Maxwell: The Final Verdict

Over lunch that day, Maxwell consulted David Maislish, a thirty-nine-year-old solicitor managing his own small firm. Its slender resources made it eminently suitable for his purposes, for regardless of any other professional or domestic obligations, Maislish was always ready to jump to his bidding. His direct competitors were Dick Russell and David Vogel of Titmuss Sainer and Webb, a medium-sized firm of solicitors linked to Charles Clore, the property developer. An even closer connection was that Vogel had become godfather to one of Kevin’s daughters, and Russell was married to Mandy, Pandora’s sister. Summoned to Maxwell’s office to give advice, the brother-in-law and godfather would rush round from their nearby offices knowing full well that the Publisher had already decided his course of action but wanted assurance that his chosen ploy would escape prosecution. Listening to the most litigious man in the kingdom enjoying the sound of his own voice, the trio of lawyers would console themselves with the reflection that they billed by the hour – and that their income was phenomenal.

In the very nature of Maxwell’s way of business, it was essential to prove that his course of action had been taken only after consultation with and approval by a lawyer. The law, he believed, was nothing less than a weapon – the more lethal the better. The ‘comfort’ letters provided by Maislish and Vogel were Maxwell’s first line of defence against any criticism, and they usually sufficed. In London, lawyers were still blessed with the aura of professionals, apparently bound by a Hippocratic oath to serve the interests of justice rather than Mammon. Throughout the capital, Maislish, on Maxwell’s behalf, had won an unenviable reputation for pulling every legitimate trick in the book to delay and defeat unwelcome writs.

Maislish knew that, should he fail his paymaster, others would be eager replacements – not least Philip Morgenstern, a senior partner at Nicholson Graham and Jones and a confidant of both Kevin and Robert. Unlike Maislish, Morgenstern was something of a sleuth, always hovering quietly in his master’s footsteps, undertaking the more private work, arousing suspicion even eulogizing the Chairman’s qualities in 1995. Like Maislish, although he evinced only circumspect emotional commitment to Maxwell, Morgenstern’s dedication seemed passionate. Maxwell’s was an account which none of those lawyers wanted to lose.

But all the lawyers recognized that Maxwell’s memory and energy were waning. As his affairs grew more complicated, the interlocking and overlapping corporations he had constructed to confuse outsiders were proving difficult even for him to untangle. It was a condition which his vanity would deny as he restlessly drove himself to protect his achievements and sustain his ambitions.

By Tuesday, 11 December, Maxwell’s formidable spirit had risen to the level required if he was to match an exhausting climax of constant meetings. Employees and representatives were flying into London from Moscow, Berlin, Frankfurt, Sofia, Tel Aviv, New York and Hong Kong to bring news of deals, ventures and problems. While the underlings were transported from Heathrow by helicopter to be housed in hotels at his expense, Maxwell was seated in his office, planning new banks in Russia and Bulgaria, media purchases in Israel and Germany, and the development of market research in the Far East. His adrenalin was racing as he burst into the dining room that lunchtime to confront his newspaper editors and senior executives.

As Joseph Pereira, his quiet Portuguese valet, served another unmemorable dish, Maxwell’s dissatisfaction with the Daily Mirror engulfed the room. His target was Roy Greenslade, the newspaper’s editor. Greenslade’s sin was to have refrained from printing Maxwell’s offer of a scoop – that six ministers would resign in protest against Margaret Thatcher’s refusal to stand down after her failure to pass the threshold vote in the Conservative leadership election on 20 November. ‘Just print it!’ Maxwell had shouted. ‘I am your publisher!’ But since there had been no corroboration (the prime minister had resigned two days later), Greenslade had refused, and in Maxwell’s opinion had shown himself to be untrustworthy. During that lunch, the insubordinate editor seemed unrepentant, and Maxwell appealed for support to Charles ‘Gorbals’ Wilson, the former editor of The Times. Wilson, a small, pugnacious Scot, had gratefully accepted the Captain’s shilling to become the editor of the Mirror Group’s Sporting Life after his removal by Rupert Murdoch. It was a road to somewhere for a man who was going nowhere. Naturally, experience had long taught Wilson to satisfy his employer’s whims, even with tongue in cheek: ‘I would have said it sounds like a flier to me, Bob.’

‘What?’ exclaimed Maxwell. ‘A flier. It was a scoop. The scoop of the decade.’

