The fall of Eric John Watson, from penthouse-dwelling playboy to prisoner in apparent penury, didn't happen overnight. He's also recently caught Covid-19, split from his long-time partner Lisa Henrekson, large swathes of his business empire are in liquidation and his companies owe Inland revenue more than $118m in back taxes and interest.
His jailing this week for four months on contempt charges, after English courts ruled he'd been hiding assets from creditors in a "rainy day account" in his mothers' name, was nearly a decade in the legal making. It followed what Lord Justice Christopher Nugee - whose London courtrooms deal with billionaire oligarch divorce proceedings - described as a "long-running and horrendously complex case".
But there were signs Watson's fall started much earlier than his tangle with Sir Owen Glenn, who over the last decade Watson transformed from eager business partner willing to invest hundreds of millions into a personal Captain Ahab who's spent more than $40m using Farrer & Co - lawyers to Queen Elizabeth II and Rupert Murdoch - hunting him through high courts on three continents.
The Weekend Herald has reviewed hundred of pages of court rulings from Watson's near-decade-long proceedings with both Glenn and the Commissioner of Inland Revenue, thousands of press articles from the past three decades on the one-time business and gossip pages fixture, and interviewed former friends and foes to find a constantly-dealing business shark who, almost inevitably, bit off more than he could chew.
Watson was unavailable for comment this week. An intermediary said the Covid lockdown in the United Kingdom had prevented him even meeting his lawyers while in prison, but they understood Watson was "in very good spirits" and has been making jokes about the "interesting people" he had met this week at London's Pentonville prison.
Watson was said to still be combative regarding his dispute with Glenn, claimed the ventures delivered profits to his one-time partner, and hoped an appeal and freedom would allow him to better-defend himself in both court and in public.
But even during his ascent in New Zealand during the 80s and 90s - where Watson rose from Whitcoulls store manager to be counted amongst the country's richest men - there were those who thought that beneath his movie-star good looks and international playboy lifestyle lay a businessman who resembled less his low-profile idol, and genuine mogul, Graeme Hart and more Gordon Gekko on thin ice.
Watson grew up in Christchurch and left Xavier college at 16 to become a butcher's apprentice, before changing tack and taking salaried jobs at Whitcoulls and Xerox. He started working for himself in his late 20s and broke through the Swarovski ceiling after rolling up printing and stationery operators as Blue Star and selling out to giant US Office Products in 1996.
That deal reportedly netted him $150m. He had yet to turn 40, but he was up and away and it would be two decades before he'd crash to earth.
But this ascent was not painless, at least not for those on the other side of the table. Accountant Bruce Sheppard recalls the experience of clients who ran a small printing firm that became a takeover target for Blue Star.
What was considered a fair value price was put to Blue Star, and Sheppard said Watson responded with: "I'm not going to pay you that. I'll just stop all my companies using your business, and then your fair value is zero."
"He dutifully did it, and my poor clients got ground into the dust," Sheppard says. The eventual sale price was just half of what his client had sought.
Sheppard is one of the few willing to talk on the record about Watson, and has the scars to prove why this is so rare. Watson, and Mark Hotchin, sued him for defamation over his criticism of Hanover Finance. But the accountant now feels emboldened by recent events. "If Eric is indeed impecunious, at least he will have a roof over his head for the next four months," he cackles.
A former associate of Watson says that, in his opinion, this ruthless strategy worked - in New Zealand, at least.
"When you're aggressive with legal counsel, you can exhaust people and roll them over. It's not particularly unusual, but he's just done it to a greater magnitude. But as soon as you get to markets where people could fight back - offshore courts, dealing with people who are offshore savvy - it will catch up with him."
The former associate was surprised to see Watson jailed, as he says the businessman was usually careful to never leave himself exposed. "He never signed anything, and always had other people sign, and tried very hard to make sure he was never personally on the hook for anything."
The former associate says that, in his opinion, Watson was "amoral," but also said he had great talents - "He was a great salesperson and had great bravado and he'd sell sand to the Arabs". Even Glenn, in the London proceedings, said his opponent was very personable and could "charm the socks off a kitty".
