fears had grown as he observed Maxwell’s efforts to prop up MCC’s profits. In October 1990 he offered Kevin an unorthodox solution. If MCC’s share price fell further, said Woods with an air of self-congratulation, the family would be able cheaply to buy (through the Mirror Group, still privately owned by Maxwell) the remaining 40 per cent of MCC shares owned by the public. ‘That’s an interesting idea,’ answered Kevin, recognizing Woods’s naivety about the state of the family’s finances. ‘I hadn’t thought of that.’ To his relief, the real crisis had not yet penetrated even into the inner sanctum.
Woods’s misgivings had been interpreted by Maxwell as evidence of disloyalty, the cardinal sin in the dictator’s eyes. Maxwell’s displeasure was aggravated when a secretary in Woods’s department was suspected of leaking to the satirical magazine Private Eye stories of a sexual affair between herself and Maxwell.
‘Sack her,’ ordered Maxwell, doubly outraged by the association with the magazine he had successfully sued for defamation. Woods refused. ‘She’s innocent,’ he insisted. But he was proved wrong. The secretary had forged letters and had invented the relationship. Woods was deemed to be a traitor. ‘Kick him out of his room,’ instructed Maxwell. Woods was removed from his plush office and dispatched to the equivalent of a dungeon, a shabby room in an outbuilding without a secretary. He hinted that he would resign his directorships, but Maxwell gambled correctly that his tax expert, like so many employees, would bear the embarrassment to avoid losing his high salary.
Of all those people in autumn 1990, few were as trusted by Robert and Kevin Maxwell as Larry Trachtenberg, an excitable, thirty-seven-year-old Californian international relations graduate who until 1985 had sought a PhD at the London School of Economics. During his period at the LSE, Trachtenberg had been renowned as the legman, the gofer amiably operating a photocopying machine late into the night to please a tutor, until he abandoned his studies to earn his fortune. In 1987, his babbling self-salesmanship had beguiled both Robert and Kevin Maxwell into believing him to be a talented investor and, keen to become rich, he had wilfully lent himself as the Maxwells’ tool. The American’s misfortune was his ignorance about the rules governing behaviour in the City. Untrained in finance, he casually assumed an expertise he lacked.
Almost every day, after the 7 a.m. ‘prayer meeting’ with his father, Kevin awaited Trachtenberg in his office. Together they agreed the implementation of Robert Maxwell’s orders: principally to use the £700 million plus in the pension funds to finance the empire’s difficulties. In Maxwell’s opinion, it was a stroke of genius to delegate to an underling under his own and Kevin’s supervision the negotiations being undertaken with banks over the use of the pension funds. By removing himself from personal contact, Maxwell could always deny any knowledge of any wrongdoing and maintain his worldwide profile as one of the globe’s media moguls. Concealing reality was, he knew, vital for survival.
Maxwell had begun using pension fund money as a temporary palliative in 1986. In that year he borrowed £1.5 million from MCC’s pension fund. In 1987 he borrowed £9 million. Both sums were repaid. His alleged legal authorization flowed from the ‘Powers of Investment’ clause in the fund’s deed of trust. But the clause stipulated that the trustees could only ‘lend money on such security as the Trustees think fit to any person except an Employer’. Accordingly, Maxwell was breaking the terms of the trust from 1986 onwards. Only the Publisher understood the irony of the presence in his wooden bookcase of a book called ‘Creative Accounting’ by Ian Griffiths. Chapter 4 was entitled, ‘How to pilfer the pension fund’.
In 1988, two of Maxwell’s financial ambitions coalesced. He wanted common management for the nine pension funds under his control – Mirror Group Pension Scheme, Maxwell Communication Staff Pension Plan, Maxwell Communication Works Pension Plan and six private pension schemes – and he aspired to own a bank. Both ambitions would allow him to authorize investments of other people’s funds for his own personal benefit. He prided himself on being a shrewd investor, in currencies and gilts as well as shares. In 1986, he boasted that he had earned £76 million by buying and then breaking up the Philip Hill Investment Trust, an operation which had earned him genuine acclaim from cynical City observers. His genius was that he had not paid a penny. Instead he issued 112.6 million MCC shares worth £306 million. He then sold off most of the Trust’s assets and used the cash to finance a buying spree in North America. Among the purchasers of the shares owned by the Trust was his own staff pension fund.
