Tuesday 23 October 2018

Mysterious ways: the highs and lows of U2's money

As Bono's tax dealings ­threaten to eclipse U2's ­release of a new album, our reporter looks at the wealthy band's jam-packed back ­catalogue of investments, canny and ­otherwise

U2 on The Joshua Tree Tour
U2 on The Joshua Tree Tour
Controversy: Apple CEO Tim Cook, left, greets Bono from the band U2 after Apple Pay and U2 offered iTunes customers a free download of their latest album, Songs of Innocence in 2014. Photo: Marcio Jose Sanchez
The Clarence Hotel, one of Bono and The Edge's investments
John Meagher

John Meagher

November was supposed to be a special one for U2. These weeks would be all about building excitement for the release of their 14th studio album, and first in three years.

But while U2 and Bono have been in the news, the forthcoming album, Songs of Experience, has only been a footnote in the conversation.

Instead, the frontman has had to come out to defend his investment in a Lithuanian shopping centre. The so-called Paradise Papers - millions of documents about the tax avoidance schemes of celebrities and big corporations - showed that Bono's money has filtered through a Malta-based firm in order to minimise his tax bill.

It's perfectly legal, but the revelation has caused him a considerable headache. Headlines like the Guardian's 'Tax rogues like Bono are harming the world's poorest people' will not have made for pleasant reading.

Controversy: Apple CEO Tim Cook, left, greets Bono from the band U2 after Apple Pay and U2 offered iTunes customers a free download of their latest album, Songs of Innocence in 2014. Photo: Marcio Jose Sanchez
Controversy: Apple CEO Tim Cook, left, greets Bono from the band U2 after Apple Pay and U2 offered iTunes customers a free download of their latest album, Songs of Innocence in 2014. Photo: Marcio Jose Sanchez

Nor would the sentiments of James Delingpole, writing in Britain's biggest selling newspaper, The Sun: "I can forgive Bono's greed - I'm sure we'd all behave the same if we earned that much and could afford a fancy accountant. What I can't forgive is his outrageous hypocrisy. Bono is forever using emotional blackmail to make starstruck governments spend our money on his worthy causes."

Bono says he "distressed" by the revelations, but insists that - to the best of his knowledge - everything is above board. "I've been assured by those running the company that it is fully tax compliant," he said in a statement, "but if that is not the case, I want to know as much as the tax office does, and so I also welcome the audit they have said they will undertake."

It's not the first time Bono and U2 have had to answer tricky questions about their tax affairs, but it could hardly come at a worse time with Songs of Experience set for release on December 1. After the triumphant tour in honour of their most emblematic album, The Joshua Tree, they might have felt that 2017 had been going their way. But the Ausra shopping mall in the town of Utena has put a spanner in the works.

Even their latest single, 'Get Out of Your Own Way', is being scrutinised with fresh eyes in the wake of the Paradise Papers. In lyrics penned by Bono, guest star Kendrick Lamar raps that "the filthy rich can only truly own what they give away".

And Bono, by anyone's definition, is filthy rich. Estimates vary wildly, but some US reports suggest his net worth is in the region of $600m. Much of it is down to the music - and being a member of one of the most consistently popular bands on the planet - but a series of canny investments have also swelled those coffers.

And U2 - especially Bono and the Edge - have been enthusiastic investors for years, with a keen eye for start-ups with potential.

The Clarence Hotel, one of Bono and The Edge's investments
The Clarence Hotel, one of Bono and The Edge's investments

Facebook may have moved well past the start-up phase by 2009, but it was still in its infancy compared to today. That year, U2, through the Elevation Partners investment group Bono had co-founded, spent $86m on a 2.3pc share of the social media site. Six years later, they cashed in their share for an eye-watering $1.4bn.

U2 have also had a close relationship with Apple - having worked with then CEO Steve Jobs around the time of the launch of the iPod. And, they inked a lucrative deal - rumoured to be as high as $100m - to allow Apple to give away a free copy of their last album, Songs of Innocence, to all iTunes subscribers, a figure that in 2014 stood at 500 million people. (Many of them were unhappy to receive the album unexpectedly, much to Bono's chagrin.)

The band also bought a $300m stake in the US business bible, Forbes - ironic, perhaps, as their collective wealth is regularly featured in the magazine's annual Rich List.

Last week, Forbes carried a report looking at the success of the band's Joshua Tree tour - which called to Croke Park in July - and noted that they had collected more than $300m in ticket sales. It's a figure that pales into comparison with their more extensive tours - such as the globe-trotting 360° Tour - but it's still enough to ensure that they will be close to the top of the chart for the most revenue made from touring by any act this year.

Despite a hefty recording and touring schedule, Bono is said to have an insatiable appetite for investment opportunities - and several at a much smaller scale to the Facebooks of the world. One of the projects he's most engaged with at present is the Dublin-based food-tech start-up, Nuritas, and U2 have invested in this firm whose USP is using big data techniques to discover peptides - molecules in food and food by-products - that can be used by the life sciences sector in supplements and new drugs.

But U2's extracurricular activities have not always been a success. They may well rue their involvement with the Spider-Man Broadway extravaganza, once described by The New York Times as "the worst musical ever". The project was beset with problems, mishaps and delays and wound up costing $75m to stage. It's not thought to have recouped that amount in a three-year run between 2011 and 2014.

