The appeal of whisky cask ownership in an era when Scotch is quite possibly the most popular premium spirit in the world comes from prestige, rarity and the story behind the barrel.
A popular candidate for all three is whisky casks that come from a silent distillery, a mothballed, closed or demolished place where a particular spirit was made, and outside of the World Wars, the biggest reason why distilleries shut their doors came in the mid-1980s.
The story of the whisky loch is the stuff of legend, and like a lot of legends, it can be interpreted in so many different ways.
The classic version of the story is that the pursuit of profits led many distillery groups including Distillers Company Limited (DCL), the then-largest in the world, to ramp up production with an eye towards a blended whisky demand that never came.
With a surplus of whisky so large it could fill a loch, many of these distilleries closed, the blended whisky was sold for pennies on the pound and it would take nearly two decades for single malts and high-quality whisky to return with a focus on the connoisseur.
A lot of this is true, but it is only part of the story, and another major part that cannot be neglected is DCL’s part in one of the biggest British business fraud cases of the 20th century.
The Guinness Four
Whilst initially the Scotch Distillers’ Association and more akin to a loose association of different distilleries, DCL bought a lot of them during the bankruptcy of Pattisons amidst an astonishingly vast fraud scandal in 1901.
This made it the largest whisky company in the world, which meant that it felt the effects of the whisky loch harder than others given that its business had been shaped around blended whisky once that became the most popular mass-market product.
By the mid-1980s, it was struggling enough for other companies to consider takeover bids. One was the Argyle Group, owner of Glen Scotia as well as the supermarket chain Safeway (now part of Morrissons), who planned a hostile takeover bid that DCL’s board was not happy with.
However, they were beaten to the punch by a remarkable bid by Guinness, makers of the popular stout beer of the same name, who executed a friendly takeover bid worth £4bn.
This baffled the Argyle Group, as well as the entire financial market at the time; Guinness was very successful but DCL was significantly bigger than them. How did they manage to buy the heart of Scotch whisky? The answer is through fraud and share price manipulation.
Ernest Saunders, then the head of Guinness, worked with arbitrage expert Ivan Boesky to invest in shares to boost Guinness’ share price, increasing its value on paper enough to buy the whisky giant.
The problem was that this was insider trading, which is illegal, and when Mr Boesky was
arrested, he agreed to cooperate with several investigations in 1986 in order to lower his prison sentence.
This became one of the biggest share frauds in UK history and would fundamentally reshape the landscape of Scotch whisky. It would take until after the final appeal of the Guinness Four (Ernest Saunders, Gerald Ronson, Jack Lyons and Anthony Parnes) before the whisky market would rebound.