Tom Bower

MAXWELL

THE FINAL VERDICT

Copyright

William Collins

An imprint of HarperCollinsPublishers Ltd. 1 London Bridge Street London SE1 9GF

www.harpercollins.co.uk

First published in Great Britain by HarperCollinsPublishers 1996

Copyright © Tom Bower 1995

Tom Bower asserts the moral right to be identified as the author of this work

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Source ISBN: 9780007292875

Ebook Edition © JUNE 2012 ISBN 9780007394999

Version: 2016-11-09

Dedication

To Sophie

Epigraph

You are my teacher and all my life you have tried to demonstrate the principles underlying every action or inaction … Above all, you have given me the sense of excitement of having dozens of balls in the air and the thrill of seeing some of them land right.

KEVIN MAXWELL, written to his father in 1988

The Maxwell Foundation will be one of the richest of its kind in the world.

JOE HAINES, 1988

Contents

Cover

Title Page

Copyright

Dedication

Epigraph

Preface

1 The Autopsy – 9 November 1991

2 The Secret – 5 November 1990

3 Hunting for Cash – 19 November 1990

4 Misery – December 1990

5 Fantasies – January 1991

6 Vanity – March 1991

7 Flotation – April 1991

8 A Suicide Pill – May 1991

9 Two Honeymoons – June 1991

10 Buying Silence – July 1991

11 Showdown – August 1991

12 ‘Borrowing from Peter to Pay Paul’ – September 1991

13 Whirlwind – October 1991

14 Death – 2 November 1991

15 Deception – 6 November 1991

16 Meltdown – 21 November 1991

17 The Trial – 30 May 1995

Epilogue

Keep Reading

Notes

Company Plan

Dramatis Personae

Glossary of Abbreviations

Index

Acknowledgements

About the Author

By the Same Author

About the Publisher

Preface

On 12 May 1989, Peter Jay signed a short letter marked ‘Private and Confidential’ addressed to George Potter OBE, a director of Control Risks, one of Britain’s leading private detective agencies. Jay, the chief of staff to Robert Maxwell, thanked Potter, a former police officer, for ‘your letter and for the time you gave to meeting me and preparing it’.

Potter’s letter had described his surveillance of ‘the location and the levels of background radiation in the area’. Potter was referring in cryptic fashion to a surreptitious reconnaissance mission which he had undertaken around my home in Hampstead, north-west London. He continued: ‘Extremely sophisticated equipment does exist which might overcome the technical problems. Its acquisition would cost an estimated £50,000.’ The private detective was describing a scanner which would emit rays capable of penetrating my home and ‘reading’ the contents of my computer’s hard disc.

Wisely, Potter cautioned Jay about the problems. First, the detective wanted to be paid in advance the £50,000 for the equipment and also some fees. Secondly, Potter warned, he had ‘reservations as to the possibility of obtaining the evidence you require and the ability to keep the operation covert’. The detective’s concerns were understandable. A van carrying the scanner would be parked at the bottom of my garden in a narrow service road used by the Hampstead postal sorting office. Remaining unobtrusive for long periods would be difficult.

Jay, who had once basked in the glorious description as one of Britain’s ‘cleverest men’, was not slow to grasp Potter’s cautionary tone but was sensitive to the dissatisfaction that this report would cause his demanding employer. Little had been achieved since, one month earlier, he had received a briefing from Tony Frost, an assistant editor of the Daily Mirror, following his investigation around my Hampstead home.

Frost had accurately noted my address and identified my car, before reporting that ‘neighbours say his working hours are “rather erratic” with frequent trips away’ and that I ‘spent “a full working week” at the offices or studios of the various TV companies who commission his work’. Curiously, he noted that my newsagent ‘seemed to know Bower quite well’. After alluding to my financial status, Frost observed that my road is ‘typical of the more up-market parts of Hampstead’ and flatteringly noted, ‘the house looked to be tastefully and expensively decorated inside’.

Copies of Frost’s memorandum were also sent to Eve Pollard (then editor of the Sunday Mirror), Ernest Burrington, (then editor of the People) and Joe Haines (then a Daily Mirror columnist and a director of the Mirror Group) – all owned by Maxwell’s Mirror Group Newspapers.

Jay filed Frost’s report in his bulging ‘Bower File’, which was marked in large letters ‘Private and Confidential’, reflecting the heading of every document it contained. Each letter on the topic signed by the chief of staff urged its recipient to treat the matter with utmost secrecy. Jay had become rather proficient in conducting the operation.

Ever since his employer had heard in summer 1987 that I was planning to write Maxwell: the Outsider, an unauthorised biography of himself, Peter Jay had been employed as his chief of intelligence to gather and co-ordinate information about my activities and identify those people whom I was interviewing. On one occasion, detectives had clearly followed me to a meeting with Anne Dove, Maxwell’s former secretary, with whom he had enjoyed a close relationship in the 1950s. The results of their work were formalised under Jay’s supervision in sworn statements which would be used to back the avalanche of writs and court hearings, costing £1 million, which obsessed Maxwell until his death.

Initially, Maxwell tried to prevent the book’s publication in February 1988, at the same time publishing his own version written by Joe Haines. When my book hit the top of the bestseller list, Maxwell sought through individual cajolery and writs to prevent every bookshop in Britain selling the title. Eventually he was successful in this endeavour, but he nevertheless continued to hound me and the publishers by pursuing various writs for libel. Jay’s task was to co-ordinate and supervise the unprecedented legal battle.

By spring 1989, one year after publication, when the first of three publishers had agreed to publish the paperback version only to retreat rather than face the subject’s wrath, Maxwell’s anger was increasing in parallel to the secretly developing insolvency of his empire. His fury had shifted from the book’s accurate description of his unaltered dishonesty to something which in his view was more sinister. He believed that I had become a focus for his enemies and a receptacle of damaging information. Just as he was finalising a deceptive annual financial report for the Maxwell Communication Corporation, of which he was chairman, he embarked upon a new venture to humiliate the book’s publisher and bankrupt its author.

Four lawyers were Maxwell’s principal advisers. Lord Mishcon and Anthony Julius were his solicitors and Richard Rampton QC and Victoria Sharp were the barristers. During their frequent court appearances, they betrayed no hint of doubt about their client’s virtues. On the contrary, they pursued his mission with depressing vigour, commitment and pitilessness.

Their client’s anger had by then increased still further. The book had been published in France and his defamation action there had failed. To his fury, a court had ordered that he pay me FFrs 10,000 in costs. The threat that the book might also be published in his beloved New York galvanised him to resort to more draconian measures.

Maxwell had become convinced, in the words of Stephen Nathan, another barrister hired for advice, that I had ‘compiled (and continued to compile) an extensive record of information concerning Mr Maxwell and has put the distillation of that information on to a computer which he keeps at home’. Maxwell’s source was Frost, who, during his gumshoe expedition around Hampstead, had picked up from an ‘unidentified source’ the notion that my study had become a centre for subversive activities against the Chairman.

Nathan had been asked to advise whether I could be prosecuted for failing to register as a data-user under the Data Protection Act 1984 or, better still, whether Maxwell might approach the Director of Public Prosecutions. The DPP, the Chairman hoped, would direct the police to seize the computer without warning. That course, advised Nathan, would be possible only if Maxwell could persuade the DPP of the allegedly dangerous contents of the computer.

Frustrated by Nathan’s wishy-washy advice, Maxwell ordered Lord Mishcon to seek the seizure of my computer on the orders of a judge under an Anton Piller order. Naturally Jay passed on the instruction to Julius. Such an order, suggested Jay, would enable ‘Bower’s computer records to be seized under warrant, without advance notice being given, therefore without Bower having an opportunity to destroy or conceal such records’. In retrospect, the irony of Maxwell mentioning Anton Piller was manifest. The order, as Mishcon explained, is used to obtain the seizure of documents for the investigation of fraud or systematic dishonesty. And Jay, in passing on Mishcon’s advice to the Chairman in another ‘Intermemo’ on 7 April 1989 headed ‘Bower’s Computer’ and marked ‘Strictly Confidential’, noted mournfully, ‘Legally speaking, this is not (quite) the situation with Bower.’

Mishcon urged his client to adopt the customary course and apply to the court for the computer records. But, he cautioned, ‘Our evidence that these records exist is thin.’ Therefore, advised the peer, ‘I recommend that investigations should continue.’ Hence Maxwell ordered Jay to seek the evidence required, and this was why Jay was inspired to ask the detective to place the scanner at the bottom of my garden. But after receiving Potter’s disappointing news, Jay concluded, ‘It is not really practical to proceed along the lines we discussed.’

That was by no means the end of the battle. Until October 1991, Maxwell regularly held meetings with lawyers and with his personal security staff to propel the battle towards my bankruptcy and his vindication. The readiness of Peter Jay, a journalist and former British ambassador, to function as his willing tool was sadly not unique in Britain or elsewhere. He merely epitomised a cravenness common among a horde of self-important personalities and powerbrokers whose self-esteem was boosted by the Chairman’s attentions and deep purse.

Unfortunately, the sort of campaign directed against my book acted as a disincentive for most newspapers against exposing Maxwell in his lifetime. Many blame Britain’s libel laws and lawyers’ fees for protecting him, yet the law and its expense were not the sole reason for British newspapers’ reluctance or inability to uncover his crimes. More important was the environment in which newspapers now operate.

Few newspaper editors and even fewer proprietors nowadays relish causing discomfort to miscreant powerbrokers. By nature anti-Establishment, the so-called ‘investigative’ reporter finds himself working for newspapers which are increasingly pro-Establishment. Only on celluloid, it seems, does an editor smile when listening to a screaming complainant exposed by his journalists.

Proper journalism, as opposed to straightforward reporting or the columnists’ self-righteous sermonising, is an expensive, frustrating and lonely chore. Often it is unproductive. Even the rarity of success earns the ‘investigative’ journalist only the irksome epitaph of being ‘obsessional’ or ‘dangerous’. The final product is often complicated to read, unentertaining and inconclusive. No major City slicker has ever been brought down merely by newspaper articles. Like the Fraud Squad, financial journalists usually need a crash before they can detect and report upon the real defects. Often, only with hindsight does the crime seem obvious. Even though in Maxwell’s case his propensity to commit a fraud had been obvious since 1954, it was almost impossible for any journalist to produce the evidence contemporaneously.

Moreover, many of those who reported Maxwell’s affairs during the 1980s were only vaguely aware of the details of the Pergamon saga in 1969, when his publishing empire had disintegrated amid suspicions of dishonesty which appeared to have terminated his business life. After three damning DTI reports, no one expected Maxwell’s resurrection. However, the DTI inspectors, having found the evidence of fraud and voiced a memorable phrase about his unfitness to manage a public company, had not directly accused him of criminality. It was the inspectors’ cowardly reluctance to publish their real convictions and the police failure to prosecute which permitted Maxwell during the 1980s, when explaining his life, to distort the record of the Pergamon saga.

Accordingly, by 1987, Buckingham Palace, the City, Westminster and Whitehall had forgotten or forgiven the past. In the year in which Maxwell’s final frauds began, most journalists reflected the prevailing sentiment and were willing to afford him the benefit of the doubt.

To have broken through Maxwell’s barrier required not only a brave inside source who was willing to steal documents but also someone who would risk the Chairman’s inevitable writ. But, unlike in America, whistleblowers are castigated in Britain, where secrecy is a virtue. To break those barriers also required expertise and a lot of money, increasingly unavailable to newspapers and to television. So almost until his end Maxwell enjoyed a relatively favourable press, although journalists were not to blame for the canker’s survival.

The real fault for Maxwell’s undiscovered fraud belongs to the policemen employed in the Serious Fraud Office, to the civil servants, especially in IMRO and the DTI, who are empowered to supervise Britain’s trusts and corporations, and to the accountants at Coopers and Lybrand who were his companies’ auditors. As with most of Britain’s financial scandals, those arrogant, idle and ignorant bureaucrats, having failed in their duties, were not embarrassed nor dismissed, because they were protected by self-imposed anonymity. It was their good fortune that many blamed Britain’s libel laws for the failure to expose Maxwell’s fraud. But that was and remains too easy. Maxwell prospered because hundreds of otherwise intelligent people wilfully suspended any moral judgment and succumbed to their avarice and self-interest. To suggest that much will be learned from Maxwell’s story is to ignore past experience, but his story is an extraordinary fable, not least because only now can one read the final verdict.

ONE The Autopsy – 9 November 1991

The corpse was instantly recognizable. The eye could follow the jet-black hair and bushy eyebrows on the broad Slav head down the huge white torso towards the fat legs. Until four days earlier, the puffy face, recorded thousands of times on celluloid across the world, had been off-white. Now it was an unpleasant dark grey. The body was also disfigured. An incision, 78 cm long, stretched from the neck down the stomach to the crotch. Another incision crossed under the head, from the left shoulder along the collar bone. Firm, black needlework neatly joined the skin to conceal the damage to the deceased’s organs.

Lying on a spotless white sheet in a tiled autopsy room, the corpse was surrounded by eight men and one woman dressed in green smocks. An unusual air of expectancy, even urgency, passed among the living as they stood beneath the fierce light. It was 10.25 on a Saturday night and there was pressure on them to complete their work long before daybreak. Over the past years, thousands of corpses – the victims of the Arab uprising – had passed through that undistinguished stucco building in Tel Aviv. But, for the most part, they had been the remains of anonymous young men killed by bullets, mutilated by bombs or occasionally suffocated by torture.

This cadaver was different. In life, the man had been famous, and in death there was a mystery. Plucked from the Atlantic Ocean off the Canary Islands, he had been flown for burial in Israel. Standing near the corpse for this second autopsy was Dr Iain West, the head of the Department of Forensic Medicine at Guy’s Hospital, London. His hands, encased in rubber gloves, were gently touching the face: ‘He’s been thumped here. That looks genuine. You don’t get that falling just over the edge of a boat. You don’t get this sort of injury.’ West’s Scottish-accented voice sounded aggressive. Retained by the British insurance companies who would have to pay out £21 million if the cause of death were proved to have been accident or murder, he found his adrenalin aroused by a preliminary autopsy report signed two days earlier by Spanish pathologists. After twenty-one years of experience – and 25,000 autopsies – he had concluded that there were no more than two Spanish pathologists who deserved any respect: the remainder were ‘not very good’. The conclusion of Dr Carlos Lopez de Lamela, one of that remainder, that the cause of death was ‘heart failure’ was trite and inconsequential. West was thirsting to find the real cause of death. His first suspicion was murder. Yet he knew that so much of pathology relied upon possibilities or probabilities and not upon certainties. Mysteries often remained unresolved, especially when the evidence was contaminated by incompetence.

The Briton’s position at the autopsy was unusual. Under the insurance companies’ agreement with the Israeli government, he could observe but not actively participate. West regretted that he would not be allowed to follow the contours and patterns of any injuries which might be discovered and privately felt slightly disdainful of his temporary colleague, Dr Yehuda Hiss. He recalled the forty-five-year-old Israeli pathologist – then his junior – learning his craft in Britain in the mid-1980s. He had judged him to be ‘competent’, although unused to the traditional challenges of autopsy reports in Britain. West was nevertheless now gratified to learn that his lack of confidence in the Spaniards was partially shared by Hiss. In the Israeli’s opinion, Dr Lamela’s equivocation about the cause of death was unimpressive.

