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1 YEAR AGO: Revealed: the full inside story of the Michelle
Mone PPE scandal
PPE Medpro and partners made as much as £100m profits
At least £70m
from PPE Medpro contracts taken offshore
Small
electronics firm behind supply of gowns for NHS
Jet, yacht and
racehorse purchased after PPE deal
Tory peer and
husband now selling yacht and properties
Mone takes
leave of absence from Lords and may leave UK
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David Conn
and Paul Lewis
Fri 9 Dec
2022 12.00 GMT
On the
sunny spring evening of 7 May 2020, in the lethal first wave of the Covid
pandemic, the Conservative peer Michelle Mone and her husband, Douglas
Barrowman, had themselves filmed for Instagram. Standing between the stone
pillars at the front door of their mansion on the Isle of Man, they clapped for
NHS staff, carers and other key workers, as they did weekly from different parts
of their Ballakew estate.
“As always,
Doug and myself would just like to say a massive thank you tonight to everyone
… that are keeping the country going,” Lady Mone posted. “We appreciate each
and every one of you.”
Two years
later, officers from the National Crime Agency (NCA) were investigating PPE
Medpro, a company that received more than £200m of government Covid contracts
weeks after Mone referred it to ministers.
The
Ballakew estate, a nine-bedroom property nestled amid 154 acres of manicured grounds,
with a spa, tennis court and helipad, was one of several places raided on 27
April this year as part of the NCA’s inquiry into potential fraud by PPE
Medpro.
Lawyers for
PPE Medpro have declined to comment on the NCA investigation, which is
continuing. However, this week the company was at the centre of a political
storm.
The prime
minister, Rishi Sunak, said he was “absolutely shocked” by a bombshell report
published by the Guardian two weeks ago revealing that Mone and her husband
secretly received tens of millions of pounds originating from PPE Medpro’s
profits, according to bank documents.
MPs voted
to force Sunak’s government to release documents relating to PPE Medpro, which
Mone had helped to secure a place for on a “VIP” lane that the government used
to prioritise politically connected suppliers at the start of the pandemic.
Meanwhile,
the Guardian revealed that Mone had been “aggressively’” lobbying ministers on behalf
of a second company, LFI Diagnostics, which was another secret entity of her
husband’s family office in the Isle of Man.
Now, the
Guardian can reveal previously unreported details about the PPE deal at the
heart of the Mone controversy and the enormous profits it appears to have
generated – mostly on the back of supplies that have been rejected by the
Department of Health and Social Care (DHSC) in a dispute with the company.
Mone,
Barrowman, PPE Medpro and three other intermediary companies in the supply
chain appear to have made in excess of £100m in profits from government
contracts worth £203m, according to a Guardian analysis.
It is a
business chain that stretches from the Isle of Man to Cyprus, Hong Kong and
then China, and it resulted, it seems, in vast fortunes that were moved
offshore.
The string
of revelations appears to have taken its toll on Mone, who announced this week
that she was taking a leave of absence from the House of Lords with immediate
effect – according to her spokesperson, “in order to clear her name of the
allegations that have been unjustly levelled against her”.
The only
speck of good news for the peer this week appears to have come in the 1.17pm
race at Newcastle on Thursday, won by Monbeg Genius, a horse she bought for her
husband as his “second wedding gift”.
The
six-year-old gelding, bought for £80,000, was one of a number of acquisitions
that Mone and her husband made in the months after they secretly received at
least £65m from profits originating from PPE Medpro. In a change of direction,
several of those assets are now for sale.
In March
2020, when the horror of the pandemic was setting in and the government began
frantically trying to fill PPE stockpiles that had been allowed to dwindle
dangerously low, normal requirements that public contracts must be
competitively tendered were abandoned.
The DHSC
would end up spending £12bn on PPE, much of it acquired via the “VIP” lane,
which prioritised contracts for companies recommended by MPs, peers and other
politically connected people.
It was the
day after Mone and Barrowman filmed themselves clapping for the NHS, on 8 May
2020, that Mone wrote an email to her fellow Tory peer Theodore Agnew, then a
minister in charge of procurement, copying in Michael Gove, at the time the
Cabinet Office minister. For both, she used their private email addresses.
Mone, who
was appointed to the House of Lords by David Cameron in 2015, explained that
she could supply PPE “through my team in Hong Kong”. She appeared to have
already communicated with Gove about this offer.
