It turns out that one bank had sent CIB, the Met’s anti-corruption squad, a suspicious activity report in 1999 concerning Page’s transactions. But nothing appears to have prompted anyone in the force to pull the royal police officer aside and see if he was in too deep.
After the dot.com bubble burst, an academic study of trading patterns in American households found that men had traded more than women and did so ‘from a false faith in their own financial judgement’.
Had the Met done its own study of Page’s bank accounts in 2001, anti-corruption officers would have found that he was involved in a new and very high-risk form of gambling where false faith in your own financial judgement often meant huge financial losses.
Worse still, Page was now also gambling with other people’s money.
Chapter 6
The Currency Club
Page nodded to the SO14 officer from inside his Mercedes as the car-park barrier was raised. He liked the sensation of being noticed at work. This wasn’t even his best car. The top end ‘his and hers’ Mercedes were parked on the drive in Essex. This work one was a ‘run-around’ he’d bought for £30,000 from his Halifax share winnings. Still, it didn’t look out of place among all the diplomatic motors.
Armed officers manned the car-park entrance on The Mall because it is part of nearby St James’s Palace, which at the time in 2001 was used for state and ceremonial functions. It was also the London residence of the elderly and not-so-well Queen Mother.
Royal Household staff, diplomats and other dignitaries who couldn’t get into Buckingham Palace are allowed to park at St James’s, some on-duty SO14 officers too, but not for personal reasons. However, for years there was ‘an unwritten rule’ to raise the barrier for wives, friends and family members who fancied a spot of shopping maybe followed by a West End show.6
Page went straight from the car park to the BP canteen where Harry counselled him about a new betting strategy. Page was in the market for one as the dot.com bubble and bath had taught him an important lesson: never again be so exposed in your investments. Spread the risk across a range of betting opportunities.
In March 2001, two months after the birth of fourth son, Samuel, Page did just that. On Harry’s advice he moved from just buying shares to spread betting – a new, tax-free, alternative way of trading on world markets.
Page set up accounts with the two leading spread-betting firms, IG Index and CMC. He maintained the Halifax share account but started spread betting like a man with an insider’s knowledge of the volatile world of commodities and foreign currencies, which of course he didn’t have.
As Charles Brown of IG Index explained:
Spread betting, essentially, is a way to back your judgement in the financial markets. You can go long or short of a market to profit from rising or falling prices. You simply buy if you think the price is set to rise [going long], or sell if you think it will drop [going short]. The degree to which you are correct dictates how much you win or lose. In simple terms: the more a price moves in your favour, the more money you make; the more the price moves against you, the more money you lose.
CMC’s client-relations adviser Gina Plowman put it this way:
A financial spread bet allows an investor to bet on whether the price quoted for a given financial instrument (a share, gold, commodities like oil, bonds and currencies) is likely to go up or go down in value. Their profit or loss is the difference between the price at which they buy and the price at which they sell. Unlike traditional share dealing, spread betting means that investors don’t own the physical share, but bet solely on price movements, giving them an opportunity to profit whether the markets are rising or falling.
Making the deregulated stock markets available to common people was a legacy of the Margaret Thatcher era when the Conservative government first sold the privatization of public utilities to the electorate as a progressive step towards a share-owning democracy. The aggressive marketing of share offerings in British Gas, British Telecom and British Rail carried off the trick of getting people to buy a piece of something they had already owned.
Two heavy donors and friends of the Conservative Party, Peter Cruddas and Stuart Wheeler, were the respective driving force behind the spread-betting giants CMC and IG Index.
Cruddas founded CMC in 1989 and would soon boast impeccable royal connections. The self-made billionaire’s early life appealed to Page’s sense of himself as a self-styled ‘cockney wide boy’ with untapped potential. The CMC boss came from an east London council estate. He left school at fifteen without qualifications and worked his way up the foreign exchange desks of various banks before leaving to set up the spread-betting company. Through his philanthropy for disadvantaged youth, Cruddas also became friendly with Prince Charles and his father Prince Philip, to whose charities he donated.
In contrast, Wheeler was an Eton- and Oxford-educated banker with a love of gambling and card games – he had apparently played bridge with Lord Lucan and Omar Sharif.
Twenty-four hours before Page opened his first spread-betting account with IG Index, Wheeler had made the largest ever donation to the Conservative Party of £5 million.
On his application form, Page declared his occupation as a police officer earning £33,000 a year with a home worth £120,000 and savings and assets of £180,000. On 15 March 2001, IG Index awarded Page a £20,000 betting limit and wished him every success at the casino of financial markets.
At the time there was no warning to inexperienced punters of the high risks associated with spread betting. That’s because when it first started, spread betting was a casino for City professionals who couldn’t get enough at work and understood movements in financial markets and currencies.
Fortunes can be won and lost in volatile markets because the price movements are greater. This high-risk gambling is hostage to events in far-off places that come out of the blue, effect supply lines and therefore prices even if only for a few minutes. A dock strike in Rotterdam, a guerrilla attack on a Colombian oil pipeline, flooding in a Chinese sugar-cane factory or a copper-mine disaster in Zambia are all opportunities for the astute City professional. From their swivel chairs they can access market-sensitive information a lot quicker than the man on the street and therefore are able to pile in or bail out more efficiently.
