The looking-glass world of Mr and Mrs Clowes

Peter Clowes has been free for a week, and already he has a plan: he's going to prove he was innocent. Peter Popham reports

Peter Clowes has come back to Macclesfield. The man jailed for 10 years on sample charges of stealing pounds 16m from investors in his company Barlow Clowes, the man who with his wife, Pamela, shared his 'n' hers Lear jets, million-pound yachts and a chateau in France with its own vineyard, has returned - just four years after being sentenced - to the part of the world where it all began.

All the flashy accoutrements that made him the most garish symbol of Eighties greed are gone. He answers the door of the grimy, rented terraced house bordering a busy road in the centre of town in worn blue jeans and shirtsleeves; it's all a million light years away from his mansion up the road in leafy Whiteley Green, with its servants' quarters and swimming pool and acres of woodland.

The double chin and bulldog jowls, likewise, are gone, and with them the bumptious tycoon's grin. But he's unmistakably the same man: the elevator shoes, the fat white quiff shading his eyes, his chin sunk on his chest, the broad Mancunian vowels. And jail has failed, in a crucial sense, to knock the stuffing out of him. He talks of "regret", "remorse" and "responsibility", but still refuses to accept that he is a thief. "I have never stolen anybody's money," he says. "I have never lined my nest with anybody's money. My plan now is first to sue the Home Secretary for wrongful imprisonment, then to get my conviction overturned. It'll take time, maybe five or seven years - look how long it's taken Ernest Saunders - but that's what I'm determined to do."

This is delusion of a shocking order, self-deception on the grand scale. As the millions of words written since 1988 about his disastrous career make clear, Clowes was guilty of crime after crime after crime. He wove huge tangled webs of deceit around his businesses, sprawling across the world, to baffle investigators. But, as Alan Suckling QC for the Crown put it at the opening of his trial in February 1992, "The basic dishonest scheme was simple and as old as the hills. You persuade people to entrust their savings to you by telling them that they will be kept safe in a particular rock-solid investment. You don't put the money in a rock-solid investment but use it to live the life of Riley. You make good the deficiencies that come up with fresh money from new investors, and you lie and cheat to cover your tracks."

A fraud of this type has only a finite lifespan: sooner or later you run out of fresh money, existing investors can no longer be paid, and the whole thing splatters against a brick wall. If that happens, ruin and disgrace of the sort that have befallen Clowes are the only possible outcome - unless of course you do a Robert Vesco.

In 1970 the American financier Robert Vesco bought out a struggling organisation called Investors Overseas Service (IOS), a now-notorious investment company previously headed by Bernie Cornfeld. The following year Vesco embezzled pounds 146m, disappeared and was on the run for the next 24 years, finally turning up last year in a Cuban jail. Peter Clowes had joined a subsidiary of IOS as a life insurance salesman the same year that Vesco came on board; according to the director of a company which Clowes's firm took over, quoted in Lawrence Lever's book, The Barlow Clowes Affair, Clowes "idolised" Vesco.

But of course, as he is at pains to point out, Clowes has not disappeared. His solicitor, Milton Firman, says "I am absolutely certain that he has no hidden funds, otherwise he would not have received legal aid." On his doorstep, Clowes told me, "I could have gone into hiding, but instead I'm here, where everyone can find me." And of course he is on parole, and must report regularly to his probation officer. Ahead loom the long legal battles to clear his name, and his oft-repeated pledge to repay his creditors. He'll be far too busy to even think of doing a bunk.

Peter Clowes's tale is a story of one man's cleverness, greed and recklessness. But it is a story rooted in the realities of south Manchester, where post- industrial squalor rubs shoulders with the whitewashed, half-timbered gentility of villages like Prestbury and Whiteley Green, where Clowes and his family spent their glory days. It's an area which, like Clowes himself, has striven furiously to transcend the grime and penury of its past - often making a hideous spectacle of itself in the process. Macclesfield is a case in point: a modest town that must once have been very pleasant, lapping against the Peak District, it has gone to drastic and absurd lengths to modernise itself, filling the centre with tower blocks and elevated highways so it has become almost uninhabitable.

