Knox had invited himself into Virgin’s new warehouse. The introduction aroused no suspicion. In that era, it was normal for Her Majesty’s Customs and Excise to provide a clerk every three months to calculate each company’s purchase tax, a 33 per cent levy on all sales. Sitting in Branson’s congested first floor office, watching attractive girls flitting around their unsuspecting tousle-haired employer, Knox glanced through Branson’s accounts, especially those of Caroline Exports trading as an unregistered company. Branson, the director, was too excited by that day’s postbag containing hundreds of cheques, postal orders and cash to care for the grey man as he sifted through the PT 999s, Caroline’s purchase tax returns. His new business, Branson often chortled, was amazing. Punters’ cash was being banked for records he still did not possess. Imported American records, bought for pennies, were sold for pounds. ‘Cash flow,’ he enthused, ‘is great.’ But his aspirations were not financed entirely by conventional means.
The genesis of his fraud, Branson would say, was accidental. Soon after Virgin Records’ birth, Branson himself had driven a van to Dover with a consignment of records for export. After a Customs officer had placed the official stamp on a PT 999 confirming that the records had been exported and were exempt from purchase tax, Branson had boarded the ferry for Calais. Unexpectedly, the sailing was cancelled because the French port was closed by a strike. Branson had driven off the ferry and, unhindered by officials, returned towards London. During the drive, he realised that the records could now be sold through his mail order company to British customers without adding purchase tax. The extra money would belong to him. Two tax agencies could be deceived. Customs would not receive the 33 per cent purchase tax and the Inland Revenue would be denied the tax on his additional profits.
On his return to Paddington, Branson had confided his discovery to his inner cabal of six. ‘The Customs office is not near the port,’ he explained, ‘so the forms get stamped but they don’t have any barriers or checks to see if you’ve gone on to the ferry or driven back to London.’ His audience was transfixed.
Branson’s conscience was untroubled by the dishonesty. Gambling against discovery was exciting. A pattern had been established that he would later describe with evident pride: ‘I have always thought rules were there to be broken.’ He had cheated in school examinations; he had repeatedly deceived the Church Commissioners, the landlord of his home in Albion Street, by disguising its use as an office; he had defrauded the Post Office by using the telephone without paying; now he was selling bootleg records; and he had just been convicted for poaching game in a magistrates court.
The recent conviction for poaching had been particularly revelatory. Branson had driven in his white Mini with Mundy Ellis, his bubbly, blonde girlfriend, to stay with Caroline and Rob Gold, a music publisher, in a rented cottage in Suffolk.
Branson liked the Golds and the sentiment was reciprocated. The Golds lived on a houseboat in Little Venice and Caroline had become Branson’s paid assistant, although she had become wary after Branson had unsuccessfully invited her father, Frank Gold, a shipping forwarder who owned warehouses, to become involved in his purchase tax operation. Nevertheless, the Golds felt sympathy for the young man whose twin laments were, ‘I didn’t get enough love from my mother’ and ‘How can I make money?’
Rob Gold had told Branson there was ‘some shooting in a public wood’ and Branson had brought two shotguns, an inheritance from his grandfather, Sir George Branson. Gold had never shot before but nevertheless took one of the guns as they walked in the countryside with the women trailing behind. Soon after the two started shooting, they heard yells. A gamekeeper was running from one direction and the landowner from another. Branson realised immediately that they were trespassing and ran off with the women. Gold fell and was caught. Both were charged with poaching.
Two months later Branson and Gold returned to Suffolk by train to attend the Sudbury magistrates court. During the entire journey, Branson carefully read The Financial Times.
At the hearing, Rob Gold noticed the clerk approach Branson. ‘I understand your father’s a magistrate?’ asked the clerk, confirming information which Branson had earlier supplied. ‘Yes,’ nodded Branson gravely. Seconds later, the clerk was whispering in the ear of the Suffolk magistrate. Watching with awe, Gold understood the social chasm separating himself from Branson, and the essence of his friend’s fearlessness. The fine was only £10 and the confiscation of the guns. Branson smiled. This nonchalance was confusing for those unaware that behind the awkward reticence was an acutely self-confident young man, a master of exerting influence.
‘Do you realise who you are dealing with?’ Branson challenged a police officer when, shortly after, he was stopped speeding in Glasgow. A growing sense of invulnerability fed his appetite for recklessness, developed as a boy at Stowe, the public school where he was educated. Lacking any signs of self-doubt or fear of retribution, Branson showed remarkable ability to speedily bypass the truth. For him, the plot to defraud Customs and Excise was just another whacky prank.
‘It’s a great wheeze,’ he buzzed. Cheating Customs, he urged his employees, would be effortless. For a child from Surrey’s stockbroker belt evading taxes imposed by the confiscatory socialist government was an act of principled defiance. The Establishment’s rebels were sure that rules could be ignored, bent or broken. Doubters were swayed by Branson’s enthusiasm for the role of Robin Hood. Helping impoverished students hear their music despite the ogreish government’s taxation, he urged, would constitute a blow for justice. None of Branson’s merry group had ever committed a serious crime but all were mesmerised by Branson’s persuasiveness that his interests and theirs were identical, even if the scheme was illegal. Chris Stylianou, the Charterhouse-educated manager of Caroline Exports, was wary until others nodded agreement. Branson’s genius was to disguise his impatience for fame and fortune by championing the struggle of down-trodden youth.
The white Transit van was driven regularly to Dover. The documents for the export of records were proffered and, after securing the official stamp on the PT 999 form from the Customs officer, driven unseen back to London. The van rarely transported the records specified on the consignment. Instead, a batch of worthless recordings of the Band of the Irish Guards was loaded. Over a period of months, Virgin’s mail-order business attracted gratitude from a growing army of music fans.
By the time Mike Knox reported to his superiors – ‘Virgin looks dicey. It’s worth an operation’ – about twenty young employees, enjoying the permanent party atmosphere encouraged by Branson, were dispatching the ‘export’ records by post from the warehouse in Paddington. Among the thousands of customers were Mike Knox and Dick Brown, his deputy in the Customs investigation team, ordering records as normal customers from their home addresses.
Their investigation had started after a visit to EMI’s head of security in Hayes, west London. Knox had confessed his bewilderment to the record producer’s head of security about Branson’s ability to sell his records cheaper than the shops. The former policeman employed by EMI admitted his own suspicions that ‘Something’s fishy’.
‘I’ll look at his PT 999s,’ thought Knox.
Reading through the thick wodge of Customs certificates accumulated by Branson over the previous ten months, Knox noticed the official stamps at Dover testifying to his regular export of records in batches of at least 10,000 to every country in Western Europe and to the United States. Knox was particularly intrigued by two certificates. On both occasions Branson had, according to the certificate, exported 30,000 records in a Land Rover. Amid the clatter of Branson’s office, no one heard the staid ‘tax clerk’ murmur to himself, ‘You can’t load 30,000 records on to a Land Rover.’ Shortly afterwards, a surveillance unit had been established in St Mary’s Hospital, overlooking Branson’s offices.
Every night at 3 a.m. over the following three weeks, Dick Brown arrived at EMI’s headquarters. Neatly stacked in the record producer’s loading bay were boxes marked for delivery to Virgin, invariably with a note on the invoice: ‘For export’. Regularly, Branson was ordering two hundred copies of ‘She’s a Lady’, Tom Jones’s hit, apparently for export to Switzerland. To monitor the fate of those records, Brown marked on each record a letter of the alphabet with an ultra violet pen, invisible to the naked eye. ‘A’ was