PPE Medpro
had at that stage not even been incorporated as a company in the UK. But Lord
Agnew’s officials added Mone’s offer to the “VIP” lane. Within weeks, the
government had awarded PPE Medpro two huge contracts. In the first, the DHSC committed
£80.85m for the supply of 210m face masks. The second involved paying £122m for
25m sterile surgical gowns.
Back then,
there were some clues that PPE Medpro was linked to Mone and her husband. The
company’s directors, Anthony Page and Voirrey Coole, both work in senior roles
for Barrowman’s Knox group, a collection of Isle of Man-based financial
services firms. Page had a connection to Mone too, as the registered secretary
of her personal brand company, MGM Media. Curiously, he stood down from that
role on the same day that PPE Medpro was incorporated, 12 May 2020.
Page worked
for the Knox House Trust, which has two divisions. One provides offshore wealth
management services to high net worth clients. The second, which was run by
Page, is Barrowman’s “family office”, also known as the Knox family office,
which oversees his and his family’s financial affairs.
This week
it emerged that Page is the person who prepared a key document seen by the
Guardian that lists PPE Medpro and LFI Diagnostics as “entities” of the
Barrowman’s family office.
However, in
2020 the links between PPE Medpro, Mone and Barrowman were not fully known. And
they were denied, dismissed or downplayed by lawyers representing all three
parties. Asked about PPE Medpro, lawyers for Mone and Barrowman insisted the
couple were not involved and had “no role or function in PPE Medpro, nor in the
process by which contracts were awarded to PPE Medpro”.
Deploying
the language of aggressive legal threats, Mone’s lawyers have repeatedly denied
that she was “connected in any way” to the business. One said in December 2020
that “any suggestion of an association” between Mone and PPE Medpro would be
inaccurate, misleading and defamatory.
That same
month, Page, in his capacity as PPE Medpro’s director, gave a fuller account of
the mysterious company, and denied that it had been awarded contracts because
of connections with the government or the Conservative party.
He said the
“group behind” PPE Medpro had set up the new UK-registered company “solely to
supply the NHS and in order to pay UK tax”.
In a press
release, Page added that PPE Medpro comprised “a consortium of successful
entrepreneurs” who had “in excess of 40 years’ combined experience in the
supply and provision of medical supplies”. The UK government had “requested
assistance” from this group, he added, to protect the country from “counterfeit
or unreliable products” and to avoid “grossly inflated prices from numerous
opportunist operators”.
One person
with detailed knowledge of the PPE Medpro operation told the Guardian more than
a year ago that Page’s press release was misleading. They said: “As far as I
knew of the people involved in the supply chain for PPE Medpro’s contracts with
the DHSC, they had zero experience of PPE before the pandemic.”
Another
well-placed source came forward around the same time to dispute Mone and
Barrowman’s repeated denials of links to PPE Medpro. They were not the kind of
person who would normally talk to a journalist. But they felt increasingly
uncomfortable reading the claims that were being made by lawyers representing
the couple. Holding their silence, they said, was “morally untenable”.
However,
the source warned that establishing a link between the Tory peer and PPE Medpro
would prove exceptionally difficult given that the family’s financial affairs
were cloaked in offshore secrecy.
On the same
day as PPE Medpro was incorporated in the UK, a company with the identical name
was registered in the Isle of Man, an offshore financial centre where ownership
of companies can be kept secret and no corporation tax is charged on profits.
While the
UK “PPE Medpro” secured the contracts with the government, its Isle of Man
sister company entered into agreements with a London-based business, Loudwater
Trade and Finance, according to documents seen by the Guardian last year.
In one of
the agreements, PPE Medpro stated that the company’s role in the deal was to
“use their extensive network” to seek to secure contracts with the NHS and
“other government bodies within the British Isles”. It did not stipulate who
exactly at the company had “an extensive network” that could help to secure
government contracts, but Mone is the only such figure publicly known to have
lobbied for the company.
According
to the agreement, Loudwater committed to “manage and secure the supply chain of
key PPE items from China and abroad”. A family-owned importing company,
Loudwater is principally run by one of its directors, Maurice Stimler. In its
annual report for the year to 30 September 2020 – the period covering its deals
with PPE Medpro – it stated that its “principal” business activity “continued
to be … international trading in coffee, consumables, edible nuts and fruits”.
