Maxwell: The Final Verdict. Tom Bower

few qualms about his use of the funds. Soon after buying the Mirror in 1984, he had told Ken Angell, a former Mirror Group employee, ‘I own the pension fund.’ Angell, knowing that pension funds are vested in trustees on behalf of their beneficiaries, was surprised, but, when challenged, Maxwell logically explained his assertion. Since he personally owned the Mirror Group, and the pension fund effectively came under his control, he ‘owned’ the pension fund. To his delight, the funds were always in surplus.

      The instrument for Maxwell’s control of the pension funds was BIM’s manager Trevor Cook, born in Northumberland in 1949, who had obtained a first-class degree in mathematics from Newcastle University. Appointed on 2 October 1985 as manager of the Mirror Group Pension Scheme, the inoffensive Cook was a pension fund administrator, not an accountant. Maxwell’s grounds for the selection were easily established: Cook willingly complied with his employer’s demands in return for a handsome salary. Having engineered an unusually close relationship, the Publisher insisted that he be notified in advance of all Cook’s movements. ‘Maxwell regarded his time as one hundred times more valuable than anyone else’s – so he wanted to talk at his convenience,’ recalled Cook, who made himself available to his employer’s telephone calls at all hours, knowing how much he relished disturbing his minions. Cook had proved himself malleable and easily impressed by Maxwell’s investment prowess, convinced that he ‘was a safe pair of hands’. Having asserted his ‘ownership’ of the pension funds, Maxwell directed the investments to suit his requirements. To Cook it appeared that the Publisher’s investments were astute and profitable, even if unconventional.

      In March 1988, Maxwell had pooled four pension funds – benefiting at the peak 23,400 employees and worth over £700 million – into one Common Investment Fund (CIF). The management of CIF was entrusted to another Maxwell creation, Bishopsgate Investment Management (BIM), a non-profit-making organization. Both inventions had been established under the 1986 Financial Services Act with the permission of the Investment Management Regulatory Organization (IMRO), the government-appointed regulator. Given Maxwell’s history, John Morgan, IMRO’s director, should have been cautious. On his original written application, Maxwell had written that BIM was owned by the Pergamon Foundation Stiftung, a charitable body based in Liechtenstein. After reading the application, an IMRO official asked Cook for the Liechtenstein accounts. Cook asked Ron Woods, who in turn asked Maxwell. ‘Impossible!’ screamed Maxwell. ‘They can’t have them!’

      ‘They won’t authorize BIM without the accounts,’ pleaded Woods. But Maxwell was implacable – for good reason. The Foundation had no staff and no premises and produced no accounts to prove that it controlled any money. It was a legal fiction managed by his Swiss lawyers, who were paid to refuse answers to any questions. Maxwell was chairman of the trustees and, in his opinion, beyond mortal scrutiny. ‘There are no Liechtenstein accounts,’ Cook wrote to IMRO. Surprisingly, there was no reaction.

      Maxwell’s escape from the potential trap had been effortless. Since the law required that BIM be owned by a registered charitable trust with proper accounts, he just invented one. The figment of his imagination was called the Maxwell Charitable Trust, its creation partly supervised by Deborah Maxwell, his legal adviser. Under the proposed structure, the Trust would control BIM, although neither actually employed any staff. The Trust was effectively just Robert Maxwell, without any trustees appointed by the pension funds, though including one trustee, David Corsan, a retired Coopers auditor who was also an IMRO director. BIM’s manager Trevor Cook and his staff were employed by Headington Holdings, a subsidiary of Headington Hill Investments. That extraordinary structure was ignored by the government’s regulator after the initial application was withdrawn, and on 6 April 1988 BIM received formal approval to manage the pension funds of over 20,000 employees from offices at 4/12 Dorrington Street, near Maxwell House. Cook was appointed the compliance officer, formally responsible for BIM’s obedience to the laws and for the company’s liaison with the regulatory authority.

