Exclusive: Bankrupt Cameron crony was victim of $2bn Venezuelan bond scam

Could it be the reason behind Tony Caplin’s debts of more than £3m?

WHITEHALL EDITOR

He was a Tory City grandee with impeccable connections who rose to become a quango king – chairing an influential Treasury body that handed out £60bn of government money to fund infrastructure projects around the country.

But Tony Caplin’s political friends deserted him last weekend and he was forced to resign from his government roles when it emerged that the businessman had been declared a bankrupt with debts of more than £3m.

Until now it has been a mystery how a former well-paid chairman of the blue-chip stockbroking firm Panmure Gordon – where David Cameron’s father once worked – could have fallen on such hard times.

But now inquiries by The Independent suggest an explanation that Mr Caplin would have had very good reason to have kept secret: he may have fallen victim to a bizarre $2bn Venezuelan bond fraud.

The strange story starts three years ago in 2011 when Mr Caplin set up a company called Kellmar in the Isle of Man.

He was the only active director of the firm which was notionally based in the offices of a local law firm.

But Kellmar never carried out any trading and less than a year later it was struck off the island’s register after Mr Caplin failed to pay the lawyers who set up the company their £42,000 in fees. It was Kellmar’s collapse in February 2012 that preceded Mr Caplin’s bankruptcy the following November.

But documents seen by The Independent suggest that Kellmar and Mr Caplin may have expected to have a far rosier future. They show the company was due to be the beneficiary of a $2bn (£1.2bn) Venezuelan bond - paying annual interest of 9.2 per cent worth millions of pounds a year – which was to be transferred into Kellmar’s name.

Income from the bond was due to be used for charitable purposes – bizarrely entirely of Mr Caplin’s choosing.

A letter to Kellmar, purporting to come from the president of the Central Bank of Venezuela, states that “the Bolivarian republic of Venezuela has transferred free and clear the ownership of the bond to you for the purpose of making possible the funding necessary for the development of humanitarian projects to be selected at you own discretion”.

An attached document cites Mr Caplin’s financial experience as former chairman of Panmure Gordon and his role as a council member of the Medical Research Council as reason why he had been chosen by the Venezuelan government to use the interest generated by the bond to “benefit thousands of families in North, Central and South American countries”.

But despite the convincing and official-looking documents perhaps all was not as it seemed. The documents appear to be a fairly basic fraud. An analysis by a Venezuelan financial blogger found several discrepancies in the documentation. Firstly, the transfer refers to the Venezuelan Ministry of Finance, which in May 2011 was actually called the Ministry of Finance and Planning.

On top of this, the full ownership of the real bond in question did not actually rest with the Central Bank of Venezuela – so could not legitimately have been transferred to Kellmar.

But what is beyond doubt is that no bond was ever transferred to Kellmar or Mr Caplin. The Central Bank’s president Nelson Merentes – who purportedly signed it – has declared that he had never signed any such bonds over.

And Venezuela has become rather notorious for such frauds. At the time of Mr Caplin’s bankruptcy, warnings were posted on financial message boards advising investors to be aware of fake Venezuelan bonds – one even quoted the same international securities identification number that appeared on Mr Caplin’s “bond”.

The reports suggested that fraudsters make money by asking for a fee to transfer the bond. In another case the false bonds are used to gain lines of credit from other financial institutions using them as collateral. The fraudsters would then disappear with the loaned money.

But how might Mr Caplin, with all his City experience, have got himself caught up in such a deception?

People who know him and have worked with him say that, despite having sat on the boards of numerous companies, he was strangely vulnerable to such a scam.

“He was naive and too trusting. He was a nice man and worked very, very hard but I think he also needed money and could be very susceptible to a convincing fraudster,” said one former colleague.

An analysis of his business career also shows a somewhat mixed record.

Of the nearly 100 companies which Mr Caplin has been a director of since 1990, 55 are now dissolved. Several others have gone into liquidation owing money to creditors.

At the time he set up Kellmar while he was still serving on the boards of several companies – these were part-time roles without significant financial rewards.

“I think it would be fair to say he needed the money,” said one former business associate. “If you were to ask me whether he might have been attracted to such a scheme the answer would be ‘Yes’.”

The associate added that he also cared hugely about his reputation, and the shame of being forced into bankruptcy would have been immense.

“He cared hugely what his family and friends thought of him and it doesn’t surprise me at all that he didn’t want anyone to know because of the shame. It’s really very sad.”

Last night when contacted by The Independent Mr Caplin said he did not want to comment on the causes of his bankruptcy.

But the political ramifications for the Government will not go away. Serious questions remain about how Mr Caplin could have been made chairman of the Public Works Loan Board (PWLB) – after he was made bankrupt – without either checks on the public record being made or any form of declaration of financial solvency from Mr Caplin.

Yesterday Chris Leslie, the shadow Chief Secretary to the Treasury, wrote to the Cabinet Secretary Jeremy Heywood demanding to know who was responsible for vetting Mr Caplin before putting him in charge of a body responsible for distributing such large sums of public money.

He also asked about Mr Caplin’s links to the Conservative Party – for which he worked briefly in the mid-2000s – and whether that had been declared during the vetting process for being made chairman of PWLB, which began after he was made bankrupt.

“The decision to appoint Mr Caplin to run this lending arm of the Treasury raises a series of important questions,” he wrote.

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