Branson: Behind the Mask

by Bower, Tom

  Prizes naturally made Branson feel special.

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  Virgin’s Crime: The Trial

  Branson’s genius is to blur and bury jarring inconsistencies. To the public, he appeared as the billionaire sponsor of a Formula One team, the owner of exotic islands and the master of a global empire. His status was enhanced by Virgin publicists generating a stream of stories and photographs illustrating his relationship with celebrities. ‘Kate Middleton turns to Sir Richard Branson for advice,’ was a newspaper caption in August 2009 highlighting his intimacy with the future queen not long before the announcement of the royal engagement. A photo taken for former South African president Nelson Mandela’s ninetieth birthday showed Branson alongside Robert De Niro, Oprah Winfrey, Will and Jada Pinkett Smith, Naomi Campbell and Neil Diamond. ‘It’s a fantastic halo’ effect, he admitted.

  That coup was followed by photos of Branson alongside Queen Noor of Jordan. Together, they had launched Global Zero, an organisation dedicated to eradicating the world’s nuclear weapons within the next twenty-five years. Shortly after, there were photos of Branson visiting Darfur in the Sudan with Jimmy Carter, the former American president and a leading Elder, a member of the global advisory group sponsored by Branson. The journey of an elderly politician, an ageing hippy and Mia Farrow was planned, said Branson, ‘in solidarity with people in Darfur’ to highlight the famine and civil war. The journey ended in disarray. The local government was irritated by the outsiders’ interference, and the ex-president was manhandled. In the years since the al-Qaeda attacks on New York and Washington, the invasion of Iraq and the bombings on the London Underground, the antagonism between Muslims and Christians like Carter had grown. Angered that his group of self-appointed ‘civilisers’ were treated without respect, Branson committed himself to a three-day fast in sympathy with the suffering Sudanese. ‘The Elders’, he said, ‘are in a position of moral authority and respect and play a key role in world peace.’

  Proud of his creation, Branson was blind to Carter’s eccentricity. The former president was proposing to end strife in ‘the Holy Land’. Israel, urged Carter, should negotiate with Hezbollah and Hamas, whom he called ‘peace-loving organisations’. Since the two groups regularly organise terrorist attacks against Jews and deny the Jewish state’s right to exist, Carter’s prejudice was unlikely to win sympathy among Israelis. The resentment towards him baffled Branson, who praised ‘the beauty of the Arab Spring as inspirational’.

  Ignorant of the complexities of the Middle East’s torturous conflicts and the centuries-old religious wars between the Muslim sects, Branson had become dismayed by politicians. In his opinion, they were a transitory breed incapable of improving the world. He genuinely believed that sticking Virgin’s label on a discredited former president could influence international statesmen. Eric Bost, the American ambassador in Pretoria, reported to the State Department in 2007 that Branson was participating in discussions led by Nelson Mandela to offer Robert Mugabe, the president of Zimbabwe, £6.5 million if he retired immediately. Branson denied Bost’s report, but it was not inconsistent with his conviction that government should be entrusted to entrepreneurs blessed with decades of experience. He prided himself on his abilities but preferred to ignore the public’s expectation that politicians behave with transparency. He thrived on ambiguity.

  Secrecy had always been Branson’s preference. Ever since 1969, when he had concealed Virgin Records’ true profits from some of his associates, he had guarded his finances in offshore companies. Over the years, he had also ensured that his cabal of executives, especially Gordon McCallum and Stephen Murphy, rarely emerged from the shadows, yet the contrast between his clandestine financial management and his political gestures passed unnoticed among the admiring public. Branson was accepted on his own terms. Even when his ventures faltered, his halo remained fixed. He was universally hailed as an outstanding businessman, even when cracks exposed his empire’s financial vulnerability. At this stage, Virgin Atlantic had soaring losses.

