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Last Updated: Wednesday, 9 June, 2004, 09:31 GMT 10:31 UK
Porn Star!
Friend to the stars and owner of Express Newspapers and OK! magazine, Richard Desmond has made a name for himself as a successful businessman. But where does his money come from? The Money Programme investigates.

Richard Desmond is no stranger to controversy but even this colourful press baron is likely to be embarrassed by revelations of his brushes with the New York mafia and details of a battle with the Inland Revenue over millions of pounds of disputed tax.

Donations to Labour

The revelations come just months after the row over Desmond's 100,000 donation to Labour shortly after the government decided not to refer his takeover bid for Express Newspapers to the Competition Commission in 2001.

Desmond's brushes with organised crime came in the early 1990s, almost a decade after he secured the franchise to publish the UK version of Penthouse. Having already made a mint out of magazines in the UK, he spotted a new opening to cash in on the pornography industry in the US.

Desmond's move into America put a few noses out of joint. He'd taken adverts in his magazines for phone sex lines from Ricky Martino, widely reported to be a member of the Gambino crime family, but not known by Desmond.

Mob dealings

According to Jerry Capeci of the John Jay College of Criminal Justice in New York: "Anyone who gets into the sex business in New York, whether it's pornography, distribution of magazines or phone sex lines, has to deal with the mob sooner or later.

"They're always out there looking to make a buck and if you are getting big enough and making enough money for them to notice you, they're going to come after you and look to get a piece of your action," adds Capeci.

The deal with Martino started to go very sour and the New Yorkers, who were losing serious amounts of money, wanted compensation.

Pistol-whipped

Although Desmond refused to pay any compensation, this all changed after his managing director Philip Bailey went to New York for a business conference and was accosted by two men on his way back to the airport. The men, according to a police report based on Bailey's evidence, pistol-whipped him, cut him with a knife and used an electric cattle prod on his testicles. They also told Bailey to tell his boss - Desmond - that he was a "dead man".

Desmond, who has previously said the attack on Bailey was a fantasy, did, however, take it seriously enough at the time to encourage Bailey to report the attack to the New York Police Department. And, apparently in fear of his life, he hired a bodyguard, James Brown, to protect him. Brown had previously served time in prison during the 1980s for threatening a witness in a court case.

According to a source close to Brown, Desmond was then told he had to pay the Americans 2m or face the consequences. It is said the cash was later delivered in bags to an Italian restaurant in London's Soho, although Desmond categorically denies giving any money to the Gambino crime family at all.

Taxman deal

Back in the UK, meanwhile, an Inland Revenue study of an agreement between Desmond and United Newspapers resulted in a huge bill for tax claimed to be due on the deal. United Newspapers, which was keen to sign a distribution deal with Desmond, signed an agreement with him that - fortuitously for Desmond - did not include a sale-or-return clause. This meant Desmond could print as many magazines as he liked and still get paid, even if United couldn't then sell them.

The agreement proved an expensive mistake for United, which was then forced to buy ten of Desmond's titles to get out of it. Desmond made 12m on that sale, which attracted the attention of the Inland Revenue and gave rise to a long-running dispute between Desmond and the UK taxman.

Desmond says his advisors believe no tax is due, but his accounts show the Revenue has been asking for as much as 8m, a sizeable sum even for a man who values his own porn TV operations at 260m.

This programme was first transmitted on Tuesday 24 September 2002.




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