This salesmanship and charm was on full display to the New Zealand public in the 90s, when Watson turned Blue Star proceeds into a corporate raiding warchest that pushed the limits of stock exchange rules and regulations as he repackaged and listed a bewildering range of businesses.
He was right there surfing the first dotcom bubble, as a key player with FlyingPig (which never got airborne) and Advantage.
He repackaged the shell of listed Frontier Petroleum as a debt collection business, and loaded Eldercare retirement homes into the shell of Petroleum NZ and called it a health services company.
He accumulated shares in McCollam Printers in the late 90s while negotiating on behalf of US Office Products to take them over. The move sparked fierce debate over insider trading laws when our own Securities Commission decided that while the dealing had not enhanced "the reputation and standing of our market" there was no case to answer, but the US Securities and Exchange Commission some years later concluded differently. (Watson settled with the SEC, neither admitting nor denying their finding.)
His grinding low-ball takeover of retailer Pacific Retail Group - which counted Noel Leeming and Bond & Bond - was part of the reason for Takeovers Code reforms in 2000 to ensure all shareholders were treated equally.
PRG's purchase of UK electronics retailer PowerHouse, following Watson's move to London in 2002, turned into a disaster with constant losses burning hundreds of millions of shareholder funds and requiring the sale of its retailing silverware.
By this point Watson had become almost a caricature of a playboy, marrying swimsuit model Nicky on his 40th birthday and accumulating a collection of nearly a hundred racehorses. He was assessed as worth $260m, good for sixth place on the NBR New Zealand rich list.
He would further extend this lifestyle in the United Kingdom - despite divorcing Nicky in 2003 - hosting black-tie parties for Hollywood celebrities in Cannes, fighting Oscar winner Russell Crowe in the bathroom of a swanky restaurant and living for most of his time in London in a penthouse that, if transported to the other side of the world, would have ranked as New Zealand's most expensive family home.
His 50th birthday party was a two-day affair in Istanbul that reportedly cost close to $2m. He became popular on the sports pages after buying the distressed Warriors league team for a song in 2000, causing controversy after voiding and slashing contracts. He then sold a half share to Glenn in 2012 for $6m while their relationship was warm, then profited by repurchasing that share for less in 2015, before finally selling the whole club to Autex for $16m.
He formed a relationship with Swedish model Lisa Henrekson that lasted for three sons until their split as the calls starting closing in earlier this year.
But it was the change of hemispheres that would light a long-burning fuse at Inland Revenue that would blow up in spectacular fashion more than a decade later. In 2004 the tax departments' high net worth individuals unit began an audit to unpick a bewildering series of transactions - counsel for IRD said in court at least 14 different trusts were involved - that moved his wealth out of New Zealand and into tax haven the Cayman Islands.
This manoeuvre was not atypical, court proceedings in London against Glenn later heard: "Part of the reason for the complexity of the structures through which Mr Watson does business is no doubt a desire to avoid paying tax," Lord Justice Nugee said generally, before becoming specific in a ruling two years later discussing how the proceeds of the sale of the Warriors to Autex had been dealt with: "He wanted to have access to the funds but (as usual for Mr Watson) did not want to pay any tax."
Inland Revenue alleged the Cayman's move was designed to avoid paying non-resident withholding tax, and after nearly a decade working through the courts, in 2019 the High Court found Watson's Cullen Group was liable for $112m in back taxes and interest.
While Watson had wound down his New Zealand presence in recent years, for reasons that were never explained, the award triggered a wave of liquidations of the local branches of his empire.
Administrators acting to recover the tax debt are likely to clash with Glenn over payments made to US-based Hart Agriculture Corp, a dairying company run by Eric's brother Richard. Liquidators in New Zealand have identified $17.5m in loans owing, while Glenn's lawyers have also identified payments to Hart from Watson they wish to claw back.
Watson himself didn't appear to give evidence at the tax case at the High Court in Auckland. When asked from the bench where he was, his counsel pleaded ignorance. It appears he was on holiday at the time in Saint Moritz, Switzerland.
Who paid for this particular holiday would the following year became a matter of intense scrutiny in London when lawyers acting for Glenn claimed money hidden by Watson under his mother's name had been released for "high level spending" at the likes of Harrods - and also for family holidays.
