It was the height of summer 2020, and Andrew Barnes, home from university, was settling back into life in Guernsey, a British dependency that at the time had no COVID-19 cases. The pubs were busy, offshore finance workers tinkered with their spreadsheets, and a delayed election – which one pundit branded “the strangest in the world” – was back on. As the manifestos started trickling in, Barnes, not usually too bothered by politics, took interest. “A lot of the candidates were spouting information which had no factual basis whatsoever,” he told me. Nothing new, perhaps. But Barnes thought something needed to be done, so he created an independent fact-checking site modelled on the UK-based FullFact.

Working mostly alone and for free, this student would try to hold back a wave of misinformation washing over the British island.

Like Barnes, I had returned home to Guernsey for the pandemic-struck summer after becoming interested in this strange election. When we first met, I expected to find myself on the sidelines of some quirky politics. I didn’t expect to be leaked a report about a secretive multi-million-pound government-backed fund. I didn’t expect senior figures in the island’s financial and political world to whisper their concerns about this fund to me if I promised not to reveal their names. I didn’t expect to find a tangle of conflicts of interest and questionable double-jobbing. In fact, much of our initial conversation was about squirrels.

‘The truth’

Barnes and I met on a bright early September morning in St Peter Port, Guernsey’s main town. Fresh out of a week’s mandatory self-isolation, and running late, I hurried along cobbled streets to the Digital Greenhouse, a co-working space opened in 2016 in the hope of encouraging new tech start-ups. Like Barnes, I was born and bred in Guernsey, an island of 63,000, and had gone to the mainland to study: in my case, journalism; in his, engineering. I had just graduated, but his pandemic-hit research was continuing remotely.

In the open-plan and eerily quiet Greenhouse we talked about some of the routine election claims: around nurses’ pay, secondary education plans and the economy.

Barnes seemed particularly amused by one candidate’s plans to introduce non-native red squirrels, much to the horror of local conservationists. There were plenty of dubious claims to wade through so he gladly accepted an invitation to be a regular guest on my election podcast.

A little under a month later the first of several polling days was looming. A handful of candidates had gathered at my old workplace, BBC Guernsey. Lyndon Trott was among them, about to take part in the final day of half-hour radio debates.

Trott, 56, an experienced politician with a skill for flashing his cheery gap-toothed smile, had been at the heart of a minor political revolution on the island. In previous elections, there had been a number of constituencies, traditionally fought over by supposedly ‘independent’ candidates – who often formed friendship networks once in government. But following a 2018 referendum, the voting system had been changed: there was now one, all-island constituency, and Trott and other key figures in our parliament had formed a party of sorts: the Guernsey Partnership of Independents.

Trott had styled his re-election campaign on being a trusted purveyor of “the truth” when it came to public finances, with a track record of defending the island’s low-tax model during his time as Guernsey’s chief minister and now as its deputy. He is also the chairman of Guernsey Finance, which promotes the island's finance industry internationally.

Clutching for a win in the debate, he praised a little-known initiative he had personally driven, according to his glossy manifesto. The Guernsey Investment Fund had been a “great success”, he said, ”diversifying the economy at the same time”. What he didn’t know was that I’d spent much of the month since my meeting with Barnes in the echoey Greenhouse trying to dig out information about this very fund. And it had proved remarkably hard to find much evidence to back up his claim.

Where’s the money going?

Announced in early 2018, the fund was proof, according to the then chief minister, Gavin St Pier, that the island was “truly open for business”. Now 53, St Pier was also running for election as a member of the Guernsey Partnership of Independents, though his sharply cut suits hinted at his background as a high-flying financier as well as small-island politician.

“Our need to diversify is well-understood,” Guernsey’s head of economic development, Charles Parkinson, added at the time, describing the fund’s potential as a “key enabler to meet that objective”. An initial £25 million taxpayer stake would be invested in locally linked firms, with a focus on tech, providing a return to the taxpayer and investment in a new sector.

But soon, in March 2018, Trott was answering concerns in Parliament. After the failure of a similar scheme in Jersey, why had politicians not had the chance to debate the fund’s creation, one asked? As an investment – rather than a loan – venture, the fund “could not be more different”, he reassured them, explaining that everything was within government rules.

