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Maxwell house style

In 1973, the DTI said: "He is not a person who can be relied upon to exercise proper stewardship of a publicly quoted company." But, in the 1980s, many people thought they knew Robert Maxwell better.

False accounting, intermingling private and public company funds, related-party transactions at artificially high (or low) prices, share price manipulation, the inability to work with a board of directors, the hoodwinking of auditors and other advisers – it’s all there in the DTI report into Robert Maxwell’s business empire. We refer, of course, to the 1971-73 investigation into Pergamon Press and Robert Maxwell & Co Ltd, not the 2001 report into Mirror Group Newspapers.

So how did Maxwell pull it off again? The latest DTI report sheds a little light, making clear that (a) it does not seek to use hindsight to be wise after the event, and (b) “We discovered no evidence which showed that he had ‘changed his spots’ as regards his stewardship of a public company.”

In 1977, the Solicitor-General decided not to prosecute anyone in the wake of the Pergamon Press affair. Two months later, Maxwell asked the Stock Exchange what its attitude would be if he made a cash bid for a company. As Maxwell had not been prosecuted, the exchange said that it was powerless to bar him from being a quoted company director, but would suggest to the merchant bank involved that an independent chairman be appointed as it was likely that Maxwell would want to be managing director.

Maxwell’s “rehabilitation” began in earnest with his acquisition of a stake in BPC in 1980 – although his appointment to the board triggered the resignation of Cazenove as brokers to the company. But his turnaround of the ailing business not only saved thousands of jobs, it saved creditor NatWest tens of millions of pounds. NatWest had been Maxwell’s bank since perhaps as early as 1945 – and also financed most of his private #113m bid for MGN in 1984.

Banks and other professionals thought that, because Maxwell had sorted out BPC, the 1971-73 DTI reports were no longer applicable. Samuel Montagu, for example, told the latest DTI inspectors that it was not necessary to know in detail how Maxwell had run his companies; it was sufficient to have a general understanding of his management style.

A Coopers & Lybrand Deloitte audit partner observed in an internal memo that Maxwell had “always been totally loyal” to the firm, because “we stood by him in the 1970s”.

Of course, if all else fails, there’s always intimidation. When an analyst at UBS Phillips & Drew wrote an investment circular on Mirror Group headlined “Can’t Recommend A Purchase” (look at the initials), Maxwell went ballistic and demanded that UBS sack the miscreant. The analyst was at Kleinwort Benson three months later.

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