Victims of a sunshine fraudster: Britons are being bullied and deceived by a timeshare firm in Tenerife. Phil Davison and Michael Prestage report (CORRECTED)

CORRECTION (PUBLISHED 19 SEPTEMBER 1993) APPENDED TO THIS ARTICLE

THE SIGNS on the wall describe it as 'The Ultimate Experience', but for most of the 7,000 timeshare owners of Island Village, Tenerife, even getting in has become the ultimate nightmare. They are the victims of a multi-layered property and cash imbroglio that has cost many of them thousands of pounds more than their original investment and left some with shattered nerves.

The man who built the complex, the former gold dealer John Palmer, has a conviction for fraud and was acquitted of handling, melting down and 'laundering' proceeds of the pounds 26m Brink's-Mat gold bullion robbery at a security warehouse near Heathrow airport in 1983.

He retains overall control over the 180-villa complex via a complex web of companies in England, the Isle of Man and Tenerife itself. Lawyers on the island estimate the complex cost the 43-year-old Mr Palmer pounds 6m to build but that his companies have collected tens of millions since.

Based on an average pounds 3,000 for a lifetime ownership of one week a year, initial sales of the 180 villas netted more than pounds 500,000 for each week, or well over pounds 20m. The current average of more than pounds 100 a week 'maintenance' fees, brings in around pounds 1m.

Brink's-Mat, the security firm, has a Mareva injunction (an asset-freezing injunction) on Mr Palmer's assets. It is known that he has substantial funds and bank accounts and moves cash around the world. But wherever he goes Brink's-Mat and its insurers follow, in an operation to track him and up to 50 others named in a High Court injunction.

The Tenerife venture has many layers. Documents obtained on the island show that thousands of buyers, would-be buyers or simple tourists, mostly Britons but including Germans, French, Danes and others, are parted from their money using a range of tactics.

'They kept us waiting for three hours, refusing to hand over our keys and demanding pounds 460 maintenance fees, after we'd been up on the journey since three that morning,' we were told last week by 'John', a former prisoner-of-war aged 73, who is partially disabled. 'We'd already paid it by post and had a receipt.

'There were heavies all around there and a queue of people like us, all being treated the same. The woman at the reception just smirked and said she was doing her job. I said 'yes, just like the Gestapo used to say',' he said.

The reception desk is manned by Jean Brooks, known to many owners as Rosa Klebb after one of James Bond's most memorable opponents. Her office is most notable for her brown-and-white mongrel dog and a sign that reads: 'The more I meet people, the more I love my dog.'

John's 65-year-old wife, 'Nan', took up the story. 'I could see John's wartime memories coming back. I knew he needed to lie down so I just signed them a cheque to get it over with. He hasn't been the same since.'

The couple, who returned to England last week after their annual four-week ownership, did not want their names published for fear of reprisals from the armed men who guard the Village complex on behalf of Mr Palmer's Island Village Management company. 'The heavies watch your every move,' they said.

Brian Roberts of Welling, London, paid pounds 6,300 for two weeks in a one-bedroom villa in 1985. Two years ago, he was encouraged to upgrade to a two-bedrom villa - cost for two weeks pounds 13,019 - on the understanding that he was 'trading in' the smaller villa. He paid a new deposit of pounds 2,584 pounds for the bigger place. A few months later, he received a toughly-worded bill for pounds 9,293 from Island Village Management stating that they had been unable to sell his original two weeks but that he had to pay for the larger villa. Mr Roberts refused, held on to his original one-bedroom villa but forfeited his pounds 2,584 deposit. Almost every owner we spoke to last week had a similar story.

Timeshare owners set up an association and called an annual meeting at Wolverhampton in September 1991. They were unhappy that they had received no accounts and worried that a fund for major repairs did not appear to have been set up, claiming maintenance was poor.

Armed and uniformed security guards, as well as several armed and burly associates of Mr Palmer, ensure that warnings to owners are taken seriously. While we watched new arrivals enter the reception area on Friday, we were monitored closely by half a dozen security men, including two Lebanese brothers, Mohammad and Hussein Durbah, both of whom have appeared in court in Granadilla, the nearest town to the Island Village complex on the Playa de las Americas, to answer complaints by owners of intimidation.

Two of the arriving owners. Graham and Soozie Webster, of Wirral, Merseyside, had been refused their keys unless they paid pounds 228 maintenance fee for 1993. Mr Webster refused, showing his receipt for that sum paid by post. Later, Soozie rushed out, relieved and happy. 'We've got the keys, we've got the keys.'

Mr Palmer himself has appeared twice before Judge Nieves Rodriguez, on 10 and 15 February, when he claimed that as founder of the village he had 'a moral obligation' to look after it.

On other occasions he claimed to have had nothing to do with Island Village Management for many years. At the last hearing, the judge called in police to remove heavily-built associates of Mr Palmer, who had been mingling with villa owners there to lodge complaints.

Despite his insistence that he no longer has anything to do with Island Village Management Ltd, the Independent on Sunday has a copy of a registration document from the Commercial Register of Santa Cruz de Tenerife, the island's capital, stating that Mr John Palmer, referred to as a jeweller, British passport number B343169 with domicile in The Coach House, Battlefields, Lansdown, near Bath, is 'the unique administrator' of Island Village Management. It is dated 6 March 1989 and has not been updated or altered. This newspaper also has a copy of a document from Tenerife's Tourism and Transport Board, a government body on the Canary Islands, naming John Palmer as operator of the Island Village complex in the name of Island Village Management. It is dated 16 May 1989.

Many of the management fees are paid to Island Village Financial Services Ltd of Brentwood, Essex. Christine Ketley, a spokeswoman for the firm, said the problems were caused by a small minority of owners. 'It is a few who want things done differently and their tactics stink.'