On Maxwell’s instructions, the pension fund bought from Philip Hill 12.4 million shares in Beechams, the pharmaceutical company. Three months later, just before a take-over bid for Beechams was announced, he ordered that the same shares be sold to MCC. When the news of the bid broke, the share price soared. Then, in March 1987, just before the end of the company’s financial year, MCC sold the same shares back to the pension fund and pocketed £17.4 million in profit. That ploy allowed Maxwell days later to boast that MCC had earned ‘record profits’. Only after his death would he be accused of receiving insider knowledge about Beechams, enabling him to manipulate the ownership of the shares and steal from the pension funds.
Over those ensuing years, Maxwell’s personal investments in banks – Ansbacher, Guinness Peat, Singer and Friedlander, the Midland and Robert Fraser – reflected his ambition to earn a fortune by controlling other people’s money. In his dream, he was emulating Lord Stevens, another newspaper baron and in Maxwell’s opinion ‘a spectacular success,’ who with Lord Rippon had transformed Invesco MIM into a £2 billion investment management fund. Hence in 1988 Maxwell established a new framework for the management of the pension funds. He had few qualms about his use of the funds. Soon after buying the Mirror in 1984, he had told Ken Angell, a former Mirror Group employee, ‘I own the pension fund.’ Angell, knowing that pension funds are vested in trustees on behalf of their beneficiaries, was surprised, but, when challenged, Maxwell logically explained his assertion. Since he personally owned the Mirror Group, and the pension fund effectively came under his control, he ‘owned’ the pension fund. To his delight, the funds were always in surplus.
The instrument for Maxwell’s control of the pension funds was BIM’s manager Trevor Cook, born in Northumberland in 1949, who had obtained a first-class degree in mathematics from Newcastle University. Appointed on 2 October 1985 as manager of the Mirror Group Pension Scheme, the inoffensive Cook was a pension fund administrator, not an accountant. Maxwell’s grounds for the selection were easily established: Cook willingly complied with his employer’s demands in return for a handsome salary. Having engineered an unusually close relationship, the Publisher insisted that he be notified in advance of all Cook’s movements. ‘Maxwell regarded his time as one hundred times more valuable than anyone else’s – so he wanted to talk at his convenience,’ recalled Cook, who made himself available to his employer’s telephone calls at all hours, knowing how much he relished disturbing his minions. Cook had proved himself malleable and easily impressed by Maxwell’s investment prowess, convinced that he ‘was a safe pair of hands’. Having asserted his ‘ownership’ of the pension funds, Maxwell directed the investments to suit his requirements. To Cook it appeared that the Publisher’s investments were astute and profitable, even if unconventional.
In March 1988, Maxwell had pooled four pension funds – benefiting at the peak 23,400 employees and worth over £700 million – into one Common Investment Fund (CIF). The management of CIF was entrusted to another Maxwell creation, Bishopsgate Investment Management (BIM), a non-profit-making organization. Both inventions had been established under the 1986 Financial Services Act with the permission of the Investment Management Regulatory Organization (IMRO), the government-appointed regulator. Given Maxwell’s history, John Morgan, IMRO’s director, should have been cautious. On his original written application, Maxwell had written that BIM was owned by the Pergamon Foundation Stiftung, a charitable body based in Liechtenstein. After reading the application, an IMRO official asked Cook for the Liechtenstein accounts. Cook asked Ron Woods, who in turn asked Maxwell. ‘Impossible!’ screamed Maxwell. ‘They can’t have them!’
‘They won’t authorize