Like most editorial lunches, this one ended on a baffled note. Maxwell astonished his employees by blowing his nose into a napkin, but he had failed to cajole anyone into castigating Greenslade. Even so, the editor would agree to depart shortly afterwards.

Maxwell’s real business followed lunch. Waiting in Kevin’s office were Michael Moore and Andrew Capitman of Bankers Trust. Capitman had more reason than ever to be grateful to Maxwell. Recently, he had flown at his client’s expense to visit him on his yacht in Istanbul and had eaten pounds of the best caviar while exchanging a few sentences which could have been spoken quite safely on a telephone. Despite the largesse, Capitman had become convinced that Maxwell’s finances were worse than precarious. Although the Sunday Times was about to list Maxwell among Britain’s richest men worth £1.2 billion, Capitman suspected the truth. But that, he felt, ‘wasn’t our problem’. Although Bankers Trust was in business to lend money, the loans were always syndicated to other banks, thus avoiding any risk.

‘We need a short-term loan,’ said Maxwell, looking at Moore, a brusque, unrefined Cockney and the bank’s technician. ‘The security is the Mirror Group.’ Both bankers expressed their readiness to oblige. The bank would earn by cross-selling the loan for a small profit to other banks. How the money was repaid was not their problem but Maxwell’s – and the other banks’.

After the bankers had left, Maxwell and Kevin agreed to hold back on this transaction. Loans against the Mirror Group would contaminate any future plans to float it on the stock exchange. The two hoped that the profits from the newspaper’s sale would pay off all the debts incurred by using the pension funds. The sale was already codenamed ‘Project Andy Capp’. The lawyers to be involved would be chosen after a beauty parade later that week, and Maxwell would chair the first meeting with bankers on 14 December.

That night, Maxwell decided to show himself around London. At 7.15 he appeared at Tobacco Dock for the Sunday Times Christmas party. His invitation from Andrew Neil, the editor, followed several conversations and a lunch during which they had discussed Neil’s possible employment by Maxwell. As he shuffled through the crowd towards his host that evening, his face betrayed the satisfaction he derived from being universally recognized. He was a man who loved attention and sought the spotlight. Publicity was his oxygen, and if he was too long absent from the limelight he began to feel suffocated.

From Tobacco Dock, Maxwell was driven to Jeffrey Archer’s penthouse apartment on the Thames embankment. Having powdered his face in the lift in front of the novelist’s son, he entered the party expecting to be greeted like royalty. Unlike other guests, including most members of the Cabinet, who stayed for at least an hour, Maxwell exited after just ten minutes. His entry had not been sufficiently applauded and he had not quickly enough become the centre of attention. Worst of all, the sight of people enjoying themselves had been depressing. Over the next days, he failed to appear at successive parties to which he had accepted invitations, not least those of employees, including LBI’s at Les Ambassadeurs club. Instead, he remained in his penthouse each evening drinking heavily, a habit which had developed with startling speed.

He even missed his own party. Traditionally, Maxwell had hosted a Christmas dinner and dance for senior executives at Oxford. One hundred had been invited on Saturday, 15 December, but despite all the enthusiasm for dispensing hospitality he had shown in previous years, he now felt drained, having exhausted himself that afternoon in meetings with Israelis, Mongolians and Italians. The prospect of smiling at those with their noses in his trough was too much. At the last moment, Betty whispered to the guests, ‘Bob’s sick,’ and the seating arrangements were changed. ‘I bet he’s up there in his room,’ quipped Ernest Burrington, the Mirror Group’s new managing director. ‘He’s in a huff with his family.’ Maxwell was in fact consuming his second bottle of champagne. In the hall at the end of a high-spirited evening, most agreed the party had gone better in the absence of the host.

Everyone, Maxwell told himself, was oblivious to his depression, even his children. Over the following days, his sons and daughters celebrated Ghislaine’s birthday, partied at Joe’s Café in Draycott Avenue and split off to various festivities. There was no plan for the family to gather for a Christmas meal. Maxwell was alone and estranged. Even his youngest son’s Christmas card, a tasteless photograph of anonymous racing horses, was signed with an unemotional message: ‘Bob, many thanks for all your help and kindness – Kevin and Pandora.’ The parents had not bothered to list his four grandchildren. Needless to say, there was no hint of love. The awareness of fractured relationships was painful.