The complexity of Watson's financial ecosystem doesn't surprise Simon McArley. The former deputy head of the Serious Fraud Office ran the nearly three-year investigation into Hanover that closed in mid-2013 after deciding there were no grounds to prosecute either Watson or his Hanover co-owner Mark Hotchin.
"Trusts everywhere, companies everywhere: The business empire is enormously complicated. We spent a long time trying to unravel it, and I'm not sure we got to the bottom of it all, but we were pretty clear we'd identified what we thought were the parts relating to Hanover," McArley said.
The reason for McArley's professional interest has been well-canvassed, with Hanover Finance arguably the poster-child for the meltdown of the finance company sector following the global financial crisis. Watson, and his co-owner Mark Hotchin, pulled more than $90m out of the company in dividends in the years leading up first its freezing, then disintegration, with tens of thousands of investors owed $554m suffering massive losses.
The fallout from Hanover made a public sales pitch to New Zealanders difficult, but Watson's eyes were by now firmly abroad and his highest-profile market splash of the past two-decades was another backdoor-listing - edgy fashion brand American Apparel.
But a few years after listing in 2006, the company whose marketing was largely driven by controversy, ran into serious financial difficulties. Watson appears to have managed an early exit and avoided the equity wipeout that came when the company filed for bankruptcy in 2014.
Glenn actually waged two wars over the past decade. The first, and well-canvassed, was with Watson. The second is with his own trustees - found to have cut Glenn off from his own wealth and authorised millions in fee payments to themselves - who committed hundreds of millions of dollars to Watson's schemes and required this legal Great War to unwind.
An example of just how convoluted Glenn's proceedings became - and how quickly $40m can be spent on lawyers - one single paragraph of Lord Justice Nugee's 2018 ruling canvasses how these trustees had shuffled $45m in Swiss Francs into the account of an Israeli law firm to be held by a Liechtenstein entity for use as a legal warchest to resist Glenn's attempts to unseat them.
These moves did not hold back the legal tsunami for long. Glenn sued the trustees in Nevis and California, resulting in settlement and their replacement. Lord Justice Nugee later ruled in London that Watson had induced one of them into signing onto his investment schemes by promising to find a plum legal job for their daughter.
It was only the application of tens of millions of dollars of legal pressure - by both Inland Revenue and Glenn - that has pulled back the veil and provided a startling glimpse at Watson's modus operandi.
Justice Palmer, in that 2019 tax ruling, said of a complex web of loans, trusts and shells that all actors in the transaction were "highly related parties" and "in reality, Mr Watson was on both sides of the loan transaction."
The Lord Justice Nugee ruling, written in the more flamboyant style of English jurists, reached similar conclusions about what was described as an "ecosystem" of corporate structures that for "optical reasons" kept Watson's involvement secret.
He ruled Watson's Project Spartan was "thoroughly misleading and deceitful" particularly in claiming £22.5m was needed from Glenn's trusts to buy out a joint venture partner, when in truth the price was much less and the excess was intended to be used to pay down debt owed personally by Watson.
In 2018, following Glenn's knockout victory in the Spartan proceedings where Watson was ordered to pay $54m - in addition to $250m already surrendered - a bloodied Watson put on a brave face and flagged an appeal and another round.
He then told the Herald: "This is by no means over."
But the hits and freezing orders in the two years since have been heavy, and Watson's credibility now seems in tatters.
Lord Justice Nugee spoke of his "willingness to tell outright lies if he thinks they will remain undetected", called his evidence to the court as "almost worthless" and said "I had the distinct impression when he was giving that evidence that he was not misremembering, but was deliberately covering up the truth".
The judge also declined Watson's lawyers' attempts to get credit for good character when sentencing him for contempt: "You are a man with no criminal convictions, but that he [Watson's lawyer] cannot put you forward as a man of unblemished character."
Watson's lawyers attempted to stay his prison sentence, pending appeal, arguing imprisonment would lead to his professional ruin and public humiliation in New Zealand. Their request was denied.
Two years on, it now looks over.