In its
agreement with PPE Medpro, Loudwater said it would source PPE via “the Eric
Beare network of factories and compliance capabilities”. Eric Beare is a
company based in Hong Kong, owned by a businessman originally from South
Africa, Andrew Sack. On its website, even now, Eric Beare states that it
specialises in trading small electrical goods out of Hong Kong, such as speakers,
alarm clocks and kettles. There is no reference to PPE.
Eric Beare,
which has not responded to requests for comment, procured the PPE from Chinese
factories.
Interestingly,
Loudwater does not appear to have had a direct relationship with Eric Beare. Rather,
Loudwater is understood to have paid a third company, Neumer Trading, owned by
Evan and Ricky Neumann, two brothers resident in Israel, for the introduction,
according to a legal source familiar with the details of the supply chain.
Neumer
Trading, which did not respond to requests for comment, was registered in
Cyprus, another low-tax jurisdiction. Loudwater paid the money to bank accounts
in Cyprus.
There is no
suggestion of wrongdoing by Loudwater, Eric Beare or Neumer Trading. The supply
chain they were part of was complex, involving cuts taken at each stage in the
process, which is not in itself unusual in the global PPE market. But what does
stand out is the vast profits that appear to have been made from the deal –
particularly by Mone and Barrowman.
In March,
the Guardian reported that it had seen the purchase agreements with the Chinese
manufacturer of the surgical gowns, showing that Eric Beare and Loudwater had
bought the 25m gowns for just £46m. That meant a £76m top-line profit from the
£122m that the DHSC paid PPE Medpro, although that figure does not account for
costs.
Further
leaked documents seen by the Guardian indicate that the top-line profit on the
face masks contract was £26.5m. On paper, that would suggest that PPE Medpro
and its partners stood to make as much as £102.5m profit from its £203m
contracts with the UK government – a roughly 50% profit margin. No relevant
parties responded to requests for comment on that figure.
Documents
from HSBC, which investigated the flow of PPE Medpro profits that went to
Barrowman, shed further light on how those profits were divided up. Barrowman
was paid £70m by PPE Medpro in September 2020, at least £65m of which he told
the bank were “profits”, and then distributed the funds through a series of
offshore accounts, trusts and companies.
One of the
recipients, bank records indicate, was a trust of which Mone and her adult
children were the beneficiaries. It received £29m in funds originating from PPE
Medpro profits in October 2020, the documents state.
According
to the Guardian’s analysis, the huge profits shared between the couple suggests
that about £30m was then shared between the three other companies in the supply
chain.
There is no
suggestion that Loudwater’s profits went offshore. Its UK accounts record that
the year in which the deals were done was a bountiful one, with pre-tax profits
increasing by £10m. The following year, turnover and profits dropped back to
their pre-pandemic level. Stimler noted in the accounts that 2020 had been an
“exceptional year” for his company.
Contacted
for comment, Stimler replied: “Loudwater has no comment to make at this time.”
None of PPE Medpro’s supply chain partners responded to requests for comment
from the Guardian.
That
includes new questions now being asked of Andrew Sack, of Eric Beare, about LFI
Diagnostics, the second company over which Mone lobbied ministers. Sack owns
30% of LFI Diagnostics, which Mone tried to help in its ultimately failed
effort to sell the UK government Covid lateral flow tests. At Companies House,
the other 70% shareholder is listed as “PPE Medpo” (sic).
Meanwhile,
in parliament there is now growing scrutiny of the entire PPE Medpro deal. In
its press release of December 2020, the company said it was “proud” that its
face masks and gowns had “undoubtedly” helped to “keep our NHS workers safe”.
But the surgical gowns it supplied – items whose sterility is vital to protect
from infection in critical healthcare settings such as operating theatres –
were rejected by officials on inspection in the UK. The DHSC is still trying to
recoup its money through mediation, a dispute resolution process. The gowns
have never been used by the NHS, although PPE Medpro insists the gowns passed
inspection and it is entitled to keep the £122m paid under the contract.
There are
also questions about tax. PPE Medpro said it created a UK division to pay UK
tax because it was “the right thing to do”. In Companies House filings, PPE
Medpro recorded less than £4m in profit and stated it had only £900,000 in UK
tax to pay. But questions remain about at least £65m in profits distributed
offshore in the Isle of Man. Asked about PPE Medpro’s apparent offshore profits
in February, Page replied: “You again raise the issue of some profit being
booked offshore. I remind you that this does not make any such profit unlawful
or improper.”