At 7 a.m. on Friday, 21 December, he was seated in his kitchen, switching between the morning television breakfast shows and drinking coffee from a large mug while George Wheeler, his hairdresser for the past twenty-one years, was applying L’Oréal No. 7 to dye his hair black. ‘Have you checked all the roots?’ asked Maxwell as he grabbed for a telephone. ‘Don’t worry,’ laughed Wheeler, well aware of his client’s obsession with banishing the slightest hint of age. ‘A phobia about grey hair’ was the hairdresser’s explanation. ‘Even if he saw a grey eyebrow, he would go berserk.’

His time was ebbing and his failure to own a share of Britain’s growing television industry had come to seem a depressing indictment of his career. Poor finances had compelled the premature sale of a 13.8 per cent stake in Central Television, losing him over £20 million in extra profits, and had prevented him bidding for the licence for Britain’s first satellite channel. Murdoch had now cleaned up on that gravy train. All Maxwell owned in the world of broadcast television was an unprofitable stake in French television and 51 per cent of MTV in Europe, the pop station. MTV was an inspired investment, but it was still losing money. Everything was losing money, and there seemed no respite.

As Wheeler waited for the dye to dry, he hoped that he would be spared a repetition of a previous calamity when the Publisher’s hair had turned the wrong colour. Fraught hours had been spent washing the hair back to its natural grey and reapplying the dye. The sight of Maxwell’s vast, naked girth quivering in underpants had amused some eyewitnesses among his personal staff. ‘How can anyone fear that man?’ thought his valet. Once dressed, Maxwell had resumed his hectoring.

‘Have a good Christmas,’ Maxwell joked to the hairdresser. Ever since Wheeler had complained of not being given a seasonal tip, he had been listed to receive a bottle of Scotch and another of gin. Now an ordeal lay before his employer, his hair freshly blackened. At lunchtime there were Christmas drinks for staff on the tenth floor. Maxwell made a brief appearance, oppressed by the evident happiness of others. The prospect of the holidays was awful.

His delight would have been to rest and recover on the Lady Ghislaine, anchored and awaiting his arrival in the sunshine of the US Virgin Islands. Sleek and towering five decks high, the 155-foot, 430-ton yacht had been designed by Jon Bannenberg for the brother of Adnan Kashoggi, the Saudi arms dealer. The Arab had commissioned a gin palace with maximum internal luxury and volume for pottering around off the South of France rather than a craft suitable for crossing the Atlantic. Visitors to the Lady Ghislaine could only be awed by the sumptuous, white-carpeted state room; the comfortable dining room, the bathrooms with gold-plated fittings, the elaborate kitchen and the sheer scale of private luxury. Maxwell regarded the craft as a most precious possession, one which he was unwilling to share. Yet fearing loneliness, he had impulsively agreed that Betty should join him. The opportunity would be used to complete a chore.

That summer, when relations had collapsed beyond recall, Betty had delivered in writing her terms for a final separation. Her husband was to provide sufficient money to complete her house in Fraytet, in the Dordogne, France, to buy a pied-à-terre in London, to meet her removal expenses, to pay her debts and to transfer a capital sum which would provide her with ‘an adequate income’ for life. Her final request was that they spend eight days together, alone, to discuss the ‘separation in a civilized manner, as two people who have loved each other very much and spent forty-six years together’. They had barely spoken or met since July, yet, lonely and exhausted as Maxwell now was, Betty was better than nothing. He had instructed her to fly to St Thomas.

Maxwell arrived on the islands in the Gulfstream on Christmas Eve. He had not bothered to consider that the aircraft’s crew would be separated from their families over the holiday. That inconvenience was part of the deal, although it would contribute to Captain Hull’s eventual divorce. After all, Maxwell was also missing the wedding of Isabel, his daughter, in San Francisco. ‘It’s her second,’ he had snapped. The news awaiting him at the airport from the Lady Ghislaine’s captain, Stephen Taylor, was infuriating. While the yacht was being manoeuvred into the harbour, a wind had swept the craft on to an uncharted sandbank, damaging her rudder. Hull was dispatched to Miami to fetch an engineer, while the Publisher went on board. But the expert’s verdict was miserable. Without a spare, the Lady Ghislaine could not sail. ‘Maxwell’s upset,’ Hull told his co-pilot with studied understatement.