On paper, at least, Palmer sold the Island Village complex soon after it was completed, to 17 separate companies, known as Island Village Units Numbers One to Seventeen, registered in Ramsey, Isle of Man. But his own Island Village Management Ltd, registered in Douglas, Isle of Man, continued to market the timeshares. TTI Europa, also based on the Isle of Man, was appointed as trustee for the complex. Lee Penrose, head of TTI Europa, is also listed as a shareholder and secretary of each of the 17 Units companies.

Mr Penrose said Island Village had been set up as a club trustee scheme and TTI Europa operated similar ventures across Europe. John Palmer had established a series of companies in the Isle of Man and conveyed the properties to them. These were then handed to TTI Europa as trustee.

'I find I can talk fairly frankly with John Palmer. I have tried to facilitate discussions between him and the committee. Our obligation is to look after members.'

John Morgan, of Airdrie, Scotland, who now runs the comunidad or owners' committee, set up under Spanish law in an attempt to remove Mr Palmer's associates, has met Mr Palmer and Mr Penrose to persuade Mr Palmer to hand management control to the committee. He says the relationship between Mr Palmer, the 17 companies and TTI Europa is 'unclear'.

The Tenerife lawyer now defending the owners' right to manage the complex, Armando Perera, was appointed by the 17 Isle of Man companies in response to the owners' demands to set up their own committee under Spanish law. He says he is unsure who is who in the Isle of Man web and that his aim is merely to see Spanish law applied. 'John Palmer has no legal rights to manage the village. But he does so de facto. He is physically there and refuses to leave,' Mr Perera said.

When Mr Palmer last appeared in court on the island here, Mr Perera produced photocopies of credit card bills and slips he said revealed a further layer to the operation. Although all were related to 'management' or other fees, demanded from new arrivals before they were allowed their keys, the bills were made out to eight other companies, all of which, the lawyer said, Mr Palmer or his known associates control.

The Island Village is far from Mr Palmer's only such venture, according to Mr Perera and other sources. A similar timeshare complex on another Canary island, Lanzarote, several years ago, was largely sold off to individual owners but never completed. Mr Palmer's companies failed to pay the builder, who went bankrupt.

Mr Palmer's private jet, number G-JITN, taxied from its spot outside the fire station at Tenerife's Reina Sofia airport last week and he has not been seen on the island since.

When on the island, Mr Palmer keeps a low profile. He moves between a penthouse in the Flamingo Club to another timeshare complex he is said to own, but which has not been completed, in a blue Opel Omega. He travels with his Lebanese associate Mohammad Durbah, who has been known to carry a shotgun - he told the Granadilla court that he had a licence. Mr Palmer, born in Birmingham, is married with two daughters. His long-time business partner was Garth Chappell who was convicted of involvement in the Brink's-Mat theft and disposal of the Mars Bar-size gold bars. Mr Palmer and Mr Chappell had been business partners in Bristol for many years before they moved into a legitimate gold-smelting business. Mr Palmer left Birmingham at 15 and joined his brother Malcolm in a roof tiling business.

He later started a second-hand car business and struck up a partnership with Chappell. They opened a shop selling second-hand car spares. The couple then went into the furniture trade.

Scadlynn Ltd, the firm they used to deal in scrap gold, was based above one of their furniture shops at Bedminster, Bristol. By the end of the 1981/82 financial year the turnover was pounds 6m.

After the Brink's-Mat robbery pounds 13m was laundered through Scadlynn's bank accounts. At the time of Chappell's trial the court was told that such was the demand for cash their local bank, Barclays in Bedminster, had to have special deliveries of pounds 50 notes from the Bank of England.

Chappell was found guilty and sentenced to 10 years in jail for handling the stolen gold. But Palmer was not tried at the same time. In January 1985, with his wife, Marnie, and children, Mr Palmer took a holiday in Tenerife. He did not return. While on the island he founded his timeshare business.

In June 1985 Palmer was forced to leave Tenerife under an 'undesirable aliens' rule. He attempted to enter Brazil on a passport that had expired and was arrested. After spending four nights in prison he flew back to Heathrow, where he was arrested. He was later acquitted of any part in disposing of Brink's-Mat gold.

That was not Mr Palmer's first brush with the law. In 1980 he and Chappell faced charges of obtaining credit on furniture by providing false references. He received a six-month suspended prison sentence.

In December 1991 Palmer and Chappell were given 18-month suspended prison sentences for their part in a mortgage fraud. Palmer was also ordered to pay pounds 13,052 compensation and pounds 5,000 costs. Palmer admitted obtaining nearly pounds 65,000 by deception.

Palmer told a Bristol newspaper through his London solicitor, Henry Milner, that he had not been involved with Island Village for six years and had no links with the management company. Contacted by the Independent on Sunday last week, Mr Milner said: 'I know where he is, but I can't tell you.'

Yesterday, Island Village launched a new money-seeking venture. Just before we left the island, we found a pamphlet on our windscreen. Anyone who had a hired car, it said, would be given cash towards the hire and 'discount vouchers', simply by showing up at the Village with the car rental certificate. It did not explain how to get past the armed guards.

CORRECTION

WE have been asked to point out, in relation to an article headed 'Victims of a Sunshine Fraudster' on 28 February, that the shares of the 17 Island Village owning companies have never been personally held by Mr L W Penrose but are held in trust by Timeshare Trustees (International) Limited as trustees only, and beneficially for, the members of the Island Village Club. Timeshare Trustees (International) Ltd and Mr Penrose have always been completely independent of John Palmer and his companies. We apologise for the errors.

(Photographs omitted)