfire as the Irish government bailed out and Negroponte’s crew left town.) However, the list predominantly consists of various U2 entities, some with cool musical and U2-ish names, and others that sound more off-the-shelf: ‘Kitchen Recordings, Lakehaven, Lorijudd Investments, Mother Records, Mother Music … Ravencrest, Remond, Straypass, the Fair City Trust and Thengel’.92
Because of the band’s global reach and structure, the publicly available records of U2’s companies in Ireland tell us only part of the story about their finances, and even less about Bono’s personal money pot. Indeed, the details about what these Irish companies do are not merely baffling, they are also quite thin. Much of the activity of some of these companies appears, to the untrained eye, to have consisted of making loans to one another. For example, the accounts for 2003 show Not Us Ltd owing €4.7 million to U2 Ltd, then described as the band’s ‘master-tape manufacturing subsidiary’.93 (Yes, U2 had a company of their own just to create ‘masters’, the definitive final mix of a record from which copies are then pressed and otherwise copied.) Perhaps the master-tape business had been poor, or maybe it was something to do with this debt, but ‘oddly [U2 Ltd] had accumulated losses of €3 million back [in 2004] … leading to a “fundamental uncertainty” notification from the auditors’.94 The journalist who wrote those words, quoting from the bedazzling accounts of how these two companies alone further kicked money back and forth to each other in 2005, concluded: ‘Confused? Presumably you should be.’95
Corporate matters were somewhat simplified, apparently, after the notorious Dutch move in 2006, when millions of euros in inter-company loans were written off.96 U2 Ltd’s balance moved into the black, and its activity began to be described in its Irish-filed accounts as ‘the creation, protection and licensing of intellectual property’ rather than making master-tapes; its turnover shrank dramatically, from €20 million to €3 million, between 2007 and 2010. Whatever the exact purpose of this company within the U2 empire, U2 Ltd is of some interest because it has visibly paid tax in Ireland on its profits in recent years. In 2009, the year of the biggest Bono tax controversy, it coughed up a not-very-whopping €144,000 in corporation tax: that’s Ireland’s 12.5 per cent corporate-tax rate on about €1.15 million in profits. (By way of comparison, Google Ireland declared €47.5 million in pre-tax profits in the same year.) But this was positively bleeding cash to the taxman compared to what happened in 2010: as U2, the band, were on the largest-grossing tour in music history, U2 Ltd’s profits plummeted to just over €130,000, and thus its corporation-tax bill was a mere €16,500; though this is by no means to suggest that this was the only tax paid that year by U2 and its members, it is damnably difficult to document the rest. Poor old Not Us Ltd, meanwhile, was still in the red, with accumulated losses of €3.8 million, though these losses had been cut considerably since 2005.97 With eight other Irish companies also still doing the band’s business, and further entities passing their money around the world from bases elsewhere, it was and i
s difficult to put these sums in a global context. As an Irish financial journalist explained: ‘Not Us is not obliged to furnish complete accounts, and its abridged returns do not contain details of income and expenditure. It is thought that the majority of U2’s money is stored in trusts and partnerships. Neither the U2 partnership nor Princus Investment Trust, a pension scheme vehicle, has to file public accounts.’98 (There is more about what is known about Bono’s own portfolio and profile as an investor outside Ireland in Chapters 2 and 3: compared to U2’s Irish ‘web’, only partly described above, they are blessedly simple.)