Would parliamentarians be told which companies received investment, one asked? “Probably not,” Trott said, claiming the firms were likely to be uneasy with their shareholders being made public. Nearly three years on, the island’s parliament is still to be told where the money is going.

Like other public investments, those decisions are left to a professional manager, in this case the investment firm Ravenscroft, which in turn hired a technology firm, MXC Capital, as an adviser. A three-person non-political board rules on their recommendations.

A government committee also kept abreast of the fund’s performance, which both Trott and St Pier sat on before the election. Despite this set-up, concerns about the fund were still apparent among senior figures I spoke to across Guernsey’s business and political world. One, who wished to remain anonymous, welcomed my call, saying they had been waiting three years for someone to write the story.

Island secrets

Finding meaningful information about the fund was difficult, as taxpayers’ money and privately raised millions mingle in a place where confidentiality is king.

The Guernsey Registry, an unassuming valve in the offshore economy, could provide some clues, I had thought. Home to thousands of company filings, the registry is tucked away in the island’s renovated market building – less than two minutes from where I had met Barnes. A staff member initially warned me off visiting – citing a pandemic that had all but fizzled out on the island. Ushered into a side room, polite inquiry by the registrar about why I was there was followed by a yielding of limited information.

Guernsey Investment Fund PCC Limited was registered in late 2017, but the papers offered few other clues. This was a company, of sorts, and like others it was not required to publicly file accounts under Guernsey law. And despite the significant public investment, the fund was listed as a private venture, meaning that like most funds there were no investor or investee details in the papers either.

Transparency battle

Guernsey sits at eleventh place out of 133 in the Financial Secrecy Index, compiled by the Tax Justice Network. Like Jersey (16th) and the Isle of Man (43rd), which are also possessions of the British Crown. Island authorities dispute the secrecy tag, arguing they can be trusted to keep other people’s money because they know who owns what and pass on information about any bad apples, even if it is kept out of the public’s view.

Campaigning British MPs Andrew Mitchell and Margaret Hodge have said this approach is flawed, citing offshore leaks. And it’s not just MPs that are critical when wrongdoing is unearthed. I was there in 2016 when an island judge labelled a collapsed fund scandal a “reeking pile of guano”.

The same MPs have argued Guernsey’s financial secrecy can be exploited by money launderers and could even undermine the UK’s national security. A constitutional stand-off in 2019 resulted in Britain’s dependencies committing to make company ownership information public by 2023, a move welcomed by transparency campaigners.

But while Guernsey’s secrecy has long been used to hide financial information from people around the world, it increasingly felt like similar tricks were now being used to keep information from the island’s own citizens.

Skin in the game

Guernsey has no Freedom of Information Law and when I requested more facts about the fund, the government – under its voluntary code for providing information – directed me to its own accounts, which include two brief paragraphs on the subject, detailing an impressive 46% growth of the fund’s share value in 2019.

The accounts also showed an extra £40 million of government money was allocated that year, taking the eventual taxpayer commitment to £65 million – around £1,000 per resident.

Snippets of information from the fund’s manager and other investment recipients provided other details. Chief minister Gavin St Pier’s declaration of interests showed that a little over a year after he enthusiastically launched the fund, he had also personally invested in it alongside taxpayers, something he later told me was “nothing remarkable”, given he had no influence over its investments.

But I – and Guernsey’s other voters – still knew very little about this multi-million-pound fund being run supposedly on our behalf.

A breakthrough

Shake an apple tree for long enough, though, and fruit will eventually fall. Word got out that I was asking questions, and someone with answers snuck me a confidential report that allowed me to peer into the secretive world of the Guernsey Investment Fund, revealing which companies had received the funding, though it didn’t tell me everything. One name stood out: MXC Capital.

The tech company’s advisory arm was screening fund investments, but the report showed that another company in the MXC group had also received £3.6 million of investment from the fund. Not only that, but a different MXC company had co-invested with the fund in Threat Status Limited, a venture that didn’t seem to do anything to diversify the local economy – supposedly one purpose of the fund – on account of it being based in Hampshire. And, just to tie up this complex web, MXC had also invested in the fund itself, to the tune of up to £5 million.

