The great racing swindle?

Last year three of this man's horses romped home, winning his associates £3.9m. Most bookies paid up – but not Betfred online. Why? Nick Townsend visits Gibraltar to find out

A sweltering lunchtime outside Gibraltar's Supreme Court, and Ray Pilley, a long-time resident and lawyer on The Rock, jocularly grumbles about the theft of just-ripened tomatoes from his garden.

There is unlikely to be an arrest. Barbary Apes have snuck in and swiped them. Crime only rarely gets too much more serious on the self-governing British territory, where, even on a short stroll, you'll almost invariably pass a constable – part of the British police force – on the beat. Theresa May, take note.

Yet, there is no shortage of employment for the 200 lawyers within a town whose income is derived predominantly from its magnet as an offshore base for financial interests and, particularly of late, internet gaming operators.

It is that which has brought former RAF pilot Pilley and his in-house QC Freddie Vasquez at Triay & Triay Lawyers to the courtroom, in pursuit of justice for their clients, the "Gibraltar Five".

What makes an increasingly acrimonious affair a cause célèbre is not merely that the central adversaries in the proceedings are the Newmarket-based Irish trainer and gambler Barney Curley, a bane of the bookmaking industry for four decades, and Phill Brear, a former top police officer in the UK – but that the case goes to the heart of offshore gaming and, what many claim, is the potential lack of protection for UK punters.

The quintet of punters, who do not include Curley – though four of them are related to him – are owed £823,272 by the offshore-based arm of Betfred – the UK betting operator which earlier this year bought the Tote.

Those winnings form part of a multimillion pound coup organised by Curley on 10 May last year when his associates placed hundreds of accumulator bets, mostly Yankees (a combination bet involving a four-horse accumulator and permed doubles and trebles), in betting shops on four horses running in four separate, modest races. Further wagers were placed online.

Three of the runners, Agapanthus, Savaranola and Sommersturm were trained by Curley. The fourth, Jeu De Roseau, formerly in training with him, was based with Chris Grant in Co Durham. Agapanthus and Savaranola won at Brighton and Wolverhampton respectively. Though Sommersturm – ironically the most fancied of the trio – was beaten at Wolverhampton, Jeu De Roseau followed up with victory at Towcester. But three winners were enough, with odds of 11-2, 4-1 and 25-1 having been obtained on those horses, to ensure total winnings, on paper, of £3.9m. If Sommersturm had gone in, too, the tally would have increased to an estimated £20m.

All betting shops in the UK eventually paid out, including Betfred – but not Betfred's online operation, which withheld winnings due to the five punters pending an investigation on the advice of Gibraltar Regulatory Authority led by Phill Brear.

The suggestion was that Curley was betting "by proxy" through his accomplices, "a clear deception", as it has been described by Brear, 54, an ex-Deputy Chief Constable of the West Yorkshire police.

However, their complaints over his handling of the dispute has led to legal representatives for the five punters seeking a judicial review of Brear's decision. The legal process will be followed closely by no fewer than 22 concerns, including bookmakers, online casinos, and the betting exchange, Betfair, that now operate from Gibraltar.

It is easy to see why such entities have flocked to The Rock. The benefits include just 1 per cent gaming tax on turnover, capped at £425,000, compared with 15 per cent on profits in the UK. Offshore companies also do not have to pay UK levels of VAT on costs like advertising and are not paying corporation tax to the UK government. Most crucially, offshore operations do not have to pay the 10.75 per cent betting levy on profits – although some do so voluntarily. This is income which is vital to the health of British racing.

One trenchant observer, Charlie Brooks, the former trainer, jockey and now newspaper columnist, recently described Gibraltar as "that parasitic rock which is sucking the blood out of British racing like a tick".

Conservative MP Matthew Hancock, whose constituency includes Newmarket, known as racing's "headquarters", told the Commons in July that "in the past few years, levy had fallen from £110m a year to £59m". He added: "Funding for horseracing has been in crisis and the problem has been in part that those [bookmakers] who make a profit from the sport through gambling have gone offshore to escape contributing to the sport on which they rely." He added: "Why should we allow the gambling industry to avoid tax in that way?"

John Penrose, the Heritage Minister, who is responsible for gambling, subsequently announced proposals that gambling should be taxed where it is consumed, not from where was it was supplied. However, that will not necessarily dispel immediate concerns over protection for punters in dispute with offshore-based operators.

Here, the British Horseracing Authority investigated and apparently found nothing untoward about the Curley coup. In addition, the Independent Betting Arbitration Service directed operators in the UK and in another offshore location, Alderney, to pay out winnings.

Brear, however, in a faxed letter received by the Racing Post in June that appeared to come from him, maintained that his was the only agency to conduct "a meaningful and proportionate investigation".