Losing money hasn’t been limited to the various U2 entities that crowd their accountants’ shelves. Among Bono’s most publicly visible loss-makers has been Brushfield Ltd, and then the Clarence Partnership, through which entities he, The Edge and a varying cast of others have operated the Clarence Hotel in Dublin’s city centre since 1992. This stolidly attractive Victorian edifice on the Liffey quayside, made over in the 1930s with Arts and Crafts touches such as the lovely little wood-panelled octagonal bar, was a slowly decaying two-star ‘relic of old decency’ when the surrounding Temple Bar area began to be transformed in the 1980s, first by arty gentrifiers taking advantage of cheap short-lease rents while the city waited to build a bus terminal, and then by tax breaks and other subsidies when prime minister Charles Haughey and his property-developer pals decided to abandon the bus-station idea and build a touristy ‘cultural quarter’. It was probably inevitable in this context that someone would push the Clarence upmarket, reducing the number of rooms, popping a penthouse on top, putting in a fancy restaurant, and creating what would come to be called a ‘boutique hotel’. What is more remarkable is that in the midst of the Celtic Tiger period, one of the most dramatic economic booms the developed world has ever seen – with nearly 10 per cent annual growth for six years in the late 1990s and further rapid expansion up to 2008 – Bono and his fellow investors in the Clarence were somehow unable to make it profitable most years. The exceptions were in 2006, when the tide of red ink was stemmed by the ‘brave decision on the part of U2 to forego the loans given to Brushfield over the years, which – when the various entities are totted up – come close to €18m’, and again in the 2010 accounts when, in another transaction, the hotel was able to waive almost all of a €770,000 lease payment to the Clarence Partnership itself.99 Bono’s partners by 2010 were reduced to The Edge and a controversial duo of property developers, Paddy McKillen and Derek Quinlan.
A man shouldn’t be judged by the corporate company he keeps, but it is an inescapable fact that complex financing for the Clarence companies had been provided over the years by Anglo Irish Bank, which came to be known as a casino for developers and as the foremost exemplar and destroyer of Ireland’s ‘financial architecture’. The bank, described frequently after 2008 as ‘Ireland’s most toxic’ – itself no mean distinction given the reckless lending throughout the Irish financial system – was a favourite source of seemingly bottomless money for property investments. In July 2012, long after the catastrophically indebted bank had been bailed out by the state, then wound up into a state-owned entity called the Irish Bank Resolution Corporation, criminal charges were at last brought against some of Anglo Irish’s senior executives.
There was another kind of architecture at play, however. The Clarence became more than a footnote in Bono’s complex financial arrangements, more than a stylish location that he tried to publicise with tricks like lighting up a cigarette in its lobby in defiance of the then-new smoking ban, when its U2 owners decided to gut both the building itself and a set of older neighbouring buildings to create a much bigger luxury hotel. Designed by that unequalled creator of neoliberalism’s architectural icons, the Briton Norman Foster, the new, improved Clarence would be topped with what looked for all the world like a giant flying saucer that had aimed to land on the river but missed; it was the symbol of Bono’s unearthly ego that Dublin had been awaiting for decades. Neighbouring businesses, initially worried about being dwarfed by the new monstrosity that utterly changed the scale of its immediate streetscape, were largely cajoled into acquiescence, and Dublin City Council approved the project in 2007. The state planning authority, however, was not so sure: its senior inspector called the scheme ‘conceptually brilliant but contextually illiterate’ (this was only half-right, since it mistook exhibitionist flamboyance for ‘brilliance’) and recommended its rejection. Other bodies chimed in opposition, as the Irish Times reported: ‘The Department of the Environment argued that the “exceptional circumstances that might warrant the … demolition of protected structures have not been demonstrated”. Dublin City Council’s conservation architect Clare Hogan said the demolition of all but the facades would render the protected structures “meaningless” .’100 Bono and his fellow developers, for their part, threatened that failure to gain approval might force them to sell the property, which might then be developed as – those of a sensitive disposition should look away now – ‘a down-market budget hotel’.101
The planning board rejected its inspector’s rejection, and in 2008 the plan got the go-ahead by a seven-to-one vote. About the best thing that can be said for the collapse that has decimated the Irish economy since that time is that it has put grandiose plans like the one that would have ruined the Clarence and its quayfront on indefinite hold, with Edge himself admitting early in 2009, in what might have been but probably wasn’t a Yeatsian allusion, that such plans were ‘being looked at with a much colder eye’.102
It wasn’t just the Clarence plan he was speaking of. A couple of miles east along the Liffey, U2 had long been working on another building project with a similar mix of grandiosity, vulgarity and questionable connections. This time, in addition to Anglo Irish, Bono and the boys were working with the soon-to-be-discredited Dublin Docklands Development Authority (DDDA) to produce a skyline-piercing tower nearer where the river runs into the Irish Sea. This is not the place to tell the full story of the DDDA, set up by the state and then, naturally, devoted to the interests of property developers and financiers who were busy ‘transforming’ the old docks area into subsidised and, when the crash came, soon-to-be-vacant offices and apartments. The DDDA was in the happy position of being simultaneously developer, virtual financier (through intimate connections to Anglo Irish) and planning authority for the area under its remit. The consequences have been disastrous.
