Rothschild who crashed to earth: How the bank dynasty heir’s City reputation is in tatters after a £700m investment scheme blew up in his face

By Geoffrey Levy and Richard Kay

PUBLISHED:17:13 EST, 19  October 2012| UPDATED:08:40 EST, 20 October 2012

 

 

Even at 76, with untold wealth and the holder  of a rare Order of Merit from the Queen, Lord Rothschild has continued to  dream.

It is a father’s dream: that his only son  Nat might one day lead the world’s most enduring banking dynasty to new heights,  repairing an old family schism and burnishing its blue-chip image to even  greater brilliance.

Today Jacob Rothschild is a bitterly  disappointed, even angry man, as his son and heir fights to save his own  dwindling reputation and, with it, the first soiling of the proud Rothschild  name in centuries.

Living the high life: Nat Rothschild, pictured with L'Wren Scott at a partu during the Cannes Film Festival, has seen his City reputation destroyed after a deal to invest in an Indonesian coal mining company turned sour 

Living the high life: Nat Rothschild, pictured with  L’Wren Scott at a partu during the Cannes Film Festival, has seen his City  reputation destroyed after a deal to invest in an Indonesian coal mining company  turned sour

Nat himself can hardly believe what has  happened. A mere tick of the dynastic clock ago he was widely seen to be on  course to be the richest of all the Rothschilds.

Helped by the pulling power of his name, he  was hailed as a financial genius, a young man — once a wild child but now  drinking nothing stronger than Coca-Cola — with a unique networking ability to  bring billionaires together to make deals.

His private £5 million Gulfstream was  criss-crossing the globe for 750 flying hours a year. That was before he decided  to raise £700 million from investors — ‘big players only’ he airily informed one  relatively minor figure who expressed interest — to plough funds into an  Indonesian coal-mining company called Bumi that a City contact had drawn to his  attention.

By July, 2010, Bumi’s £10 shares had been  absorbed into his own  FTSE-quoted cash vehicle, a shell company called  Vallar, which was then renamed Bumi plc.

For Rothschild’s new Indonesian  partners,  the Bakrie family (one of whom is currently standing for  election as president  of the country), the deal offered the back-door  prestige of being quoted on the  London Stock Exchange — quite a prize to businessmen in a part of the world not  noted for the transparency of  its corporate culture.

Crisis: A top City banker said 'Nat Rothschild will never raise another dollar from anybody' following after this deal went bad for some investors  

Crisis: A top City banker said ‘Nat Rothschild will  never raise another dollar from anybody’ following after this deal went bad for  some investors

Yesterday, after acrimonious disagreements  and accusations in the Bumi boardroom,  and Nat Rothschild having dramatically  stood down as a director, his  investors were showing a loss of three quarters  of their money with the  share price slumping to around £2.50.

Nat Rothschild’s fierce letter of resignation  from the board arrived on  Monday from an address in St Peter Port on the  low-tax Channel island of Guernsey, where one of his corporate offices is  registered.

Meanwhile, an internal investigation into  allegations of financial impropriety at  Bumi has expanded to include alleged  threats and the hacking of email  systems to snoop on exchanges of messages at  boardroom level.

The company chairman Samin Tan claimed that  Rothschild indicated he’d had ‘access’ to his emails and had been reading  them.

Rothschild’s response was to declare that the  allegations were ‘untrue and defamatory.’ Attention has also been drawn to the  level of expenses paid to directors.

And he did not just fall out with the Bakrie  family. Senior British  industrialists he installed as independent directors to  safeguard UK  shareholders’ interests also had their disagreements with  him.

Dynasty: The collapsed deal has reignited tensions between Lord Jacob Rothschild, right, and his one-time wild-child son Nat Rothschild 

Dynasty: The collapsed deal has reignited tensions  between Lord Jacob Rothschild, right, and his one-time wild-child son Nat  Rothschild

Sir Julian Horn-Smith, former deputy chief  executive of Vodafone, who is  senior independent director of Bumi, asked Mr  Rothschild to step down  because of his ‘disruptive behaviour’ on the  board.

The crisis has been a shock to Nat  Rothschild’s overblown ego, especially  as many feel his reputation can never  fully recover, and one top City  banker was quoted in The Times this week as  saying that ‘Nat Rothschild  will never raise another dollar from anybody’.

Another puts it this way: ‘His  name has  become toxic in the City  of London.’

Now, his father Lord Rothschild, a figure of  great integrity who was once a  shoulder to cry on over lunch for a distraught  Princess Diana, is the  one who needs consoling, says a City friend.

To add insult to injury, it is  NM  Rothschild, the family bank from which  Jacob Rothschild split three decades ago  to found his own highly  successful investment trust, that has been called in by  Bumi plc to sort out the mess.

Playboy: Nat Rothschild had a reputation for being a wildchild 

Playboy: Nat Rothschild had a reputation for being a  wildchild

The last time there were tensions between  Lord Rothschild and his son — he also has three daughters — it was because Nat  was virtually running wild, drinking and partying to excess.

Nat has never denied an escort girl’s story  that she was asked to provide strippers and drugs to a party he threw in 1994 at  Waddesdon Manor, the magnificent Rothschild family seat in Buckinghamshire where  Presidents Reagan and Clinton, as well as Lady Thatcher, have stayed, and which  is now run by the National Trust.

According to the girl: ‘They were  very  precise in what they wanted — three slim black girls in stockings,  suspenders  and high heels. They also wanted the girls to do extras.’

In those days, just down from Oxford,  Nat  enjoyed his wildchild reputation with almost as  much pleasure as,  in  recent years, he has relished being seen as a  pivotal figure in the  world  of billionaire  finance.

