June 22, 2018

McCarthy and Stone and a media firestorm in 1991

The Dispatches programme on Monday night is not the first time McCarthy and Stone has been in the eye of a storm.

In 1991 it launched a disastrous High Court action against the Daily Telegraph claiming £800,000 damages over articles about service charges. The fallout of the affair was that the housebuilder sold off Peverel in 1993 because of a “perceived conflict of interest”. Early in 1989, Ian Cowie of the Daily Telegraph wrote a hard-hitting article about inflated service charges at McCarthy and Stone developments.

“The article appeared that weekend and it was damning to say the least, with comments from residents and misleading figures on the service charges,” writes John McCarthy, the founder of McCarthy and Stone, in his memoirs Building a Billion (Harriman House, £16.99. 2011). “It didn’t show us up in a good light at all.”

McCarthy then provides a fascinating account of how he and his company responded to this attack, which ultimately involved burning through £200,000 in legal fees in the High Court.

Princess Diana opens McCarthy’s Bournemouth HQ, with John McCarthy (right)

After the first article appeared, McCarthy held a “crisis management meeting” with his lawyers, PR and Nigel Bannister, the then head of Peverel. But he also involved Sally Greengross: then the head of Age Concern and now the president of the Association of Residential House Managers.

Earlier this year Greengross infuriated Campaign against retirement leasehold exploitation supporters when she referred in the House of Lords to pensioners complaining about the problems of retirement leasehold as “barrack-room lawyers” with too much time on their hands.

McCarthy refers to Greengross in his account of the crisis:

“Apparently the whole episode started because someone complained to Age Concern that we were ripping their granny off over the service charges paid to Peverel. I made an immediate appointment for the next day to meet Lady Sally Greengross who was president of Age Concern. I had had a lot of contact with Sally and we sponsored her organisation. She helped me to network with many other influential people including John Yates of Help the Aged. The complaint against us was that the service charges were higher than our clients had been originally told and this was the main point that Ian Cowie was concerned about. In his article he quoted increased charges of between 16 and 50 per cent.”

McCarthy added: “What no one had appreciated was that budgets for the service charge were prepared well before the release of the flats for sale and therefore often well before all the relevant and detailed information was to hand.

“Some of our residents’ children were quick to point the accusing finger. We had by then many thousands of very happy customers but as happens when the press gets a  story, the flames were fanned and what started as a local flare up became an inferno.”

The issue was then taken up by former Labour MP for Edinburgh South, Nigel Griffiths who attacked McCarthy and Stone in the House of Commons, and singled out the firm’s founder for criticism.

He told the Commons: “Mr McCarthy spoke out in an article called ‘The truth behind the gossip’. It was so full of inaccuracies that it was really the gossip behind the truth. It was a half-fictional account of the workings of McCarthy and Stone that many residents found hard to credit.”

 

McCarthy and Stone’s lavish HQ in Bournemouth. The company is owned by its bank, HBOS

The Daily Telegraph, edited by Max Hastings, was not persuaded and the critical articles against McCarthy and Stone continued, resulting in the housebuilder launching a libel action in 1991.

“The next string to our fight back bow was Terry Wogan … I met him in London for a photo shoot. He wanted £5,000 appearance money which did seem rather a lot. Nevertheless, our PR people thought that Terry was the right man for our fight back message.”

McCarthy was very proud of his performance in the High Court, where his own barrister primed him with some grand-standing questions.

“Mr McCarthy, have you ever put in an insurance claim? We all do and we all inflate them don’t we”

After a pause, I replied: “No. That’s illegal. You can’t do that.”

“You’re not a crook are you, Mr McCarthy.”

“No,” I replied with conviction.

Sadly for our hero, the wheels fell off the McCarthy and Stone bandwagon when the High Court learned that McCarthy and Stone had just been fined £2,000 for misleading sales literature in an action launched by the Office of Fair Trading.

McCarthy and Stone, having spent £200,000 on its fancy lawyers, walked away, leaving McCarthy to muse: “The problem with litigation is that you never know what might come out of the woodwork.”

However, the whole scandal was a chastening experience and one thing that had to change was McCarthy and Stone’s ownership of Peverel.

“One area of criticism was that there was a perceived conflict of interest between McCarthy and Stone and Peverel. In 1993 we sold Peverel for £30 million to its management through Electra Investments. Interestingly, in the formative days of us moving into the provision of sheltered housing in the private sector, a number of institutions including housing associations were not interested in taking on the management. They seem to have missed out.”

Curiously, Electra Investments, and the fund Chamonix, are again the owners of Peverel, having bought it off the administrators for £50 million earlier this year.

The chapter ends with McCarthy saying: “Our critics tried to shoot us down in flames but they weren’t using the right ammunition and they weren’t very good shots either.”

McCarthy saw the current property crash coming and sold up in December 2003. He now owns Churchill Retirement Living, which is run by his sons. It attempted to buy back McCarthy and Stone, which is now in hock to HBOS.

“McCarthy and Stone are firmly in the bank’s clutches and will find it very difficult to resurrect themselves. It could be third time lucky, but I doubt it.”

John McCarthy’s life after McCarthy and Stone …

“My second elephant – 57lb and 54 lb tusks – in Botswana (2008)

“13 foot 6 inch croc on the Zambezi, Africa (2010)

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