That may be
so, but the large offshore distribution of PPE Medpro profits raises moral and
practical questions. Was UK tax paid on the full profits of a deal with the UK
government to supply PPE to protect NHS workers in the pandemic? And with so
much money now offshore, how will PPE Medpro repay the DHSC if a court rules
that it needs to return some or all of the £122m it received for unused gowns?
In November
2020, five months after PPE Medpro secured government contracts, and two months
after Barrowman and Mone received at least £65m of its profits, Hello! magazine
ran glossy spreads of photos from the couple’s wedding on the Isle of Man,
attended by 90 guests.
The
following month, Mone posted on Instagram idyllic shots of their honeymoon at a
five-star resort in the Maldives. Life looked good for the couple, who appeared
to be on something of a spending spree.
In January
2021, Barrowman’s firm bought a new private jet, an 11-seater Cessna, M-KNOX on
its tail, for a price estimated in airline databases to be approximately $10m.
Between
August 2020 and July 2021, Mone’s three adult children were reported to have
bought four handsome properties in Glasgow for more than £3m. Companies in the
Knox family office are also understood to have bought at least eight properties
for £9m in Glasgow’s prestigious Park Circus, a favourite residential area for
Celtic and Rangers footballers.
Mone and
Barrowman also promoted a new office business, Neo Space Aberdeen, in which she
said they intended to invest £18m.
In August
2021 Mone posted on Instagram a picture of herself and Barrowman on the yacht,
renamed Lady M, that her husband had bought in May 2021 for £6m. “Business
isn’t easy,” she posted. “But it is rewarding.”
The
Guardian has asked Mone and Barrowman if the jet, yacht, properties, investment
in Neo Space, wedding and honeymoon were paid for directly or indirectly out of
the PPE Medpro profits. Barrowman’s lawyer did not reply. Mone’s lawyer said:
“We are advised there is no truth in what appears to be entirely speculative
‘guesses’ on your part.”
Whatever
the ultimate source of the funds, it now looks as though the couple are selling
their assets almost as quickly as they acquired them. Both of their
well-appointed residences, the grand Ballakew estate and their Eaton Terrace
London home, are now up for sale. So too is the Lady M yacht.
One source
familiar with the couple’s financial plans said they have been considering
leaving the UK and the Isle of Man and relocating to southern Europe.
The couple
may decide to leave the UK, or the tax haven island protected as a British
crown dependency. But they are unlikely to escape the scrutiny of the UK
parliament. Mone remains under investigation by the Lords commissioner for
standards. That inquiry has been paused owing to the separate NCA investigation
into PPE Medpro.
And in
Westminster there are calls for full disclosure about Mone’s interactions with
four key ministers: Gove, Agnew, Lord Bethell and Matt Hancock.
There are
also growing questions about the government’s insistence, repeated so many
times since the start of the pandemic, that “ministers did not and do not have
any role in awarding contracts”, and that civil servants were the ultimate
decision-makers.
One
official working on the critical effort to develop the UK’s testing capacity
has told the Guardian that because of Mone’s links to PPE Medpro, the company
was given special treatment when it tried to sell lateral flow tests. The
company required more personal attention from officials, the official said, a
culture they found “improper, and personally abhorrent”.
“Ministers
are now saying that the VIP status was irrelevant, because civil servants
ultimately made the decisions on which companies were awarded contracts,” the
official said. “But that is disingenuous: it is corruption of policy, process
and procedure. Ministers made clear that politically connected people should be
given special treatment. So we were forced to spend extra time with these
companies – such as PPE Medpro, which had no apparent expertise and should not
have got through the door.”
The DHSC
has always said – and maintains today – that due diligence was followed in all
cases of procurement during the pandemic.
Meanwhile,
Mone, Barrowman and PPE Medpro are no longer responding to requests for comment
from the Guardian. Last month, in response to questions about her receipt of
PPE Medpro profits, a lawyer for Mone said: “There are a number of reasons why
our client cannot comment on these issues and she is under no duty to do so.”
The
Guardian stands by its reporting.
Additional reporting by Henry Dyer
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