The MT Interview: Victor Chandler
By Matthew Gwyther Thursday, 10 July 2008
Born into a bookmaking family, he found himself suddenly in charge of his father's failing business, with no experience and a widowed mother and sisters to support. The 'Indiana Jones of gambling' now runs a billion-pound business from Gibraltar and lives the high life.
It's a funny old place, Gibraltar. If you arrive in town by air, you touch down on a runway that can only be used when the busy main road it crosses is closed to allow the plane to land. And it's not a landing for the nervous flier. One false nudge on the easyJet joystick amid the capricious cross-winds whipping around the 426metre (1,400ft) high Rock and you'd be in the drink.
Wedged in the narrow western entrance to the Mediterranean, Gib is one of the most densely populated spaces on the planet, with 30,000 souls holed up in less than three square miles. A stone's throw from the airport runway is Spain, which ceded the Rock to the British at the Treaty of Utrecht in 1713 and has spent most of the time since tetchily trying to get it back. Its border post is staffed by officious Spanish who, if they are in an especially bloody mood, can make going backwards and forwards by car a very tedious business indeed. But, hey, it's an advance from the 1970s under Generalissimo Franco, when the border was shut, isolating Gibraltar completely.
Most legendary among the oddities are, of course, the apes - the only wild monkeys in Europe. The myth says that as long as they survive, British rule in Gib will endure. (Not much chance of that changing at the moment: a referendum in Gibraltar in 2002 yielded a 99% vote against London sharing sovereignty with Madrid.) The 230 free-spirited Barbary macaques routinely amble down the Rock and into Gibraltarians' houses to steal food and to goose unsuspecting tourists.
Gibraltar is an age-old Olive Belt melting-pot. Over the centuries, it has welcomed all sorts into its dusty streets - Phoenicians, Vandals, Moors, Genoese, Maltese, Catalans, Sephardic Jews and British squaddies, to name a few. (It was the last group that was the target when, in 1988, on Winston Churchill Avenue, just outside the airport, three IRA members were controversially shot dead by the SAS. The unarmed trio had left 100lb of Semtex in a car over the border in Spain.)
The most recent migrant influx, though, has been the online gambling companies. Although an overseas territory of the UK, Gibraltar's USP has long been its generous tax laws. Its offshore status had always made it popular with lawyers, tobacco smugglers, accountants and financial services companies keen to avoid the grasp of chancellors and finance ministers all over Europe. The Rock's continuing special tax status gets right up the nose of the EU Commission, which is doing all it can to level the playing field.
This is because in the past 10 years inward investment has gone into overdrive, as Gib has welcomed everyone in - 888.com, Party Gaming, 32 Red, not to mention the offshore businesses of old-stagers such as Ladbrokes and William Hill - onto the Rock. Property prices have gone through the roof, the traffic's a nightmare and GDP has skyrocketed to an estimated £730m a year.
The person who set this gambling wave in motion is Victor Chandler. Nine years ago, fed up with the UK government's levying of 9% duty on betting, he shifted his telephone and internet operation to Gibraltar.
Victor Chandler International moved into an office block that can kindly be described as a little on the shabby side. The tired pile at 50 Town Range would certainly have struggled to achieve the status of prime real estate in early 1970s Basingstoke.
MT arrives to interview Victor on a significant day for the long-established Chandler gambling dynasty. After 75 years, the Walthamstow greyhound-racing stadium back in the UK had just announced its closure. The east London dog track was opened back in 1933 by Victor's grandfather, William, but it is a sign of the times that it is no longer economically viable and will be turned into a supermarket.
After a short wait in the grubby, makeshift reception area - a white board on the wall has the phone number of 'Javier the plumber' scribbled on it - we are ushered into Chandler's sixth-floor office, which has a splendid view out across the Straits towards Africa. The walls are covered with racing memorabilia and a portrait of Lester Piggott. Visible offshore are moored cargo vessels and tankers, all avoiding taxes.
