By Sam Tobin
LONDON (Reuters) - British billionaire Richard Branson severely damaged Virgin Group's reputation by residing in a tax haven while UK-based airline Virgin Atlantic sought a government bailout during the pandemic, according to internal Virgin emails cited in a $250 million London lawsuit on Monday.
The emails were cited by lawyers for U.S. train operator Brightline, which is being sued by the Virgin Group after cancelling a deal to use the Virgin brand in 2020, just over 18 months after it was signed.
Under the deal Brightline operated a rail line in Florida using the name Virgin Trains USA.
Brightline says it cancelled the deal because the Virgin brand had been hit by negative press coverage of Branson's 2020 claim that Virgin Atlantic would need a bailout from the British government to survive the pandemic.
Brightline's lawyers cited internal Virgin Group emails describing group founder Branson being based in the British Virgin Islands for tax purposes as "a reputation killer", while one email from an external public relations adviser said: "Richard needs to show he's not a ruthless, tax-evading billionaire."
In an April 2020 email, Virgin Group CEO Josh Bayliss referred to Branson's tax residency in relation to the request for a bailout, saying: "Richard cannot escape the criticism. The truth is he has paid as little tax as possible".
Virgin argues its brand was not materially damaged by the group's handling of COVID-19, meaning Brightline was not entitled to cancel the licensing deal without paying an exit fee of up to $200 million. The company is also seeking unpaid royalties.
Virgin's lawyer Daniel Toledano said in court filings that the brand suffered some negative press in Britain in 2020 following Virgin Atlantic's request for government support, but its reputation quickly recovered and was unaffected in the United States.
Brightline's lawyer Nigel Tozzi, however, said the deal had entitled his client to a brand with a high international reputation, like Coca-Cola (NYSE:KO) or leading European soccer teams Real Madrid and Barcelona.
"It is the Beatles, not the Bay City Rollers," he said in court filings.