December 9, 1991

MAN WHO STOLE THE NEST EGG

ERIC ELLIS, London

It's fitting that the despots who ran the socialist world found in the late Robert Maxwell a soulmate who could be their standard-bearer in the capitalist West.

For when he died in mysterious circumstances off Spain's Canary Islands a month ago, Maxwell left a legacy of corruption, fraud and mismanagement his friends Ceaucescu of Rumania and Honecker of East Germany could easily understand.

He even resorted to some of their more sinister methods of maintaining control in bugging the offices of his senior executives, revealing the depth of his own paranoia and raising further questions about how he died. Put simply, Robert Maxwell was a crook.

He stole from his employees up to Pound 1 billion from their pension funds, to fund his private debts and excessive lifestyle.

He dodged taxes and through a complex network misappropriated borrowed money and then misled the borrowers, mostly international banks bluffed into submission.

Inspectors at the much-maligned Department of Trade and Industry got it right 20 years ago when they declared Maxwell was unfit to run a public company. Thousands of investors only now are feeling that painful reality.

The Pound 2 billion collapse of Maxwell's house of cards has been the most intriguing in an appalling year for British business, which has included such disasters as Asil Nadir's Polly Peck International and the Bank of Credit and Commerce International.

Maxwell's heirs, Kevin and Ian, also may not have been as innocent of their father's wrongdoings as first imagined.

Weekend revelations have both sons signing Mirror Group Newspaper documents that transferred away Pound 400 million of pension funds at their father's behest.

The appointment of administrators Arthur Andersen to the private Maxwell companies has left the public companies, 58 per cent owned Maxwell Communications and 51 per cent owned Mirror Group Newspapers, in high anxiety

Ostensibly, both are functioning normally, albeit under massive debts (MCC Pound 1.5 billion and Mirror Pound 400 million) and with its major shareholder in ruins. The shares of both companies were suspended a week ago.

However, analysts believe their imminent receivership is unlikely in that Maxwell's banks will be reluctant to wear another Pound 1 billion in losses so soon after the mess the private companies will make on their balance sheets.

Nevertheless, the vultures have settled over the Maxwell carcass and the administrators have said a priority is to sell the MCC and Mirror stakes and raise up to Pound 1.5 billion .

The British group, Pearson, publisher of the Financial Times, has expressed"enthusiasm" in buying the Mirror Group, which publishes Britain's only traditionally Labour-leaning newspapers, the mass circulation, Daily Mirror and Sunday Mirror. Pearson chief executive, Mr Frank Barlow, is a former Mirror employee.

If Pearson does succeed - its bid is being resisted with the vigour Fairfax journalists displayed towards Kerry Packer - it will almost certainly assure the success of Rupert Murdoch's satellite broadcasting service, BSkyB. Pearson is also a major shareholder in BSkyB and like Murdoch's Sun newspaper, would promote the channel through the Mirror.

Daily Mirror editor Mr Richard Stott has also mounted an ambitious management buyout bid, backed by the big venture capital fund, Electra, and will meet with administrators today.

Other parties mentioned as possible players include the German print media giants, Bertelsmann and Alan Bond's nemesis, Lonrho, which publishes the weekly London Observer. Kerry Packer's interest has been rumoured for the past fortnight without foundation from Sydney.

Arthur Andersen has said everything is on the block at Maxwell House - MCC and Mirror stakes, a strategic 8 per cent of the Independent newspaper (tipped to go to a troublesome Italian investor), 10 per cent of merchant bank, Henry Ansbacher, a net of Eastern European and Israeli newspapers and the market research group, AGB.

Maxwell properties in Paris, New York and London are also for sale, as are his private helicopter, plane and the luxury yacht, the Lady Ghislaine, from which he died. His widow, Betty, laid off her staff at Headington Hall, the Maxwell's rented estate near Oxford, at the weekend.

More than most collapses, Maxwell's demise has claimed major casualties in the City, not merely the hundred or so international banks like National Westminster, Barclays, Swiss Banking Corporation and Credit Lyonnais, but big-name advisers such as Smith New Court and Samuel Montagu, who defended him to the last.

Include in that group are Maxwell's auditors, Coopers and Lybrand, and many analysts are posing the question, how much did they know and when did they know it?

The same questions are being asked of the Serious Fraud Office, and the Stock Exchange, both of which have been active since Maxwell's death but surprisingly silent beforehand given the depth and unsophisticated nature of his looting of public funds.

The Maxwell debacle also has a far-reaching political dimension in that the only newspaper group strongly pro-Labour has been decimated just months before an election is due and one which is expected to be fought mostly on economic issues.