  The recession was damaging all the major airlines. The number of lucrative business-class passengers had fallen. Virgin Atlantic was vulnerable in July 2010. Without the benefit of BA’s disasters at Terminal 5, the £36 million profits in 2008 turned in 2009 to a record loss of £132 million. To survive, Branson had to forget his homily about caring for Virgin’s employees. He cut flights, reduced his staff by 10 per cent, delayed the delivery of new aircraft and did not announce any further renewable-fuel experiments. His airline had shrunk by 20 per cent. Many blamed Steve Ridgway for missing too many opportunities. The revelation of the airline’s problems coincided with the start of the trial against the four BA executives for conspiring with Virgin Atlantic’s senior staff to fix the Passenger Fuel Surcharge. The trial was certain to dominate the media, and Ridgway was at the heart of the prosecution case, giving Branson good reason to be nervous.

  Throughout his career, Branson had concealed his methods of operating. He had lied about his purchase-tax fraud – in his version the fraud was perpetuated ‘only three times’, whereas it had continued for nearly a year. He had said, when victorious in the Camelot libel trial, ‘My mother always taught me to tell the truth,’ yet in his own books he advised aspiring disciples, ‘I have always enjoyed breaking the rules.’ Ruthlessness camouflaged by smiles had been a good weapon against competitors. In Screw Business as Usual he had written, ‘Do good, don’t do harm. Give back if you can’ – a homily that was no protection when Virgin’s executives confessed to a criminal conspiracy to fix the fuel surcharge. Their confession was matched by BA’s admission of guilt in America and agreement to pay a combined $300 million fine for the cargo and fuel-surcharge cartels.

  With Virgin’s and BA’s admissions of criminality, the case for the prosecution in London appeared to be watertight. Steve Ridgway had signed a statement that read, ‘I apologise unreservedly for my involvement in this case.’ Although he denied having ‘direct contact’ with BA, he did admit encouraging Paul Moore, Virgin Atlantic’s public-relations officer, to arrange the announcement of the surcharge with BA’s executives. ‘I did not stop the discussions,’ Ridgway said. Despite his confession, Branson never suggested that his job was in jeopardy. Some assumed Branson’s benevolence was influenced by a degree of prudence. The prosecutors in Washington and London believed that the emails between Ridgway and Branson confirmed that the airline’s owner was aware of Virgin’s secret discussions with BA. Richard Latham QC, the British prosecutor, intended to name Branson as a participant in the conspiracy during the trial, as did lawyers for the defence. Virgin’s immunity agreement compelled the executives to give unequivocal support to the prosecution, but although Branson had been put firmly in the frame, his inability to recall receiving Ridgway’s emails and his professions of ignorance about the discussions with BA posed a problem for Ali Nikpay, the Office of Fair Trading’s legal director. Potentially, Branson’s testimony could confuse the jury, and hostile cross-examination could threaten his reputation, so in the end Nikpay decided that he should not be called as a witness. Branson had good reason to be grateful. At that moment he was still hoping to buy Northern Rock, and Virgin had submitted an application for a banking licence. The preliminaries of the criminal trial due to start in April 2010 would jeopardise that breakthrough. However, beyond public view, the prosecution’s case was struggling.

  The defence noticed that Nikpay had failed to commission a report on the pricing of airline tickets. Nor, the defence lawyers realised, had the prosecution commissioned an expert to explain to the jury the financial consequences of the alleged cartel. Without evidence of financial loss, submitted the defence, how could the prosecution establish a crime? ‘A staggering omission by the OFT,’ a defence lawyer told the judge, Mr Justice Owen.

  By contrast, the defence had obtained expert evidence suggesting that the prosecution was misrepresenting how the surcharge had affected ticket prices. The surcharge, according to this evidence, was never si
mply added on to fares. Rather, it was another component churned by the computers as they endlessly recalculated a myriad of prices. The consequence of this evidence was critical: the prosecution would be pressed by the defence to prove that the surcharge had actually cost an individual passenger an identifiable amount of additional money.