The curious Hampshire investment got £400,000 in total, with MXC matching the fund’s stake in Threat Status Limited, the report showed. British company filings provided some clues as to how the deal may have come about.

They showed it wasn’t the first time an MXC company had invested in a firm founded by Threat Status’s owner, Jonathan Inns. MXC Limited had backed a previous venture of his, years earlier, suggesting a prior business relationship between the two bosses: Inns, an information security expert who had previously worked for the British government; and MXC’s Ian Smith, the veteran tech investor now screening investment opportunities on behalf of the Guernsey taxpayer.

After the deal went through in April 2018, Smith later joined Inns on the board of Threat Status, retrospectively giving the south coast cybersecurity firm both a Guernsey-resident director and, along with the fund, two island shareholders.

I asked both parties about their relationship, the deal and the potential island benefit other than to MXC. Threat Status did not respond. A spokesman for MXC Capital, Ravenscroft, and the fund’s board said it was “inappropriate to comment on any single investment” but the fund as a whole was successful in providing a return and boosting local employment and tax revenues. Without access to confidential information some of the investments’ benefits to Guernsey’s economy may not be immediately apparent, they added.

It was time for a sense check, so I showed these fund connections thrown up by the leaked report to John Christensen, a former economic adviser to Jersey’s government. “None of that passes a smell test,” he said.

“The public, I think, has every right to know that the fund is properly managed; that there are no internal conflicts of interest; no sense of cronyism; and no cross- investment.”

Christensen is interested in what a “plan B” might look like for Guernsey and other offshore economies. A director of the Tax Justice Network, he told me he was not opposed to public-private investments such as the fund, but that Guernsey’s government should think carefully about the best way to diversify its economy, including investing in training in areas with skills gaps, such as IT.

The right kind of deal

When Mick Taylor, a 74-year-old car industry veteran, approached the fund about a loan for his business it was MXC’s Smith who spoke to him. In August 2020, they had discussed a loan – the kind that both Trott and promotional body Locate Guernsey previously said the fund would not entertain.

Taylor had spotted an opportunity to import two-seater electric vehicles suited to the island’s narrow lanes, but needed short-term finance to help him meet the small but growing demand. In the end, the previously retired entrepreneur would get financial help elsewhere, not wanting to accept the “ridiculous” loan terms offered, he said.

Taylor’s business, EV GO, was not alone in failing to get financial support. By April 2019, the fund’s then chairman, Gilbert Chalk, said 65 funding applications had been considered but not progressed, as it sifted through more than 100 ventures for the right kind of deals.

Talking to me was not a case of sour grapes, Taylor said, but because the fund’s lack of interest in his proposal seemed curious. From the report, I knew the fund had offered loans to other companies. And like me, he had seen promotions for businesses to relocate to secure fund investment and was confused about who it was really supposed to help. “Guernsey deputies need to support the small businessman more,” he said.

An island getaway

When the fund launched there was talk among deputies of it helping to diversify Guernsey’s economy, but five years as an island journalist led me to treat such claims with scepticism. Offshore finance is the main game in town here, reflected in election candidates’ pledges to sustain the “engine” of the economy.

The industry took off long before tech enterprises like the Digital Greenhouse made remote working easy. As Guernsey’s real greenhouses, full of tomatoes, dwindled from the 1970s due to increased competition from cheaper European crops, tourist numbers similarly collapsed as Brits headed to Europe for cheaper and more reliable sun. But Guernsey had already developed laws for those seeking a different kind of getaway. They’ve evolved in the decades since, but still include 0% tax on most company profits, a flat income tax rate and no inheritance, wealth or capital gains taxes.

These and other perks of island life are promoted by Locate Guernsey, launched by the government in 2016. With staff in the same office as the company registry, it has been successful in attracting dozens of wealthy relocators, with a surge in interest reported since the pandemic.

