Maxwell: The Final Verdict. Tom Bower
MCC’s share price, had gambled on a put option with Goldman Sachs had alarmed him. ‘You’re not the regulator’ was Maxwell’s response, surprised that the Frenchman should choose to protest now, since the Publisher had bought a similar option from Goldman Sachs of 10 million MCC shares in March 1990 and another from BIT for £18.9 million.
‘I don’t understand,’ sighed Anselmini. ‘You do not do what you say or say what you do.’ Maxwell had nevertheless abruptly promised not to repeat the ploy.
When eight MCC directors met on 23 November (without Ian Maxwell), Robert Maxwell anticipated some disagreement but, given that around the table were gathered well-paid subordinates whose devotion and above all loyalty had hitherto been unconditional, he expected them to exercise a degree of reticence. All of them had, after all, witnessed how MCC’s profits had been maintained only by his skilful property deals and currency speculation – transactions which had attracted the critics’ scorn and, more recently, some suspicion, but they had provided the company’s only respite from commercial decline. Two items dominated their agenda that day: finalizing the interim accounts, and agreeing the interim dividend.
As always, Maxwell’s priority was to maximize the profits. Only high earnings would support MCC’s share price. Kevin naturally sided with his father, a stance also adopted by the company’s auditors present at the meeting. Both Neil Taberner (for MCC) and Peter Walsh (for RMG), the faithful and all-too-unquestioning accountants from Coopers, were content to be used by the Chairman to fulfil his puff which featured prominently in the partnership’s annual report: ‘Coopers always gives an immediate response and always provides what I want within my deadline.’ In earlier years, Reg Mogg, MCC’s previous finance director, had with Taberner’s help legally transformed the debt-laden company’s accounts so that they boasted profits. Not the least of his successes was persuading Taberner in 1990 that the value of MCC’s ‘intangibles’ (its goodwill and publishing rights) was £2.2 billion. Coopers were not only generous in their valuations but were allowing MCC to retain an ‘intangible’ on its balance sheet even after the sale of a subsidiary. One year later, other accountants valued the ‘intangibles’ at £300 million.
Ron Woods, the tax expert and MCC director, had already seen the in-house accountants’ preliminary treatment. Nearly all the proposed profits had been earned from foreign exchange speculation. Unlike the non-accountants, he noticed that the auditor had bowed to Maxwell’s pressure in allowing the foreign exchange profits to be placed above the line to boost overall profits, while camouflaging losses in the ‘transition account – reserves’. Taberner knew precisely what Maxwell expected from his accountant.
That creative treatment provoked no dissent. Instead, a row erupted over the proposed dividend. Maxwell wanted shareholders – of which he was by far the largest – to receive £44.5 million in cash. One consequence of Coopers’ treatment of MCC’s accounts, certified as ‘fair and true’ for the shareholders and Inland Revenue, was the concealment of the company’s net liabilities: Analysts would later discover that in 1989 the company’s real liabilities had been £684 million, in 1990 they had risen to £859.2 million and during 1991 they would zoom to £950.2 million. But the reality of those debts was not apparent in the published accounts. Anselmini, knowing the company’s precarious state, condemned the notion of a pay-out. He was supported by Richard Baker, the rough managing director. Although Baker’s office walls were covered with Pirelli calendars of semi-nude girls and although visitors had to endure his crude jokes, it was his integrity which had secured Maxwell’s original ‘war chest’ in 1988 to finance the Big One, the acquisition of Macmillan. Bankers trusted Baker, and ten banks had pledged £200 million each, an event celebrated with a champagne party on board the Lady Ghislaine. But in the years since then Baker’s loyalties had frayed. Now, for the first time, he opposed Maxwell’s demand for an increased dividend. The company’s finances, he argued, were too perilous. A lot of the published profits, he knew, were illusory and there was simply no cash to pay for a dividend. To Maxwell’s fury, he was supported by Woods.
