Kevin Leech
– How to Blow a Billion
Kevin Ronald Leech grew up in Manchester and left school aged 15 with eight O levels. His father ran a garage but also operated a small undertaking business. On the death of his father, aged just 51, Kevin, who had been training to become an accountant, took control of the family funeral directors. He was 21.
Leech, to his credit, built the funeral firm into a 38-strong chain of undertakers, ultimately selling it in 1982 to the Co-operative Group for around £2.5 million. Nearing the age of 40, he then upped sticks and moved to Jersey, which had better weather and a much more tax-friendly environment – and no doubt wondered what he was going to do with all that money.
It had not been an easy start in business for Leech. In order to raise the £3,000 he needed to buy out the rest of the family in the beginning, Leech had to turn to the family solicitor for a personal guarantee. ‘In 1964 when I wanted help, nobody would help me,’ he says.
There were no venture capital funds then. There were no tax breaks for people. So I made a conscious decision… that I would back people when banks couldn’t help. Banks can only help when you are successful. Banks can only help when you have got collateral.
With his new-found wealth, Leech set about making investments, and he soon became known as a venture capitalist. He took a punt on a Liverpudlian chemist called Jeremiah Milner who was looking for backing for his new form of kidney treatment which, he said, would improve the lives of patients, cut dialysis time and sharply reduce the risk of infection. Leech was convinced and invested £50,000 for a substantial 68 per cent stake in the company, ML Laboratories. It was a shrewd move, and proved Leech had the talent for spotting and negotiating good deals. It wouldn’t always be this way.
In 1987, the Merseyside Science Park-based company became the first public biotechnology business to be listed on the London Stock Exchange. In 1991, the shares soared by 310 per cent to some £9 each, valuing Leech’s stake at £170 million. A stockbroking circular at the time suggested the shares could reach £25 and that the drug could prove helpful in treating Aids. That would have meant Leech’s original £50,000 investment would have become nearly £500 million.
It didn’t quite work out like that, as the relationship between Leech and the widow of the founder later soured. Nevertheless, in 1996 Leech made £55 million from the sale of some of his ML Laboratories shares. And this time, he really went to town. Already a big fish in the rarefied atmosphere of Jersey, Leech had greater ambitions.
The 1990s must have felt like a heady time for Leech. In 1996, the Independent newspaper called him ‘one of Britain’s most powerful business angels’, adding that he had a ‘sure touch’ when it came to investing. One thing that was certain was Leech’s prolificacy.
Leech embarked on one of the most random acquisitions sprees the United Kingdom had ever seen. And random is the word. Like many entrepreneurs, Leech fell into the trap of believing that because he was successful in one field he could easily transfer those skills – and his acumen – to any other area of business. But while this approach may have worked for the likes of Virgin founder Richard Branson, and no doubt makes for an interesting term of study on a Harvard MBA, there is only one Branson – and business theory and business practicality do not mix. The way Branson stretched his brand is the exception that proves the rule. Leech did not even have a brand. He formed various property and leisure holdings, such as Queensborough Holdings and Heritage Great Britain, most of which were related to secretive Jersey-based trusts. To this day it is difficult to really work out exactly what he does and does not own.
At one time or another Leech’s eclectic business empire included the Needles Pleasure Park on the Isle of Wight, the Cheddar Gorge Cheese Company, adventure park Lightwater Valley, the Land’s End Hotel, the John O’Groats Hotel, the Snowdon Light Railway, various caravan parks and, bizarrely, the Robin Reliant car company.
It is fair to say that the Needles Pleasure Park on the Isle of Wight receives mixed reviews. While some enjoy it, others note that it is ‘1950s Britain at its worst’. One reviewer on tripadvisor.com comments, ‘The Needles is totally spoilt by this crummy, outdated so-called pleasure park… it is a hideous blot on a beautiful landscape’. Others on the travel advice site complain that the food is poor and the prices steep.
The Snowdon Mountain Railway, which the firm runs, is described by other members of the public who have used it and commented on tripadvisor.com, as ‘cramped’ and ‘expensive’. And it’s downhill from there in terms of reviews.
The Land’s End Hotel was reviewed by a mystery guest in the Sunday Times in August 2008, and the conclusion was stark. ‘There is something mean-spirited about Land’s End Hotel,’ it said. ‘Everything seems to come at a cost – it feels like a money-making machine.’ The review, giving the hotel a paltry one out of ten, added, ‘The exterior is dull, the reception was poorly run, the rooms are poky and boring, the bed was uncomfortable.’
Of course, when running consumer-facing companies, it is hard to please all the people all the time. And with technology giving people a way to vent their spleen, it is easy to pick holes. Yet the feeling remains that Leech is not an expert in everything he invests in.
