Maxwell Misfortunes May Prompt Changes In Business Oversight
AS the avalanche of financial scandal triggered by the death of Robert Maxwell Nov. 5 continues to roll, large chunks of the media magnate's sprawling empire of 400 companies and subsidiaries are certain to end up under new owners.Amid anger and dismay that Mr. Maxwell had siphoned as much as 600 million British pounds (US$720 million) from his public corporations in a desperate attempt to keep his family holdings solvent, executives of Mirror Group Newspapers (MGN) and Maxwell Communication Corporation (MCC) last week put them up for sale. The family companies, which had controlling interests in MGN and MCC and include the weekly newspaper, The European, have been placed in the hands of administrators. The European's editor, John Bryant, said Friday that the current issue might be the last unless a buyer could be found. In an attempt to create a bulwark against the rest of the Maxwell empire's collapse, the New York Daily News, acquired by Maxwell last March, filed for bankruptcy Thursday under United States bankruptcy code. Maxwell's son Kevin said that the Daily News was not for sale, but London bankers and accountants trying to sort out the chaos said the odds were heavily stacked against him. Kevin and his brother Ian last week resigned as directors of MCC and MGN. Richard Stott, editor of the mass circulation Daily Mirror, announced Friday that he was heading an attempted management buyout of MGN. The Pearson Group, publishers of the Financial Times, said it too was interested in acquiring the profitable MGN. The German publisher Bertelsmann and the Australian media tycoon Kerry Packer have also been mentioned as possible MGN buyers. These hectic moves took place amid revelations that in the six months before his death Maxwell had secretly switched 350 million British pounds in pension funds, plus large parcels of shares, from MGN to his private companies and used them as collateral for loans from an array of banks. It is reported that 100 million British pounds in MCC shares was switched in the same way. MCC pension funds however apparently were ring-fenced by US law against such transfers. British pension-fund law is much slacker. Swiss Bank Corporation is demanding immediate repayment of 55 million British pounds owed by the Maxwell companies. Other banks at the weekend were preparing claims. SBC began making its repayment demand some weeks before Maxwell's death, MGN sources said, prompting him to plunder the pension fund. It was reported Saturday that earlier this year an increasingly desperate Maxwell had bugged the offices of his executives who were beginning to question the transfer of pension money and shares from the public to the private companies. This emerged as Scotland Yard detectives seized documents at Maxwell's offices. A banking source said the private companies' total debt to the banks was 900 million British pounds. Clive Thornton, chairman of MGN until its purchase by Maxwell in 1984, described the revelations as "unsurprising." "At the time of the takeover I warned about Maxwell's business methods, and unfortunately everything that has happened since his death has justified my misgivings," Mr. Thornton said. With a general election to be held by July next year, bidding for the Daily Mirror and its mass-circulation weekend stablemates, the Sunday Mirror and the People, promises to be controversial. The Daily Mirror has the second largest circulation among British newspapers and is the only tabloid that consistently supports the Labour Party. Maxwell's purchase three years ago of the publishers Macmillan and the American Official Airline Guides - the main elements in MCC - was the turning point in his fortunes, according to a London banker. "His US holdings were bought at too high a price, and he soon felt the pressures of recession. From then on he was literally robbing Peter to pay Paul." Maxwell's large-scale clandestine use of pension funds to bolster his business operations is likely to prompt important changes in the law, an official of the Department of Trade and Industry said.