Unearthing a Buried Fortune At
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JCB Unearthing a buried fortune at JCB How Lord Bamford, head of the JCB excavator empire, channelled half a billion pounds through an obscure company, sparking legal action from his brother BY TOM BERGIN SPECIAL REPORT 1 JCB UNEARTHING A FORTUNE ROCESTER, ENGLAND, MARCH 25, 2015 leading British industrialist and po- litical donor has channelled more Athan half a billion pounds through an obscure company that isn’t required to file financial accounts, a Reuters analysis of corporate filings shows. Much of the money allegedly ended up being paid to the industrialist himself, ac- cording to claims in court documents. Lord Anthony Bamford made the pay- ments as head of the family-owned JCB group, which is one of the world’s top mak- ers of construction machinery. It has an- nual sales of sales of nearly 3 billion pounds ($4.5 billion). Bamford is one of Britain’s best-known business leaders and a member of parlia- PREMIER VISIT: Prime Minister David Cameron giving a speech at JCB’s headquarters in Rocester, ment. In the past five years he has given 2.6 central England, last November. REUTERS/OLI SCARFF/POOL. Cover: JCB’s chairman, Lord Anthony million pounds to the Conservatives, the Bamford, has made substantial donations to Cameron’s Conservative party through a company called dominant party in Britain’s ruling coalition, JCB Research. NEWSCAST VIA JCB/HANDOUT and in 2013 he became a Conservative member of the House of Lords, the upper chamber of the British parliament. To keep detailed information on the company’s trade secrets The peer has urged politicians to provide information on the company’s as private as possible.” more incentives for companies to invest in trade secrets as private as When Reuters asked why JCB group manufacturing, and JCB group has a repu- possible. had paid hundreds of millions of pounds to tation for reinvesting more of its profits in JCB Research, the spokesman initially said developing new products than do listed A spokesman for JCB group, explaining why its the payments were for research work. He companies with dividend-hungry share- research arm is an unlimited company that does not later said some of the payments were for holders. “JCB may be a global company, file publicly available accounts management services, including fees to di- but first and foremost we’re British and rectors. The directors include Bamford and we invest heavily in Britain,” Bamford was Staffordshire, central England, was widely his wife, Carole. quoted as saying in 2013. seen as a business of modest size, best The spokesman for JCB declined to say A Reuters study of JCB group accounts known for being the vehicle for Bamford’s how much money JCB Research paid its found that between 2001 and 2013, the group political donations. Its other finances have directors. paid 577 million pounds to a separate com- remained mysterious to outsiders. There is no suggestion that JCB or pany called JCB Research, which conducts The firm has only two shares, both Bamford used the arrangements to mini- research and development for JCB group. owned by Bamford. Unlike JCB group, mise tax liabilities. Indeed, tax experts said However, much of that money did not go to JCB Research is an independent unlimited Bamford may in fact have incurred more tax fund research, according to allegations in pre- company, which means it does not have to by paying himself partly via JCB Research viously unpublished court documents. file accounts available for public scrutiny. than if he had received the money as divi- Instead, according to a legal claim by A spokesman for JCB group said: dends from JCB group. In return, however, Bamford’s brother, large sums went to direc- “Intellectual property has always been of he gained secrecy. tors of JCB Research – including at least 130 the greatest importance to JCB group.” Limited companies, even if family- million pounds to Bamford and his wife. He said JCB Research was structured as owned like JCB group, are required to dis- Until now JCB Research, based in an unlimited company “to keep detailed close the total remuneration paid to their SPECIAL REPORT 2 JCB UNEARTHING A FORTUNE directors. Independent unlimited compa- nies do not have to do so. However, Bamford’s brother Mark, a di- rector of JCB Research until 2011, volun- tarily opened a window into the company when he brought a legal action in 2010. He disputed ownership of the company and how JCB Research had distributed millions of pounds to directors. In publicly available but previously un- reported court papers, Mark Bamford al- leged that his brother had transferred more than 300 million pounds from JCB group to JCB Research between 2001 and 2008. Mark alleged that JCB Research had then paid more than 130 million