Victor doesn't seem terribly emotional about the impending Walthamstow closure. Indeed, his leading role in encouraging gamblers to move online rather than waving £10 notes at trackside bookies has actively contributed to its demise. He says the writing has been on the wall for ages: it has been losing half a million a year and he can't remember the last time he actually received a divvy from his small shareholding. (The stadium was run by a cousin.)
No, he's not sentimental about Walthamstow. But he does observe with a smile that 'Frances, my 90-year-old aunt, will be devastated. She goes to every meeting.'
Chandler's voice is soft, low-pitched and so gravelly - no doubt the result of a lifetime smoking Camels - that one has to listen to the interview tape repeatedly afterwards to hear all of what he has said. He has actually given Camels up since they changed the tobacco to a milder variety and sticks to large cigars now.
Although a big, imposing man, with bright blue eyes, Chandler is shy and doesn't impose himself on the conversation. He doesn't mind silences and thinks carefully about his answers.
Does he regret the passing of the old days and the lost intimacy with customers, now it's all done online or over the phone? 'We've still got the top-line customers. We keep in close touch. It's a shame the atmosphere's gone out of the racecourse. But it's technology that has made my business successful - I can't complain.' Ninety-three percent of his business is now online.
The expansion of Chandler's business has been largely through its myriad web-based betting platforms, which now include casino and poker sites, as well as betting on sport, from Gaelic games to golf. Victor Chandler International (VCI) has offices in Macau, Kuala Lumpur, Buenos Aires, London and Dublin, with a total staff of 290, and betting and gaming sites available in a multitude of languages. Although VCI is small compared to the big guys, it turns over more than £1bn in an industry where you'd expect a gross margin of 6%-7%. Ninety percent of VCI bets come from low-stake internet punters, but half the turnover comes from high-stakes players.
The man labelled the Godfather - or even the Indiana Jones - of gambling has led an unusual life. He was born into the dynasty in 1951, brought up on the South coast at Seaford and was an unqualified disaster at school.
Expelled from Highgate - 'I was caught for the third time climbing out of the window to go clubbing. I was in love' - he was then sent to Millfield, the Somerset boarding-school famed for producing talented sports players without worrying too much about five good O-levels.
His father got him into Millfield (past pupils include James Hewitt and Sophie Dahl) because the headmaster, Jack Meyer, owed him a gambling debt run up at a Chandler casino in Mayfair, London, by the name of Casanova's. Meyer would send young Chandler into town to place his bets with the local turf accountant. 'We were all taught in Nissen huts and it was a bit drafty, but I loved it,' he recalls.
Despite relieving his son's headmaster of a tidy sum, Chandler Snr was pessimistic about the future of the gambling industry and did not want Victor to go into the business. 'He saw a future that didn't happen - he thought the Tote would take everything over and the whole industry would be nationalised.' So, given a choice between studying at UCLA in the States and going to catering school in Switzerland, Victor chose the latter.
Was he a good chef? 'No, lousy. I was alright front-of-house, but not in the kitchen. It's the worst life, cooking.'
He went to Spain to sow his wild oats and had a fine old time. 'Any young man is going to enjoy himself in Spain when he's 21. Bumming around in Ibiza and Mallorca and along the coast here. It was a wonderful time.'
Then his father died of cancer, aged 52, and the fun was over. Victor returned to the UK to take charge of a business about which he knew little. But he had his mother, plus two younger sisters at school, to look after, so he got on with it. The company was in a serious financial mess, he didn't hit it off with the senior management and he endured a fairly miserable time while he learned the ropes.
At one point, two years after he took over, he was ready to call it a day and nearly sold the company to Hugh Hefner's Playboy Enterprises. But the offer was too low and then things started to get better. He developed a good line in growing small chains of betting shops and selling them on to the majors while retaining the freeholds.
Chandler recalls Ascot in 1977 being the first good year: 'We made £100,000, which was a fortune in those days. After that, I think I felt for the first time that I'd got out of the bank's clutches.' He started to enjoy himself. He got into the high life, striking up a friendship with the painter Lucien Freud, a keen gambler.
