Victor Chandler: He's got the racing industry in a flap

By Lucy Baker

It's Saturday, the busiest day of the week at Victor Chandler's Gibraltar headquarters. The chairman of the eponymous private betting empire has just arrived in the office and is chatting with staff in the racing room, the nerve centre of the organisation where all phone and online bets placed by the company's 32,000 worldwide customers are handled.

The smoke-filled room is lined with banks of television screens permanently tuned to sports channels to allow the group to keep constant track of its wins and losses. Although the day's main event, the Scottish Grand National, has yet to take place, about 50 men and women are fielding calls from clients wishing to take a punt on everything from cricket to football matches. "It's going to be a big day today," Mr Chandler says.

In May last year, Mr Chandler, who turned 49 yesterday, sent shock waves through the betting industry by becoming the first big-name bookie to open an offshore service for UK clients, allowing them to avoid the 6.75 per cent betting tax and 2.25 per cent racing levy charged on each bet placed at home. Instead, he deducts a 3 per cent service fee for each wager made by his 20,000 registered UK gamblers.

"It was the realisation that people could bet in Ireland at 5 per cent that really made me think, 'Why should my UK customers be marginalised and have to pay tax?' Everyone tells us we live in a global economy, and the choice of where you place your bets should be up to you rather than up to the government."

Starting with four people, who used mobile phones to handle orders because they could not get connected to the local Gibtel network quickly enough, the Victor Chandler International office now has 350 employees, a mixture of Gibraltarians, Brits, Spaniards, Chinese, Greeks and Americans. Since the Chandler move, property prices in the territory have leapt 25 per cent and the company, which now has an annual turnover of about $1bn, claims to be responsible for about a quarter of Gibraltar's GDP. Mr Chandler says: "We are popular with some people here, but not with others. The Government worries because now there is just one industry supporting the area, and that's the betting industry."

It did not take long for others to join the offshore revolution and Chandler's arch-rivals Ladbroke and Coral have established substantial operations in the territory. Mr Chandler says: "It was inevitable. You were never going to have a monopoly on this market. Where we still have the lead is the Far East."

Although many have described his defection to Gibraltar as "an overnight move", Mr Chandler had planted the seeds for his UK tax-free unit three years earlier by offering a similar offshore service, also based in Gibraltar, to his high- rolling Asian clients. Although the UK is the biggest market in volume terms, regions such as Hong Kong, Taiwan and Thailand are by far the most valuable, accounting for 60 per cent of turnover and growing fast.

Asian clients regularly risk between £5,000 and £10,000 on a wager, with half of all bets going on football games. Mr Chandler says: "I hadn't realised there was so much interest in UK and international soccer as there is in Asia. They see more games than we do. It's because the results of sports in Asia can be easily influenced. The Chinese look for a medium to gamble on which they believe is straight."

Of the scandal surrounding South African cricket and alleged Indian bribes, Mr Chandler says: "We're the sort of people it affects the most because we are the end of the line. We're looking at the transactions we made around the time of the World Cup." The day The Independent visited, Mr Chandler was awaiting "very important Indian guests", who had flown in on a private jet. As well as entertaining clients and potential business partners in his office, a shrine to his beloved horses which overlooks the Rock of Gibraltar, Mr Chandler makes frequent trips to Asia, preferring to handle his business in person, but complaining that jet lag often wipes four days out of his hectic schedule.

The early life of this flamboyant bookmaker was just as eventful. He was brought up in Seaford, Sussex and enrolled in a local boarding school at seven, but was later expelled from Highgate School in north London "for climbing out of a window at night. I was in love". Fortunately, his father came to the rescue, persuading the headmaster of Millfield School to take on his wayward son.

Mr Chandler the younger says: "Jack Meyer was a great gambler and became a friend of my father's. I think they had dinner one night and decided I should go there." He finished his education and decided to go into the catering trade. He was working for a hotel management consultancy in Madrid when his father, "Old Victor", died of cancer at age 50. At 22, young Victor had to take over the family business, becoming the fourth generation of Chandlers in bookmaking. The VCI boardroom is lined with pictures of the three Victors - Victor junior, his father and his grandfather who, confusingly, was called Bill and is best remembered for building the Walthamstow greyhound stadium.