Stuck motionless on a sandbank watching videos with Betty would not have amused Maxwell at the best of times. He was renowned for having once, in a fit of contemptuous pique, ordered his chauffeur to drive off from a London hotel, abandoning his wife, although she could be seen in the entrance hall. On Boxing Day, he fled from the imprisonment and flew to New York, leaving Betty to open Christmas presents, still wrapped, with the crew. Captain Taylor was fired shortly afterwards.

Maxwell’s depression did not lift in New York, which was disagreeably cold and still attuned to seasonal cheer. Worse, however he looked at the accounts, he could not see an easy escape into profit. The remedy, he decided, was to sell more of the empire and seek temporary relief by raising further loans to buy MCC shares. His telephone call to Kevin at Hailey was calculated to interrupt his son’s holiday. While the father remained in New York, his son would organize the finances.

On 28 December, after spending the morning with Trachtenberg discussing the finances, Kevin lunched with Basil Brookes, Albert Fuller and Robert Bunn at Chez Gerard in Chancery Lane. Their discussion about the group’s finances was for once uninterrupted by telephone calls since Kevin had left his portable in the car. Even so, with so little candour, their conversation produced no result. Three days later, before leaving the office to celebrate the New Year, Kevin and Bunn signed transfers for two more Berlitz share certificates. Both were handed to Lehmans, in exchange for $29.7 million. The Maxwells’ total debt to Lehmans had soared to $113.6 million.

FIVE Fantasies – January 1991

The holiday mood had been forgotten when Robert Maxwell met his son in his penthouse at seven o’clock on Sunday morning, 6 January 1991. Over the previous two weeks, Kevin seemed to Andrew Capitman, the banker, to have matured from gofer into joint manager. In his conversations with bankers, he was giving the impression that his was a major corporation suffering only transitory problems. But the secret purchase of MCC shares to stabilize the price was proving unsuccessful, and newspapers were speculating that an American-led coalition would at any moment launch an attack against Iraq in the Persian Gulf to free Kuwait from occupation, triggering chaos in the world’s financial markets. These were the worst conditions, undermining Maxwell’s hopes of recovery.

Among those who sensed Maxwell’s increasing problems was John Holloran, the manager of BPCC, the former printing division of Maxwell’s empire, who had bought the company in a management buy-out in January 1989. Ever since, Halloran had been pressing for payment of £97 million owed by BIM to the BPCC pension fund. Maxwell had resisted, but the sum was to be paid in July 1991. In the meantime, anxious to get more cash, Maxwell had persuaded Cook that it would be better eventually to pay BPCC in money because share prices would be falling. So BIM began selling shares. As the proceeds arrived, they were deposited on Maxwell’s orders in the account of RMG, his private company. From there they were used to repay his private debts. Halloran, with excellent sources in Maxwell House, detected the crisis and reminded the Publisher that he expected prompt payment with interest in the summer.

The financial crisis was no longer a secret. Jean-Pierre Anselmini recognized the critical sign: bankers were telephoning daily and Kevin was often avoiding their calls. Yet, like so many others, he believed that the Maxwells’ fortune in Liechtenstein could cover the debts. After considerable negotiating effort, Anselmini proudly presented Maxwell with a plan to repurchase MCC’s debt at a 25 per cent discount from certain European banks. ‘Can’t do it,’ said Maxwell. The profitable deal could not be completed because there was no money. Anselmini, like Ron Woods months earlier, was still too gullible to understand. Maxwell instead wanted another deal. Proffering a document written by Robert Bunn explaining all the outstanding loans of the private companies, he asked: ‘Can you arrange to get these restructured? Just as you did for MCC?’

Bunn’s report suggested that those private companies had debts of £1 billion against assets of £2 billion. Naturally, Maxwell did not confide that some of the assets belonged to the pension funds. Even so, Anselmini reported shortly afterwards: ‘It’s impossible.’ Maxwell’s disappointment was only too plain. ‘I don’t have a magic wand,’ added Anselmini. The mood in the City was deteriorating. A wave of financial scandals, the deepening world recession and the threat of a gigantic leap in oil prices because of the Gulf war had made bankers naturally wary. Now Anselmini’s telephone calls to the banking village had sparked suspicion. Bankers began contemplating Maxwell’s stricken finances and noted a crop of adverse newspaper reports. The burden to find a solution was firmly placed upon Kevin.

