Accountant for home secretary’s family investment vehicle says strategy was discussed at Tony Rudd’s home and his contacts were used to raise cash

This article is more than 3 years old

This article is more than 3 years old

The extent of the involvement of Amber Rudd’s father in a business she was running in the late 1980s, despite him being declared unfit to be a director, has been disclosed by an accountant who worked for the family firm.

Speaking exclusively to the Guardian, Simon Spector, an accountant for the family’s investment vehicle Lawnstone, described how strategy would be discussed at Tony Rudd’s home in Kensington Square, London and his “raft of contacts” was used to help raise money.

“I suppose there were meetings there because that was where Tony lived and it was one of the places they met to gather and discuss strategy and opportunities,” he said.

The home secretary’s father had been the subject of an excoriating 1988 Department of Trade and Industry (DTI) report, which dealt with his management of a separate company that ceased trading in 1981. The report said he was “either unaware or chose to ignore” the duties of a company director and was unfit to direct “any company whether private or public”.

In light of the report’s criticisms and recommendations, in the past week the Guardian asked Amber Rudd how she had ensured that her father was not involved in the day-to-day running of Lawnstone. She declined to answer the question, as did her father.

Instead, a spokesperson for the home secretary said: “It is a matter of public record that Amber had a career in business before working in politics.” There is no suggestion of any breach of any of the laws governing the directors of companies.

An analysis of the Lawnstone parent company’s accounts also indicate that it paid no corporation tax in any of the eight years for which the home secretary was its director.

Amber Rudd became a director and shareholder of Lawnstone Limited at the age of 24 in January 1988, taking over from her sister and brother-in-law.

Seven months later, a report of a DTI investigation into Tony Rudd’s management of the separate Greenbank Trust found that he had systematically misused it and stripped it of its assets.

Having taken control of Lawnstone earlier that year, Amber Rudd restructured it with a new parent entity – The Lawnstone Group plc – owning the original Lawnstone Limited.

Despite the parent company’s registered office being in Lower Belgrave Street, its first three years of accounts were signed off at Tony Rudd’s Kensington Square home, despite him officially playing no role in the running or ownership of the company.

Spector, an accountant who served as The Lawnstone Group’s secretary in the early 1990s, said that although he was “in the background” and not responsible for the day-to-day running of the firm, Tony Rudd continued to provide advice to the firm.

Lawnstone specialised in developing startups and identifying potential investors. “Amber would be finding investors, people. Companies that wanted investment would come to the advisers to try and find the people. Amber had connections in the City,” said Spector. “Tony, I think, still had a lot of connections in the City.”

Under Amber Rudd, the company paid fees to her father “in respect of financial consultancy and public relations advice”, including a £24,500 payment in 1995 and smaller payments of £1,500 in 1996 and 1999.

Richard Murphy, a chartered accountant and anti-tax avoidance campaigner, described the arrangement as “a red flag signal that there may be something wrong”, adding that the difference between an adviser and a director of a company was a distinction of which he had been conscious throughout his career.

“There’s a difference between advising a company and going occasionally to a meeting, and being a regular attender at a meeting which takes place at your home, where you are paid,” he said.

The Lawnstone Group’s accounts reveal that the company paid zero corporation tax under the home secretary’s control, despite reporting five-figure profits in its final four years.

As a result of the losses acquired when the new company was incorporated, as well as further losses incurred between 1990 and 1993, the company paid no tax throughout its entire lifespan, despite reporting five-figure pre-tax profits from 1994 to 1997.

The Lawnstone Group’s 1990 accounts note that “a subsidiary had corporation tax losses of approximately £178,000 available to be carried forward for set off against future profits”. The company never paid tax, but did claim £1,638 back from the government in 1991 for an overpayment of tax before Amber Rudd took over the company.

Spector, who was not involved at the time, said that the company had been structured so as to avoid large tax bills by offsetting a “big deal” that had “gone very sour” against future profits.

“They were trying to structure it so they could actually utilise the losses,” he said. “There was a deal that had gone wrong, before I got involved so they were trying to structure it so they could utilise it against some of the things that were succeeding.”

Amber Rudd and the Kensington Square connection

There are several houses currently for sale on Kensington Square.

A four-bedroom house is priced at £6.75m, with the estate agent praising the view over “one of London’s most beautiful and exclusive garden squares”.

Another Grade II house “moments from stylish Kensington High Street” is on the market for £7m.

It was in these exclusive surroundings the home secretary took her first steps in a business career that is now raising questions about her life before she entered parliament six years ago.

Central to the questions is her relationship with her father, the former stockbroker Tony Rudd.

It is unusual to have been involved in one DTI investigation. Perhaps uniquely, Tony Rudd was involved in three.

In the run-up to major changes to the City in the 1980s, his stockbroking firm Rowe Rudd decided to take over a small investment trust called the Greenbank Trust. To do this, he set up a company called Malton, which would acquire Greenbank.

The takeover was a disaster. Within just a few months, Greenbank, Rowe Rudd and Malton’s finances were precariously intertwined. Greenbank’s assets were stripped, and the DTI stepped in.

The DTI’s report on Greenbank reveals serious issues in the management of the company.