Legend has it that Freud painted Victor's portrait in the 1980s to pay off a gambling debt. Chandler says this isn't true, but acknowledges that he loved his dinners with Freud and fellow-painter Francis Bacon at Wheeler's on Old Compton Street, Soho. 'They were great company - Francis drank too much and was a masochistic gambler. He used to enjoy losing ... A strange man.' Chandler sold the portrait at Christies for £4.1m in 2006, but there are others - although he's less keen to talk about this than the marvel of the age of Freud's current girlfriend - 'She's 26,' he chuckles. Freud himself is now 86 years old.
Chandler's love is for horses - his favourite pastime is riding around his estancia (ranch) over the border. He's not into football, but he clearly recalls realising that was where the real money lay in modern gambling. During the World Cup finals of 1994, a man turned up at Chandler's office in London with a million pounds in cash that he wanted to place on behalf of a Chinese businessman.
The Chinese, a nation in which gambling, although illegal, is very deeply rooted, regard football as one of the few sports that is straight and they gamble vast sums on the results of European soccer. Chandler's fascination now is for Asia and the Far East.
He recalls his original trip to Macau, a Chinese territory where gambling is permitted. 'When I first went to Macau in the late '90s, there were bombs going off, and people were disappearing and being shot. It was terrifying. I had to have two bodyguards and a bullet-proof car. I asked the driver whether the car was bullet-proof. He said: "No, sir - it's bomb-proof." And we had outriders. Then when the Chinese took over, all the gangsters suddenly disappeared into mainland China - just whisked away and never seen again ... I was offered a block of flats there with an average price of $20,000 a flat. I wish I'd bought them. Worth a fortune now.'
Asia is developing fast for Chandler, despite the irritation of his websites being attacked and threatened by irate Chinese competitors. 'The big change in Asia that we've noticed in the last 18 months is that, whereas we used to be competing with the illegals who had their agents and pyramid operations on the ground taking the cash, right up to the top to the actual bookmaker, now you have a different kind of person playing online. People are becoming more educated and they're not frightened to use their debit or credit card. It's a huge sea-change.'
The sea-change back in the UK has been the City boys. With much of the activity in the Square Mile, especially among hedge funds now just a higher form of gambling, it's no surprise that City folk are among Chandler's highest rollers. A love of potentially painful risk is part of the culture and they still have plenty of cash to burn. 'Yeah, it used to be the English Premiership footballers,' says one of Chandler's aides. 'But after the negative publicity, when they're not training they just sit at home playing on their Wii machines these days.'
Many were aghast when it was alleged in 2003 that Michael Owen, the England striker, had gambled an astonishing £2.2m on horseracing and football.
Chandler has endured a number of run-ins with the media over the years, the most painful being a Panorama investigation in 2002 linked to horseracing, during the course of which his offices and home were raided by the Metropolitan police. The Met subsequently agreed in the High Court that it had acted illegally, and cleared Chandler of any suggestion of wrongdoing.
After all the ups and downs, how he cashes in is now the dilemma. Although gambling has developed to become more corporate and acceptable, it is still grouped with such undesirable addictive activities as drinking and smoking, and is strongly disapproved of by many. It was interesting, for example, how Alan Sugar came over all prudish in the final of The Apprentice and criticised one team for basing its men's perfume brand on roulette.
And there is also the ticklish subject of the legality of online gambling activity in many countries. The City's appetite for buying shares in newly floated online gambling companies has cooled, following the sick-making roller-coaster ride of Ruth Parasol's PartyGaming, hit by US anti-gambling laws. (Parasol is a social acquaintance of Chandler's on the Sotogrande luxury resort scene, 25km away.)