"I hadn't worked in the business except in the holidays," says Mr Chandler. "But I had my mother to look after and two younger sisters at school, so there was pressure on me to earn a living. I was lucky to survive. There were a few hairy moments."

At one point, two years after he took over the business, Mr Chandler was ready to throw in the towel. "It was the end of 1975, beginning of 1976. I nearly sold the company to Playboy, which at that time was being run by Alan Kinghorn. They had just set up a new betting arm in the UK and were looking for a list of clients. I was approached, but luckily things started to turn around for me and I decided to carry on. The offer wasn't enough."

What about last week's deal between Playboy and the Ladbroke group to launch a new Bunny casino in London? Mr Chandler says: "I hope it's as good as the old Playboy club." Despite the collapse of the earlier deal, Mr Chandler and Mr Kinghorn remained firm friends and regularly travelled to the races together before Mr Chandler moved to Gibraltar. "Before mobile phones, we used to do the Telegraph crossword in the car going to the races," Mr Chandler says. "I sometimes think mobile phones spoilt our lives."

In the early years, when young Mr Chandler took bets personally on the race course, he struck up a relationship with Lucien Freud. "He was a client and friend of my father. I can't remember where I bumped into him, but we had a few drinks one night and we started to see each other and we'd regularly go out to supper. He's fanatically interested in horse racing."

Mr Freud also regularly placed bets at all the big meetings and is once said to have taken Mr Chandler for a fortune at Royal Ascot. He painted Mr Chandler's portrait in 1986 and although the bookmaker denies the story that it was given to him to settle a gambling debt - "I wish that were true" - the work remains a treasured part of Mr Chandler's extensive art collection.

His Spanish and London homes are adorned with paintings by modern artists such as PJ Crook, and he even has a drawing by Picasso. Mr Chandler says: "I used to collect all the modern British paintings. I started buying pieces I'd be ashamed to own now. When I get time, I'm going to go up to Seville or to Madrid and look at the galleries."

From his desk at work, he faces a Crook painting of a crowd of people reading newspapers, perhaps serving as a reminder of the importance of his public

profile. It is a half-hour journey for Mr Chandler from his home across the Spanish border in Sotto Grande, Andalucia. The imposing pink building, with a swimming pool in the front garden, is close to the famous Valderama golf course, in the area known to locals as "La Zona VIP", the VIP zone. He has another residence for weekdays, which is said to be "the best in Gib". His driver says he is rarely there.

Mr Chandler says he is happy living in Spain and working in Gibraltar, although he misses attending race meetings as he regularly did when his Victor Chandler On Course division was still the most important in the company.

"I'm getting along fine and my Spanish isn't bad. But I do miss the racing. I love horses and I love the atmosphere and I love gambling."

His wife, Carole, is less than enamoured. "She's not very keen on it, I must say. She likes it in the summer - from May to December it's fine. But when the weather is bad, there's not a lot to do. She calls it the cultural desert."

And Mrs Chandler is not the only one who finds the lifestyle of Gibraltar, despite its plentiful supply of duty-free and apes, a less than attractive proposition. Since the offshore move, VCI has been dogged by its inability to retain key workers, with several top executives quitting in recent months. It took three attempts to recruit a new finance director.

"We had terrible trouble. Two people who had agreed to do it changed their minds when they really saw Gibraltar. It depends what people's expectations are." He says many of the employees who transferred to Gibraltar from the UK and who have young families are extremely happy. "There is no crime and they all have swimming pools," he says.

Many challenges face Mr Chandler apart from staff shortages as he battles to stay ahead in the cut-throat betting game. Last month three Court of Appeal judges unanimously overturned a ruling which had opened a loophole allowing Mr Chandler and his offshore colleagues to advertise their services to UK customers via Teletext.

