The night before, however, an anonymous caller tipped Branson off and told him about the invisible ink. The mogul-in-training and his Virgin cohorts bought a sun lamp and ran to their warehouse, where the UV light revealed that, indeed, all of their EMI records were marked with an E. As Branson recalls:
We began to run in and out of the warehouse carrying piles of records into the van. We then made a terrible mistake: we assumed that the Customs and Excise officers would just raid the South Wharf warehouse. We therefore drove all the records round to the Oxford Street shop and put them in the racks to be sold. We had no idea that Customs and Excise officers have greater powers of immediate search than the police.
Branson had named his company Virgin because he and the people who worked for him were “virgins at business.” They were also, evidently, virgins at crime.
Customs descended on the shops, and Branson was hauled into jail. “I had always thought that only criminals were arrested: it hadn’t occurred to me that I had become one,” he wrote. “It wasn’t some great game about my getting one up on the Customs and Excise office and getting off scot-free: I was guilty.” He spent the night in jail, before his mother showed up and posted a family home as bail. Branson’s headmaster at school had once predicted that the young man would either become a millionaire or go to prison. “By twenty-one, he had achieved the latter,” Bowers wrote, “albeit briefly.”
He had also managed to plunge himself even further into debt. Branson negotiated a settlement with the government, totaling 60,000 pounds, worth more than 700,000 pounds today. If he couldn’t pay, he would be re-arrested and put on trial.
This being the story of a future Davos fixture, the incident turned out to have a silver lining. In order to pay back the previously unimaginable sum they now owed to the queen’s government, Branson and Virgin needed to learn how to run a business. “The next two years were a crash course in how to manage cash,” Branson wrote. “From being a completely relaxed company running on petty cash from the biscuit tin and a series of unpaid IOU notes, we became obsessively focused. We used every penny of the cash generated from the shops towards opening up another shop, which in turn was another pound towards paying off my customs and excise debt.”
They also began exporting records for real, as well as laying the groundwork for the record label that would, within a few years, mint Branson his first fortune, when it released Mike Oldfield’s prog-rock opus, Tubular Bells, to massive sales. Along with hits from the Sex Pistols and Culture Club, Virgin Records would eventually release albums by iconic ’80s artists like the Human League, Phil Collins, and Peter Gabriel before Branson sold it at a large profit in 1992.
“Incentives come in all shapes and sizes,” Branson wrote, “but avoiding prison was the most persuasive incentive I’ve ever had.” The young Branson seems to have taken away a related lesson from his experience: The value of a good tax lawyer. As he wrote in his memoir, the night in jail impressed upon Branson the need to keep his business above board. According to Bowers, when Tubular Bells became a hit, earning Branson his first millions, he began depositing his earnings and Virgin’s trademarked logo in an offshore “family trust” set up in the Channel Islands.
Today, the Virgin group is a vast warren of around 400 companies registered offshore (in places including, aptly, the Virgin Islands). As David Runciman wrote in the London Review of Books, Branson “has been very careful about when he pays tax and to whom.” Meanwhile, his “wish to avoid being taxed by the British government means he cannot spend more than ninety days a year in the UK.” Such is one of the many ironies of life as Britain’s most famous entrepreneur.
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