pounds to Anthony Bamford and his wife between 2001 and 2008. FLAGSHIP COMPANY: JCB is one of the world’s top three manufacturers of construction equipment. The Mark Bamford also alleged that JCB family-owned company says it invests heavily in research and development. REUTERS/DARREN STAPLES Research provided a loan account to an unidentified director that at times exceeded A FAMILY DISPUTE 40 million pounds, according to the docu- Money flow ments. It has not been publicly disclosed Payments from JCB group to JCB Research Joseph Cyril Bamford, father of Anthony how much money JCB Research paid or and Mark, started the JCB empire in a may have lent to directors after 2008. MILLION DOLLARS rented lock-up garage in 1945. In 1956 he JCB Research was “a conduit for certain 80 established J.C. Bamford Excavators Ltd, members of the Bamford family to extract which became famous for making bright value” from JCB group, according to Mark yellow backhoe loaders. It remains the Bamford’s legal claim. 60 group’s main operating company. In court documents, Anthony Bamford As the business grew, Joseph Bamford set responded that JCB Research had paid se- up JCB Research in 1961 as a limited com- 40 nior executives of JCB group and members pany. But in 1974 the whole group was re- of the Bamford family. But he denied that structured shortly before Anthony Bamford JCB Research was used to extract value 20 took over running the firm. Joseph Bamford from JCB group. moved to Switzerland and ownership of the Lawyers for Bamford said that details of business was shifted offshore. Bamford’s earnings from JCB were private 0 JCB Research was re-incorporated as an '01 '03 '05 '07 '09 '11 '13 and should remain so. unlimited company outside the main JCB The dispute between the brothers was group, with Joseph Bamford and his wife Source: Reuters’ analysis settled privately before it came to a full Marjorie owning the company’s two shares, court hearing, and the allegations made by filings show. Mark Bamford were not proven or disprov- Independent unlimited companies are en. A spokesman for JCB and Anthony comment further. rare, in part because the owners accept com- Bamford said the legal case “arose from a A spokesman for the Conservative Party plete liability for the company’s debts. Only fraternal misunderstanding and has long had no comment on JCB Research but said: 0.15 percent of companies incorporated in since been amicably resolved.” “All donations to the Conservative Party Britain are unlimited, a spokeswoman for Mark Bamford also said the dispute are properly and transparently declared to Companies House said. An even smaller had been settled amicably. He declined to the Electoral Commission.” number are, like JCB Research, unlimited SPECIAL REPORT 3 JCB UNEARTHING A FORTUNE and not owned or controlled by limited STALWART SUPPORTER: Lord companies. They benefit from minimal re- Bamford has donated money to porting requirements. the Conservative party for many Prem Sikka, professor of accounting at years. William Hague, former Essex University, described JCB Research leader of the party, visited JCB as a “black box” because of its lack of headquarters during the 2001 transparency. election campaign. REUTERS/ In court filings, Anthony Bamford STRINGER said that the purpose of registering JCB Research as an unlimited company was “to preserve the confidentiality of payments made by JCB Research and in particular to shield details of the JCB group’s research programme and outlay from competitors.” When the dispute between Anthony and Mark Bamford erupted in 2010, the media paid little attention. In an interview with London’s Evening Standard newspa- per at the time, Anthony Bamford down- played the case, saying: “It is essentially a dispute about jigger all.” But court documents obtained by Reuters portray a family drama involving millions. By then, Joseph and Marjorie Bamford PRIVATE DEAL stood down as a director of both JCB were dead, and Anthony Bamford owned Despite the hundreds of millions of pounds Research and the main JCB group holding both shares in JCB Research. Mark going through JCB Research, Anthony and company, JCB Service. Bamford claimed that he should have Mark Bamford valued the company at less Whatever the deal between the two had the share that had been owned by his than 30,000 pounds for inheritance tax pur- brothers, Anthony Bamford remained mother and that he had been deprived of it poses after the death of their mother in 2003, the sole shareholder in JCB Research, ac- by Anthony. according to the 2010 court documents. cording to corporate filings. Large sums of Mark Bamford alleged that in 1997 The low valuation was because the com- money continued to flow from JCB group Anthony had persuaded their mother, then pany has few assets and makes no profit, into JCB Research.