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  1. Wealth
March 15, 2011

Tchenguiz in Trouble

By Spear's

Somewhere along the line Robert had racked up losses of over ’1 billion when the stock market fell out of bed in 2008.

The arrest of the billionaire brothers Vincent and Robert Tchenguiz by the Serious Fraud Office has made serious waves lately, not least among those attending the Monaco Mipim property bash, where Vincent’s 130-foot vodka palace – called Veni, Vidi, Vici, which is Tchenguiz-speak for ‘I Came, I Saw, I Borrowed Billions’ – hosts the biggest and brashest bash in town. The trouble is whether the billions relate to how much they’re worth, how much they owe, or how much they’re suing their bankers for.

It all started back in 1981 with the formation of Rotch Property. The brothers borrowed heavily to buy major properties which had strong rental flows from blue chip covenants to repay the borrowings. Then along came the Noughties Decade and the bankers went mad in the pursuit of bonuses and threw money at people like there was no tomorrow, including the Iranian Tchenguiz brothers.

Robert was wont to visit Johnny Gold’s Rags and Tramp L’Oeil Clubs, where he loudly held court with the likes of Caprice and a bunch of hangers-on, drinking £100+ bottles of vodka and playing backgammon. In short, the sort of flamboyant playboy that bankers in the old days were taught to avoid like the plague, until they became blinded by their bonuses.

The trouble was that Robert applied his business model for property to non-property assets such as stock market investments where you lend or borrow at your peril, something the bankers of yore knew only too well, as things that go up can also come down. So he borrowed like hell and ended up owning thousands of pubs, just as the value and profits of pubs were going down. You see the dangers of Robert’s new business model, and too much vodka.

Then he bought loadsa supermarkets, Somerfields, just as this chain was being left behind by all the others. Oops! Lesson not learnt repeated: This boy must attend more in class, and learn that if you buy shares with loadsa property in them, it’s not the same as buying the properties directly and receiving the rental income yourself.

Not to be outdone by these experiences, Robert hit on the idea of buying shares in one of those supermarket chains that was sinking his investment in Somerfields, namely J Sainsbury: his idea was to borrow enough moolah and buy enough shares to force the Sainsbury board to put their valuable freeholds into a separate property company in which he would have a major shareholding, while J Sainsbury would lease back their own freeholds and Robert would benefit from the rental income. Lesson at least half-learnt.

“Nice one Robert, but not today thank you!” said the board of J Sainsbury after a meeting that lasted all of two seconds. Not to be rebuffed quite so easily, Robert started buying CFDs – Contracts for Difference – one of the three-letter acronyms devised by bankers to enrich themselves at the expense of their clients, in an effort to become a bigger shareholder than he actually was, in the belief that the volume button of his demands would at least be turned up.

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Somewhere along the line Robert had racked up losses of over £1,000,000,000, when the stock market fell out of bed in the Autumn of 2008, and Robert’s fantasy curve came down quickly. This time the board of J Sainsbury cracked open one of their award-winning bottles of Champagne and just laughed their heads off. His bankers, though, weren’t laughing at all as the Kaupthing Bank of Iceland, the land of volcanoes, vodka and soon to-be-busted banks, realised, or didn’t realise, that these losses were going to hit them like a lava-flow of molten assets, or possibly vanish into thin air like volcanic dust.

Robert now turned his attention to banking, particularly his Icelandic bankers, and somehow ended up on the board of Exista, Kaupthing’s major shareholder, apart from Kaupthing itself, that is, which mysteriously owned half its own shares, as it lent money to clients to buy its own shares. Most banks don’t engage in share ramping, but Kaupthing wasn’t a bank as that word is normally applied.

At this point the trail goes decidedly dodgy and everyone ended up taking out more loans and writs and then The Kaupthingie Fault-line erupted and was no more, owing billions, including to HM Treasury. (Trust them to get involved post hoc.)

At this point someone remembered to prod the Serious Fraud Office, the SFO – another three-letter acronym that doesn’t work – from their slumbers and hence the arrests. The Tchenguiz brothers protest their total innocence and tell the world that no charges will ever be brought against them. Let justice run its course.

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