Israel, for example, is Chandler's third-largest territory, served by a Hebrew-speaking team in Gibraltar. However, when Chandler's CEO, Michael Carlton, made a visit last year to talk to members of the Knesset, he soon found himself detained and helping the authorities with their enquiries. (Carlton, for his part, pointed out that the 92% his company returned to gamblers compared very favourably with the lesser figure given back by the Israeli state monopoly.)
Last October, the day after the Prix de L'Arc de Triomphe in Paris, Chandler was interviewed by les flics about VCI's activities in France. 'I was there for a day and it was fairly relaxed, but it was a terrible waste of the policeman's time,' he notes, taking another small drag on his cigar.
And, when it comes to making life awkward, the Americans are the heaviest of the lot. The US authorities have arrested and imprisoned British online gambling executives who made the mistake of touching down on US soil. David Carruthers of BetonSports and Peter Dicks of Sportingbet found themselves cooling their heels in this fashion. (Carruthers is still under house arrest in St Louis, awaiting trial on racketeering charges.)
Chandler has steered well clear of the US for this very reason. 'In America, they are just protecting their gambling industries - and states with incomes (from gambling). I can see poker being legalised and run on a state-by-state basis, but they will want to keep it for themselves.'
Didn't he think it odd that the moral majority in the US was so down on gambling, bearing in mind its enthusiasm for pornography and guns? 'They've got the biggest porn industry in the world,' he says. 'If the Christian Right really exercised that sort of influence over legislation in the States you'd soon see that disappear. No, it's to do with something else and, usually in America, that is money.'
Does all this worry him - having a successful business, but still carrying a touch of an outlaw? 'I think the world is changing. To a large degree, our business has lost its stigma. All Europe will accept gambling in time. Countries will legalise, regulate and tax. And that's a good thing for us, because it adds value to the business. We've got a partnership with a casino and bingo operator in Spain, which will get going next year.'
Nevertheless, Chandler thinks it unlikely that he'll float his company, which includes a 45% shareholding by Michael Tabor, the horse-breeder and racer, who is worth nearly $2bn. Chandler is now 57 and has a young family from his second marriage - one small child and another expected in August. 'I'd rather sell it than float it. That's the truth. I don't want to deal with the City - I've seen too many people float and spend most of their lives dealing with the City rather than running their businesses.'
In 2000, he came close to selling to Enic, the sports and media group controlled by the legendary Bear Sterns bath-taking billionaire Joe Lewis, but couldn't agree on a price and the length of time he might remain involved.
Although Chandler can now step back and has lieutenants to run the business, he still takes a close interest in what goes on each day. Despite the more predictable returns of online poker and roulette, gambling is by definition still a risky business for the bookie as well as the punter. One of the two will always lose. It's hard to hedge last-minute large wagers on sporting events and he prides himself on rarely turning down a bet. He did, however, decline to take a large sum on Boris Johnson to win the London mayoral election at odds of 7 to 4. 'No value in that at all.'
Despite all those years helping punters part with their cash, he retains a sense of anxiety. 'Yes, I think that's what drives me. You always wonder if something you haven't foreseen can bring you down. I think it's caused by the insecurity of taking over the business when I was so young and realising that the company was insolvent. I've always got that in the back of my mind, that it could all go wrong.'
But did he think his father would be proud of what Victor had achieved? 'I think he'd be amazed,' he snorts. 'He thought I was the laziest person he'd come across.'
FOUR CHALLENGES FACING CHANDLER
1. Working out how to cash in by finding a buyer for VCI
2. Dreaming up the next big thing - online poker is a busted flush
3. Moving the gambling industry further towards blue-chip legitimacy worldwide
4. Keeping a weather eye out for online fraudsters, cheats and other undesirables
CHANDLER IN A MINUTE
1951: Born April 18, UK. Educated Highgate (expelled) and Millfield
1970: Catering college, Switzerland
1973: Takes over family betting business on death of his father
1976: Almost sells up to Playboy Enterprises
1977: Firm makes £100,000 at Ascot
1999: Moves Victor Chandler International to Gibraltar
2000: Almost sells business to Enic
2002: Launches online poker