Maxwell: The Final Verdict. Tom Bower

Maxwells want us to understand the private companies,’ Maitland had written plaintively six months earlier about the web of 400 different corporate names through which the Maxwells operated. And there was so much to understand.

      Robert Maxwell had always yearned to manage a publicly quoted company, not just for the prestige but, more pertinently, to enable him to play with other people’s money. The Maxwell Communication Corporation was that tool, marred though it was for him by a colossal defect: the legal requirement for public accountability. For a man whose love of publicity went hand in hand with a pathological desire for secrecy, the desire for a publicly quoted company seemed illogical. But the sophist’s empire was designed to fool the honest inquirer. MCC sat at the centre of an utterly confusing and ever changing matrix of private and therefore secret companies. At the very top were a group of Liechtenstein trusts, anonymous and unaccountable owners of the majority of MCC’s shares. In reality, they were controlled by Maxwell. Beneath those Liechtenstein trusts and surrounding MCC like a constellation were 400 private companies of varying sizes and activity, trading with MCC and among themselves, not only in all matters of publishing, communications, printing and technology, but also in property, currencies, gilts and shares.

      MCC was the corporate name adopted in 1987, replacing the British Printing and Communications Corporation. The reason, said Maxwell’s spokesman, was to shed the image of ‘dark northern printing halls’, but it was not, claimed Maxwell unconvincingly, ‘an ego trip. It was a decision reluctantly taken.’ To boost MCC’s value, Maxwell had incorporated Pergamon Press, his privately owned and profitable international scientific publishing company which was the foundation of his fortune, into the public company. Maxwell’s own shares in MCC were owned by Pergamon Holdings, which in turn was a subsidiary of the Maxwell Foundation, a private Liechtenstein company which in turn also controlled the privately owned Mirror Group, and which in 1991 was renamed the Robert Maxwell Group. In parallel, there was another Maxwell family company called Headington Hill Investments, ultimately owned by Liechtenstein trusts, which controlled the family’s shares in other private companies.

      Maxwell’s purpose in creating this constellation of companies was indisputable. Beyond public scrutiny, he could move shares, assets, cash and debts to satisfy any need, increasingly regardless of rules and laws. So long as MCC was recording gigantic profits in its annual glossy brochure, the City experts did not query his netherworld. But recently a new phrase, its implicit rebuke stirring unease, had entered into the experts’ vocabulary – ‘the quality of MCC’s profits’. There was a suggestion that the empire’s finances were not as sound as their conductor desired the world to believe.

      The deliberate confusion created by Robert Maxwell had now become a barrier against the sympathy he required. Maitland’s initial proposal for a loan had been rejected by Zurich. There was more than passing concern about the Maxwells’ ‘rush’ for money and there was some doubt about their ability to repay. The astute feared that they might be ambushed by the confusion.

      ‘Speculative characteristics’ were mentioned in Zurich and were blamed for the recent drop in MCC’s credit rating from BBB to BB, a warning to banks that their loans were marginally less secure. The doubts which this decline reflected had been fuelled by disparaging newspaper reports about Maxwell’s awkward repayment deadlines and the ‘juggling acts’ he was performing in order to pay off $415 million of debt. To find the cash, he had begun dismantling his empire. Businesses worth $500 million had been quickly sold, arousing suspicion and uncertainty and prompting newspaper comments about strange deals set up to channel money from his private companies to MCC. The very bankers who had rubbed their hands in glee at the prospect of earning fees by helping to finance the creation of the Maxwell empire were being approached to earn more money in arranging sales. In return for commission awarded for selling Maxwell businesses, the banks were expected to lend more money. But, increasingly, they wanted safer security for their loans. That was the reason for Kevin’s smiles at Julie Maitland, the banker.