True, he spent not far short of £1 million on  his own 40th birthday party  last year in Porto Montenegro, in the tiny Balkan  state, but most saw  this as more of a classic networking bash — the invitations  even  included helpful details of where guests could park their private jets.

And Porto Montenegro, of course, is a  development on the Adriatic coast in which he has a considerable personal  investment.

But his most satisfying parties in recent  years have been of the kind of  gathering in Corfu on the £80 million yacht of  his good friend and  business associate Oleg Deripaska, the Russian oligarch,  which ended in a spectacular and very public fall-out with his old Oxford  Bullingdon  Club friend George Osborne, now Chancellor of the Exchequer. It was  to  reveal a side of Nat Rothschild which those publicly pillorying him now  would do well to consider.

For when Nat heard that Osborne had  been  repeating details of a private conversation with Peter Mandelson,  who was also  there, he in retaliation famously claimed that Osborne and  the Tory party  fundraiser Andrew (now Lord) Feldman had solicited a  contribution to party  funds from the Russian tycoon. Osborne issued an  immediate denial, but  considerable damage was done.

Friends in high places: This is the family home on the Greek island of Corfu where Nat Rothschild entertained Chancellor George Osborne and former business secretary Peter Mandleson 

Friends in high places: This is the family home on the  Greek island of Corfu where Nat Rothschild entertained Chancellor George Osborne  and former business secretary Peter Mandleson

Fast forward three years to a lunch party in  2011 near St Tropez. One of the guests, on being invited by old friends,  explained he had Nat Rothschild staying with him, and could he bring him along?  And Rothschild came — but not for long.

As one of those guests recalls: ‘We’d barely  sat down to lunch when he breezily said he was off. I can’t even remember  whether he ate anything. I can only imagine we weren’t important enough.’

Ex-wife: Nat Rothschild was married for three years to Annabelle Neilson, model friend of Kate Moss 

Ex-wife: Nat Rothschild was married for three years to  Annabelle Neilson, model friend of Kate Moss

And one figure close to him says: ‘Nat’s mind  is always turning over deals. He used to be fun — more than that — but these  days, apart from the odd girlfriend, his closest companion seems to be his St  Bernard dog.’

Girlfriends there have certainly been,  including the actress Natalie Portman and, most recently Florence von Preussen,  a  slim, attractive scion of the Guinness family.

He was also married for three years to Annabelle Neilson, model friend of Kate Moss.

Acquaintances find a  somewhat unsettled  sense about him.

He has homes in  Paris, Moscow, New  York and Greece but seldom spends more than a few days at a time in  any of them.

The home where he  spends most time during  the winter is his sumptuous penthouse in  Klosters. He was introduced to the  Swiss ski resort by Canadian mining  and property magnate Peter Munk.

While his father Lord Rothschild continued to  live in Britain — holding board meetings in the basement kitchen of the London  townhouse in St James’s  he uses as an office — six years ago  Nat took  Swiss citizenship and  became a tax exile.

His reputation already was that of a young  man with the ability  to make big money fast.

This was the point at which the personal  fortune of the son and heir was  poised to overtake the personal fortune of the  father. This year’s  Sunday Times Rich List places him 73rd with a personal  fortune of £1 billion. His father is 192nd with a mere £465 million.

Over in Klosters his life is remarkably  low-key. One place where he is a regular is the village’s only pizzeria,  Alberto’s.

Carol Thatcher’s partner Marco Grass is his  ski instructor, while his  highly-supportive mother Serena — she and Jacob have  been married 51  years today — is a regular winter guest. His peaceful life  there is in  stark contrast to the battle raging over Bumi.

But the dismay Lord Rothschild feels at the  way the unseemly hostilities  over the running of a public company have engulfed  Nat cannot be  underestimated.

‘He is  furious with him — they are barely on  speaking terms,’ says a family  friend. ‘No Rothschild has ever before been  involved in such a mess.’

Old Etonian Nat, of course, bears the name of  his 19th-century ancestor  Nathan Rothschild, who arranged the finance that  helped the Duke of  Wellington win the Battle of Waterloo.

Privileged: Nat Rothschild was pictured, in the front standing row fourth from the right, alongside Chancellor George Osborne, far left, in this photograph of Oxford University's Bullingdon Club in 1992 

Privileged: Nat Rothschild was pictured, in the front  standing row fourth from the right, alongside Chancellor George Osborne, far  left, in this photograph of Oxford University’s Bullingdon Club in 1992

‘Sometimes,’says an acquaintance from his  Oxford days of unfettered hedonism, ‘I  wondered if he wouldn’t be able to cope  with the weight of being a  Rothschild, beyond its ability to pull the girls.’

Few City people who have encountered the  slim, freckle-faced figure would agree with that assessment. They see a man who  has cleverly exploited his family’s magnetic name to make a fortune — ‘well,  wouldn’t anybody?’ says one banking figure.

But in the sensitive world of big money  investment, it can take only one disaster to ruin a career.

For Nat Rothschild, the stakes may have been  higher than even he initially realised.

Not so many months ago the thought was  entertained that his entrepreneurial zeal could make him the best figure of the  young generation to heal the family split of 1980 when Jacob left NM Rothschild  to establish his own Rothschild Independent Trust, currently worth some £2 billion.

Not any longer. The favourite now to take  over when the French head of the historic bank, Baron David de Rothschild,  retires, is his son Alexandre.

For Nat there is one bright spot in the saga,  however. His father was one of the ‘big players’ he invited to put money into  Bumi. Wise old Jacob declined.

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