SFO arrest property tycoon playboys
18 March 2011
While most of the industry were basking in the French Riviera last week, the Serious Fraud Office (SFO) made it clear that two property tycoons would not be able to attend the party.
Following a 16-month probe into the failed Icelandic bank Kaupthing, the SFO chose to arrest regular partygoers Vincent and Robert Tchenguiz last Wednesday, just one day before real estate professionals gathered in Cannes for the MIPIM property show.
If they had intended to set an example to the industry, the organisation's choice of arrest dates for the Tchenguiz brothers and 7 others could not have been better planned.
Vincent and Robert were supposed to hold their annual open yacht party in Cannes whilst the property show was underway and so news of their arrest spread quickly around the cafes and hotels of Cannes, where over 18,000 fellow property professionals gathered.
Jonathan Samuels, CEO of Drawbridge Finance, said: "News of the Thenguiz arrest reached Cannes in the thick of the event; it was a major talking point."
"The timing was unfortunate but it did cause maximum embarrassment to those had been arrested."
The Tchenguiz brothers made their fortunes through real-estate investments, but ironically an investigation into the duo is unlikely to centre on their property business.
Their highly-geared investments, facilitated by loans from Kaupthing, boded well for Robert and his R20 investment company during the boom. He was part of a consortium that bought the Somerfield supermarket chain and later sold it to The Co-op for £1.57 billion. He also had a 26 per cent stake in pub group Mitchells & butlers and 10 per cent in J Sainsbury.
Both brothers were using the same highly-geared strategies up until the market turned. At that point, Robert was nursing losses of up to £1,5 billion and Kaupthing seized £137 million of the profits he had made from selling Somerfield.
Vincent managed to avoid some of the high profile problems that his brother experienced, however he still holds huge amounts of debt behind his property business and portfolio.
The brothers were arrested for ‘questioning' about the collapse of Kaupthing and were not charged therefore their involvement in any wrongdoing remains unclear.
What is clear though is that the latest arrests, made at such a poignant time, sends a concise sign to the industry that they are not yet free from the legacy of boom-time investments.
Jonathan Samuels added: "Whilst news of the arrests was well-known, it did not ruin the event, and MIPIM was still a resounding success.
"People were still focused on doing business and the sector remains ‘cautiously optimistic' about the future."
The Tchenguiz brothers yesterday won the right to pursue a claim of more than £1 billion in damages from the failed bank. Vincent said he would ‘vigorously' pursue the compensation.
By Katie-Jill Rowland