West watched Hiss dictate his visual observations. Touching the body gently, even sensitively, the Israeli noted small abrasions around the nostrils and rubbed skin under the nose and on the ear, but no signs of fresh epidermal damage anywhere on the head or neck. There were no recently broken bones. Although the body had apparently floated in the sea for up to twelve hours, the skin showed no signs of wrinkling or sunburn. ‘We’ll X-ray the hands and the foot,’ ordered Hiss.

His dictation was interrupted by West: ‘I wonder if they’ve looked at his back?’

‘No, no,’ replied Hiss, going on to note a small scar, thin pubic hair and circumcision.

Again he was interrupted: ‘The teeth are in bad condition.’

‘The dental treatment is poor,’ agreed another Israeli.

‘Very poor’, grunted West, ‘for a man who was so rich.’

‘Are you sure it’s him?’ asked an Israeli. ‘We’d better X-ray the teeth for a dental check.’

‘Well, it looks like him,’ snapped West. ‘The trouble is we’re up against time. He’s being buried tomorrow. I think we’ll take fingerprints.’ Again, he criticized the Spaniards: ‘The fingernails haven’t been cut off. They said they’d done it.’

Midnight passed. It was now the day of the burial. The corpse was turned over. ‘We’ll cut through and wrap it back,’ said West impatiently. The two pathologists had already concurred that the Spanish failure to examine the deceased’s back was a grave omission – it had been a common practice in Britain since the 1930s, as a method of discovering hidden wounds.

There was no sentiment as two scalpels, Hiss’s and an assistant’s, were poised over the vast human mound. None of the doctors contemplated its past: the small baby in the impoverished Czech shtetl or ghetto whose soft back had been rubbed after feeding; or the young man whose muscular back had been hugged by admiring women; or the tycoon whose back five days earlier had been bathed in sunshine on board a luxury yacht worth £23 million. Their scalpels were indiscriminate about emotions. They thought only of the still secret cause of death.

After the scalpels had pierced the skin and sliced through thick, yellow fat on the right side, West’s evident anticipation was initially disappointed: ‘I’m surprised that we didn’t find anything.’ A pattern of bruises was revealed to be only on the surface, the result of slight pressure, but not relevant to the cause of death. More dissections followed, mutilating the body tissue, slitting the fat, carving the flesh inch by inch in the search for the unusual. Minutes later there was a yelp.

‘Do you see that?’ exclaimed Hiss.

‘It’s a massive haematoma!’ gasped West, peering at the discovery. There, nestling among the flesh and muscle in the left shoulder was a large, dark-red blob of congealed blood.

‘Nine and a half by six centimetres,’ dictated Hiss in Hebrew, ‘and about one centimetre thick.’

West prodded the haematoma: ‘There’s a lot of torn muscles – pulled.’ It was those tears which had caused the bleeding.

Here was precisely the critical clue missed by the Spaniards: since there were no suspicious bruises on the skin, they had lazily resisted any probing. Now the new doctors were gazing at violently torn fibres. Yet Hiss was not rushing to the conclusion he sensed was already being favoured by West. ‘The trouble is, it’s also an area where you often hit yourself,’ he observed.

‘It’s not a hit,’ growled West.

There was, they agreed, no pattern of injuries of the kind which usually accompanies murder – no tell-tale grip, kick or punch marks, no small lacerations on the skin which at his age would easily have been inflicted in the course of a struggle or by dragging a heavy, comatose body.

‘There’s tearing,’ insisted West, peering into the corpse. ‘Violent along the muscle.’ The dissecting continued. Another muscle tear was found near the base of the spine and a third haematoma deep in the muscle in the front abdomen. The blood was so localized, they concluded, that the tears must have occurred shortly before death.

By 12.30, as the cadaver steadily ceased to resemble a human being, West became quite certain: ‘The muscle fibres were torn in a desperate attempt to grab something.’ Hiss did not reply. As the legs and each finger were cut open to scour for other secrets, he remained reserved. The embalmer’s formalin, he realized, had destroyed any chance of finding conclusive evidence. ‘It’s well worth doing, isn’t it?’ repeated West as they drank coffee.

‘Yes,’ replied Hiss, still looking for a pattern of injuries and still feeling restrained by a Health Ministry official’s edict that he should be cautious (the edict was possibly a consequence of the friendship between the deceased and the serving minister of health).

The corpse was turned over on to its shredded back. The Spanish stitches were cut by a sharp scalpel. It was just past one o’clock in the morning and the pathologists were about to enter already trodden ground. Swimming in formalin within the distastefully brown chest cavity were the remains of the Spaniards’ handiwork.

Dr Lamela, the senior Spanish pathologist, had carried out his duties in circumstances very different from those enjoyed by the Israelis. Working in a cramped, ill-lit autopsy room, he had lacked important instruments, and had afterwards been denied any laboratory in which to conduct essential scientific tests. Aged thirty-five, he was a reluctant pathologist, obtaining little satisfaction from his task. In his three-and-a-half-hour investigation of the virgin corpse, he had noted that there were no external marks, bruises or perforations of the skin, the obvious signs of murder or violent death. Later tests had confirmed that no poisons were present.

Lamela’s next theory was drowning. But he had noticed no water in the respiratory tracts leading to the lung, which ruled out death by drowning. Nor had he found much water inside the lung tissue. The single, reliable test for judging whether the deceased was alive or dead when he fell into the sea had been frustrated by nature. That proof depended upon traces of the sea’s diatoms (microscopic algae) in the bone marrow. If the person had fallen living into the sea and swallowed water, the diatoms would have entered the bone marrow, providing irrefutable evidence of drowning. Subsequent tests revealed that at the point in the Atlantic where the corpse had been discovered and hoisted into a helicopter, the seawater contained no diatoms. The ‘little’ water in the lungs Lamela ascribed to pulmonary oedema, water which could arise through a heart attack. He therefore relied upon speculation rather than scientific proof when, mistakenly believing that the deceased was a strong swimmer, he excluded drowning and suicide as a cause of death.

Instead, Dr Lamela had concentrated upon the coronary arteries to the enlarged heart. Both were 70 per cent constricted. The evidence of a heart attack seemed strong. The twenty-two-stone man had lived with only one functioning lung and a diseased heart, and the right ventricular muscle of the stricken heart was acutely enlarged. His widow had disclosed a medical report written some years earlier which had noted a lack of oxygen in the blood, a common cause of sudden death. Taking into account the deceased’s complaints to the ship’s crew just before his death about the temperature in his cabin, Lamela concluded that the fatality had been caused by a heart attack. But, by scientific criteria, he was again speculating. He had failed to test whether there was an infarction of the heart muscle (a noticeable scar in the heart tissue), a certain indicator of an attack. Instead he had relied upon the small blemishes which revealed slight attacks in the past. His shortcomings were manifest.

At 1.20 on Sunday morning in Tel Aviv, eight men and one woman peered into the evidential debris bequeathed by Lamela, the stench from the formalin irritating their eyes and noses. As an assistant ladled the liquid out of the cadaver, Hiss complained, ‘There are some bits here you don’t recognize as a human being’s.’ The Spaniards had butchered the evidence. Dissected organs had been thrown into the corpse rather than sealed in a plastic bag. What remained of the lungs was full of water, but whether natural fluids, seawater or formalin was impossible to determine. The dissection of a remnant of the lung revealed some froth. ‘Consistent with both heart attack and drowning,’ the pathologists agreed. Examination of the liver revealed acute sclerosis, consistent with alcoholism. What remained of the other organs was practically worthless.

‘There’s no heart, nothing,’ complained West.

‘I think we should send the bill for this one to the Spanish,’ laughed West.

‘To the King, Juan Carlos,’ agreed the Israeli.

Suddenly, another assistant excitedly announced the discovery of a blood clot in the head. Further examination revealed no bruising. It was just accumulated blood fixed with formalin, West and Hiss agreed, a relic of Lamela’s butchery. A deep bruise near the right ear also contributed nothing to establishing the cause of death but was probably contemporaneous with the tearing of the muscles. The British pathologist’s earlier excited conclusion that ‘He’s been thumped’ had been jettisoned, along with his initial assumption of murder.

At 2.30 a.m., their work was completed. ‘I think it’s been a very bloody dissection,’ mourned West as he lit a cigarette. Stepping into the warm air outside, he walked towards his car. He would drive back to Jerusalem, where he had landed just twelve hours earlier on a Gulfstream jet formerly owned by the man whose corpse he had just abandoned. ‘I’ll look at Jerusalem before I go home,’ he decided as he sat back in the car for the fifty-minute journey to the Holy City.

The body would soon be transferred to the same destination for its funeral after a mortician had performed some rapid repairs. It would be buried with a mystery. Three pathologists – British, Spanish and Israeli – had ruled out murder but disagreed on the cause of death. Both Hiss and West discounted Lamela’s dismissal of drowning. The ambivalent evidence prevented any definite decision. But Hiss supported the Spaniard’s theory of a heart attack.

In the Israeli’s scenario, the deceased had suffered the preliminaries of the attack, left his cabin and walked to the rail overlooking the sea. Either stumbling or in the early stages of the attack, he had fallen forward, toppling over the ship’s rail or under a steel cord in the stern. At the last moment, he had grabbed at the rail, torn his muscles and, in pain, had plunged into the dark wilderness where the heart attack had come to a swift conclusion. ‘I think he drowned with an epidural haematoma,’ said Hiss.

Suicide was ruled out by the Israeli. In those circumstances, he argued, suicides never cause themselves violent harm before their death. Nor do those contemplating suicide jump naked to their death, and the deceased’s body had been found without the nightshirt which he had worn that night.

On reflection, West was dismissive of Lamela and Hiss. The Briton’s conclusions were determined by the torn muscles and coagulated blood. Lamela would say in retrospect that the muscles had torn during the convulsions of the heart attack. Both West and Hiss rejected that as ‘ridiculous’. Both agreed that the muscles had been ripped by a sudden jerk after the deceased’s left hand had grabbed something. The pain in those seconds would have been intense. West discounted a heart attack, although ‘he had a heart disease which was potentially lethal’. He had two reasons: first, because ‘I would expect him to have fallen on to the deck’; second, even if he had toppled over the railing, ‘He would have been acutely breathless, convulsing and unable to grab anything.’

West favoured the theory that the muscle tears were caused in the deceased’s passage towards suicide or by an intervening accident. He had left his cabin and walked to the railing of his yacht. After climbing over, he had held on pondering his fate. Either he had accidentally slipped or he had deliberately jumped. In either event, in a sudden reaction, he had grabbed for the rail to save himself. His twenty-two stone combined with the fall’s momentum had ripped his muscles and within seconds forced him to release his grip. He had fallen into the dark sea where he had drowned. But even that was supposition: ‘I think that probably death was due to drowning. I can’t prove it. Nor can I prove the opposite.’ In an English court, ‘The verdict would be an open verdict.’

Distillation of the pathologists’ opinions leads towards the most reliable conclusion. Feeling unwell, the deceased had been on deck for fresh air. Stumbling, probably from a minor heart attack, he had fallen forward, passing under the steel cord or over the rail and, as he had twisted to grab it, had hit the side of his head against the boat. In double agony, he had lost his grip and dropped into the sea. There he died, some time later, from exhaustion or a heart attack.

But two critical issues remained unresolved. First, the cabin door had apparently been locked from the outside. If true, it pointed either to suicide or to murder, because anyone feeling unwell would be unlikely to lock a door. Secondly, the corpse had been found in seas notorious for strong currents. Twelve hours had elapsed between the deceased’s disappearance and his discovery. In the frequent occurrences of drowning around the Canary Islands, bodies are rarely found if missing for more than nine hours. Dr Lamela, with years of experience of drownings in that area, was puzzled by the condition of this particular corpse, which had allegedly spent twelve hours in the sea. ‘The body’, he recorded, ‘appeared to have been dead longer than it was in the water.’

Lamela’s conjecture spawned tales of intrigue, unidentified frogmen, a mystery ship, satellite photographs, radio intercepts, intelligence-service rivalries, unauthorized weapons deals, stolen gold, secret bank accounts, money laundering, untraceable poisons and ultimately murder. Given the identity of the corpse, nothing was unimaginable. At four o’clock in the morning of 10 November 1991, it was en route to Jerusalem to be fêted by the world’s most enigmatic government as a national hero.

In his lifetime, the deceased had boasted of his final bequest. ‘Billions of pounds’, he had crowed, ‘will be left to charity. My children will inherit nothing.’ The reality, he knew, was very different. He had bequeathed a cataclysm, but the full nature of his criminality was still known only to his youngest son.

TWO The Secret – 5 November 1990

The plan was finalized precisely one year before he mysteriously died.

Concorde landed at New York’s JFK airport six minutes late on 5 November 1990. Among the forty-nine passengers gliding self-assuredly off the supersonic flight from London at 9.26 a.m. was Ghislaine Maxwell, the twenty-eight-year-old daughter of the media billionaire. Elegantly dressed and wearing a distinctive hat, Ghislaine was blessed as Robert Maxwell’s youngest and favourite child. But even to her father’s most loyal employees, the thin, would-be socialite was condemned as arrogant and a beneficiary of her father’s fame and power. ‘She’d ask for a cigarette and walk out with the packet,’ complained Carol Bragoli, a secretary.

That morning she seemed more purposeful than usual. Robert Maxwell had entrusted her with a mission to carry an envelope across the Atlantic. Stepping into a chauffeured limousine, she was whisked to 200 Park Avenue in Manhattan. Awaiting her on the twenty-eighth floor was Ellis Freedman, an elderly lawyer who worshipped her father and had served his interests for nearly forty years. Ushered into the waiting room, the messenger handed over the envelope. There was no reason for the young woman to be suspicious. Yet, unknowingly, she had become enmeshed in a plan, initiated by her father, to steal $200 million.

Eleven days earlier, at 8 a.m. on 25 October, Kevin Maxwell, the thirty-one-year-old joint managing director of the Maxwell empire, had met Albert Fuller, the thirty-nine-year-old accountant responsible for the empire’s treasury. Like all of Maxwell’s most trusted employees, Fuller’s qualification for his well-paid position was his tolerance of abuse dispensed around the clock by the tycoon. Deliberately, even cynically, Maxwell had gathered in his inner sanctum apparatchiks who were not only beholden to him but even adulated him. Although technically competent, they were weak men attracted to a father-figure. Fuller was especially grateful to Maxwell. Two years earlier, he had been involved in the loss of a banker’s draft worth £4.7 million but had been exonerated and allowed to resume work after several weeks’ suspension.