Brexiteer and former UK trade minister Digby Jones is one, having last year settled permanently in his Guernsey home, previously valued at £1.3 million. COVID-19 had accelerated a planned move to the “beautiful island” the now-retired peer told me, adding that he would continue to pay UK tax on income arising from work there, and Guernsey income tax on his island-based income.

‘A good year’

Guernsey was also proving a land of plenty for MXC Capital.

In 2018, the year the fund officially launched, the MXC group reported that advisers’ fees – together with another venture – were expected to top £1 million, CEO Ian Smith wrote in MXC Capital Limited’s August report. Joint investments, such as the ones in the Guernsey fund, would see a profit share of 10% or more which compared “very favourably” to its public company investments, Smith added. The fee income for the advisory work – earned through a separate deal with investment firm Ravenscroft – appeared much needed. In 2018 the MXC group made a loss of £7.6 million.

After his deals with the Guernsey Investment Fund, things appeared more positive for Smith. “This has been a good year for MXC,” he wrote in an August 2019 year-end report. MXC’s fees – earned from third parties – had generated more than £2.4 million, helping the group turn a £9.4 million profit. The majority of these fees ultimately flowed to MXC Capital (UK) Limited, Smith wrote, a subsidiary company in which the fund’s manager, Ravenscroft, had earlier taken a 25% stake in back in July 2018 – a few months after both parties had helped Guernsey’s government launch the fund.

Amid this tangled web of interests, I remembered that MXC’s parent company had also bought Guernsey’s only newspaper back in 2019. The co-investment with a different Ravenscroft managed fund had seen MXC invest £4.9 million in the Guernsey Press, a 200-year island institution that Smith hoped would “further embrace technology”.

As I wondered how all of these connections fitted together, I checked in with Andrew Barnes to discuss his own fact-finding mission. He told me he was sometimes hindered by a lack of government information against which to check candidates’ claims. “Especially the [lack of] availability of ‘sensitive information’ that isn’t really that sensitive, or should be in the public eye,” he said. Facts that some might consider problematic – such as the chief minister investing in the fund or Trott being both a senior politician and lobby group chairman – went largely unnoticed.

Speaking to Barnes from England, I was coming to the realisation that the island we had both grown up in was not normal.

‘A political play’

On my side of the Channel was Lance Plunkett, one of the few people I traced from the leaked fund report willing to talk. His lost property app – Found Limited – had received £150,000 backing.

The idea for the app came to Plunkett, 43, after he lost a set of keys in a taxi in his native Australia, realising the need for a centralised police database for lost property.

The “Guernsey-based developer” was valued at £3.5 million, representing a 40% uplift on the fund’s initial valuation, the report states.

Plunkett was previously contracted by Guernsey’s government and helped launch the Digital Greenhouse in 2016. But once Found was established, he was unable to attract the skilled tech staff he needed, he said, so in 2019 he opened up an office in Bristol.

Found Limited was still a Guernsey-based business despite having UK-based staff, he said. He was also “technically” a Guernsey resident, he said, later clarifying that he had spent more time in the UK recently because of COVID-19 travel restrictions.

Company filings show that Found is registered as an overseas company in the UK, with both the original company and Plunkett, as a director, listed to a Guernsey address. There is no suggestion of wrongdoing. When I questioned Found’s tax arrangements, Plunkett wrote: “We pay taxes in both Guernsey and the UK… there is nothing untoward in this.”

He was grateful for the fund’s investment in his app but said it was “a political play” to suggest there was a genuine focus on helping island tech start-ups. In a later email, Plunkett seemed unsure about that too, writing that I was misrepresenting his feelings about “The Guernsey Innovation Fund [sic]”.

The report showed that two other early-stage island tech start-ups had received fund backing by the end of 2019. One had defaulted on its loan and since gone out of business while the other is now facing COVID-related difficulties. The other companies in the report included two established Guernsey firms, two linked Jersey-based companies, and another UK-based firm.

What’s eating Gilbert Chalk?

As the global pandemic raged, a rupture had occurred behind the scenes of the Guernsey Investment Fund, largely unknown to the public. The leaked report, written in the early stages of the pandemic, was broadly optimistic about the fund’s underlying investments, but something else was causing unease.