  There was another complication that the OFT ignored. BA had applied surcharges to many of its 219 routes, but the airline competed exclusively with Virgin Atlantic on only three routes to the Caribbean. The extent of the alleged cartel would have been minuscule. The OFT had apparently also failed to take into account the fact that all of BA’s bigger competitors were excluded from the alleged cartel, so how could price-fixing operate?

  Most importantly, a crime would have been committed only if BA and Virgin had made a binding agreement to restrict their freedom to price tickets. Yet throughout that period, the two airlines were competing furiously against each other on prices. Every lawyer in the courtroom noted the judge’s displeasure at the OFT’s misunderstanding of airline finances and competition laws. And then it got worse for the prosecution.

  From the outset, the four accused had insisted that all of BA’s surcharges had been agreed internally before any of the conversations with Virgin’s executives had occurred. BA’s executives could not understand how innocuous conversations about the timing of public announcements could be construed by Branson and Virgin as an admission of a criminal cartel to fix prices. The explanation, BA hoped, would be found in Virgin’s internal emails. The disclosure of Virgin Atlantic’s emails and documents during the period of the alleged cartel was critical to the defence. Under British law, the defendants were entitled to read all of the airline’s relevant communications, but access to them depended upon the OFT, Virgin and Herbert Smith, the airline’s solicitors.

  During the two years before the trial, the four accused claimed to have become exasperated by the reluctance of the OFT, Herbert Smith and Virgin to disclose critical emails and documents. According to the defence’s claims, Virgin was refusing to divulge what it called ‘core legal advice’, including the statements made by its executives to their lawyers. Among those statements, BA suspected, were protestations of innocence by Virgin’s executives.

  In total, each of the three executives had made nine successive statements. In sharpening their memories, they had changed their vague testimony to precise admissions of guilt in a criminal conspiracy. Any inconsistencies in those statements would be dream material for a defence lawyer’s cross-examination. The most important was the one provided by Paul Moore, the cornerstone of the prosecution and due to appear as the first witness.

  To Moore’s initial surprise, he had been told by lawyers representing the US Department of Justice and Virgin that his conduct had been illegal. He eventually accepted his lawyers’ advice that his conversations with his counterpart at BA, Iain Burns, had materially influenced the price of airline tickets, which amounted to criminal price-fixing. That belief, he understood, was essential in supporting Virgin’s immunity agreement.

  BA argued that the legal advice given to Moore was mistaken. Virgin’s executives, claimed a defence lawyer, ‘thought it was in their interests to make the case against British Airways stronger, and that’s why they were persuaded to say what they said’. Virgin’s bid to retain its immunity was, according to the defence, compounded by the OFT’s ‘extraordinary degree of deference to Virgin’s interests’. In other words, the OFT relied on Virgin’s own investigation to confirm that a crime had been committed.

  By the closing stages of the pre-trial hearings, Ali Nikpay had yet to provide the defence with copies of the twenty-seven statements signed by Virgin’s three executives for the American Department of Justice apparently admitting their own dishonesty. The absence of those statements alienated the trial judge. He told the OFT and the prosecutor that the BA executives could not get a fair trial without reading the evidence. Access to the statements depended on the Virgin executives waiving their privilege of confidentiality. Herbert Smith’s letter to Moore asking for permission to hand his statements to the defence was posed in language which, the judge subsequently noted while approving a defence lawyer’s argument, had shown ‘cynical mis-compliance’ with the judge’s own rulings about the evidence.

  Virgin was faced with a dilemma. Regardless of the trial’s outcome, the company’s reputation would be damaged. The harm could be minimised by ending the trial in one of two ways: first, by Virgin executives denying in their testimony that they had acted illegally; and second, by releasing their inconsistent statements. Taken together, the prosecution’s case would be weakened.

  Just before the trial started, Virgin agreed to show the defence the twenty-seven statements. Herbert Smith, however, declined to disclose the documents they had used in their interviews with Branson in March and April 2006. Branson’s own statement had been largely redacted. The defence’s quest for Virgin’s documents assumed even greater importance on the day the trial formally started – 27 April 2010.