The complaints are not limited to his Cornish attractions. At the other end of the land, it’s just as bad. John O’Groats is famous, at least in the United Kingdom, for being the very northerly tip of Scotland. It’s the place you leave from or arrive at when undertaking a charity walk, run or cycle from one end of Britain to the other. Thousands of people head there or leave from there in the quest to raise money for charity. But you certainly wouldn’t go there on holiday. One of the more promising reviews calls it ‘a seedy tourist trap’, while it is estimated that visitors spend on average just 10 minutes at John O’Groats. That’s a long way to walk – 874 miles or 1,407 km – for a 10-minute stop. The John O’Groats Hotel remains ‘closed for refurbishments’, as it has been for 12 years, and local people have been calling for years for something to be done about it.
Even local politicians pile in. Jamie Stone, a member of the Scottish Parliament, quoted in the John O’Groats Journal, said:
For as long as I have been [a member], John O’Groats has been a glaring example of a tourism destination whose potential has never even been remotely realised because it has been crying out for investment. The continuing impasse is nothing short of a disgrace.
All in all, Leech’s is not quite the impressive haul of acquisitions that it might seem on paper. But the collection certainly is odd, especially when you put it together with Leech’s other interests. His Queensborough Holdings company, run with long-time business partner Stuart Sim, has been through a number of incarnations over the years, focusing on caravan parks, restaurants and hotels. In 1995 it bought Compass Leisure and Anglia Leisure, making it one of the United Kingdom’s major caravan park operators. In 1998 it acquired 46 Deep Pan Pizza outlets from City Centre Restaurants for £10 million. Leech also bought Fletcher Powerboats, the biggest maker of trailer boats in Europe, from Hornby Group.
It did not stop there. Flush with cash from his ML Laboratories stock sale, in 1997 Leech splashed out on the Robin Reliant automobile company. The Robin was basically a three-wheel fibreglass van, and owners only required a motorcycle licence to drive one. It was said that the Princess Royal bought one for her estate, the Duchess of York apparently gave one to her toe-sucking boyfriend, John Bryan, and the American Embassy retained a fleet for running errands around London. Derek ‘Del Boy’ Trotter, hero of the BBC’s hit comedy Only Fools and Horses, famously plied his trade in a yellow Reliant van.
Leech insisted it was a cool business decision, but it turned out he was a Reliant collector, with four vehicles of his own. He moved the firm to share a home with Fletcher International Sportboats, in Burntwood, Staffordshire, and pressed ahead with production of up to 800 cars a year. The firm ceased trading in the year 2000, but Leech remains a director of several companies that provide spares or maintenance to the vehicles.
Life was good for Leech. Most weekends he would apparently fly his family and friends back to his native Manchester in one of his two private jets, a Mitsubishi MU-2 and a Cessna 404, and would head for his box at Old Trafford to watch Manchester United play football.
But Leech was about to become a whole lot richer. The dotcom boom at the end of the 1990s was a Klondike of opportunities for investors like Leech. He jumped in with two feet, in both the United Kingdom and the United States, and starting making multiple investments in internet start-up firms. Leech became chairman of a Nasdaq-quoted company called ci4net.com Inc. It became a publicly traded entity on 20 December 1999, following the completion of a reverse merger.
Described by Leech as an ‘economic network’, or ‘Econet’, ci4net had equity interests in around 40 internet-related partner companies. It had a 50 per cent or greater interest in 34 of these companies, and held minority interests in the remainder. These companies included eight ‘internet infrastructure companies, 18 business-to-business e-commerce companies, 12 business-to-consumer e-commerce companies and one incubator company’.
If Leech’s pace of acquiring companies in the early 1990s had been fast, this latest spree was of another order completely. In a statement issued at the time, Leech said, ‘We intend to be the leading Econet in Europe and we are confident of our ability to continue building a foundation of investments to position ourselves to achieve this goal as the European market matures’.
On 23 February 2000, ci4net acquired trrravel.com. On 1 March 2000 it acquired Systeam SpA, ‘one of Italy’s leading information technology system integrators, offering robust software solutions’. Six days later it acquired a majority interest in 4th Wave Technologies, ‘a provider of local ISP services and content’. Then Leech really got busy! On 22 March 2000, ci4net acquired six separate businesses, according to a statement from the firm. That’s six companies in a single day. It acquired a 51 per cent equity stake in Mostra Limited, ‘a firm with expertise in online and offline customer acquisition and retention strategies’. It also snapped up a 50 per cent equity stake in Chorus Inc, a company with ‘expertise in assisting high-growth United States-based technology companies set up European business operations’. It acquired a 25 per cent equity interest in Enteraction TV, ‘a UK-based developer of broadband and interactive TV applications’, as well as taking a 50 per cent stake in Businessvillages.com, which was ‘developing a series of community sites targeted at professionals’.
