Six-year sentence ends flamboyant reign of Versailles founder Cushnie

High-profile Labour donor creamed off £29m from trade finance company

Carl Cushnie, once lauded as Britain's most successful black businessman, was sentenced to six years in prison yesterday for defrauding investors in his collapsed company, Versailles.

Carl Cushnie, once lauded as Britain's most successful black businessman, was sentenced to six years in prison yesterday for defrauding investors in his collapsed company, Versailles.

Cushnie, who appeared on a Labour Party election broadcast, creamed off £29m from the company. He will be joined behind bars by his business partner, Fred Clough, who received a sentence of the same length.

Between them, they built Versailles into a supposedly highly successful trade finance company, funding a life of luxury for Cushnie and Clough, before it collapsed, spectacularly, in 2000.

The conviction, which includes a ban from being company directors for 10 years in the case of Cushnie and the maximum of 15 for Clough, is a major victory for the Serious Fraud Office, which, along with the Department of Trade and Industry, investigated the pair for five years after realising that the exponential rate of expansion of Versailles was not all it seemed.

It is a crushing blow for Cushnie, who is thought to have used nearly £30m he made from selling shares in Versailles just before they tanked to buy a mansion in Kingston upon Thames, Surrey, and two town houses in London. He also bought a villa in the millionaire's haunt of Ramatuelle, near St Tropez, and an apartment on Boulevard St Michel in Paris. Spare cash went on paying off spending on his Harrods gold card and other credit cards.

It is not only his expensive lifestyle which will be curtailed. Cushnie had reaped political as well as financial rewards from the growth of Versailles. He built up a high profile in powerful circles, as the embodiment of Britain's multicultural and meritocratic society.

Sharing the stage with Sir Alex Ferguson and Mick Hucknall in Labour's European election broadcast, Cushnie declared: "Leadership is having the vision and being able to direct and shape events so that the vision can be realised."

Cushnie, a Labour donor, was taken even further into Tony Blair's circle of "Cool Britannia" acolytes. When Bill Clinton came to London in 1997, Cushnie was introduced to the former US President by Mr Blair as "one of England's leading black businessmen". In 2002, when the Prime Minister hosted a charity tennis match at the Queen's Club in west London, Cushnie sponsored the event.

Cushnie, 53, is even reported as having had a type of coffee named after him at the River Café restaurant.

He was a director of the Royal Commonwealth Society and sat with the Princess Royal on the fund-raising committee of Save the Children.

Yet, for all of that time, behind closed doors, Cushnie and his business partner were orchestrating a massive fraud against the individuals who invested their money in Versailles, known as "traders", Southwark Crown Court ruled last month. By the time the tennis contest came around, the DTI and SFO's investigation was well under way.

Cushnie, once a confident and outgoing individual in his business activities and other public projects, refused to take the stand to defend himself during the five-month trial which finished last month.

Instead, he had to listen to Clough, the 66-year-old former finance director of Versailles, who has admitted to taking £19m out of Versailles. Clough turned star witness for the prosecution, revealing in painstaking detail how, in the nine years of Versailles' existence, it created the illusion of growing a massive business which was worth £630m at its height. The model ­ solid but unexciting when carried out by other businesses ­ seemed to be a spectacular success in the hands of Clough and Cushnie. Versailles supposedly sourced the funding to hand out bridging loans from the traders, who invested in the business to make a return on their money.

Clough, a trained accountant, told the court baldly that Versailles made only one legitimate loan during its existence, and that made a loss. The rest of the business was merely an illusion, created by circulating cash through a myriad of shell companies.

Standing just a few feet from the man with whom he used to work closely, Clough said: "I produced false figures every month." He added that those figures bore "no resemblance whatsoever" to the true state of the business. Clough, who had concealed from Cushnie that he spent a previous term in prison in Jersey, has been convicted in the Versailles case of three counts of fraud, including against the traders and the bankers that lost £70m when Versailles went down.

Cushnie's total sentence was for nine years, though some will be served concurrently, bringing the term down to a maximum of six.

His lawyers argued that their client was not aware of the financial fiction being created by Clough, was only convicted of defrauding the traders.

Giving his remarks on the sentencing yesterday, Mr Justice Jackson said: "I commend the Serious Fraud Office for the thoroughness of their investigation into this important matter."

It is a big boost for the body, which has suffered a string of embarrassing failures in court, and has been dubbed the "Seriously Flawed Office" and, because of its address, "Nightmare on Elm Street".

Last summer, the SFO was left facing a bill of millions of pounds after the entrepreneur Andrew Regan was acquitted of theft in the Co-op scandal.

It was also slated over the Maxwell debacle and the failure to convict anyone over a £20m fraud at the DIY chain Wickes.

The SFO, created in 1988 to combine lawyers, specialist accountants and police under one roof, never declares whether it is pleased or displeased with jury verdicts, though those close to the body were yesterday celebrating that what has been one of its largest cases in recent years had been such a resounding victory.

It will now begin the process of trying to recover the assets the two amassed through the fraud. Depending on how many of the cars, homes and jewellery have ended up in the names of family and friends, that task could be quite difficult.

One expert in recovering assets said: "The process can be enormously complex; it depends on how many times around the world someone has sent their money. And often, money has just been frittered away on dinners at The Ritz."

The memory of fine food and wine may not have been too much comfort for Cushnie and Clough as they spent their first night in custody yesterday.

And possibly Cushnie, as former chief executive of Versailles, may have been thinking about the words he uttered when he urged voters to vote Labour ­ that leadership is about being able to "direct and shape events".