      For years, Robert Maxwell had publicly prided himself on the education of his children. In numerous interviews he had extolled the virtues of the ‘Three Cs’ – concentration, consideration and conciseness. But there was an extra, unpublicized lesson he gave Kevin: the unique importance of a businessman’s relationship with his bankers. For Maxwell, it was said, there were only two relationships: master and servant, and customer and supplier. While most suppliers could be treated with disdain, even contempt, Kevin had been nurtured by his father to cultivate and charm those whose money he wanted to use. Banks, he had learnt, survived and prospered by cultivating a certain trick of confidence, lending more money than they possessed. His father responded by perpetrating a succession of confidence tricks.

      So Kevin reacted promptly when he heard from Maitland about her superiors’ reluctance to lend money. Oozing apparent sincerity, he promised: ‘We can provide ample security for the loans.’ The names and quantities of the shares he mentioned as a guarantee for the repayments persuaded Maitland’s superiors to abandon their doubts. He was offering shares in the most prestigious companies – seemingly a testament to Maxwell’s personal wealth hoarded in Liechtenstein. On 7 September Crédit Suisse accordingly granted a £50 million loan for six months. The loan was not to Maxwell Communication Corporation, the publicly quoted company, but to the biggest of Maxwell’s private companies, the Robert Maxwell Group (RMG). Simultaneously, Kevin ordered the appropriate share certificates to be hand-delivered to Maitland’s bank. But there was good reason for the bank to be suspicious of these. On each share certificate, the registered owner was shown as Bishopsgate Investment Management (BIM).

      BIM was a private company established by Maxwell to manage the nine pension funds of his 23,400 employees pooled in the Common Investment Fund (CIF) and worth about £727 million. In theory, BIM was the trustee of CIF, which included the Mirror Group Pension Trust (MGPT), but because MGPT’s sixteen directors at the beginning of 1991 included Robert, Kevin and Ian Maxwell (and four trade union representatives), who were also directors of BIM, the self-governance of BIM never existed. Under the regime imposed by Robert and Kevin Maxwell, who were respectively chairman and finance director of BIM, the purchase and sale of BIM’s investments and, equally important, the registration of its share certificates and the location of their physical custody were determined by them rather than by Trevor Cook, the company’s manager (who was also a director).

      On the Maxwells’ directions, Cook would either loan BIM’s cash to the Robert Maxwell Group or deposit the money in the account of Bishopsgate Investment Trust (BIT), which the Maxwells could draw at their convenience. BIT had been specially created by Maxwell to act as a private nominee owner of shares without any legal relationship to the pension funds, blurring the actual ownership in the eyes of outsiders. As directors of BIM, BIT and RMG, the Maxwells could effectively constitute themselves a board of directors and transfer the ownership of shares from the pension funds to their private company, using them as collateral for private loans without the knowledge of anyone else. That easy access to loans depended on the size of the pensions’ Common Investment Fund.

      Ever since the CIF had been created, Maxwell had sought to persuade, cajole and even threaten his employees not to opt out of their employer’s pension funds. A special twenty-one-minute video, fronted by Maxwell himself seated on a large black leather chair, promised them that the pension schemes would ‘provide good benefits, are financially sound and well run’. To his relief, few had dared to withdraw their money. He could continue to use their millions as his own. No company’s affairs received greater attention from Maxwell than BIM’s.

      Maitland ought to have appreciated that BIM managed the pension funds of Maxwell’s empire, but she felt no need to make special inquiries. With each share certificate was a transfer form signed by Kevin and others, including Ian, his thirty-four-year-old brother, showing that ownership of the shares had been transferred to RMG. Maitland did not query why the pension funds should agree to that transfer. Indeed, when on one occasion she saw that a share certificate sent by Kevin was still owned by BIM, she returned it for RMG’s name to be inserted on the transfer form. So, by 8 November 1990, £70 million of pension fund shares had been used to raise money for Maxwell personally. On that same day, Kevin asked Maitland for another private loan. She seemed unsurprised when he offered as collateral a share certificate for 500,000 Berlitz shares. It was, he