  On the first day, Branson was put firmly in the frame by the prosecutor, but once again the media’s generous treatment of Virgin Atlantic smothered the prosecutor’s allegations and the references to Branson were not highlighted in the following day’s newspapers. Until the end of the week, Latham’s address to the jury followed a predictable course, but then, after the prosecutor and the defence lawyers had completed their speeches to the jury, a series of revelations began to destabilise the trial. The judge was compelled to delay proceedings, exclude the jury from the courtroom and listen to the defence lawyers’ bitter accusations about reputations, motives and suspicious conduct.

  During the two-year campaign by the defence lawyers for access to more of Virgin’s internal records, the airline and the OFT replied that software glitches had prevented the computer experts from retrieving ‘some corrupted’ messages. The OFT’s lawyers, after mentioning the huge harvest of data already disclosed, dismissed the few missing files as irrelevant. Surprisingly, no one precisely identified those absent files.

  The first hint of an unusual course of events was the disclosure by Herbert Smith during the first week of the trial of eleven significant, previously unseen documents. Each document had been requested two years earlier. ‘This is deeply disquieting,’ said the judge, after hearing that the paper documents had been ‘on the top of the pile’, not ‘in the back of the filing cabinet’. Just before the lawyers ended that day’s arguments, the prosecution announced that a new batch of emails had been disclosed to the defence that afternoon. Everyone assumed the following day would be difficult because this correspondence referred to the foundation of the prosecution’s case.

  Richard Latham had focused on the conversation between Moore and Burns on 21 March 2005 about another surcharge increase. According to Moore’s statement and Virgin’s version of events, Virgin had been discussing an increase of its own surcharge by £3 or £5. Ridgway had told Moore to telephone Burns. Moore obeyed and opened with the words, ‘This is one of those conversations we’re not going have.’ Moore described how he revealed to Burns that Virgin intended to raise the surcharge by £5. According to Moore’s evidence, Burns instantly replied, ‘You might well want to think about going up by £6.’ His swift answer reflected BA’s own intentions.

  ‘That sounds good to me,’ said Moore. ‘I’ll expect we’ll do that then.’

  Critically, the prosecution emphasised to the jury that the public had paid £6 rather than the £5 originally proposed by Virgin because Burns had influenced Moore. In other words, the conspiracy between the airlines had cost the public real money. An email disclosed at a late stage appeared to confirm the prosecution’s case.

  Timed at 1.46 p.m. on 21 March – after Ridgway had spoken to Moore, but before Moore spoke to Burns – Moore had emailed his team that Ridgway had decided to impose an additional surcharge. The message included his proposed press statement: ‘Virgin Atlantic has reluctantly decided to increase
its fuel surcharge by £5 … from Tuesday 22 March.’ As the prosecution emphasised, just twenty-nine minutes later, at 2.15 p.m., Moore telephoned Burns to seek agreement for a joint announcement.

  But a newly disclosed email emanating from Moore’s department contradicted the prosecutor’s version. The new correspondence showed that Virgin Atlantic had decided to increase the surcharge by £6 before Moore telephoned Burns. At exactly 1.56 p.m., ten minutes after Moore sent his internal email, Anna Knowles, a member of his team, sent an email disclosing that Virgin had decided to fix the surcharge at £6 – in other words, the same amount as BA, and that email was sent before the conversation, which the prosecution argued amounted to collusion. Nineteen minutes later, Moore spoke to Burns. To the judge’s evident surprise, the defence alleged that the prosecution and Virgin had discovered the new email in 2008 but had not revealed it to the defence for two years – after the trial started. In its defence, Virgin claimed that Knowles’ message was discovered only by accident and her original email was missing. According to Virgin, Knowles’ message was a copy which had been forwarded to others in the airline’s headquarters by Polly Hardiman, another member of Moore’s staff. Therefore, it could not be verified as genuine. That explanation was dismissed by the defence. Nevertheless, the disclosure of the new email dispatched a torpedo towards the OFT’s case. Other conduct by Virgin and its lawyers now took on a more colourful meaning so far as the defence was concerned.