After a thirty-minute explosion of emotion, Anselmini gave way, having been assured that Maxwell would take his dividend in shares. But in the vote Baker and Woods remained opposed, though they were outvoted by the other six directors. Over the following three days, Baker and Basil Brookes, the thirty-four-year-old finance director appointed at the board meeting on 23 November, argued for a compromise statement that ‘a satisfactory outcome for the year is dependent upon the disposals’. Much of the empire would need to be sold to raise money to repay the loans – a self-defeating strategy. Both men visited Kevin at home. Baker’s persistence had infuriated the Maxwells and, despite his loyal service, he was instantly excommunicated. He had little option but to take early retirement, allowing Kevin to inherit his powers. Robert Maxwell was delighted. Baker had been too straight. Whenever the Maxwell private companies had bought or sold something from MCC to boost profits, Baker had argued MCC’s case too strongly. A cash dividend would now be paid; and the accounts, without a caution, were approved. Anselmini did not protest. The empire took another lurch towards doom.
With that issue settled, at 9.30 a.m. on 26 November Maxwell flew by helicopter to Farnborough to board the Gulfstream for Vienna. As he gazed at the print-out of the day’s programme, his sense of his own importance was appreciably enhanced. He noted that Charlotte Thornton, his pretty new secretary (‘A diluted successor to Andrea Martin,’ commented Woods), had listed the telephone numbers, much as if he were a head of state, of the two Mercedes which would meet him at Vienna airport. He would be driven to the Imperial Hotel, the capital’s best, to dispense a succession of newspaper interviews before handing over a cheque for £15,000 to the director of the national library at a ceremony attended by Franz Vranitsky, the Austrian prime minister. Altogether, his profile would be raised in that small, former Nazi state.
The highlight of the visit was that evening’s dinner arranged by Ulrike Pöhl, the wife of Germany’s central banker. A private room had been reserved at the Steirer Eck, one of Vienna’s best restaurants, to entertain the Austrian prime minister and his wife. Although Betty was listed among the guests, Maxwell had not bothered to invite her. At the end of an enjoyable meal – it was especially agreeable for Maxwell, who had taken the opportunity to lecture the prime minister about the confidences shared with him by the world’s leaders – he pushed his plate back and announced, ‘Well, I’ve got to get to America.’ The admiring gaze of his hosts was like a tonic, dispelling any doubts: the Austrian politician could not claim to have an executive jet at his beck and call.
At ten o’clock that night, Maxwell boarded the Gulfstream. The divan bed was already prepared. An adventure movie was in the video machine. A bottle of Perrier and one of Dom Pérignon 1982 were ready to be opened, and because Maxwell enjoyed a second dinner the fridge was filled with food prepared by Martin Cheeseman. Clearance was given to Captain Hull to take off. After refuelling at Luton, the Gulfstream headed for Atlanta, Georgia, a ten-hour flight. As usual on the transatlantic flight, Maxwell swallowed a sleeping tablet and slumped into deep unconsciousness.
Awaiting him were endless meetings across the USA, in Florida, Illinois, Washington, New York and Minneapolis, to persuade more bankers and pension fund managers to invest in his Central and Eastern European Fund. Getting control of their money had become important to his survival, but to his irritation Merrill Lynch was failing to deliver eager investors. A telephone call to Kevin reconfirmed their precarious financial position. Supporting MCC’s share price was proving expensive: the £50 million loan from Crédit Suisse had been spent, as had the $84 million raised through Lehmans. Maxwell’s needs seemed limitless. He ignored any suggestion that his strategy was flawed, that he was spending too much to save the company and losing any chance of survival.
The financial crisis was made worse by his loneliness. On 2 December, Maxwell awoke in the Halekuani Hotel in Hawaii. Anyone else welcomed at the airport by the presentation of garlands around his neck would have gazed at the blue Pacific and at the soft yellow sand and have marvelled at life in that paradise. Maxwell could contemplate only his imminent eight-hour flight to Tokyo, where he was to spend three days