Finally, still on 24 March, ci4net acquired 70 per cent of ICM Resource Ltd, which operates Eazyprint.com, ‘Europe’s first online print shop’, before rounding off the day with a 2 per cent stake in Perform.com, a business that ‘had developed a suite of internet-based tools to facilitate the effective management of people, projects, goals, communications, training and development’. Get that man a drink!
After all that excitement, you might imagine Leech would require a break. Yet on 1 April 2000, ci4net acquired 5 per cent of Kismet International NV, ‘a leading developer of online gaming systems’. Three days later, a ci4net subsidiary acquired e-Bidding.com Inc, ‘a United States-based freight and e-commerce company the assets of which included an end-to-end transaction engine for connecting carriers and shippers’. One month later, on 1 May 2000, ci4net acquired a 51 per cent equity stake in Citee BV, ‘a leading systems integrator in the Netherlands employing 275 technically trained specialists’.
The company announced that revenues for the 12 months ending 31 January 2000 were US$4,409,094, although the company recorded a net loss of US$22,833,559, for the same period. Despite these numbers, Leech somehow made it to number 17 in the Sunday Times Rich List in the year 2000, with an estimated ‘fortune’ of US$1.2 billion. He was Jersey’s first billionaire.
And when the dotcom bubble burst, he became the first person in Jersey to go from billionaire to bust in double-quick time. Leech had become Icarus.
In 2002, Leech was taken to court in Jersey by HSBC in an effort to recover money he owed it. At the time, HSBC said it was attempting to recover £22 million, with Leech stating his assets as being worth just £15 million. It later turned out that Leech actually owed nearer £90 million in total, with the bank owed a whopping £88 million. According to documents released the following year, Barclays International Corporate Services was also owed £1.6 million, and there was an outstanding £2.5 million allegedly owed to Burger King, the fast-food franchise that Leech brought to Jersey in 1997.
Leech was declared ‘en desastre’, the Jersey term for bankrupt. He took the opportunity to visit his friend Paul Davidson in Marbella. Davidson, a former plumber who is known in the City of London, not surprisingly, as ‘the Plumber’, is another acquisitions addict. He became notorious when he placed a £5 million spread bet on the fortunes of a tiny AIM-listed biotech company. He was later found guilty of stock market abuse by the Financial Services Authority. Davidson, for one, was full of praise for Leech despite this tricky turn of events. ‘Kevin is one of the nicest people who ever walked God’s earth,’ Davidson said at the time. ‘A very generous man, one of the greatest businessmen’. Perhaps not the greatest, though, eh? It was some fall from glory.
As Leech’s financial problems mounted, many of his tourism-related assets were transferred to Heritage Great Britain, a company owned by Cherberry, a Jersey firm. Records at Companies House state that Leech is a beneficiary of the Jersey trust that owns Cherberry.
The complexity of his business holdings shielded Leech from too much personal pain, although of course the loss of face in a place like Jersey was no doubt tough to take. But Leech wasn’t exactly left in the gutter. One of the main feelings on the island at the time was the speed that it all happened. ‘I don’t understand how you can lose that much money,’ said one resident. But did he ever have it in the first place?
Fellow biotechnology investor Sir Christopher Evans believed it was a simple case of Leech overstretching himself. ‘The portfolio was extraordinary. Hindsight is a great thing, but he fell into the entrepreneur’s trap of doing too many things,’ Evans said.
It wasn’t just the businesses Leech did invest in that caused him grief. He also apparently turned down an opportunity to take a 25 per cent stake in CV Therapeutics for US$2 million. It went on to be worth more than US$1 billion.
Leech himself was sanguine. ‘It was the sheer scale of the wipeout that affected me,’ he said later.
I’d become a venture capitalist, though I don’t like the term. I never thought the technology stocks would get hit on both sides of the Atlantic like they did. My borrowings had been reasonable and conservative compared to the total of my wealth at the time… But was I caught with my pants down? Yes.
Leech didn’t have to rough it for long, though. Within two years he was released from his bankrupt status. It was business as normal.
In 2006, Leech returned to the City with a stake in Accura Pharma, a business that, among other things, hoped to ‘find medical treatment for dogs that chase their tails’. Leech owned a 28 per cent stake through his Condor Trust – something like 30 million shares. The company went public on the UK PLUS market, for small-cap firms, and there was heady talk of the company being ‘worth as much as £135 million’ – although the caveat was that it hadn’t actually generated any revenues to date. Despite promises that thanks to the firm’s various products, the business is ‘stable, proven, and poised for significant growth’, the reality was different. In June 2009 Accura Pharma announced that ‘due to the ongoing market conditions… it is no longer appropriate for Accura to seek admission to AIM.’ This was more bad news for Leech.
