Arron Banks, co-founder of Leave.EU. (Photographer: Andrew Harrer/Bloomberg)

The Mysterious Finances of the Brexit Campaign’s Biggest Backer

(Bloomberg) -- Ever since Brexit supporter Arron Banks made the largest political donation in British history he’s been dogged by questions about where he got the money.

For a man who told the Financial Times he was worth 100 million pounds ($130 million) in 2015 and made the Sunday Times Rich List two years later with 250 million pounds, his 8 million-pound outlay wasn’t necessarily that striking. But is Banks—who is at the center of a criminal probe into the financing of the campaign to leave the European Union—really that wealthy? 

Analysis by the Bloomberg Billionaires Index estimates his net worth at 25 million pounds from what can be gleaned publicly. It comprises 34 million pounds worth of assets in insurance, financial services and diamond mining. The net figure deducts the amount of his funding to Leave.eu, the pro-Brexit group he co-founded.

Some of his assets are in dozens of privately held overseas companies, making any true accounting of his net worth difficult. When details of closely held assets cannot be verified, they aren’t included in Bloomberg’s calculations, and his fortune could be higher.

The Mysterious Finances of the Brexit Campaign’s Biggest Backer

Banks says the enterprise value of his insurance assets alone were valued at around 200 million pounds, according to a valuation conducted by accountants BDO in 2017. He declined to let Bloomberg review the report or disclose how much of this amount is debt, which would reduce the equity value of his holdings.

He said the Bloomberg analysis is “flawed in nearly every other aspect,” declining to provide further information, saying he sees no reason to hand out private information.

With Britain mired in political turmoil and the hourglass running down to the March 29 Brexit deadline, the decision by the National Crime Agency (NCA) to investigate Banks and his financing of the referendum campaign could yet add another twist in the saga. Indeed, depending on how things play out, the U.K. has an outside chance of heading toward a re-run of the referendum that Banks’s money played such a key role in.

The NCA is looking into whether Banks, 52, was the true source of the Brexit campaign funds and if the money was allowed under electoral rules. The agency has the investigatory powers to pierce the veil of secrecy surrounding Banks’s finances. Lawmakers in the U.K. parliament, meanwhile, have asked about his meetings with Russian officials. Banks has dismissed such connections and says he made the donation using his personal funds or those of his U.K. companies, as per the law.

When Rebecca Pow from the governing Conservative Party observed that his tangle of companies amounted to “torturous, complicated arrangements” that left many with the impression he had something to hide, Banks shot back: “I like to think I’m an evil genius with a white cat that controls the whole of western democracy, but clearly that’s nonsense.”

His interlinked holdings are registered in the U.K, the Isle of Man, Gibraltar, the British Virgin Islands, and beyond. Banks declined requests to elaborate and to provide accounts from his offshore companies. He testified to the U.K. Parliament in June that the funding he gave to Leave.eu did not come from his overseas business interests, which would be forbidden under U.K. rules.

“He has a lot of businesses that don’t seem to make a lot of money,” said Damian Collins, who chairs a committee in the U.K. Parliament that has questioned Banks as part of its investigation into disinformation during the Brexit campaign. “Nothing he says is clear.”

On Feb. 1, the U.K. Information Commissioner’s Office said it fined Leave.eu and Eldon Insurance, in which Banks owns a large stake, 120,000 pounds for breaches of electronic marketing laws. Leave.eu used the details of Eldon customers unlawfully to send almost 300,000 political marketing messages, the office said.

Peter Hargreaves, who gave 3.2 million pounds to Leave.eu and whose net worth is $3.7 billion in the Bloomberg Billionaires Index, said he’s seen nothing that suggests Banks is anything more than the victim of a smear campaign from the losing side in the referendum.

“He’s quite a character and of course the way he conducts himself he’s not going to win too many friends,” Hargreaves said. “There’s this witch hunt because he kicked the establishment in the backside.”

The Mysterious Finances of the Brexit Campaign’s Biggest Backer

Much of Banks’s wealth in Bloomberg’s calculation that’s based on available information comes from proceeds from the sale of his stake in another insurance company, Brightside Group.

A filing discloses he’d sold his entire stake by the first half of 2013, and he’s calculated to have collected 22 million pounds before tax from Brightside share sales. He also received about 1 million pounds in salary between 2008 and 2012, according to company filings.

Banks and his associates own 3 million pounds of shares in Manx Financial Group Plc, according to the Isle of Man bank’s 2017 annual report. A November stock exchange filing noted he was exploring the disposal of some or all of this holding though it isn't clear if any such disposition will actually occur.

His insurance interests are harder to value because the Isle of Man-based group ICS Risk Solutions doesn’t disclose its financials publicly. But his stake in a U.K. arm, Eldon Insurance Services, may be worth about 12 million pounds based on typical deal multiples. Banks owns between half and 75 percent of the company, according to a 2016 filing.

Banks noted the group as a whole employs 1,000 staff, insures 500,000 customers and generates 250 million pounds of premium. He sent a screenshot that he says showed two lines of a BDO report calculating the enterprise value of ICS to be between 190 million and 210 million pounds. This figure isn’t included in Bloomberg’s calculation because debt held by the business isn't known and the figure may not reflect the value of equity held by Banks.

Banks declined to provide Bloomberg with a complete copy of the BDO report. BDO declined to comment.