However, it was an inevitable consequence of aggressive marketing campaigns that inexperienced betters, bored of the safer world of share dealing, would soon find high-risk spread betting on financial markets more attractive. It wasn’t until after Page was hooked that the regulator told spread-betting firms to carry a warning in its online adverts and introduction packs about the high level of risk, the volatility in prices and the unsuitability for some of this type of betting.
On 22 May 2001, he opened a second online account, this time with CMC. It was a joint account with Mark Joyce, another young SO14 colleague at BP who was more commonly referred to by the nickname Pretty Boy. Six months later, Gripper opened his own online CMC account.
Page bet primarily on movements in the dollar to yen and pound to dollar exchange rates. He was also attracted to the money-making possibilities of price movements in oil and gold.
A boom in commodities had followed almost immediately after the dot.com bubble started to burst in 2000. Reporter Kevin Morrison, who covered the commodities bubble for the Financial Times from 2001 to 2007, and wrote Living in a Material World, recalls a period when banks made money from selling complex schemes to investors wanting high returns and the more they sold and the higher commodity prices went the more lavish the parties. He says:
The commodities boom caught the finance world by surprise. Oil went from $20 per barrel to $100 and people thought it would happen to everything else. China was growing at 10 per cent per annum and there was talk of India becoming another China, and the prospect of two-fifths of the world going through the industrial revolution that Britain went through in late 1800s. That got people’s attention in the banking world. There was a pa
nic of scarcity that the world’s resources would be exhausted by the growth of China and others so prices had to go up.
Commodities suddenly became glamorous. There had been oil-price booms before, but now you had oil, metals, agriculture products, everything was going up. And then there was the gold price going up to thousands of dollars, well beyond the price that Gordon Brown sold Britain’s gold off for in the late nineties.
For a long time commodities was unglamorous. Investment banks like Goldman Sachs and Morgan Stanley were into it. Then all of sudden other trading houses and banks could see the huge amounts of fees that were being earned from buying and selling commodities so they all piled in because they didn’t want to miss out.
Finance is like fashion. They were all now saying, ‘We’ve got to be in commodities’. It’s the herd instinct and short-sighted greed and envy among the banks. Suddenly they were hiring specialist commodities traders and paying them huge fees. A lot of specialized hedge funds appeared. The banks were selling highly complex commodity schemes to investors on the basis that there was high returns and no risk because prices would keep going up.
But in there was a veil of secrecy around trades. The prices of commodities kept going up and no one knew who was buying and selling. It was not necessarily the end user of the commodity being sold. In fact, there was a lot of speculation going on, talking up commodity prices based on fear. This had a new platform with the explosion of twenty-four hours business channels full of pundits talking up the commodity markets and launching new investment schemes all without any questioning over whether the price rises were sustainable and good for the economy and the man on the street, especially as wages weren’t rising commensurately.
For the few doubters, there were mantras: stronger for longer, this time it is going to be different. But the Achilles heel of any boom is it doesn’t last. It’s all to do with human behaviour: confidence, fear and greed. However, it’s important to remember that commodities were part of a greater bubble in cheap credit. Low interest rates also meant people were taking money out of banks and looking for investments with higher returns. This increased liquidity had to find a home, which it did in commodities and subprime debt.
There was an illusion of wealth. People’s wages were not going up but they had more money in their pocket.
Page’s ‘system’ for deciding how to spread bet was simple and not that different from what he was doing when buying and selling shares. It’s said that when the US sneezes the rest of the world catches a cold. Page was in the Buckingham Palace canteen watching developments in US interest rates policy. Alternatively, he would monitor the New York-based Dow Jones stock market exchange or pundits on CNBC talking up markets or discussing the imminent release of employment figures, budget deficits and other macroeconomic indices.
By the end of 2001, Page’s way around the blinking world of digital fractions and figures, his posh cars parked on the drive of his upmarket detached Essex home and the exotic family holidays had all caught the attention of colleagues at SO14.
They knew what he earned as a basic salary and from overtime, which he hadn’t been doing much of these days. So it was assumed these chattels were the trappings of a successful player of the financial markets. Could his strutting confidence and apparent Midas touch also work for them, some wondered.
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Adam McGregor had come to Buckingham Palace in 2000 with a dodgy past that worried some of his new colleagues for the wrong reasons.
Page first heard the gossip from one of the few female SO14 officers on his relief. The new recruit was said to have broken the unwritten rule of policing by grassing up a fellow officer who was then sacked.
‘People on my unit weren’t happy,’ Page recalled. They convinced McGregor it was acceptable to take a portable TV on his first night duty shift. ‘He lit up the garden and ended up falling asleep. The governor came out, but no one activated the ring-round system for him,’ Page explained.
The ring-round system was a way officers on night duty could sleep on post without fear of being caught. If a sergeant one night decided to do a spot check of the palace grounds the officer manning the control room at Buckingham Palace would ring to warn colleagues on different posts.