Although the 1981 Betting and Gaming Act was designed to prohibit all advertising of offshore betting in the British media, Mr Chandler had argued that text services were exempt because they fell outside the category of "documents" as described in the law.

"Regulation is our biggest challenge, but it's all a game really, isn't it?" he says. Like his rivals, he anxiously awaits the Government-commissioned review into the gambling industry, due in the next couple of months.

The review has been rumoured to include measures to clamp down on offshore betting, which threatens to deprive the Treasury of up to £480m a year. He plans to take the Teletext matter to the House of Lords, and is awaiting leave to appeal. Is he confident of victory? "In betting terms, about even money, I think."

Mr Chandler says closure of the Teletext loophole prompted him to launch two new services weeks ago, a website and a phone betting line which, although they offer a tax holiday to customers for a limited period, are basically a return to a traditional, UK-based service at the prevailing duty rate of 9 per cent.

"It gives us freedom to advertise and to partner up with content providers and broadcasters," he says. Others see the move more cynically, as a backtrack which indicates the offshore move has been less successful in attracting profitable UK custom than had been hoped.

One industry analyst said: "It is a sign that all is not as rosy in the Chandler camp as Victor would have us believe." A recent survey, just after the budget, indicated one in three British punters still prefers to bet with a UK-based organisation and pay the full deduction. "'It seems extraordinary to me," says Mr Chandler. "I don't know whether there's still a credibility problem with Gibraltar or people think they're doing something illegal. I really can't understand it."

He does understand the importance of teaming up with third parties to ensure he is well-positioned for success once the move towards interactive betting has well and truly begun, but he has failed to clinch the sort of deals which competitors such as Ladbroke and Littlewoods recently announced.

Both companies have sealed agreements with BSkyB to offer interactive gambling through the media group's Sky Sports and Open channels as well as lining up contracts with telecoms partners such as Ericsson to develop betting services using WAP (Wireless Application Protocol) technology.

But Mr Chandler dismisses this out of hand. "Open could be called closed. It's not a system I think much of. I don't believe real interactive technology will be here for 18 months to two years. I've been to California to see people who say they've got the top-of-the-range technology, but it doesn't work."

He says he has a three-year strategy to expand into new technology and new markets. And it was with this in mind that he and Michael Tabor, his racecourse-owning business partner, struck a deal last August which many have viewed as "selling the family silver".

After beginning negotiations with Enic, an investment vehicle backed by Joe Lewis, the Bahamas-based millionaire, to sell the group a stake in VCI's internet business, Mr Chandler eventually agreed to grant Enic an option to buy the entire offshore operation for about £75m.

If the deal goes ahead, Mr Chandler will be given a place on the Enic board and will continue to run his business as part of the larger, listed group, which also has a stake in Rangers football club and controls Italy's Vicenza and the Warner Brothers' chain of retail outlets.

Despite a lengthy delay in closing the deal, Mr Chandler is adamant it is still on track. "It's more in the way of a merger than a takeover," he says. "We're conducting due diligence and we should be completed by late May, early June.

"There have been a few hiccups, but they're resolved now. It's much more difficult to get a due diligence done in Gibraltar than in the UK and there's a huge amount of reporting because public companies have to go into so much depth."

The "hiccups" included an accounting accident where someone tried to hurry the process along on the computer system and wiped out 40,000 transactions. Luckily, the balances were left in, but each transaction had to be re-entered, which took a couple of months.

So what changes can we expect to the betting company after the cash injection? Mr Chandler hints that the company could eventually surrender its name. "Using someone's name these days is considered very old-fashioned, isn't it? I think we'll look for different brands for different markets."

He says he is not sentimental about ceding some control to a third party. "I can't wait for it all to go through because it gives me currency to expand the business," he says. "It gives me the muscle and the credibility that I need."

It also gives him personal financial security. But Mr Chandler says retirement is not yet on his mind. "I'm going to continue as long as I enjoy it."

Enjoyment or not, he's got his work cut out fighting off the challenge from his ever-expanding field of competitors. "The race has just started and we've got a lot of jumps to jump. But we can still win."