No matter, because he was quite busy enough on several other ventures, not least with First London Securities, an investment business with global ambition. The business ‘is a specialist finance group with a focus on asset management, investment banking and proprietary investing and has a successful track record in growth investment’. It claims to be active in the technology, healthcare and energy sectors, and ‘specialises in seed and early stage investment’. Non-executives on the First London board included Nicholas Chance, the former CEO of Third Mile Investment. He was also currently private secretary to HRH Prince Michael of Kent ‘and has specialist knowledge of Russia and CIS’. Alongside him as a non-exec was Conservative MP Tim Yeo, who was chairman of the All Party Environmental Audit Select Committee of the House of Commons.
Buried on page 27 of a market admissions document is the name Kevin Leech. Through his Condor Ventures, Leech owned a 34.4 per cent stake in First London. It reported a £10 million profit in 2008, and on 1 April 2009, announced it was changing its corporate structure ‘to create a new Isle of Man incorporated and tax resident holding company’.
Despite seemingly having his hands full with this, Leech has still found time to chair an online poker firm called Devilfish Gaming. It floated on the PLUS market on 5 March 2008, and Leech holds around 18 per cent through a discretionary trust called La Vignette Ventures. La Vignette, by the way, is (or was) the name of Leech’s opulent Jersey home. Market documents filed in relation to Devilfish state how Leech has directorships currently with 14 companies, listing another 19 companies where he was a previous director (Devilfish, nd). Where does he get his energy?
SOURCES
Clein, D (2001) Legal deal rumours lift ML, Liverpool Daily Post, 8 June
Court, M (2002) Jersey officials begin to unravel Leech’s assets, The Times, 12 October [online] 2002 http://business.timesonline.co.uk/tol/business/article1169905.ece (accessed 22 February 2010)
Daily Telegraph, October 11, 2002
Devilfish (nd) www.devilfishgamingplc.com
Durman, P (2002) John o’Groats goes to Jersey, Sunday Times, 13 October
Durman, P (2006) Seeking a cure for what ails Fido, Sunday Times, 17 September
English, S (2000) Leech to contest Milner Labs writ, Daily Telegraph, 6 July
First London Securities (nd) www.firstlondonsecurities.com
Fletcher, R (2002) The bust billionaire Kevin Leech was once the richest man in Jersey, but the dotcom collapse has felled him, Daily Telegraph, 13 October [online] http://www.telegraph.co.uk/finance/4493509/The-bust-billionaire-Kevin-Leech-was-once-the-richest-man-in-Jersey-but-the-dotcom-collapse-has-felled-him.-Richard-Fletcher-describes-the-heady-flight-into-desastre.html (accessed 22 February 2010)
Foley, S (2002) Jersey courts start trawl of bankrupt tycoon’s web of trusts, Independent, 12 October [online] http://www.independent.co.uk/news/business/news/jersey-courts-start-trawl-of-bankrupt-tycoons-web-of-trusts-613849.html (accessed 22 February 2010)
Goodman, R (2008) Devilfish Gaming is raising stakes for float, Sunday Times, 3 February
Grimond, M (1996) Biotech backer’s new baby is caravan parks, Independent, 6 April
Grimond, M (1997) Queensborough in the black after 13 years, Independent, 5 April
Guardian, December 26, 2004
Heritage Great Britain (nd) [online] www.heritagegb.co.uk (accessed 22 February 2010)
John O’Groats Journal (date unknown) www.johnogroat-journal.co.uk
Lonely Planet
Management Today (1992) Kevin Leech’s life after death, 1 February [online] http://www.managementtoday.co.uk/search/article/408941/uk-kevin-leechs-life-death/ (accessed 22 February 2010)
Manchester Evening News (2001) Cash share deal ends biotech row, 27 September
Murray-West, R (2001) Milner dispute settled at ML, Daily Telegraph, 28 September [online] http://www.telegraph.co.uk/finance/2735413/Milner-dispute-settled-at-ML.html (accessed 22 February 2010)
Murray-West, R (2002) Departing Leech springs bankruptcy surprise, Daily Telegraph,. 11 October [online] http://www.telegraph.co.uk/finance/2829904/Departing-Leech-springs-bankruptcy-surprise.html (accessed 22 February 2010)
PR Newswire (nd) CI4net.com reports year-end results [online] www.prnewswire.co.uk/cgi/news/release?id=19928 (accessed 22 February 2010)
Real Business (2007) Seducing an angel, 30 August
Tripadvisor (nd) Reviews of Land’s End Hotel, www.tripadvisor.co.uk
Sunday Times, August 23, 2008
Walsh, C (2004a) Leech’s ticket to ride again, Observer, 15 August
Walsh, C (2004b) The fall and rise of Kevin Leech, Observer, 26 December
wikipedia (nd) Lightwater Valley accident [online] http://en.wikipedia.org/wiki/Lightwater_Valley#Accident (accessed 22 February 2010)
Young, R (2000) Final punchline for Reliant’s three-wheel joke, The Times, 27 September