The secretive London family at war over its millions

Questions over tax — hotly denied — feature in a row centring on one of the capital’s biggest art collectors

One of London’s wealthiest but most secretive families is locked in a bitter feud over the ownership of its empire, which spans high-end London properties to African tobacco-trading businesses.

A key protagonist is Freddy Salem, 74, who with his wife Muriel has built up one of Europe’s most important private collections of modern art at a house on Regent’s Park. It features work by Damien Hirst, Gary Hume and other major British artists.

The row has led to lawyers for the two sides raising questions about alleged tax avoidance or evasion among the more lurid claims — all of which are denied.

Salem and his brother Beno, 63, appear to have spectacularly fallen out with the third and oldest surviving brother, Isaac, over the way the family businesses were carved up between them. Isaac claims he was not given his fair share.

He, his nephew Moussy, 42, and sister-in-law Mireille are suing Freddy and Beno in the High Court.

Among the family’s London assets are the lease on Scott’s restaurant building in Mayfair, chosen by Ian Fleming as James Bond’s favourite London haunt and now a hangout for hedge funders and celebrities. The Salems are currently selling the property for at least £100 million.

Legal papers detail in public for the first time how the brothers made themselves perhaps hundreds of millions of pounds from a trading empire that can be traced back to Lebanon in the 1930s.

Their father ran a successful money-changing business in Beirut, which his offspring joined over the decades before branching out in the 1970s into providing finance for textile traders in Nigeria.

Their connections in that country spawned a business supplying cigarettes there. But war broke out in Lebanon and the brothers fled to London in 1975. They continued their lucrative tobacco trading while diversifying into buying properties in the UK.

Despite being based in London, Nigeria, Benin, Togo and Ghana, their companies are owned through a complex array of trusts in offshore tax-free destinations such as Panama and Guernsey. The trusts were set up with the help of two Rothschild’s Bank entities in Guernsey. These are also defendants in the Salem civil case and deny any wrongdoing.

It is a measure of the wealth and influence the Salems hold in Jewish society that a first attempt to split the business, in 1993-94, was brokered by the billionaire banker Edmond Safra, who died in a bizarre arson attack by one of his nurses at his Monaco penthouse.

Such is the discord between them that lawyers for Isaac at one stage demanded in legal papers to know whether the complex business arrangements that the brothers set up around the African business was to avoid or even evade tax. Tax evasion is illegal.

Lawyers for Freddy and Beno replied in court papers that the network of companies and their dealings with each other were “structured in a tax-efficient manner” to make the profits from African trading appear in family companies in the tax haven of Guernsey.

But, they said, “to the best of their knowledge and belief, tax evasion was not the purpose of any of the structures or arrangements”.

The question arose because of the complicated manner in which connected companies would “re-invoice” each other. Key to the legal case is a claim by Isaac’s side that the empire was run as a partnership in which he was a member. His brothers say that it was never a partnership, and that he had been paid his dues in full.

They add that the fourth brother, Raymond, who died in 2002, had been “very concerned about future blackmail type demands by [Isaac] or his family” asserting that a partnership had existed.

Their defence asserts that concerns over this led to the brothers signing a deed of acknowledgement, stating there was no partnership, at the time of the proposed deal being brokered by Safra in 1994.

Rothschild declined to comment on the case but said in a statement: “Rothschild adheres to the legal, regulatory and tax rules wherever we operate. We take significant care to ensure that our clients’ assets are properly declared.

“We have stringent processes and procedures in place when taking on new clients, and conduct reviews on an ongoing basis with existing clients to be certain of the legitimacy of the source of their funds and any structures being used.”

The case continues and is listed for a hearing next spring.