On 30 June, Gilbert Chalk, the UK-based chairman of the fund’s independent board, resigned. The board said his departure was due to the pandemic, but Chalk has since declined to tell me why he left.

His resignation was followed by a series of events that altered the relationship between those managing the money.

It came as the Guernsey Investment Fund looked to sink the first of the additional £40 million of taxpayers’ money into property. Politicians had learned the details of that arrangement in January, but only after thorough questioning from a deputy. Under the deal, a different fund – managed, like the Guernsey Investment Fund, by the investment firm Ravenscroft – was due to co-invest in the properties “generally on an equal basis”, they were told.

In July, shortly after Chalk’s resignation, the MXC group agreed to pull its fund investment out. MXC’s “accelerated exit” would help return money to its shareholders and release if from committing a further £1.3 million, it said.

The same month, Ravenscroft sold its stake in the MXC company that was accruing the fees earned for the Guernsey advisory work. Despite the sale, Ravenscroft continued to “maintain a successful working relationship” with Ian Smith, it said. The MXC group posted a loss of £17.1 million in 2020, but Smith took home a £414,000 package that same financial year, to August. MXC, Ravenscroft and the board would not disclose how much they earned in fees from their fund work, citing confidentiality, but a spokesman for all three entities said they were “in line with industry standards”.

The ‘Marmite’ man

The inner workings of this £65 million taxpayer commitment were far from the minds of most Guernsey voters when they went to the polls in their largely COVID-free bubble in October. An early-hours declaration saw Gavin St Pier re-elected as poll-topper, seemingly a healthy pat on the back for his pandemic leadership. Lyndon Trott, who led the COVID financial recovery plans, was also returned in ninth place. But a week later, both men were turfed out from their senior roles when the new assembly appointed its leaders. Their new party hadn’t made the gains it hoped for.

St Pier penned an open letter in which he described himself as Marmite, pointing to 57% of people voting for him and 43% not. But there would still be a role for the ousted chief minister. The now-backbencher was tasked with establishing a Guernsey investment authority after a manifesto pledge to “strengthen governance” over taxpayer investments.

St Pier’s post-election declaration of interests omitted any mention of the fund his committee had helped launch and that he had then personally invested in, and he did not respond to my email asking if he, like MXC, had decided to pull his money out. Trott told me any comments he made about the fund in the lead-up to the election were based on information provided by the States’ independent advisers. “I stand by them wholeheartedly," he said.

In order for the fund to pass his “smell test”, John Christensen suggested changes needed to be driven by politicians, who should be ultimately accountable for public money and capable of managing any conflicts of interest. “I really emphasise the need for a proper governance structure, proper accountability, and proper audit,” he said.

The fund’s independent board, made up of three non-political members, “firmly rejected” claims that it had taken a lax approach to corporate governance. In a statement sent by Ravenscroft’s PR person, the board together with the manager and adviser MXC Capital, added that they were jointly “pleased” with the fund’s success – pointing to 2019’s increased share value, based on audited results. MXC had been appointed to provide specialist advice and its relationship with Ravenscroft was “a matter of public record”, a spokesman for all three parties said.

On the £3.6 million fund investment into an MXC group company, the same spokesman said MXC Joint Ventures was “a separate company which is co-funded equally by GIF [Guernsey Investment Fund] and MXC Capital Limited”. Guernsey’s government, through a spokesman for its senior Policy and Resources Committee, pointed out it was just one shareholder in the fund, “which operates under the governance framework for such funds, and must adhere to all the relevant laws and regulations”.

I caught up with Andrew Barnes after the election. His site had published 78 fact checks, aggregating some of the more common candidate claims. Now he was looking forward, and had penned a fiery op-ed sharing his thoughts on a “dire” post-election outlook. His negativity was based on the correlation between those who had made false election claims and those now sitting in Guernsey’s government. “Most of the candidates that got in made unsubstantiated claims, the vast majority,” he said. It left me wondering who would take on the search for truth on behalf of voters in a place lacking in transparency, not least when it came to this murky fund.