There was even worse luck for The Million Dollar Hotel movie. Based on a story by Bono, who was also a co-producer, the 2000 film directed by occasional U2 collaborator Wim Wenders, bombed at the box office and was critically mauled.

And while U2 showed remarkable acumen for the machinations of the music business in the early 1980s, they weren't without their troubles on the investment front that decade either. Together with then manager Paul McGuinness, they invested heavily in the laser-gun game Quasar, but it never caught on. And after ploughing money into venues in Germany, they discovered that games featuring replica guns were banned there.

U2 skyscraper

They've had mixed fortunes with other investments. Bono and the Edge, along with property developers Paddy McKillen and Derek Quinlan, purchased the Clarence Hotel in the heart of Dublin in 1992. It was, Bono once quipped, one of the few places that would serve the band alcohol as fresh-faced kids in the late 1970s, and for much of the 90s it and its basement nightclub, The Kitchen, were the epicentre of cool Dublin.

Having come through the recession, the four-star hotel has posted profits for the past seven years, including €500,000 for the last calendar year, but some believe its capacity to make a far greater return is stymied by its comparatively small size. An ambitious plan to add several storeys were drawn up by the star architect, Norman Foster, more than a decade ago, but went aground during the downturn.

Foster was also commissioned to design what would have become the spectacular U2 Tower skyscraper across the Liffey from what's now the 3Arena. A plush 32-storey development featuring high-end apartments, it would have housed U2's studio at penthouse level, but it, too, fell foul of the recession. A far more modest development, Capital Dock, is under construction at that location today, although it will have the distinction of being the country's tallest building when complete next year.

The band continue to record much of their music in the Hanover Quay studio, in the centre of what's now thought of as Silicon Docks. Airbnb's European headquarters is a neighbour and the Facebook and Google buildings are located close-by. The purchase of their studio has not been without controversy. In 2013, it was sold to a U2 entity for €450,000 and the figure was considered so modest - in relation to the steep property prices in the region - that it was the subject of an investigation by the Dáil's spending watchdog. The Dublin Docklands Development Authority insisted the sale had been for a fair market price and was not a "secret deal".

There has been controversy, too, around the ONE charity, which was co-founded by Bono in 2002 to raise funds and awareness for Third World countries stuck in a poverty trap.

In 2010, it was criticised for allocating just 1pc to good causes. The New York Post highlighted that, at the time, more than half the money raised was going on salaries. The non-profit body was moved to defend the way the organisation is run, insisting that money is used for promoting its campaign and raising awareness rather than being given straight to those who need help.

Glastonbury protest

While U2's PR machine will have been disappointed by the time of the ­Paradise Papers, the story pales in comparison with the revelation in 2006 that U2 had moved part of their business to the Netherlands for tax-savings purposes.

It was news that angered many, especially those who had grown weary of Bono's pleadings for the West to open its pockets to the poorest corners of the world. That year, he co-founded the Project Red campaign to raise awareness for African countries ravaged by HIV/Aids.

Even five years later, in 2011, U2 would feel the full force of that anger when a protest was attempted during their headline performance at Glastonbury. Protest organisers had planned to raise a hot air balloon emblazoned with the legend 'U pay tax 2' but blamed "heavy-handed" security for disbanding their protest.

In 2015, Bono justified the band's approach to tax in an interview with Sky News, arguing that just because he had campaigned for a fairer society, it did not mean he had to be "stupid" in business. "It's just some smart people we have working for us trying to be sensible about the way we're taxed. And that's just one of our companies, by the way. There's loads of companies.

"And we pay a fortune in tax. Just so people know, we pay a fortune in tax; and we're happy to pay a fortune in tax, people should. But that doesn't mean, because you're good at philanthropy and because I'm an activist, people think you should be stupid in business and I don't run with that."

But such an argument doesn't wash with his more trenchant critics, including the journalist and lecturer Harry Browne. In his book The Frontman: Bono (in the Name of Power), Browne accuses Bono of "amplifying elite discourses, advocating ineffective solutions, patronising the poor and kissing the arses of the rich and powerful. [Bono's approach to Africa is] a slick mix of traditional missionary and commercial colonialism, in which the poor world exists as a task for the rich world to complete."

While, the majority of the focus on U2 inside and outside the band is on Bono, other members have not been exempt from having their wealth pored over. Adam Clayton had to take a High Court action against a former assistant, Carol Hawkins, who had stolen money from him during a four-year period. The PA was convicted of stealing over €2.8m from his bank account.

"Do the math or make sure you have somebody numerate to do it for you," wrote Bono in Q magazine. "Pay attention to business, it's really a drag when it goes wrong.

"Adam Clayton, normally so fastidious about his friends, his art, his style, can fill you in on what can happen when you're too preoccupied with beauty… ugly stuff.

"Just because you're smart with your art or your activism doesn't mean you have to be dumb with your money."

Whatever one might think of Bono - or his music - few could accuse him of being stupid with his cash. And with a North American leg of the Innocence + Experience tour set to get under way next year, that cash pile will grow ever-larger.


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