At one point, in order to remove debt from Rowe Rudd’s balance sheet, 58 shares in another company were revalued. Despite having been valued at 10p each originally, the shares were re-priced at £10,000. The DTI report says this was “clearly designed to ensure there was no indebtedness” in Rowe Rudd.

“They were then transferred for £580,000,” notes the report. “This converted a debit balance of £360,000 in the books of Rowe Rudd & Co into a credit balance.”

On another occasion, Rowe Rudd carried out a series of trades for a Swiss company called Glenlyon – although no one at Rowe Rudd appeared to know who or what Glenlyon was.

One of the Rowe Rudd partners told the DTI that Glenlyon was “a client of Tony Rudd’s”, but was unable to provide any further information. Rudd’s solicitors eventually provided an address for Glenlyon in Geneva.

The DTI inspectors noted: “We wrote to Glenlyon Trading SA at this address; the letter was returned marked ‘inconnu’. We caused inquiries to be made in Switzerland for the years 1981-1983. From these inquiries it appears that no Glenlyon Trading SA or similar named organisation had traded from that or any other address in Switzerland in that period nor was any such company registered in Switzerland.”

Rowe Rudd’s share structure was so complicated that when DTI inspectors asked who was managing the company, “the answer we received was that Mr Rudd has been running” the company “despite not knowing who owned the company”.

At one point, Tony Rudd’s colleague admitted to inspectors: “I have actually spoken to one or two chums and it would appear there has been a breach [of company law].”

The DTI concluded: “The impression those concerned attempted to convey was that no one knew what had taken place. However, the fact is, sufficiently clear instructions were given and acted on which led to Greenbank being stripped of its assets.”

Although the Greenbank report was completed in 1985, the issue was passed to the official receiver, and the report was not published until the summer of 1988.

Its conclusions were clear. Rudd and his business partner were “totally unfit to be directors of any company whether private or public”.

That was by no means the last of the problems.

A meeting with Katie Chalus

A new company had been set up: an investment vehicle called Lawnstone Limited.

By 1984, Lawnstone’s ownership was passed to Amanda Rudd, Amber Rudd’s older sister. In that same year, Amanda married a man called Philippe Le Roux.

The following year, the chairman of a manufacturing company, Dennis Poore, decided he wanted to break up the firm, which was called Manganese Bronze.

Poore was a close friend of Tony Rudd’s and consulted him and Lawnstone about what to do.

Eventually, Rudd’s son-in-law Le Roux and some associates decided to take over a division of Manganese Bronze. This became the Norton Villiers Triumph Group.

This spin-off of Norton Villiers soon became the subject of a second DTI inquiry and, if anything, this was even more dramatic than the Greenbank investigation.

At one point, for example, a Norton director gave a vivid description of an Iranian woman called Katie Chalus, who intended to buy one of the company’s properties.

“I know she was an Iranian lady and reasonably wealthy,” said the director, adding that he had met her at an airport. However, as the DTI continued to investigate, another director “ultimately acknowledged to us that the so-called Mrs Chalus did not exist”.

Although the home secretary was not formally interviewed by the DTI, Amber Rudd, along with her mother and father, did provide information to this inquiry.

Le Roux was ultimately fined £15,000, while other directors were jailed.

With Amanda and Le Roux involved in Norton, Lawnstone was transferred yet again.

This time, it passed to Amber Rudd.

Questions for the home secretary

Amber Rudd became a director of Lawnstone Limited in 1988 and the company was rapidly restructured.

However, despite its new management and ownership, Lawnstone did not separate itself from the grand Kensington Square property where Tony Rudd continued to live.

Simon Spector, the accountant for the family’s investment vehicle told the Guardian that Amber Rudd continued to hold meetings there.

Spector, who worked for Rudd family companies for several years, also said Tony Rudd’s contacts were used to develop business deals.

Under Amber Rudd’s ownership, Lawnstone was restructured, which was advantageous because the company brought tax losses of £178,000 which could be set off against future profits.

Lawnstone specialised in developing new companies and finding rich individuals who wanted to invest in start-up companies. The company continued to pay occasional consultancy fees to Rudd’s father, including a £24,500 payment in 1995.

The Guardian asked the home secretary two key questions about Lawnstone: what steps did you take to ensure that your father was not involved in forming, marketing or running a company, given that the company was operating out of his home, and he was being paid for consultancy services? What did the consultancy services provided by your father involve?

But her reply offered no answers.

Instead, her advisers sent a statement which said: “It is a matter of public record that Amber had a career in business before working in politics.”

Under the home secretary’s management, the Lawnstone Group was not successful. Within months, Lawnstone had bought two finance companies, both of which went bust within a year.

A third company connected to the Rudd family was also struck off after the DTI petitioned for its winding up in 1987. Buckingham Corporate Securities had been based at offices occupied by Tony Rudd and Lawnstone. There is no suggestion that Amber Rudd was involved in Buckingham.

A few years later, Lawnstone invested heavily in a company called Monticello, and Amber Rudd became a director of that company.

The shares in Monticello were suspended from trading after the company’s chief executive, Mark O’Hanlon, gave an extensive and highly misleading interview about the company’s prospects. O’Hanlon was eventually jailed. There is no suggestion that Amber Rudd was involved in share-ramping.