Though he has subsequently agreed that winnings could be released by Betfred – the company has not taken up that option – the faxed letter adds that the coup "was a fraudulent enterprise based on deceptions and the systematic misuse of inside information... to the substantial detriment of numerous online and 'bricks and mortar' bookmakers, at least one betting exchange and most of the customers who bet on these races."

Events have since taken an even more combative turn, with Pilley, the punters' lawyer, complaining in a letter to the Gibraltar Chief Minister, Peter Caruana, that this reference to his clients as "fraudsters" is "not what one would expect from the head of a regulatory authority" and demonstrated his "complete lack of objectivity".

Lawyers for the "Five" also employed a firm of private investigators to "observe" Brear over five days in July. He was even followed to the villa he owns in Spain, close to the Ryder Cup golf course of Valderrama, which he shares with his wife, Janet.

Most pertinently, however, the investigators' report detailed what it says are the Gambling Commissioner's meetings at Betfred's lawyers, Hassans, which, according to the punters' court contentions, supports their claim that confidentiality may have been breached, that Brear was seeking to support the gaming operators in resisting making out payments and that, in his role as a government official, he is not impartial.

Pilley's colleague, solicitor Andrew Montague maintained: "What my clients claim is that the Gambling Commissioner threw the rule book out the window and acted in his role as a government official in an ultra vires, biased and prejudicial manner. His decisions are flawed and unsustainable and must be challenged."

He added: "My clients instruct me that they are determined to get justice in Gibraltar no matter how long it takes. Who could blame them? After all, they are owed an awful lot of money – almost €1m."

Regardless of the outcome of the litigation, the attendant negative publicity is unlikely to have been welcomed by Gibraltar's political leaders; nor, one suspects, Betfred or their rival offshore betting firms.

Though a controversial figure, Curley's gambling exploits are generally accepted as being a colourful thread in the tapestry of British and Irish horseracing. A spectacular coup he masterminded at the Irish racecourse of Bellewstown in 1975 won him £300,000 – the equivalent of around £2m today.

When I visited Brear's base at the Finance Ministry offices in Convent Place on the day of the first hearing, he said, during an interview, that he was unaware of being observed and photographed by private investigators.

I subsequently asked him for his response to the allegations made by the claimants. He has said he would not comment "as the matter is before the court".

I put it to him that he appeared to be on something of a crusade – one at odds with his counterparts in the UK – and suggested that he might have reacted to the fact that a major personality in British horseracing was behind the coup.

Perhaps curiously, for a man who was the UK Gambling Commission director of operations for two years and, in Gibraltar, oversees the activities of an online gaming industry, with a turnover of billions a year, Brear said: "Until this incident, I'd never heard of him."

Yet, presumably he recognised that major gambles have always been a feature of racing? "Absolutely," Brear retorted. "But let's remind ourselves that horse racing and dog racing are the only sports where participants can bet on themselves," he said. "Because of that, there are specific rules to make sure it's done fairly and transparently."

He added: "It isn't the case that a BHA licence-holder can arrange to have betting done on his behalf surreptitiously or furtively. It has to be done transparently. The rules around bets in UK and Gibraltar changed fundamentally in 2007 when they became enforceable contracts. The quaint traditions of the racecourse of the '50s and '60s belong in the 1950s and '60s. This is now a commercial business. It has to operate both within the commercial law and the criminal law."

Brear also denied that UK punters were vulnerable in the event of a dispute. "Millions of bets a week are placed through Gibraltar operators and the winnings are paid out very quickly," he said. "I can assure you that the regulations we have in place here are tighter than in the UK to ensure consumers are properly protected." He added: "There's a fantastic public interest story in all this. If you want to run it as 'poor old Barney', that's up to you. But as the evidence will eventually show, he's no Robin Hood."

Which will, no doubt, prompt some in the UK to quip that why Commissioner Brear appears to be adopting the stance of a Sheriff of Nottingham...

The cast and the races

Barney Curley

The legendary Irish trainer and gambler, 72, is a colourful racing character who in 1975 staged one of the greatest racing coups when he won a vast sum at Bellewstown after placing a wager on Yellow Sam – and then commandeering the only telephone at the track, thus stopping on-course bookies cutting the horse's starting price. He is also known for his charity, Direct Aid for Africa, that helps with homelessness in Africa.

Phill Brear

An ex-Deputy Chief Constable of the West Yorkshire Police, Brear, 54, is now the Gibraltar Gambling Commissioner. Gibraltar is the home to many online gambling companies, including Betfred online, which refused to pay out to Curley associates.

The winners (on 10 May 2010)

Agapanthus 11-2 (trainer: B Curley)

Savaranola 4-1 (trainer: B Curley)

Jeu de Roseau 25-1 (trainer: C Grant, previous trainer: B Curley)