Clowes did not begin life here but in Moss Side: now a seedy ghetto, then an impoverished working-class quarter where his parents ran a hardware store. Both parents were themselves from impoverished backgrounds, and instilled a ferocious work ethic in their two sons: they got no pocket money, for example, but had to work for wages instead. Clowes was a solitary, awkward, industrious boy, small and prone to being bullied.

After leaving school early and working for 10 years in the family shop, Clowes took the leap that changed his life when in 1970 he followed his mistress, Elizabeth Barlow's suggestion and joined her as an insurance salesman in Cornfeld's IOS. It was an intoxicating environment in which to gain a first experience of finance. Cornfeld liked to inspire his salesmen with driving ambition - "Do you sincerely want to be rich?" he would demand of them rhetorically when he addressed sales conferences and seminars - and for the sharp but gauche and inexperienced Mancunian youngster the encounter with Cornfeld must have been deeply impressive. "IOS was very exciting," a fellow staffer of the firm said. "It was swashbuckling, very successful, and patchy in terms of business ethics." A key dictum of the firm, "write the business, fix the sweat later", might well have become Clowes's personal motto.

Barlow and Clowes left the firm after it was taken over, and went into partnership together, providing market analysis to financial middlemen, Barlow playing to her strengths as a saleswomman, Clowes developing his skills (grossly over-rated by himself, his enemies say) as a computer whizz. In time Barlow went her own way, and Clowes diversified into what he hoped would be the more profitable business of managing other people's investments. His chosen method was dealing in government-issued bonds, known as gilt-edged securities or gilts. These had the advantage in investors' eyes of being "as safe as the Bank of England" - having been issued and guaranteed by the government - yet at the same time, Clowes maintained that he could make them far more profitable by shrewdly buying and selling them.

This was the business he instigated in 1973, and that original appeal - borrowing the lustre of total security provided by the government - remained central to his business right up to the crash. By the early 1980s, however, he had added some irresistible refinements: investments were to be in gilts (his firm actually called itself "the gilt specialists"); but unlike gilts offered by a stockbroker in the normal way, which can go up and down, these gilts offered a guaranteed rate of interest with full capital to be returned on maturity.

Perfect security, guaranteed growth - "almost too good to be true," as Louise Botting burbled happily on Radio 4's Moneybox programme in May 1982; with national exposure Clowes transformed himself from a modest fraudster into a rapacious one.

Because it was indeed too good to be true: Clowes punctiliously paid interest and returned capital when required, but was only able to do so because new investment money was continuing to pour in. Most of the money was not going into gilts at all: of pounds 115m invested in Gibraltar-based Barlow Clowes International, only pounds 1.9m was in gilts. When the business was closed down in 1988, after years of procrastination by the Department of Trade and Industry, 18,000 investors lost their savings. Though the government later reluctantly coughed up pounds 150m in compensation, many of the pensioners who had sunk their savings in Barlow Clowes died in penury before they could receive anything.

There were numerous other victims of Clowes's fraudulence along the way, many of whom still live within a few miles of Clowes's humble new home. Sue and Robin Cottrill ran an old-established jewellery shop in the town which Clowes took over with their consent, then quietly stripped of its assets; when it was sold by the liquidators in 1989, the Cottrills were left with nothing. Another businessman in South Manchester saw his whole business - an employment agency, said to have been worth pounds 4m, go down the pan at the same time as the rest of Clowes's empire. He, too, waits without much hope to be compensated. Meanwhile, Clowes is back in their midst, still protesting his essential innocence.

His effrontery is perhaps the most unacceptable thing to these victims - the fact that sincere apology seems something he is incapable of. Sue Cottrill says, "He almost thinks he's God. He never believed he was doing wrong to anybody."