His holdings include plenty of esoteric assets. Banks owns jewelry store 1710 Parsons, which claims to be the U.K.’s oldest jeweler, in the West Country village of Thornbury—population 12,063—where it’s sandwiched between a charity shop and a beauty parlor.

Its website says the stones for many of its jewels are sourced from four mines in South Africa owned by Arron Banks. Bloomberg estimates his holdings in the mines are worth about five million pounds, which matches the high end of their market value when they were sold in 2005.

A 2014 research report commissioned by Banks to secure outside investment valued the mines at $79 million. Ultimately no external funds were raised, Banks has said.

“These particular four are very small properties and definitely not mainstream,” said Peter Major, director of mining at Cadiz Corporate Solutions in Cape Town. “South Africa has a thousand other small diamond mines similar to them, looking for dreamers and suckers.”

Major said he’d been asked to look at those four mines at least twice in the past 12 years, but declined because diamond mining in South Africa is notoriously risky, hard to value and difficult to raise money for investments.

Whatever his net worth, Banks was willing to put a hefty chunk of his fortune toward a single political campaign. “Why shouldn’t I fight for what I believe in? To me it’s a matter of life and death for my country,” he said in a profile published by the New Statesman magazine in October 2016. “We either get back control of our destiny or not.”

When asked about the status of its investigation, an NCA official referred back to a statement at the end of last year that said it was looking into Leave.eu, Banks and other entities after material was passed to the agency from the Electoral Commission. 

There’s been plenty of questions about how Banks has been able to fund his political contributions as well as his varied portfolio of investments.

For instance, he’s invested 5 million pounds since 2007 into the renovation of the Old Down Estate, a country manor 10 minutes from the Thornbury jewelry store, according to its website. He rents it out for weddings. He also used it in 2014 to announce his 1 million-pound donation to Brexit campaigner Nigel Farage’s U.K. Independence Party.

The Mysterious Finances of the Brexit Campaign’s Biggest Backer

And those South African mines required a steady stream of investment, according to a July 2018 sworn statement made by Christopher Kimber, a former business partner of Banks, that’s part of a business dispute with him. The South African businessman joined forces with Banks to develop the mines in 2013 before their relationship collapsed.

Banks said Kimber is under investigation in South Africa for fraud and his comments are unreliable and untrue. Banks was the complainant in a case against Kimber, according to a spokesman for the South African police. After reviewing the complaint, the police concluded that the matter was more of a civil case and lacked the elements that would lead to a criminal probe, the spokesman said. Kimber said he wasn’t under criminal investigation and declined to comment further, because the civil cases between him and Banks are still ongoing.

Banks’s spending has prompted breathless speculation about Russian funding. He was questioned by members of Parliament about his contacts with Russian businessmen and officials in the run-up to the Brexit vote.

They included a “six-hour boozy lunch” in November 2015 with the Russian Ambassador in London, Alexander Yakovenko, according to Banks’s 2016 book “The Bad Boys of Brexit.” That was followed by other meetings between the pair.

Yakovenko also introduced him to a Russian businessman to discuss a possible gold mine investment, according to Banks’s testimony in Parliament. Banks didn’t invest in the project and has denied he’d ever accepted money from Russians to back Brexit during the referendum.

Still, Banks has an affinity with Russia. He married Ekaterina Paderina, a Russian, in 2001, and inside the main house’s library at Old Down is an old map of St. Petersburg, hanging above a bench upholstered with a Union Jack flag.

Kimber offers a more prosaic explanation for where Banks is getting his liquidity. According to Kimber’s sworn statement, Banks told him that his insurance companies would loan money at a low interest rate to a company “not always directly controlled by Arron Banks” from premium income to make investments.

The structure, Kimber said, had been used by Banks to fund various ventures, including the purchase of mining equipment and the acquisition of Old Down.

“It sounds like a classic version of insider lending,” said Robin Pearson, professor of economic history at Hull University Business School. Pearson said he doubted such activity would be deemed illegal provided disclosure and member approval requirements were met. 

The Electoral Commission reviewed financing of the referendum and fined Leave.eu 70,000 pounds for campaign spending offences, which the organization is appealing. The Commission looked at the 2 million pounds Banks and his companies gave to Better for the Country, the organization that ran Leave.eu’s campaign, and another 6 million pounds he reportedly gave to the group personally, both reported as loans.

The Mysterious Finances of the Brexit Campaign’s Biggest Backer

For his part, Banks testified before Parliament in June that the Brexit funds came from his company Rock Services Ltd. He said the company served purely as a treasury function handling cash for his group of companies.

“The actual loan came from another one of my companies,” he testified. “From my perspective, I am a U.K. taxpayer. I have made the loan out of my own funds or company funds.”

Banks didn’t specify which of his companies had actually generated the cash for the Brexit loans. The Electoral Commission concluded that the loans involved an offshore company called Rock Holdings Ltd., incorporated in the Isle of Man, which would have been barred from donating. It referred the probe to the NCA, saying that there were reasonable grounds to suspect “a number of criminal offenses may have been committed.” Banks has adamantly denied any wrongdoing. 

Until the agency’s findings are known, the intricacies of Banks’s fortune remain a matter of speculation.

Even one of his close allies from the referendum isn’t privy to details of his finances. “I don’t know the inner workings of his business,” billionaire Hargreaves said. “I haven’t seen his accounts.”

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