Fuller did not query Kevin’s instruction to fly immediately to New York. His tasks seemed simple. From one office he was to retrieve a share certificate numbered B1001, bearing 10.6 million shares in Berlitz, the famous international language school. Then he was to travel to another office and there exchange the single document, worth over $200 million, for nine certificates of varying denominations. There was little cause for Fuller to be suspicious about that effortless transaction. Kevin’s request was not illegal and his need for discretion was understandable. Berlitz was owned (with 56 per cent of the shares) by the American Macmillan publishing company, which in turn was owned by Maxwell Communication Corporation (MCC) – the public company, still 60 per cent owned by the founder himself, which aspired to dominate the world’s exploding media industry. By 30 October, Fuller had returned to London, his mission accomplished.

Six days later, an hour before Ghislaine’s arrival in New York, Robert Maxwell telephoned Ellis Freedman, his lawyer. The instructions again seemed straightforward. Ghislaine, said Maxwell, would be bringing an envelope with nine share certificates showing Macmillan’s ownership of the Berlitz shares. Freedman was to secure their reissue in twenty new certificates of 500,000 shares each and one for 600,000 shares. But, said Maxwell, there was to be one significant variation. The new certificates should not mention Macmillan’s ownership. Instead, each certificate was to be issued showing the owner as Bishopsgate Investment Trust (BIT), with the inscribed caveat ‘Purely as a nominee’. Even in Maxwell’s strictly compartmentalized world, Freedman ought to have been suspicious. For BIT was a private company owned by Maxwell. To the inquisitive, the laundering would not have been well disguised.

The legal authority for that exchange was to be an executive committee board meeting to be held in Freedman’s office later on the same day. The participants were three Macmillan directors: Robert and Kevin Maxwell, and David Shaffer, Macmillan’s American president and its chief operating officer in New York. None of the three men, however, was in Manhattan.

The ‘meeting’ occurred at 11.15 a.m. New York time. The two Maxwells were ‘present’ by telephone from London while Shaffer spoke from Stouffers’ Hotel in Westchester, New York State. According to the telephone records, the conference call lasted eleven minutes. One year later, Shaffer would claim to have been duped and would dispute Freedman’s official record. ‘Either I was not told the true purpose of the board meeting,’ he protested, ‘or there was a telephone connection but I was not involved.’

At the end of that day, 5 November 1990, Ellis Freedman handed the twenty-one new share certificates to Ghislaine. By then the youngest Maxwell had varied her plan. Robert Maxwell had agreed that his daughter, instead of flying immediately back to London, could stay in New York overnight. After indulging herself in Manhattan’s shops, Ghislaine met friends for dinner. The following morning, she boarded a Jumbo 747 for the return flight. That night, the envelope was deposited in Robert Maxwell’s personal safe, located in the bathroom of his penthouse apartment on the tenth floor of Maxwell House, adjacent to the Daily Mirror building in Holborn (he had bought the Mirror Group in 1984). He now possessed $200 million, the property of unsuspecting shareholders, for his personal use. That had been precisely his intention.

Two days later, on 8 November, Kevin Maxwell sat in his office, smiling at Julie Maitland, a thirty-year-old banker employed by Crédit Suisse. Over the previous months, Kevin had been assiduously wooing the dark-haired woman, who some would judge in retrospect to be naive and lacking imagination. Like most of the banking fraternity in London, Maitland had eagerly offered her services to the Maxwells and had succumbed to flattery when invited to join what Kevin called the ‘inner circle’ of core banks acting for the family group. Like other bankers, she understood that the Maxwell companies were suffering a financial squeeze. But the truth, cleverly disguised by the Maxwells from the star-struck woman, was worse. The empire was hovering on the verge of bankruptcy and Kevin was hunting for gigantic loans to tide it over. His smiles for Julie Maitland, a wilful adjustment to his customary cold demeanour, were designed to perpetuate that deception and to entice the Swiss bank to lend the Maxwells even more money.

Naturally, the young woman could not act independently. Every discussion with Kevin had been carefully noted and reported in detail, first to her London superiors and then to the bank’s head office in Zurich. ‘The Maxwells want us to understand the private companies,’ Maitland had written plaintively six months earlier about the web of 400 different corporate names through which the Maxwells operated. And there was so much to understand.

Robert Maxwell had always yearned to manage a publicly quoted company, not just for the prestige but, more pertinently, to enable him to play with other people’s money. The Maxwell Communication Corporation was that tool, marred though it was for him by a colossal defect: the legal requirement for public accountability. For a man whose love of publicity went hand in hand with a pathological desire for secrecy, the desire for a publicly quoted company seemed illogical. But the sophist’s empire was designed to fool the honest inquirer. MCC sat at the centre of an utterly confusing and ever changing matrix of private and therefore secret companies. At the very top were a group of Liechtenstein trusts, anonymous and unaccountable owners of the majority of MCC’s shares. In reality, they were controlled by Maxwell. Beneath those Liechtenstein trusts and surrounding MCC like a constellation were 400 private companies of varying sizes and activity, trading with MCC and among themselves, not only in all matters of publishing, communications, printing and technology, but also in property, currencies, gilts and shares.

MCC was the corporate name adopted in 1987, replacing the British Printing and Communications Corporation. The reason, said Maxwell’s spokesman, was to shed the image of ‘dark northern printing halls’, but it was not, claimed Maxwell unconvincingly, ‘an ego trip. It was a decision reluctantly taken.’ To boost MCC’s value, Maxwell had incorporated Pergamon Press, his privately owned and profitable international scientific publishing company which was the foundation of his fortune, into the public company. Maxwell’s own shares in MCC were owned by Pergamon Holdings, which in turn was a subsidiary of the Maxwell Foundation, a private Liechtenstein company which in turn also controlled the privately owned Mirror Group, and which in 1991 was renamed the Robert Maxwell Group. In parallel, there was another Maxwell family company called Headington Hill Investments, ultimately owned by Liechtenstein trusts, which controlled the family’s shares in other private companies.

Maxwell’s purpose in creating this constellation of companies was indisputable. Beyond public scrutiny, he could move shares, assets, cash and debts to satisfy any need, increasingly regardless of rules and laws. So long as MCC was recording gigantic profits in its annual glossy brochure, the City experts did not query his netherworld. But recently a new phrase, its implicit rebuke stirring unease, had entered into the experts’ vocabulary – ‘the quality of MCC’s profits’. There was a suggestion that the empire’s finances were not as sound as their conductor desired the world to believe.

The deliberate confusion created by Robert Maxwell had now become a barrier against the sympathy he required. Maitland’s initial proposal for a loan had been rejected by Zurich. There was more than passing concern about the Maxwells’ ‘rush’ for money and there was some doubt about their ability to repay. The astute feared that they might be ambushed by the confusion.

‘Speculative characteristics’ were mentioned in Zurich and were blamed for the recent drop in MCC’s credit rating from BBB to BB, a warning to banks that their loans were marginally less secure. The doubts which this decline reflected had been fuelled by disparaging newspaper reports about Maxwell’s awkward repayment deadlines and the ‘juggling acts’ he was performing in order to pay off $415 million of debt. To find the cash, he had begun dismantling his empire. Businesses worth $500 million had been quickly sold, arousing suspicion and uncertainty and prompting newspaper comments about strange deals set up to channel money from his private companies to MCC. The very bankers who had rubbed their hands in glee at the prospect of earning fees by helping to finance the creation of the Maxwell empire were being approached to earn more money in arranging sales. In return for commission awarded for selling Maxwell businesses, the banks were expected to lend more money. But, increasingly, they wanted safer security for their loans. That was the reason for Kevin’s smiles at Julie Maitland, the banker.

For years, Robert Maxwell had publicly prided himself on the education of his children. In numerous interviews he had extolled the virtues of the ‘Three Cs’ – concentration, consideration and conciseness. But there was an extra, unpublicized lesson he gave Kevin: the unique importance of a businessman’s relationship with his bankers. For Maxwell, it was said, there were only two relationships: master and servant, and customer and supplier. While most suppliers could be treated with disdain, even contempt, Kevin had been nurtured by his father to cultivate and charm those whose money he wanted to use. Banks, he had learnt, survived and prospered by cultivating a certain trick of confidence, lending more money than they possessed. His father responded by perpetrating a succession of confidence tricks.

So Kevin reacted promptly when he heard from Maitland about her superiors’ reluctance to lend money. Oozing apparent sincerity, he promised: ‘We can provide ample security for the loans.’ The names and quantities of the shares he mentioned as a guarantee for the repayments persuaded Maitland’s superiors to abandon their doubts. He was offering shares in the most prestigious companies – seemingly a testament to Maxwell’s personal wealth hoarded in Liechtenstein. On 7 September Crédit Suisse accordingly granted a £50 million loan for six months. The loan was not to Maxwell Communication Corporation, the publicly quoted company, but to the biggest of Maxwell’s private companies, the Robert Maxwell Group (RMG). Simultaneously, Kevin ordered the appropriate share certificates to be hand-delivered to Maitland’s bank. But there was good reason for the bank to be suspicious of these. On each share certificate, the registered owner was shown as Bishopsgate Investment Management (BIM).

BIM was a private company established by Maxwell to manage the nine pension funds of his 23,400 employees pooled in the Common Investment Fund (CIF) and worth about £727 million. In theory, BIM was the trustee of CIF, which included the Mirror Group Pension Trust (MGPT), but because MGPT’s sixteen directors at the beginning of 1991 included Robert, Kevin and Ian Maxwell (and four trade union representatives), who were also directors of BIM, the self-governance of BIM never existed. Under the regime imposed by Robert and Kevin Maxwell, who were respectively chairman and finance director of BIM, the purchase and sale of BIM’s investments and, equally important, the registration of its share certificates and the location of their physical custody were determined by them rather than by Trevor Cook, the company’s manager (who was also a director).

On the Maxwells’ directions, Cook would either loan BIM’s cash to the Robert Maxwell Group or deposit the money in the account of Bishopsgate Investment Trust (BIT), which the Maxwells could draw at their convenience. BIT had been specially created by Maxwell to act as a private nominee owner of shares without any legal relationship to the pension funds, blurring the actual ownership in the eyes of outsiders. As directors of BIM, BIT and RMG, the Maxwells could effectively constitute themselves a board of directors and transfer the ownership of shares from the pension funds to their private company, using them as collateral for private loans without the knowledge of anyone else. That easy access to loans depended on the size of the pensions’ Common Investment Fund.

Ever since the CIF had been created, Maxwell had sought to persuade, cajole and even threaten his employees not to opt out of their employer’s pension funds. A special twenty-one-minute video, fronted by Maxwell himself seated on a large black leather chair, promised them that the pension schemes would ‘provide good benefits, are financially sound and well run’. To his relief, few had dared to withdraw their money. He could continue to use their millions as his own. No company’s affairs received greater attention from Maxwell than BIM’s.

Maitland ought to have appreciated that BIM managed the pension funds of Maxwell’s empire, but she felt no need to make special inquiries. With each share certificate was a transfer form signed by Kevin and others, including Ian, his thirty-four-year-old brother, showing that ownership of the shares had been transferred to RMG. Maitland did not query why the pension funds should agree to that transfer. Indeed, when on one occasion she saw that a share certificate sent by Kevin was still owned by BIM, she returned it for RMG’s name to be inserted on the transfer form. So, by 8 November 1990, £70 million of pension fund shares had been used to raise money for Maxwell personally. On that same day, Kevin asked Maitland for another private loan. She seemed unsurprised when he offered as collateral a share certificate for 500,000 Berlitz shares. It was, he said, ‘owned by the private side’. Again, Maitland and her superiors had reason to be suspicious.

To repay MCC’s debts in December 1989, 44 per cent of Berlitz had been sold to the public for $131 million. No one had ever suggested that the Maxwells themselves had bought any of those Berlitz shares as a private investment. Nor was their name listed among Berlitz’s registered shareholders. But Maitland would insist that no hint of suspicion ever passed through her mind when Kevin said, ‘These Berlitz shares are privately owned.’ The paperwork for transferring the Berlitz certificate to Maitland had been completed by one of Maxwell’s treasury officials. The Berlitz shares, owned by MCC, the public company, were being used by the Maxwells for their private purposes. By any reckoning, it was highly improper.

Robert Maxwell of course understood the impropriety. Later that week, he signed documents promising not to use the Berlitz share certificates brought back by Ghislaine in any manner without Macmillan’s explicit agreement. His indecipherable scribble would adorn many such documents over the next year. In each case, after he had signed, he would more or less forget the deception. Dishonesty did not trouble him. Throughout his life, he had ignored the norms of morality. Indeed his fortune had been constructed, lost and rebuilt by deliberate transgressions, outwitting and outrunning his opponents regardless of any infringement of the laws. According to the ethics he had learnt as a child, watching smugglers in his Ruthenian border town, the goal was survival and profit, and the consequences to the losers were irrelevant. For Maxwell, the Berlitz transaction had been a minor sideshow at the beginning of another hectic week, working in a moral vacuum within a surreal world.

The atmosphere in the citadel of his empire, the £2 million penthouse apartment on the tenth floor of Maxwell House, was suffocatingly imperious. Polished, double doors led across marble floors into a high-ceilinged hall supported by brown marble Doric columns and lit by glass chandeliers. Beyond, the spectacle of a huge living area decked out with expensive mock-Renaissance tapestry-covered furniture and with carpets patterned in a vast ‘M’ design cautioned any visitor who might be contemplating criticism or challenge. Access to the apartment, in common with all the buildings on the Holborn site, could be gained only by coded plastic cards. Even between neighbouring offices movement was monitored by video cameras. Rigorous security was imposed to protect Robert Maxwell’s secrecy and cushion his paranoia.

The twenty-two-stone proprietor, clothed in bright-blue shirts and dazzling ties, intimidated visitors by his gestures as much as his words, his gargantuan performance humbling those physically and financially less well endowed. The theatricality, the egocentricity and the vanity of the man were unsurpassed. Servile staff offered refreshments, earnest secretaries announced incoming calls from the world’s leaders, and bankers, lawyers and accountants did everything they could to please their client, while his deep, gravelly voice issued curt instructions, allowing no questions. Those who attempted to understand his psychology invariably failed, because both his motives and his reasoning were unique. Utterly consumed by his own self-portrayal as a great man, he was certain of his invincibility, sure that his abilities would overcome the natural consequences of any decision he took. ‘Bob believed he was bigger than the City,’ lamented Johnny Bevan, one of his many brokers. To Maxwell’s gratification, enough of his visitors accepted his self-appraisal. Even his most bitter enemies used the sobriquet ‘Cap’n Bob’ – thereby recognizing, as he saw it, his supreme importance.

On the floor below, the communications centre of his universe, other compliant men and women toiled in the service of the Publisher, otherwise known as the Chairman or RM. Visitors knew that, as in a medieval court, the official job descriptions of these employees often bore little similarity to their actual task. And, again as in a medieval court, dozens of those visitors and employees waited patiently for the opportunity of an audience. From outside, invitations arrived hourly. Most were rejected with the standard computer-template reply that the Chairman regretted that his diary was full for two years. The world’s newspapers, television and radio were constantly monitored for every mention of the man, the precise words faithfully reported in regular faxes. Constantly updated handbooks listed the telephone numbers of every employee, business contact and powerbroker across the world – town home, country house and office – and the speed-dial numbers of those included on a special list. The Publisher delighted in calling employees at the most inopportune moments, demanding not only their attention but their immediate presence. Television screens displayed the trade of MCC shares in seven stock exchanges across Europe and Canada – and were the object of his intense scrutiny. The image was intended to match the substance: not a second could be wasted as the workoholic billionaire controlled his worldwide enterprise.