There are two Garden Gate posts to protect the area where the Queen and Prince Philip sleep. Page knew them well from the times he had been on night duty there. ‘It was natural for us to go to sleep on night duty and if a senior officer was coming into the garden I would contact the control room because the Garden Gate is alarmed. The control room would ring the officer on post 20 who would ring other posts. Everyone was awake until the governor did his checks and had a little chat and went away, then we’d be back to sleep.’
McGregor wanted to get on at BP and didn’t understand why he had been set up. He was told the ring-round system was not for grasses. But McGregor was telling the truth when he denied selling out a colleague. In fact, he had done the reverse and helped out by seemingly corroborating a false account of an arrest outside a pub that had led to a man being wrongly prosecuted. McGregor was subsequently found guilty of ‘falsehood and prevarication’ at a discipline board for making a false entry in his pocketbook. He was docked £5000 in pay and the other officer was sacked.7
Page was prepared to give McGregor a break. He was reassured by the new officer’s willingness to help out a fellow officer in need. So with Gripper’s endorsement, it was not long before McGregor was allowed ‘into the fold’ of a group of young Royal Protection officers taking over at Buckingham Palace.
McGregor was grateful for the lifeline. He had already noticed Page’s wealth and reputation for making money. When they discussed stocks and shares in 2001, Page appeared knowledgeable. He may not get it right every time, McGregor thought, but generally he was correct about movements in currencies like the Japanese yen.
The following year, McGregor decided he would invest in what Page was now calling his Currency Club. The terms were very attractive and way beyond what any high street bank or building society was offering: a £5000 investment got you a 6 per cent monthly return of £300 in cash. £10,000 got you £600 every month.
To join the Currency Club, a small group of SO14 investors had to deposit an initial stake in one of the spread-betting accounts that Page controlled and gambled with as he saw fit. He guaranteed that in the event he lost, every investor’s initial stake would be repaid from his own pot of £70,000. If he won, investors would get their regular returns of £300 or £600 but he would take a lion’s share of the undisclosed spoils for himself.
McGregor was in. Why wouldn’t he be? It was a sweetheart deal from the Bank of Page. At the time, McGregor was earning £50,000 gross a year from his royal protection work, half of which came from overtime pay. In 2002, he gave Page £10,000 in cash and cheque to bet on movements in the yen, dollar and sterling. At any stage McGregor knew he could have his initial stake back. Instead he chose to roll it over every month after pocketing each £600 return in cash. It was also reassuring to McGregor that the Currency Club had spread to SO14 officers working at St James’s Palace.8
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The first four months of 2002 were a particularly difficult time for the Queen. She lost her youngest sister, seventy-one-year-old Princess Margaret, in February and seven weeks later the Queen Mother died at the age of 101.
Whereas Margaret had a private funeral, the Queen Mother lay in state at Westminster Hall before her flag-draped coffin was escorted on 9 April from central London to St George’s Chapel in Windsor Castle.
The two deaths came just as the Queen and Prince Philip began a UK and world tour to mark her golden jubilee, which was planned to end with a June weekend of celebrations at Buckingham Palace. For the first time the palace gardens were to be opened to the public for a series of pop and classical concerts and a firework display.
The preparations at the London palaces were presenting a security challenge for SO14, not least because the nation was
already on high alert after the September 11 attack by al-Qaeda the year before.
In this difficult environment, Page got word that Jim Mahaffy, a Royal Protection officer from St James’s Palace, wanted a briefing about the Currency Club. BP officers tended to look down on their colleagues from the smaller St James’s Palace. Page called it ‘the mannequin factory, because it’s full of dummies’.
He knew of Mahaffy from the occasional shift all SO14 officers must do at BP. The pair met in May 2000 as the refurbished Queen’s Gallery was opened to the public.
Mahaffy, then 38, had worked at St James’s Palace since 1995. He’d been a Met constable since 1980 making him one of the more senior SO14 officers. That, according to Page, didn’t stop him from getting one of the more unkind nicknames, MAPS, short for ‘my armpits stink’.
After 22 years’ service, Mahaffy was taking home a good salary of between £2500 and £3000 every month. He and the wife liked to spend their disposable income on foreign travel. He’d heard of Page’s reputation in the financial markets and noticed the Mercedes and new house. ‘They appeared to be quite affluent,’ he said.
Mahaffy had been treasurer of a share club at St James’s Palace involving twenty SO14 officers. Each put £50 every month into one account to buy shares in blue chip companies such as British Petroleum, British banks and retail giant Marks & Spencer. They won more than they lost, Mahaffy told Page, but the profits were only in the hundreds of pounds and always split evenly.
In turn, Page explained how his Currency Club spread-betting syndicate would work. He was looking to raise £50,000 capital investment from a group of SO14 officers each putting in £5000. As long as their stake stayed in the Club, each member was guaranteed a cash monthly return of £300. All stakes would be returned within a matter of weeks if anyone wanted out.
For Queen and Currency: Audacious fraud, greed and gambling at Buckingham Palace Page 6