That month, Kevin began negotiating the extension of loans for MCC and the private companies with dozens of the banks. His negotiations with Julie Maitland persuaded her to write a new strategy paper about MCC (following one composed the previous July). Once again the bank, which had accepted £100 million in collateral for private loans, failed to take account of the fact that the shares were registered in the name of BIM. Some would claim that the omission was proof of negligence. The bank would plead ignorance, insisting that it had no duty to investigate.

Robert Maxwell’s palliative for the problems was to board the Gulfstream. On Sunday, 12 January he flew for dinner to Munich, departing early the following morning for New York to embark on a renewed effort to sell his Central European Fund on the West Coast. By the 20th his absence from London had fractured his relationship with reality. Instead of seeking solutions to MCC’s indebtedness, he flew to Bulgaria and then Croatia with Rudi Perpich, the former governor of Minnesota, to negotiate investing millions of dollars in those countries’ newspapers and television services. His hopes of profits were distant dreams. In London, the reality was increasing turmoil within the Maxwell empire caused by fears that the auditors’ finalization of BIM’s accounts might instigate a new dispute among LBI’s directors.

The trouble had started when Mark Tapley, LBI’s managing director, had returned to work on 2 January to find Larry Trachtenberg sitting in the office. ‘I don’t know what your role is in this firm,’ Tapley said angrily to the fat American, ‘but you’re meant to be out.’ Trachtenberg shrugged; despite Kevin’s promise to halt the stock lending, he had not been removed.

Unknown to Tapley, Maxwell had received a report from John Pole, the head of security, about Trachtenberg’s strange activities. During a routine search for a missing cassette tape of Trachtenberg’s telephoned market dealings, Pole discovered that the American was being threatened by a BIM employee. After some negotiations, a woman deposited the tape at the Mirror headquarters’ reception. Maxwell had clearly decided to ignore the incident, for Trachtenberg had celebrated his fortieth birthday hosting an expensive party at Mossiman’s, the Knightsbridge restaurant.

Trachtenberg was clearly secure within the Maxwell citadel. That very day, 2 January, he had typed a memorandum to the Maxwells setting out his value to them, now that it was time to calculate the 1990 bonus. Not only had he arranged transactions totalling $725 million in the previous year, but, he added in chilling prose, ‘If one were to include stock loans which were ultimately used in cash generation exercises, the total would easily surpass $1 billion.’ There it was, a stark admission of the misuse of the funds. Not surprisingly, his bald statement of facts encouraged Maxwell to increase Trachtenberg’s salary to £200,000 and to add a 10 per cent contribution towards his pension, a performance bonus of £100,000, a car and a rent-free house estimated to cost the London & Bishopsgate Group £78,000 every year.

These favours had not gone through without internal opposition. Gillie Bryson, an accountant, had noted to Kevin that Trachtenberg’s income had risen 154 per cent in two years and that he was ‘earning more than many of the top Chief Executives of the top FT-SE 100 companies’, despite the loss by London & Bishopsgate Holdings (LBH) of ‘a great deal of money’. Although Bryson complained, ‘I am at a loss to understand what possible justification there would be for any bonus to be paid,’ the Maxwells understood Trachtenberg’s value very well. Keen to capitalize on that sentiment, Trachtenberg’s latest proposal was that he exchange his shares in LBH, estimated by himself to be worth £250,000, for his house, which was valued £599,000. Although LBH was actually worthless, the Maxwells had agreed to consider his proposition.

Trachtenberg’s inviolability encouraged Tapley’s anxiety to resign, but he was persuaded by Anselmini, Willett and especially Bernard ‘Manuel’ Donoughue ‘not to rock the boat’. Pointing to the letters from lawyers and accountants approving the stock-lending scheme, Donoughue urged, ‘We’re going to arrange a buy-out of LBI so we can keep it for ourselves.’ Tapley was becalmed. By then, Trachtenberg was concealing the use of the pension fund shares while John Cowling completed BIM’s accounts.

On 5 February, Cowling asked Cook for a detailed explanation of the stock lending. He was answered with a statement of ignorance. Cook replied, ‘I don’t know much about the arrangements except that I have an agreement with LBI.’ In his files was a letter from Trachtenberg sent in early January assuring him that all BIM’s assets were safe. Attached to that letter was a note from the American acknowledging receipt at LBI of another batch of shares owned by BIM. Unknown to Cook, on that very day Trachtenberg had sent those same shares to Crédit Suisse to raise more money.