The empire was run on similar lines to those of Nicolae Ceausescu and Todor Zhivkov, the autocratic communist presidents of Romania and Bulgaria whom Robert Maxwell expensively nurtured. His employees knew only a small part of the scenario, unaware of the implications and the background to the letters and telephone calls flowing to and from their master in those nine languages he claimed to speak. None of the secretaries was allowed to remain employed too long – not even the very pretty ones whose employment the Publisher had particularly requested. No one would be permitted to learn too much, despite the effect on the office’s organization. Nevertheless, their loyalty, devotion and discretion were bought by unusually high salaries, and by fear: fear of Maxwell and fear of losing their jobs and being unable to find similarly lucrative employment. Verbal brutality crushed any opposition. In return for exceptional remuneration, they agreed to sing to their employer’s song sheet. The sole exception, and only a partial one, was Kevin. Fear of Robert Maxwell had been instilled in him from childhood, but by November 1990 his father’s passion for secrecy had been offset by the need for an ally. Kevin had become the cog in the machine essential for his father’s survival.

Bankers, brokers and businessmen in London and New York almost unanimously agreed that Kevin was clever, intelligent, talented, astute and, most importantly, not a bully like his father. Eschewing tantrums and verbal abuse, he had at a young age mastered the intricacies, technicalities and jargon of the financial community. But, with hindsight, the perceptive would be struck by the image of a dedicated son: of medium height, thin, dark, humourless, ruthless, efficient, manipulative, cold and amoral. Kevin acknowledged the source of other qualities in a written appreciation sent to his father: ‘You are my teacher and all my life you have tried to demonstrate the principles underlying every action or inaction even if we were playing roulette or Monopoly … you have given me the sense of excitement of having dozens of balls in the air and the thrill of seeing some of them land right.’ Willingly submitting to the Chairman’s daily demand to vet both his diary and his correspondence for approval and alteration, Kevin would tolerate anything from that quarter for the chance to indulge his love of the Game based upon money and power. ‘I don’t think anyone would ever describe me as being a member of the Salvation Army,’ he would later crow, echoing his father’s statement to truculent and threatening printers in the early 1980s.

For the previous three years he had worked under his father’s supervision, accepting his rules as gospel, not least the injunction never to give up. ‘He enjoyed fighting and enjoyed winning,’ Kevin admiringly observed of Maxwell’s achievement in creating an empire within one generation, while Rothermere, Sainsbury and Murdoch had relied upon inherited money. Kevin positively glowed, relishing both his own family’s wealth and the servility shown towards him.

Yet, despite his power and privilege within the organization, Kevin shrank in his father’s presence. Conditioned by the beatings – psychological rather than physical – which he had received as a child, his eyes would dart agitatedly around, nervously sensing his father’s approach, and sometimes at meetings he would slightly raise his hand to stop someone interfering: ‘Let the old man finish.’ Kevin may well have thought that he could manage the family business honestly, but within recent months either he had veered towards dishonesty or his remaining scruples had been distorted by Robert Maxwell. Many would blame his father’s lifelong dominance for that change, while others would point to his mother’s failure to imbue her youngest son with the moral strength to resist her husband’s demands.

Robert Maxwell had become a collector rather than a manager of businesses. Size, measured in billions of pounds, was his criterion. The excitement of the deal – the seduction, the temptation, the haggling, the consummation and the publicity – had fed his appetite for more. By November 1990, he owned interests in newspapers, publishing, television, printing and electronic databases across the world estimated to be worth £4.2 billion. But the cost of his greed was debts of more than £2.2 billion, and the coffers to repay the loans were empty. This was the background to Ghislaine’s flight to New York to bring back the Berlitz share certificates.

The principal cause of indebtedness was the $3.35 billion spent by Maxwell in 1988 on the ‘Big One’, as his excitable American banker Robert Pirie called it. The money had bought Official Airline Guides (OAG) for $750 million and, more importantly, after an intense and successful public battle with Henry Kravis, the famous pixie-like arbitrageur, the Macmillan publishing group for $2.6 billion. Pirie had throughout stoked Maxwell’s burning sense of triumph.

Pirie, the chief executive of Rothschild Inc., had played on Maxwell’s weaknesses. ‘If you want to be in the media business,’ advised the Rothschild banker, ‘you’ve got to be prepared to pay the price.’ He did not add that he would earn higher fees if Maxwell won. Telling his client, ‘You’re paying top dollar,’ Pirie did not discourage him from going for broke. Maxwell’s self-imposed deadline for joining the Big Ten League, alongside his old rival Rupert Murdoch, would expire in just thirteen months. Intoxicated by the publicity of spending $3 billion, he crossed the threshold without considering the consequences. ‘Plays him like a puppet,’ sniped one who was able to observe Pirie’s artful sycophancy. To Pirie, Maxwell had not overpaid. There were, in the jargon of that frenetic era, ‘enormous synergies’ and the Publisher himself did not even consider his plight as a debtor owing $3 billion. After all, Pirie boasted, ‘Maxwell had no credibility problem with the lending banks.’ But the Rothschild banker disclaimed any responsibility for the other deal. ‘He paid too much for OAG,’ he later volunteered, adding unconvincingly, ‘The deal was done by Maxwell, not me.’

Forty-four banks had lent Maxwell $3 billion, hailed by all as proof of his return to respectability. Astonishingly, the giant sum was not initially secured against any assets. He could lose all that cash without more than a blink. The interest rates, moreover, were a derisory 0.5 per cent over base rate. The deal was a phenomenal bargain negotiated through Crédit Lyonnais and Samuel Montagu by Richard Baker, MCC’s gruff deputy managing director, who had been born in Shepherds Bush, west London. Maxwell had inherited Baker when he bought the British Printing Corporation (BPC), Britain’s biggest printers, in an exquisite dawn raid in 1980.

Maxwell’s victory was more than commercial. Despite his infamous branding as a pariah by British government inspectors in 1971, which had cast him into the wilderness, Maxwell had re-established his respectability and acceptability among most in the City. Here was the reincarnation of what had long ago been unaffectionately dubbed ‘The Bouncing Czech’. Leading the supporters was the Nat West Bank, his bankers since 1945, who were impressed by the way their client had crushed the trade unions at BPC, restoring the company to robust profitability. Now the ‘Jumbo Loan’ was the world financial community’s statement of faith in Maxwell. ‘All the banks were clamouring to join the party,’ recalled Ron Woods, Maxwell’s soft-spoken Welsh tax adviser and a director of MCC. Bankers judged MCC to be not only an exciting but a safe company. Former enemies had become allies – and over the years he had collected many enemies. Their numbers had multiplied after 1969 when he had sold Pergamon Press, his scientific publishing company, to Saul Steinberg, a brash young New York tycoon. Since Maxwell was a publicity-seeking, high-profile Labour member of parliament, the deal had attracted unusual attention. Pergamon, Maxwell’s brainchild, was a considerable international success, elevating its owner into the rarefied world of socialist millionaires.

But within weeks the take-over was plunged in crisis. Steinberg’s executives had discovered that Maxwell’s accounts were fraudulent, shamelessly contrived to project high profits and conceal losses. In the ensuing storm of opprobrium, Maxwell was castigated by the Take-Over Panel, lost control of Pergamon and was investigated by two inspectors appointed by the Department of Trade and Industry. In their first report published in 1971, the inspectors, after reminding readers that Maxwell had been censured in 1954 by an official receiver for trading as a book wholesaler while insolvent, revealed that his confidently paraded finances were exercises in systematic dishonesty. Their final conclusion was to haunt Maxwell for the rest of his life:

He is a man of great energy, drive and imagination, but unfortunately an apparent fixation as to his own abilities causes him to ignore the views of others if these are not compatible.… The concept of a Board being responsible for policy was alien to him.

We are also convinced that Mr Maxwell regarded his stewardship duties fulfilled by showing the maximum profits which any transaction could be devised to show. Furthermore, in reporting to shareholders and investors, he had a reckless and unjustified optimism which enabled him on some occasions to disregard unpalatable facts and on others to state what he must have known to be untrue.…

We regret having to conclude that, notwithstanding Mr Maxwell’s acknowledged abilities and energy, he is not in our opinion a person who can be relied upon to exercise proper stewardship of a publicly quoted company.

Even before that excruciating judgment was published, most City players had deserted Maxwell or refused his business. Ostracized, he did not begin to shrug off his pariah status until July 1980, when he succeeded in his take-over bid for the near-bankrupt British Printing Corporation (partly financed by the National Westminster bank). Within two years, his brutal but skilful management had transformed Britain’s biggest printers into a profitable concern, laying the foundations for his purchase of the Mirror Group in 1984.

Building on that apparent respectability, the financial community had cast aside their doubts and contributed to the Jumbo Loan. Among his closest advisers were Rothschilds, his bankers, who had shunned him after 1969; his accountants were Coopers and Lybrand, one of the world’s biggest partnerships; and among his lawyers was Bob Hodes of Wilkie Farr Gallagher, who had led the litigation against him in 1969. For Hodes, a scion of New York’s legal establishment, Maxwell had become ‘a likeable rogue who appeared to enjoy the game’. Like all the other professionals excited by the sound of gunfire, Hodes was confident that he could resist any pressure from Maxwell to bend the rules.

A celebration lunch when the Jumbo Loan had been rearranged was held at Claridge’s on 23 October 1989 by Fritz Kohli, of the Swiss Bank Corporation. The champagne had flowed as successive toasts and speeches showered mutual congratulations upon Maxwell and his banks. The Publisher had been gratified, especially by the presence of Senator John Tower and Walter Mondale, the former US vice-president, both of them anxious to become his paid lobbyists. Everyone was excited by the star because he was a dealmaker and deals generated headlines and income. Few bothered to consider that behind the deals there was little evidence of any considered strategy or of diligent management. But even then, unknown to the bankers, the consequences of that weakness were already apparent and Maxwell’s grandiose ambitions were faltering. Unexpectedly high interest rates, a worldwide recession and a fall in stock market prices were gradually devastating his finances.

One option for salvation was to adopt Rupert Murdoch’s solution. Maxwell’s bugbear had confessed his financial problems to his banks and had renegotiated the repayment of his $7.6 billion loans. Maxwell rejected that remedy. The wilfully blind would blame his vanity but, in retrospect, others understood his secret terror of having the banks inspect his accounts. The result would have been not a sensible rearrangement but merciless castration. Ever since 1947 when he had first launched himself into business, Maxwell had massaged profits, concealed losses and siphoned off cash by running several companies in parallel and organizing spurious deals within his empire. This manipulation was possible because only he, at the centre of the web, saw the total picture. Renowned as a master-juggler, he was blessed with a superb memory, perfectly focused amid the deliberate confusion, ordering obedient and myopic accountants to switch money and companies through a bewildering jungle of relationships.

By 1990, those trades had come to infect the interlocking associations between the complex structure of the tycoon’s 400 private companies and Maxwell Communication Corporation, the publicly quoted company. The disease was his insatiable ambition. He wanted to be rich, famous, powerful, admired, respected and feared. His empire was to reflect those desires. The means to that end were MCC’s ever increasing profits, which in turn determined the company’s share price. That relationship was the triple foundation of his survival, his dishonesty and his downfall. Whenever the profits were in danger, Maxwell resorted to a ruse which exposed his instinct for fraud: he pumped his personal money into the public company. Since 1987, he had bought with private funds bits of MCC at inflated prices to keep its profits and share price high. Invariably, he was buying the unprofitable bits.

To pay for that extravagance, Maxwell had borrowed money. By 1989, his private empire – unknown to outsiders – was on the verge of insolvency. As security for the loans, he had pledged to banks his 60 per cent stake in MCC. Unfortunately for him, by November 1990 growing suspicion of his accounts and critical newspaper reports had triggered a slide in the value of MCC shares, which over three years had fallen from 387p to a new low of 142p. The latest discontent in early October intensified Maxwell’s crisis. As his financial problems grew and MCC’s share price fell, the banks demanded more security for their loans. Maxwell’s solution was radical and initially secret. To keep the share price high, he had undertaken two bizarre and contradictory strategies. First, MCC was paying shareholders high dividends to make the shares an attractive investment. But the Publisher’s insoluble problem was that the dividends which MCC paid out were actually higher than the company’s profits. In 1989, the dividend cost £112.3 million, while the profits from normal trading were £97.3 million. Among the necessary costs of maintaining that charade was payment of advance corporation tax which in 1989 amounted to £17.6 million. The extraneous tax cost for the same ruse in 1990 was £98.8 million on adjusted trading profits of £71.1 million.

Maxwell’s second strategy to keep the share price high was to buy MCC shares personally. Since 1989 he had quietly spent £100 million in that venture. The solution bred several problems, not least that he soon ran out of cash. His response was to borrow more money to buy his own shares.

To their credit, both father and son could still rely upon the large residue of goodwill among leading bankers in all the major capitals – London, New York, Tokyo, Zurich, Paris and Frankfurt – and upon those bankers’ conviction that MCC’s debts were manageable. Their guarantee, they believed, was the vast private fortune of Robert Maxwell’s privately owned companies secreted in Liechtenstein. Although none of those bankers had ever seen the accounts of his Liechtenstein trusts, they believed they had no reason to doubt the Publisher’s boasts. Maxwell continued to encourage their credulity, while using banks in the Dutch Antilles and Cayman Islands as the true, secret receptacles of his wealth.

Among that army of bankers was Andrew Capitman, an ambitious manager of Bankers Trust, the American bank. Two years earlier, Capitman had purposefully moved to London to earn his fortune pleasing Maxwell in the course of completing thirty-eight separate transactions. Not surprisingly, he enjoyed the Concorde and first-class flights across the world, the heaps of caviar and champagne, all funded by his client. He too assumed that the Liechtenstein billions were the source of Maxwell’s cash for another unusual transaction to be completed at noon on 5 November 1990, just three hours before the seizure of the Berlitz shares.

Descending from his office on the ninth floor, Maxwell hurriedly chaired an extraordinary general meeting of MCC in the Rotunda on the mezzanine floor of the ugly Mirror headquarters in Holborn. The topic was one of Maxwell’s more expensive inter-company deals. Two Canadian companies, owned by MCC, were to be sold. And, because the recession meant that the price offered by others would be low, Maxwell proposed himself (or rather the Mirror Group, which he still privately owned) as the purchaser. Capitman understood that Maxwell’s strategy in that bizarre arrangement was to boost MCC’s profits and he had independently valued the two Canadian paper and print companies, Quebecor and Donohue, at a high £135 million. In return for offering a ‘slam-dunk’ generous valuation, the banker pocketed a cool $700,000 fee.