That was all to be revealed later, however. In the glory days of 2002 the DDDA and U2 announced a swap whereby the band would allow the authority to buy U2’s studio site on Hanover Quay in exchange for a future penthouse studio in a tower, the U2 Tower, at Britain Quay, further from the city centre. At the announcement of the plans, Bono provided a moment that should be treasured by connoisseurs of historical irony: he stood on a platform provided by the DDDA and lamented that, in the past, the city of Dublin had been ‘defaced and vandalised’ through ‘corruption and cronyism’. More observant Dubliners had already begun to notice how well the DDDA fitted that pattern, but Bono was pleased to say that the DDDA people ‘know what they are doing’ and that their plans constituted ‘the best thing for the city’. He added: ‘This city was a very, very beautiful city. Now with imagination it is being remade and the new Dublin is something I’m really excited about.’103 The U2 Tower, he said, would be finished by about 2005.
The fiasco that followed was, in fairness, largely out of Bono’s hands, but it put his remarks about the DDDA’s competence into some perspective. The design of the tower was the subject of an international competition – with Adam Clayton as the band’s man on the panel – that raised hundreds of thousands of euros in entry fees, then fell into disarray with misplaced entries, audits, reviews, and an eventual winner that included among its architects none other than the brother-in-law of Paul McGuinness. And just when it seemed that the outrage about the selection of that design for a sixty-metre-tall twisting tower couldn’t get any more outrageous, the construction tender was awarded to a consortium th
at included the members of U2, which then quietly shelved the selected plan in 2007 in favour of a design two or three times taller, but perhaps a bit simpler in construction – slanting this time, rather than twisting, with an egg-shaped recording-studio on top – from none other than Norman Foster, again.
Then that plan, too, was suspended indefinitely in late 2008. In 2011 the DDDA, under new leadership that was labouring to clean the veritable Augean stables of ‘corruption and cronyism’ that had marked its two-decade history, quietly handed over the vacant U2 Tower site to a new, post-crash state ‘bad bank’ in part-settlement of its debts.104 A few months later the Irish government announced that the DDDA was being wound up.
The U2 Tower debacle didn’t cost Bono and the boys serious money, not by their standards: whereas they wrote off €18 million in loans to various Clarence-related entities, U2’s share in the losses of the company behind the tower were less than a tenth of that amount.105 But in the eyes of much of the Irish public, like the controversies over the Clarence Hotel and their tax arrangements that ran more or less simultaneously, it knocked them off any remaining moral high ground and located them firmly in a metaphorical ivory tower – since they never managed to build the real one. They were just another set of jumped-up property speculators, more of the well-connected bubble-blowers who cost the country so dear, and who got so full of themselves they thought they could leave a couple of U2-shaped scars on their home city and expect people to admire the view. Lucky for us, U2 didn’t get their tower and spaceship; lucky for them, when the crash came, they had other sources of income.
AFTER THE DELUGE: IRELAND IN CONTEXT
Was he humbled? You must be thinking of a different Bono. Of course it helps that a summary of the sort presented in the last few pages is still almost unimaginable in most of the Irish media, where Bono remained an honoured celebrity right into 2013, as this book was going to press.