      Under BIM’s articles, Robert, Kevin and Ian Maxwell, the leading directors, wielded only limited powers, but inevitably those rules were ignored by Robert Maxwell, albeit unchallenged by Ron Woods, Trevor Cook, Robert Bunn (until his resignation in 1990) and the other directors. Unknown to them, in a legal ruse to protect himself in the event of any future inquiry, Maxwell had falsified the board minutes to appoint himself the sole arbiter of the company’s management. In the event, he decided on investments – sales and purchases – without reference to anyone else. His action mirrored MCC board minutes of November 1981 which permitted him to act as a ‘committee of MCC’s board of directors’, bestowing upon himself uncontrolled powers over the public company, including the right to be the sole signatory of cheques for unlimited amounts. Naturally, these changes in the running of BIM were kept a close secret. They existed only as a legal safeguard if trouble arose.

      Maxwell quickly established a pattern of management of the pension funds. At BIM’s monthly meetings, religiously attended by Robert and Kevin and occasionally by Ian, the directors reviewed and approved BIM’s portfolio of investments. Cook and his deputy, Jeffrey Highfield, merely took care to monitor the minutes, acknowledging that the right to buy and sell shares belonged to the directors. Every month, they circulated a schedule of BIM’s portfolio of shares. So none of the Maxwells could ever be in any real doubt whether particular shares belonged to the pension funds or to their private companies.

      In September 1988, Maxwell decided to establish tighter control over the pension investments. His excuse was the discovery of a fraud of £7,000 in the payment of pensions to former employees. A subsequent report by accountants concluded that the pensions administration was a ‘shambles’. Summoning Cook and Highfield, he announced that authority for the management of BIM and the CIF investments was to be vested in Robert Bunn, the accountant employed by his private companies. ‘Bunn will handle all relations with the brokers and investment houses,’ he said. ‘We are involved in a large number of take-overs and mergers. Bunn has better expertise. Bunn will have all the powers. Your responsibility will be solely BIM’s administration.’ At the end of their employer’s ten-minute speech, neither man protested.

      But within weeks Highfield was complaining to Cook: ‘Bunn isn’t telling me about the actual investments.’ Cook remained silent, unwilling to question Maxwell’s edict that ‘We are ruled by IMRO, and we must not reveal price-sensitive information.’ Highfield was puzzled. Cook had already accepted another limitation upon himself. Three months earlier, in July 1988, Maxwell had decided that BIM and the pension funds would enter into a special and unusual relationship with yet another private Maxwell company, London & Bishopsgate Investments. LBI was the preliminary vehicle for Maxwell’s ambitions to control a bank. Not surprisingly, Cook did not understand the importance LBI would assume. ‘Go and talk to the LBI people,’ urged Maxwell soothingly, ‘and satisfy yourself of their competence.’ Cook had obliged and did not object to the relationship.

      The creation of LBI was the direct consequence of Maxwell’s introduction to Larry Trachtenberg and another American, Andrew Smith, renowned as ‘a smooth New York computer jock’. Modelling himself on the Wall Street brokers in Tom Wolfe’s novel, Bonfire of the Vanities, Smith was a fast-talking, self-confident smoothie wearing braces over heavily starched shirts. His appearance and manner shrieked a dealer determined to make his fortune. In 1989, Smith, introduced to Maxwell by his father, a German banker, had professed that his hero was Michael Milken, the American arbitrageur and junk-bond specialist who by 1990 was on course for imprisonment.

      Trachtenberg and Smith had met at the London School of Economics in 1985, both of them eager to join the rich in that booming era. Their initial ploy had been to exploit the exploding market for information and sell newsletters of financial and political analysis to banks, industrialists and investors. The information had been compiled by LSE students based on published sources. That easy money fed the two men’s ambitions. Technology was their answer. By 1987 when they met Maxwell, they had invented a computer system which, in theory, monitored all the international economies and markets to identify perfect investment opportunities before any mere mortals could do so. Calling themselves Global Analysis Systems (GAS), they were presented to Maxwell, an unrestrained admirer of technology, not as mere analysts but as investment managers. All they required was other people’s money to earn millions.

      Entranced