Capitman’s assumption that the £135 million was drawn from the Liechtenstein billions was erroneous. The true source of the £400 million Maxwell required to buy a succession of companies in similar deals from MCC during the following year was his own private loans – an unsustainable burden on his finances.

Among his most important lenders was Goldman Sachs, the giant New York bank. Of the many Goldmans executives with whom Maxwell spoke, none seemed more important that Eric Sheinberg, a fifty-year-old senior partner and graduate of Pennsylvania University. Sheinberg arrived in London in 1987 after a profitable career in New York and Singapore. For the hungry young traders in Goldman Sachs’ London office, which was sited near Maxwell’s headquarters, Sheinberg not only provided leadership but inspired trust. Trained by Gus Levy, a legendary and charismatic Wall Street trader, he was renowned for having made a killing trading convertible equities. ‘Eric’s a trader’s trader,’ was the admiring chant among his colleagues. Eric, it was said, had once confided that Goldmans was his first love: his formidable wife had to take second place. After losing successive internal political battles and suffering some discomfort after a colleague had been indicted for insider trading, Sheinberg, an inventor of financial products for the unprecedented explosion in the bull market, was now seeking the business of London’s leading players in the wake of the City’s deregulatory Big Bang. Few were bigger than Maxwell.

Goldmans already enjoyed a relationship with Maxwell. In 1984, the bank had rented office space from him in Holborn, and Sheinberg had organized the financing of his purchase of the Philip Hill Investment Trust in 1986. Despite some misgivings, Goldmans had also welcomed the business of floating 44 per cent of Berlitz in 1989, although the negotiations over the price had provoked deep antagonism, especially against Kevin. To prove his macho credentials, the son had telephoned the banker responsible at 4 a.m. New York time, to quibble about the price. ‘Both Maxwells behaved appallingly,’ recalled one of those involved. ‘Kevin worst of all. We soon hated them.’

Yet Maxwell’s business was too good to reject. The echo of the lawyers’ cries in Maxwell House – ‘Bob’s been shopping!’ – whenever the Chairman’s settlement agreements arrived from stockbroking firms, encouraged brokers like Sheinberg to seek his lucrative business. Although Sheinberg was renowned for his dictum, ‘There are no friends in the business, and I don’t trade on the basis of friendship,’ his staff in London noticed an unusual affinity between him and Maxwell. Some speculated that the link lay in their mutual interest in Israel, while others assumed it was just money. Maxwell was a big, brave gambler, playing the markets whether with brilliant insight or recklessness for $100 million and more a time, and Sheinberg was able to offer expertise, discretion and – fuelling his colleagues’ gossip – the unusual practice of clearing his office whenever Maxwell telephoned. Their kinship extended, so the gossip suggested, to Sheinberg’s readiness to overnight in Maxwell’s penthouse, to ride in Maxwell’s helicopter and even to use Maxwell’s VIP customs facilities at Heathrow airport – suggestions which Sheinberg denied.

Acting as a principal and occasionally as an adviser, Sheinberg had already undertaken a series of risks which had pleased Maxwell. On the bank’s behalf, the broker had bought 25 million MCC shares and, in controversial circumstances in August 1990, as MCC’s price hovered around 170p, he had bought another 15.65 million shares as part of a gamble with Maxwell that the price would rise. Maxwell had channelled the money for that transaction through Corry Stiftung, one of his many Liechtenstein trusts. In the event, the Publisher had lost his gamble and Goldman Sachs had been officially reprimanded for breaking the City’s disclosure regulations. That, however, Sheinberg blamed upon Goldmans’ back office, since fulfilling the legal requirements was not his responsibility. Nevertheless, by November 1990, the bank was holding 47 million MCC shares, a testament of faith which could be judged as either calculated or reckless.

As the pressure on Maxwell increased, rival traders in London watched on their screens as, at precisely 2.30 p.m. every afternoon, Goldman Sachs ‘hoovered up all the available MCC shares’. The bank’s commitment went further than was normal for a market-maker. In gratitude for the vast speculative foreign exchange deals bestowed by Maxwell on John Lopatin, a Goldman Sachs foreign exchange executive, and for Maxwell’s considerable share trading, the bank’s loans were mounting. ‘I don’t promise what I can’t deliver,’ quipped Sheinberg to the Publisher, keen to emphasize his blue-sky honesty. To Sheinberg’s staff, though, it seemed that the American was close to Maxwell, more like a colleague than a pure broker. But Sheinberg, privy to so much, knew only what suited his secretive client. The Chinese walls throughout Maxwell House were so thick that only Kevin and a handful of accountants and investment advisers in his private office were permitted to transcend the deliberate compartmentalization. Inevitably, the secrecy bred loneliness.

Maxwell’s loneliness was aggravated by the absence of Andrea Martin, his small, demure personal assistant whose unexpected promotion from receptionist had been won after she spoke impressive French during a trip to Paris. For nearly four years until May 1990, the blonde Martin had uncomplainingly worked arduous hours, travelled extraordinary distances and loyally kept those secrets which Maxwell divulged. At the end of the working day, when he retired to his bedroom in the penthouse, Martin would enter, kick off her shoes and sit on the sofa while her boss ordered refreshments from Douglas Harrod, his entertainment manager: ‘Let’s have never ending champagne, Douglas, and smoked salmon and caviar.’ The tall, benign, well-dressed butler, whom Maxwell had gleefully poached from Rupert Murdoch, would oblige with an obedient smile. After supervising the delivery of his master’s order, he would close the heavy double doors. Maxwell, he realized, was ‘besotted by Andrea’. Harrod was less clear what Andrea Martin ‘could see in someone like Robert Maxwell except a high salary’. But he had noticed a special relationship of ‘endearments and those sort of things’. However, those days had sadly passed. In the aftermath, Andrea Martin always insisted that their relationship had been strictly professional.

A few months earlier, Maxwell had summoned John Pole, his head of security. A former detective chief superintendent employed for thirty years at Scotland Yard, where he had earned sixteen commendations, Pole had become accustomed, like all Maxwell’s staff, to responding unquestioningly to the summons day and night, regardless of the inconvenience. ‘We need to talk,’ growled Maxwell as he replaced the telephone receiver. Minutes later Pole was sitting erect and attentive opposite his employer, ‘I’m concerned about Andrea Martin’s loyalty,’ sighed Maxwell. Pole had noticed the millionaire’s infatuation with the young woman. ‘She knows a lot of confidential information and I fear she’s having an affair with Nick Davies. She has promised me that it’s over, but I don’t trust him and she might be telling him more than is healthy.’

Davies was the snappy foreign editor of the Daily Mirror, a journalist generally disliked by his colleagues, who had given him the sobriquet ‘Sneaky’. Maxwell suspected Davies’s loyalty, but was uncharacteristically unsure how best to neutralize an employee who had invaded the heart of his private territory. He then uttered the phrase which preceded his most intimate instructions to Pole: ‘I need to know if this person is being loyal to me.’ It was Maxwell’s euphemism for instructing that he wanted Andrea Martin’s telephone tapped.

Maxwell had long enjoyed the use of listening devices or bugs. His black briefcase contained a concealed tape recorder operated by a turn of the lock, and a bug had been inserted into a table lamp in his home. During the 1984 negotiations with the Mirror Group’s trade unions, he had used crude tape recorders to monitor his adversaries’ negotiating position. In later years, another former police officer in his employ was regularly to bring him cassettes of taped telephone conversations among his own executives. Sitting in his apartment at the end of the day, the congenital eavesdropper would race through the tapes listening for clues to disloyalty, weaknesses or hidden mistakes. In an atmosphere reminiscent of Stalin’s Kremlin, Pole had supervised in 1988 the concealment of two microphones in Maxwell’s own office – activated by a switch under his desk – and one in the conference room in the Mirror building. A microphone was also secreted in Kevin’s office in Maxwell House. This followed the disappearance of the banker’s draft worth £4.7 million (see p. 10), Telephone taps on the suspect revealed nothing. The draft had never been cashed.

Maxwell’s ruse was to invite guests to remain in Kevin’s room or the conference room while he excused himself briefly to tend another chore. Lumbering along to his own office, he would unlock the cupboard behind his desk and activate the recording machines, which Pole had rendered foolproof to accommodate his ‘banana fingers’. Having eavesdropped on the conversations to glean his competitors’ secrets, he would return at the appropriate moment to exploit his advantage. The subterfuge had won him undeserved acclaim as an outstanding negotiator, Pole’s tap on Andrea Martin’s telephone produced different results.

At the end of the week, Pole returned with a tape: ‘You’d better listen to this, Mr Maxwell.’ For twenty minutes Maxwell sat motionless as the recognizable voices of Andrea and Davies giggled over their previous night’s romps in a car. When Davies mentioned details of Andrea’s underwear, Maxwell flinched. Pole noticed his hurt: ‘Heartbroken, even shattered.’ The woman with whom he was in love had lied. Despite her promise that her affair with Davies had ceased, it was in full flow. Emotionally, Maxwell was vulnerable. Estranged from his family, he had lost the one person upon whom he felt he could rely. He had paid for her loyalty with an annual contract worth £36,000, a considerable sum for a secretary, but after that betrayal there was no alternative but her dismissal, which followed in July 1990, Douglas Harrod noticed the result. ‘Maxwell went down in the dumps. He was a very unhappy man.’

Ever since, there had been no one with whom Maxwell could relax at the end of the day. Besides that emotional deprivation, he was also losing control of his private office. Having failed to replace Peter Jay, his self-styled chief of staff in the years 1986–9, he no longer employed anyone as competent to arrange his papers and organize his diary. As his moods and sympathies oscillated violently, secretaries and personal assistants in his private office changed with damaging regularity. Gradually, despite his roared demands for efficiency, his private office was becoming chaotic.

By contrast, the management of his tenth-floor penthouse was immaculate. Normally waking at 6.30 after fitful sleep, Maxwell would find his staff ready to fulfil his every whim, especially the most unreasonable. Deprived of his family’s company and support, he had thrown himself into a routine which had moved from hectic into frenetic. Increasingly cancelling invitations at the last moment, he would collapse into bed in the early evening to be served dinner while channel-hopping on television or watching a video.

Martin Cheeseman, his chef, had been recommended four years before by Harrod. ‘He’s worked in Downing Street,’ boasted the butler. ‘But can he cook?’ retorted Maxwell. He had proved to be a devoted servant. ‘I knew my customer and gave him what he wanted,’ explained Cheeseman, a thirty-seven-year-old south-east Londoner who served ‘mostly salmon, roast chicken and avocados’. Sufficient food was always prepared for Maxwell’s night-time feasts, especially melons filled with berries and cornflakes. Improbably Cheeseman insisted, ‘I only fed him healthy food. He didn’t pig out. He was that shape when I arrived.’ Their relationship flourished because Maxwell tended to treat his servants like directors and his directors like servants. He had warmed to the young man’s unassuming conversation, inviting him to accompany him on longer journeys so that he could avoid eating unwelcome dishes.

Alongside Cheeseman were Juliet and Elsa, the Filipina maids. Their predecessor had been fired after accusations of stealing television sets, clothes, food and cases of wine. In any event, Maxwell had not prosecuted. But the maids were obliged to tolerate an unfortunate development in his personal habits: his obesity had spawned filthiness. Not only were his soiled clothes and half-eaten food thrown on the floors, but the lavatory after use was abandoned unflushed and the bed linen was occasionally oddly coloured. ‘We’re short of face towels,’ Terry Gilmour, a chief steward, once told the Publisher’s wife Betty. Puzzled, she reminded him that twenty-four Valentino flannels had been delivered just weeks earlier. ‘Mr Maxwell’s using them instead of toilet paper,’ explained Gilmour expressionlessly, ‘and discards them on the floor.’ To save the staff the indignity, Betty Maxwell arranged for the towels to be brought in sealed plastic bags to the family home in Oxford, for washing. All these members of Maxwell’s personal staff shared one quality: their ignorance of his business activities. Although his bedroom was occasionally turned into an office with documents piled beneath a computer screen, none of those in such close proximity would have understood his orders to move money and shares.

Similar ignorance infected Sir John Quinton, chairman of Barclays Bank, who lunched with Maxwell on 7 November, the day after the Berlitz share certificates had been hidden in the safe. Britain’s biggest bank had lent Maxwell’s private companies over £200 million, and Quinton, who deluded himself that he could understand London’s more maverick entrepreneurs, was easily persuaded by his host of the health of MCC’s finances. As Quinton drove back into the City after lunch, the Publisher climbed the metal staircase to the roof of Maxwell House, walked across the astroturf and boarded his helicopter for Farnborough airport.

An unmistakable sense of relief always passed through Maxwell’s mass as Captain Dick Cowley, his pilot since 1986, pulled the joystick and the Aérospatiale 355 rose above London, passing directly over the glinting scales of justice on the dome of the Old Bailey. Cowley enjoyed being used by Maxwell as a £250 per hour taxi and would laugh about the gigantic insurance premium paid to cover landing the helicopter on the roof. Maxwell always refused to travel to the airport by car. If the weather was bad, he preferred to wait, meanwhile keeping his aircrew waiting on the tarmac for his arrival. Cowley savoured memories of flying Maxwell through snowstorms to Oxford, peering into the white gloom for recognizable landmarks, and the enjoyment of intimate conversations during those flights. He even tolerated midnight calls, hearing his employer’s lament about Andrea’s departure. Cowley was respected because he was employed to perform one task which Maxwell could not undertake: ‘I stayed and put up with all his nonsense because he paid me well.’

The flight from Holborn to Farnborough lasted fifteen minutes. As they flew that November afternoon, Maxwell could reflect on his growing disenchantment with the technicalities of finance. The excitement had long disappeared; indeed, in recent months his usual exhausting long hours running the empire had become positively unpleasant. Those financial chores he was pleased to delegate to Kevin, who, despite their past quarrels and the estrangement when Kevin decided to marry Pandora Warnford-Davis, he could now trust more than any other person. Father and son were working jointly to overcome their temporary difficulties. As the helicopter whirred down to the airport the strain of the past days was dissolving. Kevin could look after the business problems while his father embarked upon what he enjoyed most – powerbroking among the world’s leaders.

No sooner had he been deposited alongside his new $24 million Gulfstream 4 executive jet, codenamed VR-BOB (Very Rich Bob), than Maxwell was bustling up the steps shedding the last of his tribulations. Captain Brian Hull, the pilot, welcomed his passenger, aware that ‘he always became happy after he boarded. He saw me as home.’ Minutes later, they were flying at 500 m.p.h. towards Israel, a three-and-a-half-hour journey costing £14,000 in each direction.

Few things gave Maxwell more pleasure than his new Gulfstream, capable of flying the Atlantic without refuelling (unlike his Gulfstream 2, which he nevertheless retained in event of emergencies). For hours he had discussed the G4’s interior design with Captain Hull. In the end, he had settled upon a light-cream carpet, six seats covered in light-brown leather and six in cream cloth. The brown suede walls offset the gold fittings. Flying at 35,000 feet, the passenger relished the pampering he received from Carina Hall, the stewardess, and Simon Grigg, his valet. At the merest intimation that his finger might flick, he could be assured of instant service. The food in the plane’s kitchen – cheddar cheese, smoked salmon, caviar and chicken – had been sent ahead by Martin Cheeseman. Krug and pink champagne were in the fridge. Thoughtfully, Hull always provided a selection of new video films – his employer especially liked adventure stories such as The Hunt for Red October. Sometimes, Maxwell would read biographies or work through a case of papers. Music was rarely played. Facing him on this occasion was the empty place where Andrea had sat in the past, her feet often resting on his seat, tucked under one of his massive thighs. Beyond was where the divan could be set up for him to sleep. Captain Hull had noticed on flights across the Atlantic that sometimes both Maxwell and Andrea slept on it – quite innocently, he stressed.

The new Gulfstream was more than a toy. It was a testament to Maxwell’s importance and wealth. The telephone was fixed next to his seat. One night he telephoned Roy Greenslade, then the editor of the Daily Mirror. ‘Where am I?’ he boomed.

‘I don’t know, Bob. Israel? Russia …?’

‘I’m above you!’ Greenslade looked up at the ceiling. ‘I left Montreal this morning. I was in New York this afternoon. Now I’m going to Hungary. Not bad for a pensioner, eh?’

Constant travel was Maxwell’s way of escaping from reality. Over the following twelve months, the Gulfstream would fly 800 hours, more than double an average pilot’s duties. Other than New York, no other destination was more welcoming than Jerusalem’s small airport surrounded by the Judaean hills.

Ever since Gerald Ronson, the British businessman, had taken the Publisher on Maxwell’s own private jet to Israel in 1985 to reintroduce him to his origins, the erstwhile Orthodox Jew had abandoned his repeated, vociferous denial of his religion, which had even prompted him in the 1950s to read the Sunday lesson at an Anglican church in Esher. Considering the anti-semitism still lingering among Britons after the war, that denial had seemed a natural ploy for an ambitious foreigner, dishonest about so much else. But with his recent achievement of financial security and the decline in overt anti-semitism, Maxwell had grown closer to London’s Jewish community.

Tears had welled in Maxwell’s eyes on that first trip with Ronson. ‘Thanks for bringing me here,’ he repeated as they toured the country, visiting the major powerbrokers, including Yitzhak Shamir, the prime minister. ‘I want to do things and be helpful,’ Maxwell told Shamir as they posed for the photographer accompanying him. ‘I’m going to be a big investor.’ Ronson smiled at the prospect of collecting millions for charity, ‘I want to be buried here,’ Maxwell confided that night over dinner in the King David Hotel.

Thereafter on Friday nights, Maxwell occasionally travelled to Ronson’s home in north-west London to eat the Sabbath dinner or celebrate Jewish holidays. Gail Ronson, Maxwell acknowledged, cooked like his mother, especially chopped liver. He also appeared at Jewish charity functions, mixing with Trevor Chinn, Cyril Stein and Lord Young, the politician, who had invited Maxwell to his daughter’s wedding. His presence in that community had been welcomed, although some feared that his financing of a Holocaust conference in 1989 signalled an attempted take-over. After all, his urge to dominate was indiscriminate.

The interest in his Jewish background had been encouraged by his wife Betty. Together in Israel they had met Chanan Taub, a childhood friend from Solotvino, Maxwell’s impoverished birthplace on Czechoslovakia’s eastern border with Russia and Romania. ‘Poor, hungry and unmemorable’ was the Publisher’s emotional recollection of the muddy pathways, ramshackle, overcrowded dwellings and suffocating destitution there. Sixty years earlier, he reflected, he had shared a solitary pair of shoes with a sister. In 1939 Taub had swum illegally from a ship ashore to Palestine as a penniless Zionist – unlike Maxwell, who had escaped from his homeland, on the eve of Nazi Germany’s invasion, to make his way overland through Hungary and the Balkans to Palestine and then by sea to Britain as a member of the Free Czech Army. When they met again nearly fifty years later, Taub had become one of Israel’s richest diamond dealers. Yet the contrast between the two former Orthodox Jews was striking. While Maxwell boasted of wealth he did not possess, Taub concealed his enormous bank balance beneath dishevelled clothes and a twenty-six-year-old, dented and dirty Chevrolet. Ever since their first reunion, Taub had been mesmerized by Maxwell’s extraordinary transformation from the thin, small boy with pious ringlets swinging along his cheeks who uniquely arrived at Zionist classes in their village clutching a book and stuttering Yiddish phrases. Now Maxwell was ein Mensch, possessed of riches, power, influence and a large family.

Their childhood reminiscences helped to fill a void in Maxwell’s life. Israel further calmed his turbulent emotions, enabling the refugee to put down roots of a kind. In particular, he would become transformed when he entered the presidential suite of Jerusalem’s King David Hotel. Throwing open his windows, he would gaze at the old city of Jerusalem, mentioned so long ago in his itinerant father’s daily prayers at home in Ruthenia. The serenity evoked by the sunlight glinting from the Dome of the Rock above the Wailing Wall, that sacred shrine for Jews through two millennia, seemed to testify to the historic endurance of the Jews. Even he, the bulldozer, would tremble with emotion as the spectacle reawakened memories of his Orthodox childhood, the history of the diaspora, and stirred the survivor’s guilt for escaping the gas chambers.

That evening, 7 November, Maxwell dined with Ariel and Lily Sharon, the former military commander, minister and leading right-wing member of the Israeli parliament. To Sharon, as to so many other Israelis, Maxwell was ‘a friend – a Jew who had finally come home’. Their conversation concentrated upon politics, especially the question of Israel’s relations with the Arabs. The visitor glowed with pride that his opinions should be taken seriously.

Maxwell’s schedule the following day confirmed his importance in the country. After breakfast with Ehoud Olmert, the health minister and a friend with whom he shared a passion for football, he spent half an hour with Yitzhak Shamir, the prime minister. Their regular meetings were welcomed by the diminutive former terrorist. Maxwell had not only committed himself to substantial investments in Israeli industry, newspapers and football, but he had established a direct link between Shamir and Mikhail Gorbachev, the Soviet leader. The benefit to Israel had been considerable. Through Maxwell’s efforts, 300,000 Soviet Jews had been allowed to emigrate to Israel. He had also flown dozens of Soviet children afflicted by Chernobyl’s 1986 radioactive blast to Israel for treatment. In 1990, he had stood among the guests of honour at a solemn reunion of 1,000 Czech Jews, blessed by the presence of Václav Havel, the Czech president, and senior Israeli politicians.

That morning, at Shamir’s request, Maxwell had telephoned Gorbachev’s direct number in the Kremlin from the prime minister’s office. Speaking in halting Russian, he had passed on Shamir’s greetings and his request that the Soviet leader should remove an obstacle in Soviet – Israeli relations. The warmth of the conversation reconvinced Shamir of Maxwell’s importance. Emerging into the sunlight, the Publisher returned to a hectic schedule of meetings with his employees and advisers, interrupted only by lunch with David Levy, the junior foreign minister, and dinner with Yitzhak Modai, the finance minister. That night, as he lay in his room reflecting upon his importance, his financial troubles in London appeared thankfully remote. In one of those characteristic moments of rashness, he pondered first whether to buy El Al, Israel’s beleaguered national airline, or the Israeli Discount Bank, and even about bidding $11 billion for Paramount film studios.

After a short nap, at 4 a.m. on 9 November Maxwell flew to Frankfurt. There he lunched with George Shultz, the former US secretary of state whose memoirs Macmillan had published at enormous financial loss and whose company Maxwell often sought. He also met Ulrike Pöhl, the wife of the German central banker, a woman upon whom Maxwell was able to unburden his emotions and whose company he eagerly sought.

By nightfall, Maxwell had returned to London for dinner with Shimon Peres, the Israeli foreign minister. The two men, with a common ancestry in Eastern Europe, had deepened their bond when, with Peres’s approval, Alisa Eshed, his vivacious personal assistant for twenty-two years, had been appointed Maxwell’s coordinator and representative in Israel. These were the close relationships to which Maxwell had long aspired in Britain. But other than the occasional meeting with Margaret Thatcher, the prime minister, an occasional lunch with Norman Lamont, or conversations with other government ministers at charity parties, Maxwell could satisfy his frustrated political ambitions only by meeting leaders of the Labour Party.

Overcoming their antipathy, both Neil Kinnock and Roy Hattersley, Labour’s leader and deputy leader, accepted Maxwell’s invitations to meetings and meals in order to secure the continuing support for their beleaguered party of the Mirror Group’s newspapers – the Daily Mirror, the Sunday Mirror and the People. In Maxwell’s dining room, the entertainment manager, Douglas Harrod, would overhear both of them seriously seeking his advice and on one occasion listening to his request for a peerage. ‘It’s normal for a newspaper owner,’ Maxwell urged, expecting a positive response. Both visitors had smiled benignly, without committing themselves.

The delivery of the proofs of that night’s Daily Mirror interrupted the dinner with Peres. It was a familiar ritual, enjoyed by Maxwell as a means of demonstrating his influence. To emphasize to any doubters his unquestioned authority, he would push a button on the telephone to hear the editor’s attentive voice on the intercom. After he had barked an order and pushed the button again to cut off any possible response, his eyes would shine. His irrepressible pride was expressed in this telephone terrorism, harassing employees regardless of the time by insisting on their constant availability to his summons. To Peres, like so many others who saw the ritual with the proofs, his host seemed truly potent. But Maxwell’s life in his glossy apartment had in fact become a torment.

His forty-six-year marriage to Betty had effectively terminated long before. Ever since their first wedding anniversary after a whirlwind romance in wartime Paris, he had sporadically tired of the older French woman, but her devotion and his loneliness had always compelled his return. Her patience during his long absences and the regular arrival of new children had compensated for his irritation with her cold, unhumorous, unJewish demeanour. While most voiced warm respect for Betty, chiming that she was the sane, modest, reasonable and honest side of the unlikely duo, marvelling at her forbearance as her husband changed from being a muscular, brave, handsome charmer into an obese tyrant, he believed that their wartime romance should have been brought to an end after their first passion. Their markedly disparate backgrounds were not suited for an enduring relationship. Unlike Robert Maxwell, with his impoverished Jewish childhood, Betty Maxwell had been born into the tranquil, even dull, Protestant comfort of a large house in the French countryside, supported by the wealth of a silk manufacturer.

Not surprisingly, the small, plain woman with the rasping French accent had enjoyed the partying and jet-setting around the world’s most exclusive hotels and beaches, paid for by her husband. She had even tolerated appalling rows caused by his inexplicable emotional outbursts whenever his financial pressures seemed overwhelming. For years she had concealed her repeated humiliation in private by uttering public declarations of passion and loyalty. ‘Our love for each other’, she had told She magazine in 1987, ‘is not in doubt, it is the rock and rudder of my life.’ Few doubted her. Yet seven years later, in her autobiography, she would accuse her late husband of taking ‘sadistic pleasure’ in behaving during their long marriage in a ‘harsh, cruel, uncompromising, dictatorial, exceedingly selfish and inconsiderate fashion’. During his life her concealment of this truth had been near perfect. Annually, she had chosen and collected within a new leather-bound scrapbook all the newspaper cuttings and letters reporting her husband’s activities, presenting the volume to him on his birthday.

So by 1987 a woman described by an Oxford don as ‘sharp as a knife. All brain,’ could be in no doubt about the myriad accusations of fraud, deceit and dishonesty which he had attracted. Yet, rejecting the accumulated evidence and as an additional gift that year, she presented her husband as testimony to his ‘boundless energy and originality’ with a green volume listing the 2,418 bundles of documents used by one of Britain’s most litigious individuals in his lawsuits between 1945 and 1983. Prefaced by a quotation from Abraham Lincoln, Maxwell’s self-styled ‘personal archivist’ recalled how his ‘opponents dragged out every skeleton they could find from every cupboard imaginable … The British press and the British establishment have a nasty habit of never letting sleeping dogs lie and their attacks have to be nailed every time.’ In particular, she recalled the ‘seemingly unending bleak, sombre days’ of the ‘infamous DTI inspectors’ disgraceful attacks on your reputation’ and how their lives were ruined by ‘iniquitous’ High Court judges and ‘Trotskyites’ in the Labour Party’s ‘grotesque kangaroo court’. There were years, Betty recalled, when the number of loyal friends ‘could be counted on the fingers of one hand’ and when ‘Every morning, the slim thread holding the Damocles sword seemed to have frayed a little more.’ That loyalty had been rewarded by her appointment as a director of Headington Hill Investments, a controlling company linking the London & Bishopsgate companies (among other constellations) to Maxwell’s worldwide empire and to the Liechtenstein trusts. But Headington was separate and deliberately unconnected to the Robert Maxwell Group and its subsidiaries. (See company plan after notes.) Blessed, according to Betty’s own account, with high intelligence, some would think that she could not be ignorant of the developing financial crisis. Yet, for Maxwell, whether she was aware or not was irrelevant.

For twenty-five years, he had proposed separation from Betty. During the early 1950s he had fallen in love with Anne Dove, his secretary. Her lightheartedness, efficiency and typically English attractiveness, in contrast to Betty’s plodding worthiness, had resulted in a long, passionate affair. The relationship’s termination when Dove exiled herself to the Indian Himalayas had led to an uneasy reconciliation with Betty, which, after his fraud as a book wholesaler had been exposed in 1954, was interrupted by ferocious rows, complete with renewed demands for separation.

In the 1960s, he had enjoyed the company of Jean Baddeley, another devoted secretary. Pleasant looking and efficient, Baddeley had dotingly remained with Maxwell throughout the dark years after the DTI inspectors’ 1971 condemnation and had organized his office after his resurrection in the 1980s. ‘My love for him’, she would explain, ‘was based on huge respect and deep affection for someone who was very important to me.’ But when her looks declined and her imperious, jealous manner earned her the nickname ‘Queen Bitch’, Maxwell shuffled her to a side office.

By 1990, the pressure of his continuing deceit had made the demands of marriage intolerable. Effectively, he had separated from Betty. On her visits to London, she would sleep either in a hotel or with friends. Other than his occasional return on a Friday night to Headington Hill Hall, the Oxford mansion he had leased in 1959 from the council for a fixed £2,000 per annum and used as an office and family home, he barely lived under the same roof as his wife. Typically, on Saturday, 10 November, after sleeping one night in his own bedroom in Oxford, he summoned Captain Cowley to fly him back to Holborn.

For the following day, Maxwell had invited Professor Fedor Burlatsky, a well-connected Russian historian, and his wife Kira Vladina, a journalist, to lunch. To impress the couple, he sent his maroon Rolls-Royce to collect them from the Waldorf. The gesture was more rewarding than he could have anticipated.

As usual, he kept his guests waiting. His eventual appearance was dramatic: ‘If only I’d known it was you waiting for me, I wouldn’t have taken such a long time getting here.’ Maxwell was staring at Kira Vladina, a shapely forty-seven-year-old blonde. For her part, already awed by the display of wealth, Vladina was struck by the giant figure which was apparently filling an enormous living room.

Over lunch, Maxwell could hardly take his eyes off the woman. At the end of the meal, they agreed to continue their conversation, because she wished to interview him for a Moscow newspaper. Professor Burlatsky departed, Maxwell cancelled his other appointments and Vladina, accustomed to her small, sparsely furnished apartment in Moscow, relaxed in the company of the noticeably admiring billionaire. Their conversation soon switched from Maxwell’s customary bombast and inventions about his wartime heroism – ‘I escaped from Czechoslovakia on a raft at dawn with German bullets flying over me,’ he claimed, forgetting that he had simply boarded a train in peacetime – to an intimate outpouring of his misery, his loneliness and his forlorn search for affection. ‘I love the dawn,’ he murmured in Russian, correctly guessing that his listener would be impressed by sensitivity.

‘You have everything in life,’ said Kira.

‘Not love,’ replied Maxwell.

‘But everyone loves you.’

There was a long pause. ‘I don’t believe that. It’s my money they love.’ Maxwell paused again and moved closer to the Slav, so different from the women he usually met. ‘I absolutely adored my mother. With all my heart. And that’s why I always dreamt of loving and being loved in return.’

‘Are you happily married?’

‘Well, she’s French. You know how the French are. What they love more than anything is money. I never sensed any of the warmth or affection I got from my mother in my own family and which I gave to the world around me.’

Kira moved closer, responding to and even sharing Maxwell’s emotion. The man was ‘sad and lonely’, she realized, ‘even within his family’. Yet she was unable to change anything.

Maxwell continued talking about Betty: ‘She’s so calculating. A calculating Frenchwoman, putting up a good front, but she gives me no love. Not the love I got from my mother.’

Naturally, Kira knew nothing of the tempestuous rows which took place between Maxwell and Betty. Instead she noticed only the Publisher’s vulnerability: ‘His big, piercing, fatal wound’. It was already nightfall. Kira felt an intimacy towards a man who was ‘overweight, old and plain’. He spoke of his love for Russia and the culture which was his own. ‘I sympathize,’ she whispered. ‘I understand.’ Letting his imagination run wild, Maxwell had become infatuated with the woman.

Some time later that evening, he spoke of his children. ‘They’re very good at spending the money I earn. They’re not like me. They don’t work hard and take risks.’ Maxwell was clearly bothered by his seven surviving children. His favourite, Michael, he confessed, had died in 1968 after being kept alive for seven years on a support system following a motor accident. His new favourite was his son Ian, conceived in 1955 when Maxwell had been mistakenly told by a doctor that he was dying of cancer. ‘I adore him. He’s a bit like me.’ Pause. ‘But not in work. And I love my youngest daughter, Ghislaine. The rest are a cold lot. Like their mother; and they want to live off what others earn.’

Kira returned late to her hotel and her husband. Maxwell’s last words had been memorable: ‘Kira, I would so like to be in your suit of clothes or, even better, your skin.’ He had been, she thought, so tender, so trusting. The whole intimate experience had been ‘a fantasy which took hold of our hearts’.

Alone once again in his penthouse, Maxwell might have reconsidered his description of his children. He unashamedly doted upon Ghislaine, his youngest daughter, naming his luxury yacht after her and financing her unprofitable corporate-gifts business, though he would not tolerate the presence of her boyfriends, whom he suspected were hoping to benefit from a piece of the action. His relationship with Ghislaine was becoming increasingly intense, some would say indulgent. He no longer had much interest in his twin daughters, Isabel and Christine, born in 1950. Of Anne, his daughter born in 1948, he had quipped to colleagues, ‘What have Anne and Pope John Paul in common? Both are ugly and both are failed actors!’ His eldest son Philip, born in 1947, a donnish, decent man, disliked his father, and the sentiment was reciprocated. When he married in South America, his father refused to attend the ceremony. Some suspected that Maxwell had always resented the death of his elder son Michael and the survival of Philip.

Maxwell often spoke to Ian, a joint managing director of MCC and a director of over eighty private companies, but he permitted him few responsibilities, despite his annual income of £262,000 plus practically unlimited expenses. Ian, it was agreed by most, was a charming, easygoing playboy, sought by many young, attractive women, whom he tended to address as ‘princess’. But there was also an arrogance. On one occasion, Ian had told Bob Cole, Maxwell’s spokesman, to collect a suit from his London flat. Cole arrived to find the chaotic evidence of the previous night’s revelry. Scattered on the bedroom floor lay several used condoms. Ian clearly expected his Filipina maid to clear everything. A similarly casual attitude affected Ian’s responsibilities to work. Educated at Marlborough College and at Balliol College, Oxford, he understood the legal requirements expected of directors of companies but adopted his father’s cavalier attitude towards those laws, smoothing things over with a modicum of charm.

Robert Maxwell, however, noting that Ian lacked an astute appreciation of finance, engaged in the real conversations with Kevin. As the empire’s finances became perilous, it was Kevin whom he increasingly trusted. But there was little intimacy, and frequently, as in the past, he ignored his son’s advice, not least when Kevin urged that they renegotiate all their loans with the banks. ‘They’ll eat us alive,’ snapped Maxwell each time he raised the issue. All those bankers, lawyers and other professionals visiting the Publisher were appalled by the father’s treatment of his son. ‘Shut up, you don’t know what you’re talking about!’ Maxwell would yell. The eyewitnesses to those humiliating outbursts, admirers of Kevin’s talent, would gaze stupefied as his father ‘treated him like dirt’. None was more surprised than Bill Harry, Macmillan’s tax adviser. At a celebratory party on board the Lady Ghislaine in July 1989, Harry was explaining the tax implications of the company’s recent merger with McGraw-Hill when Kevin asked a question. His father exploded: ‘Don’t ever interrupt a tax expert!’ A chastened Kevin fell silent, while the others present stared at their shoes.

Yet at 7 a.m. most days during 1990, Robert Maxwell was ensconced alone in his office with Kevin, taking the place of his son’s early-morning German lessons. Dignified with the label ‘prayer meetings’, their encounters allowed them to plot and plan their agenda.

So much in Kevin’s life had changed in the last months. In 1988, his father had dispatched him to New York to manage Macmillan and their new American empire. There, to Robert Maxwell’s irritation, he had been joined by Pandora Warnford-Davis, his tall, thin, toothy, aggressive, thirty-year-old wife, whom he had met at Oxford and whose assertions of independence both before and since their wedding in 1984 had not endeared her to Robert. ‘What shall I call you?’ she had coldly asked Dick Cowley, the helicopter pilot, on first meeting. ‘You can call me Captain,’ he replied. Robert Maxwell was never able to establish that advantage over a woman he regarded as spoilt and foolish. For his staff, the defining moment of Pandora’s attitude towards her father-in-law had occurred one day when the Gulfstream was parked on the tarmac at Le Bourget airport outside Paris. Maxwell was fuming because Kevin and his wife were late for take-off. ‘Fuck them! Let’s go!’ he shouted eventually, sending Terry Gilmour, the chief steward, to deposit their passports at immigration. At that moment the couple arrived, only to be tongue-lashed by a furious Maxwell. To his astonishment, Pandora then turned on him and snarled, ‘Who the fuck do you think you are?’ Silenced, Maxwell stared out of the window until touch-down in London. The relationship worsened as the financial crisis grew, with the helicopter being frequently dispatched to collect Kevin from Hailey, his Oxfordshire country home near Wallingford. Unintimidated, Pandora once mockingly threatened to ‘use a gun [on her father-in-law] if you disturb our life again’. Her outbursts won only temporary respite. Like most bullies, Maxwell retreated when challenged but soon resumed his egotistical behaviour, demanding total obedience to his needs.

By the autumn of 1990, Kevin had abandoned his New York residence and was commuting from London on the 9.30 a.m. Concorde to New York, cramming up to twenty-one meetings into one day before sleeping on the overnight British Airways 747 flight home, with a helicopter hop to Maxwell House at 6.30 in the morning. During that year, his use of conventional airlines within Europe had declined. Under increasing pressure, he flew on chartered jets, accompanied by Carolyn Barwell, his lively assistant – to Zurich for lunch, to Hamburg for dinner, or on one occasion overnight to see his father in Istanbul, returning the following day to London. He had also more or less abandoned watching his own Oxford United football club on Saturdays or playing with his children, Tilly, Teddy and Chloe. His regular cultural outings organized by Pandora – to the theatre, Covent Garden or the Festival Hall, followed by dinner in London’s fashionable restaurants – also tended increasingly to be cancelled, prompting frequent absences from their chaotic home in Jubilee Place, Chelsea. Despite Pandora’s shrill complaints about the working hours her father-in-law required from Kevin, she enjoyed the perks of Maxwell’s fortune. Even her family shared the benefits. John Warnford-Davis, her father employed by Maxwell, used the helicopter to avoid the traffic to Newmarket, while her brother Darryll, employed at brokers Astaire and Partners, regularly approached Kevin with ‘business propositions’ in return for monitoring and buying MCC shares.

Initially, Kevin had not complained about the pressure. No other man of his age in London could helicopter from the city centre to land alongside Concorde, receiving special dispensation from customs and passport control. Like his father, he revelled in the exercise of power, seeking acceptance from the establishment as befitted an old boy of Marlborough College and a graduate of Balliol College, Oxford. He even used a barber at the Savoy, a custom Robert Maxwell had adopted more than forty years earlier. He had not complained when his summer holidays in 1990 had been forsaken. While his friends were relaxing in expensive resorts, his August days had been filled by endless meetings with bankers, lawyers, accountants, analysts and staff. His most frequent visitors were Colin Emson, the managing director of Robert Fraser, a merchant bank chaired by Lord Rippon, an independent director of MCC; Neil Taberner, a senior partner of Coopers, the empire’s accountants; Scott Marden and Andrew Capitman of Bankers Trust; Michael von Clemm of Merrill Lynch, a friend anxious to win some of the business; Sir Michael Richardson of Smith New Court, MCC’s stockbrokers, and reputedly close to the prime minister; and Thomas Christofferson of Morgan Stanley. These men were unified by more than their financial profession and their proximity to the Maxwells. Individually, each was contributing to the Maxwells’ appearance of probity and financial security.

Another group of visitors, his employees, members of the inner sanctum, the heart of the operation, were probably more important. By the end of September 1990, to help him to cope with the financial crisis, they were being summoned by Kevin to daily meetings. All were men and women of unquestioning obedience and unremarkable technical competence, closely associated with the empire’s finances. The overriding criteria for their employment were their loyalty and their readiness to become beholden to their employer in return for their over-generous salaries. Among them were Deborah Maxwell, a thirty-three-year-old dark-haired lawyer who was not related to her employer, although outsiders sometimes mistakenly believed there was a connection; Mark Tanzer, a ‘poor man’s Peter Jay’; Robert Bunn, forty-two years old, an accountant and RMG’s finance director, of whom Maxwell irreverently joked, ‘I could order him to rob the Midland Bank!’; Basil Brookes, the acting finance director recruited from Coopers; and Albert Fuller, the head of the treasury.

As the crisis deepened, Kevin included in those meetings Michael Stoney, an ambitious accountant, and Jean-Pierre Anselmini, a forty-eight-year-old Frenchman and former director of Crédit Lyonnais, who in 1988 had helped to organize the $3 billion Jumbo Loan to the Maxwells and had been flattered by the subsequent invitation to join MCC as deputy chairman. Although blessed in Maxwell’s propaganda as ‘brilliant’, Anselmini was the fullest embodiment of his state-owned bank’s naivety. ‘The bank which could never say “no”’ had lent Maxwell $1.3 billion, its accumulated bad debts now totalling over £20 billion. For the Frenchman, wilfully ignorant of Maxwell’s past, his new employer was ‘a fairy tale everyone needed to believe in’, especially because he proclaimed himself a socialist while offering an entrée into the giddy world of the media. ‘I wanted to believe in Maxwell’s success,’ Anselmini later confessed. He was hypnotized by Maxwell’s ‘star quality, and I loved the Maxwell family’. That same warmth was reflected by Sam Pisar, Maxwell’s French lawyer and business representative engaged in deals in Russia and Israel and had become a close confidante: ‘We needed myths and heroes in those dark times.’

One of the recent casualties of that trusted group was Ron Woods, a director of MCC whom Maxwell had inherited as a tax consultant (just as he had inherited the deputy managing director Richard Baker) on his spectacular relaunch into business in 1980 when he bought the British Printing Corporation. The forty-seven-year-old from the Rhondda Valley fell under Maxwell’s spell and came to regard him with a mixture of awe and fear as a ‘hero and father-figure’. To his delight, Woods had discovered that his new employer was hyper-sensitive about taxation and wished him to deploy his skill to minimize the tax liabilities on the empire’s purchases, take-overs and disposals. Little pleased Woods more than to work on his computer to produce an innovative tax scheme. The empire, he knew, was ‘tax-driven’ and he more than anyone understood its complexity. According to a senior company auditor, ‘Only Woods could explain why it was so complex.’ The challenge, Woods would attest, was ‘very exciting’. It was also legal and ethical. There was no need to resort to the criminal evasion of taxes. Maxwell’s empire was ultimately owned in Liechtenstein, so few taxes were unavoidable and they could be neutralized if, by careful anticipation, MCC and the 400 private companies accumulated the appropriate debts and losses. When he bought Macmillan, $1.8 billion of the $2.6 billion purchase price was charged to Macmillan itself so that the interest charges could be offset against the profits, thereby avoiding all taxation. Indeed, Maxwell’s only serious liability was advance corporation tax (ACT) on dividends. ‘I don’t want to pay taxes,’ he had told Bill Harry, his American tax adviser, ‘but I don’t want to go to prison either.’ This was a reference to the fate of Leona Helmsley, recently jailed in New York for tax evasion, a poignant moment for Maxwell, who regularly occupied the presidential suite in her Manhattan hotel.

Although with hindsight Woods would regret his own simplicity, he had never suspected his employer, even though he personally negotiated with the two lawyers responsible for the Liechtenstein trusts: Dr Werner Rechsteiner in Zurich and Dr Walter Keicher in Vaduz, the principality’s capital. With awe, Woods retold Maxwell’s fanciful story of how, dressed in a British army uniform, he had met Keicher’s father in Zurich all those years before and had had the savvy to lay the foundations of his empire. The Liechtenstein Anstalts, the impenetrable trusts, Woods knew, did not contain any cash, only shares. Maxwell’s claim in 1988 at the time of the launch of his authorized biography that they boasted funds of £1 billion, a figure calculated by Woods himself, referred only to Maxwell’s shareholding in his own companies, including MCC, not to his cash. With Woods’s compartmentalized knowledge, those shares were always used as collateral to raise private loans, liable to be sold by the lending banks if the Publisher defaulted.

Maxwell had trusted Woods to override the rigid compartmentalization between his private and public companies, moving from one to the other. Although during 1990 the tax expert, seeing through the maze of figures, had realized that the private companies were ‘short of cash’ and that Maxwell was making an effort ‘to prevent MCC’s share-price fall’ by purchasing his own shares through Liechtenstein, he remained faithfully silent. His loyalty was all the more remarkable given that their relationship had been fractured ever since Maxwell had used one of his private companies (Hollis) to buy AGB, a research company, in the summer of 1988. Woods’s protest to Maxwell, who was at the time sailing on his yacht, was rebuffed with the words, ‘It’s not your business to question my judgment. Just obey your orders.’ To break the impasse, Kevin had driven to Woods’s home on a Saturday morning and, after going through the figures, had understood his criticism. Both men had telephoned Maxwell to protest. But their appeal was in vain. That deal, recalled Woods, was the first sign of Maxwell’s bad judgment. The Macmillan deal in October 1988 was the second.

In the midst of the Macmillan saga, Woods had cautioned Maxwell about the price. ‘Don’t worry,’ smiled the Publisher, touching Woods on the knee, ‘I won’t offer more than $80 a share.’ Shortly afterwards, he paid $90.25, nearly $1 billion more than the company was worth, just to secure a place in history. Woods was appalled and invoked the innovation of which he was proudest – a computer programme capable of predicting Maxwell’s profits. On the eve of that final bid, he had unfolded over his employer’s desk a spread-sheet forecasting the consequence of the Macmillan purchase. ‘You’ll be liable for surplus ACT,’ he said, referring to heavy exposure to taxation. ‘That’s going to hit profits. And that’s going to hit MCC’s share price.’

For a moment, there was silence. None of the usual telephone calls interrupted Maxwell. ‘Very interesting,’ he murmured at last. ‘Has anyone else seen this?’

‘No,’ replied Woods, understanding the reason for the question. ‘If MCC’s share price falls, it will affect the private-side companies’ – many of whose loans were secured against MCC shares.

Again there was silence. Woods added, ‘I’m predicting a five per cent to eleven per cent growth rate – at best.’

Maxwell folded the paper: ‘I’ll get twenty per cent.’ Woods was dismissed from the room.

Days later, Maxwell borrowed a further £170 million from Lloyds Bank to part-finance his purchase of the Official Airline Guides. For Woods, it boded another tax nightmare, with more harmful consequences for MCC’s share price.

Ever since then, Woods’s 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 BIM without the accounts,’ pleaded Woods. But Maxwell was implacable – for good reason. The Foundation had no staff and no premises and produced no accounts to prove that it controlled any money. It was a legal fiction managed by his Swiss lawyers, who were paid to refuse answers to any questions. Maxwell was chairman of the trustees and, in his opinion, beyond mortal scrutiny. ‘There are no Liechtenstein accounts,’ Cook wrote to IMRO. Surprisingly, there was no reaction.

Maxwell’s escape from the potential trap had been effortless. Since the law required that BIM be owned by a registered charitable trust with proper accounts, he just invented one. The figment of his imagination was called the Maxwell Charitable Trust, its creation partly supervised by Deborah Maxwell, his legal adviser. Under the proposed structure, the Trust would control BIM, although neither actually employed any staff. The Trust was effectively just Robert Maxwell, without any trustees appointed by the pension funds, though including one trustee, David Corsan, a retired Coopers auditor who was also an IMRO director. BIM’s manager Trevor Cook and his staff were employed by Headington Holdings, a subsidiary of Headington Hill Investments. That extraordinary structure was ignored by the government’s regulator after the initial application was withdrawn, and on 6 April 1988 BIM received formal approval to manage the pension funds of over 20,000 employees from offices at 4/12 Dorrington Street, near Maxwell House. Cook was appointed the compliance officer, formally responsible for BIM’s obedience to the laws and for the company’s liaison with the regulatory authority.

Under BIM’s articles, Robert, Kevin and Ian Maxwell, the leading directors, wielded only limited powers, but inevitably those rules were ignored by Robert Maxwell, albeit unchallenged by Ron Woods, Trevor Cook, Robert Bunn (until his resignation in 1990) and the other directors. Unknown to them, in a legal ruse to protect himself in the event of any future inquiry, Maxwell had falsified the board minutes to appoint himself the sole arbiter of the company’s management. In the event, he decided on investments – sales and purchases – without reference to anyone else. His action mirrored MCC board minutes of November 1981 which permitted him to act as a ‘committee of MCC’s board of directors’, bestowing upon himself uncontrolled powers over the public company, including the right to be the sole signatory of cheques for unlimited amounts. Naturally, these changes in the running of BIM were kept a close secret. They existed only as a legal safeguard if trouble arose.

Maxwell quickly established a pattern of management of the pension funds. At BIM’s monthly meetings, religiously attended by Robert and Kevin and occasionally by Ian, the directors reviewed and approved BIM’s portfolio of investments. Cook and his deputy, Jeffrey Highfield, merely took care to monitor the minutes, acknowledging that the right to buy and sell shares belonged to the directors. Every month, they circulated a schedule of BIM’s portfolio of shares. So none of the Maxwells could ever be in any real doubt whether particular shares belonged to the pension funds or to their private companies.

In September 1988, Maxwell decided to establish tighter control over the pension investments. His excuse was the discovery of a fraud of £7,000 in the payment of pensions to former employees. A subsequent report by accountants concluded that the pensions administration was a ‘shambles’. Summoning Cook and Highfield, he announced that authority for the management of BIM and the CIF investments was to be vested in Robert Bunn, the accountant employed by his private companies. ‘Bunn will handle all relations with the brokers and investment houses,’ he said. ‘We are involved in a large number of take-overs and mergers. Bunn has better expertise. Bunn will have all the powers. Your responsibility will be solely BIM’s administration.’ At the end of their employer’s ten-minute speech, neither man protested.

But within weeks Highfield was complaining to Cook: ‘Bunn isn’t telling me about the actual investments.’ Cook remained silent, unwilling to question Maxwell’s edict that ‘We are ruled by IMRO, and we must not reveal price-sensitive information.’ Highfield was puzzled. Cook had already accepted another limitation upon himself. Three months earlier, in July 1988, Maxwell had decided that BIM and the pension funds would enter into a special and unusual relationship with yet another private Maxwell company, London & Bishopsgate Investments. LBI was the preliminary vehicle for Maxwell’s ambitions to control a bank. Not surprisingly, Cook did not understand the importance LBI would assume. ‘Go and talk to the LBI people,’ urged Maxwell soothingly, ‘and satisfy yourself of their competence.’ Cook had obliged and did not object to the relationship.

The creation of LBI was the direct consequence of Maxwell’s introduction to Larry Trachtenberg and another American, Andrew Smith, renowned as ‘a smooth New York computer jock’. Modelling himself on the Wall Street brokers in Tom Wolfe’s novel, Bonfire of the Vanities, Smith was a fast-talking, self-confident smoothie wearing braces over heavily starched shirts. His appearance and manner shrieked a dealer determined to make his fortune. In 1989, Smith, introduced to Maxwell by his father, a German banker, had professed that his hero was Michael Milken, the American arbitrageur and junk-bond specialist who by 1990 was on course for imprisonment.

Trachtenberg and Smith had met at the London School of Economics in 1985, both of them eager to join the rich in that booming era. Their initial ploy had been to exploit the exploding market for information and sell newsletters of financial and political analysis to banks, industrialists and investors. The information had been compiled by LSE students based on published sources. That easy money fed the two men’s ambitions. Technology was their answer. By 1987 when they met Maxwell, they had invented a computer system which, in theory, monitored all the international economies and markets to identify perfect investment opportunities before any mere mortals could do so. Calling themselves Global Analysis Systems (GAS), they were presented to Maxwell, an unrestrained admirer of technology, not as mere analysts but as investment managers. All they required was other people’s money to earn millions.

Entranced by their gimmick, Maxwell felt that they lacked gravitas. They needed the respectability that could be provided by employing in their firm an established personality in the financial community. That role, he believed, could be best performed by Lord Donoughue, a socialist academic who in the 1970s had served as a policy adviser to Harold Wilson before self-interest prompted him to switch ideologies in the 1980s to capitalism. In 1988, Bernard Donoughue, aged fifty-four, was employed as a director at Kleinwort Benson, the merchant bank, where he was responsible for research. Maxwell, the frustrated Labour politician, was keen to recruit any of Wilson’s team, and Donoughue leapt at the giant salary offered. He would be paid £180,000 per annum, plus £36,000 annual contribution towards his pension and an annual Christmas bonus of £200,000. In addition to that total of £436,000, Maxwell would provide a home in Westminster, close to parliament. An added attraction to LBI’s new, full-time executive vice-chairman (under Maxwell himself) was his belief that £300 million of Maxwell’s money was ‘sloshing about’ in various merchant banks waiting to be invested.

Donoughue’s income matched those of his two colleagues and co-directors. Trachtenberg’s initial annual salary in 1988 had been £80,000 but his income was boosted in the following year by a performance bonus of £125,000. Soon after its payment, Maxwell’s auditors realized that the bonus for all three directors had been paid on what were called ‘erroneous figures’, but it proved impossible for Kevin to overcome Donoughue’s stubborn objections and recover the money. That largesse, the loss of hundreds of thousands of pounds by sheer dilatoriness or negligence, contradicted the cultivated image of Maxwell as a ruthless cost-cutter and was a measure of the true state of the empire’s finances. Accordingly, in 1989, Trachtenberg’s income was consolidated at an annual salary of £185,000 plus £18,500 towards his pension, and Smith was paid £150,000 without any pension contribution. Trachtenberg was assured of a Christmas bonus of £125,000, Smith one of £200,000.

The trio, Trachtenberg, Smith and Donoughue, were formally embraced within Maxwell’s empire as directors of LBI – London & Bishopsgate Investments – with Robert and Kevin Maxwell. (Headington Hill Investments, the controlling company of all Maxwell’s private companies, bought a 60 per cent stake in GAS, which was then renamed London & Bishopsgate International Investment Inc. – LBII.) It was no coincidence that ‘London & Bishopsgate’ featured in the names of a growing number of Maxwell’s private companies. Among the twelve Bishopsgate companies was London & Bishopsgate Traders, London & Bishopsgate Holdings, London & Bishopsgate Group, London & Bishopsgate International NV and London & Bishopsgate International Management. All performed very different functions but, as Maxwell intended, the similarity of the names was liable to confuse outsiders. Adding to the confusion, some of the different London & Bishopsgate companies operated from the same premises and with the same staff.

Having established LBI as his new ‘investment bank’, with IMRO approval, Maxwell sought customers to establish his credibility for financial management. In spring 1988, he bought 25 per cent of First Tokyo Trust, a Scottish investment trust founded in 1980 which controlled £70 million of Japanese shares owned by institutions and private investors. Although Maxwell posed as a buyer in the name of London & Bishopsgate Holdings, a third of the money he used belonged to the pension funds.

Initially, Maxwell’s investment (codenamed ‘Setting Sun’) did not alarm Alan McInroy, the sober Scottish chairman of the First Tokyo Trust, who thought Donoughue ‘charming and competent’. Over the following two years, if any man other than the Maxwells could understand what was happening within First Tokyo, it was Donoughue. Donoughue presented himself, Larry Trachtenberg and Andrew Smith as investment geniuses. Their proposal to McInroy was to improve First Tokyo’s unspectacular performance. Instead of simply investing in Japanese shares, said Donoughue, the Trust should sign a contract to use LBI’s computer programme ‘Japan 60 GAS’ to anticipate the Japanese market’s performance and beat other investors.

Initially, McInroy was irked by Donoughue’s ambitions and opposed the plan, because it contradicted the Trust’s sober purpose, and anyway the transfer of the Trust’s powers to LBI would be expensive. But McInroy was soon outmanoeuvred. Exploiting his svelte patter and his political background, Donoughue had toured the institutions, winning their support for his idea. His management of the Trust was confirmed on 9 January 1989 when he joined First Tokyo’s board with two other Maxwell employees, George Willett, a taciturn stockbroker, and Robert Bunn. Just at the moment when Maxwell’s need for money – to buy MCC shares, to pump money into MCC by purchasing assets, and to pay for his accumulated losses since the stock market crash in 1987 – became pressing, McInroy had effectively allowed his control over the board’s six directors to dissolve, except in extremis by use of his casting vote. ‘I had no choice,’ he would explain. ‘The institutions supported Donoughue and Maxwell.’

Soon after, the Tokyo market fell sharply and Andrew Smith offered Maxwell a solution. It was called stock lending, a perfectly legitimate strategy invented in New York. Financial institutions and investors often required shares for a short period – overnight or a few days – to comply with securities laws or to cover speculative positions. Rather than buying the shares and incurring substantial costs, the investors borrowed them for a fee. In turn, to protect the registered shareholder from loss or theft, the borrower provided securities or cash worth more than the shares. Undertaken in this way, stock lending was risk-free.

It was in its pure form that, on 27 January 1989, Trachtenberg and Smith suggested to McInroy that First Tokyo could generate extra income at no risk by stock lending the shares in its reduced £60 million fund. Overcoming his initial reservations, McInroy agreed to a six-month trial. Unfortunately, however, he failed to ask a number of pertinent questions about the transactions, and most of all he failed to examine the contract between First Tokyo and LBI. He merely demanded that Morgan Stanley, the Trust’s bank which held the share certificates in its safe in London, should accept all the risk. Trachtenberg and Donoughue were told to obtain an undertaking to that effect from Morgan Stanley, whose vice-president Thomas Christofferson duly gave it. Trachtenberg and Donoughue then assured McInroy that the bank had agreed to be the guarantor, though the First Tokyo chairman appears never to have asked for written evidence. ‘That wasn’t my responsibility,’ he later explained.

Inevitably there was confusion about responsibility for the management of First Tokyo’s £60 million – confusion which was very much Robert Maxwell’s intention. First Tokyo had a contract with London & Bishopsgate International Investment Management, who were to manage the fund in accordance with the wishes of First Tokyo’s board of directors. LBIIM was owned by London & Bishopsgate Holdings, which in turn was owned by Headington Hill Investments, Maxwell’s private company ultimately owned by the Liechtenstein foundation. But it was the entirely distinct LBI which was undertaking the stock lending. This confusion was ignored by McInroy, not least because during the first year the profits seemed to exceed expectations.

McInroy’s legal advisers seem also not to have appreciated the deft self-protection of LBIIM’s contract with First Tokyo. While one clause at the top of the agreement permitted stock lending, another, much later clause allowed LBIIM to stock lend ‘in house’ for a ‘fair price’. Astutely, Maxwell and his cohorts had covered themselves in the event of future recriminations.

Unknown to McInroy, soon after the stock lending was approved Maxwell allowed Trachtenberg to use First Tokyo’s shares in an unauthorized manner. First Tokyo’s stock was being lent, not in an orthodox way on the open market, but to Maxwell privately, that is to London & Bishopsgate Holdings. And the collateral for the prime Japanese stock was not cash but MCC shares. To the Maxwells, the beauty of the operation was that First Tokyo’s shares were never sold, so preserving the myth that the fund was inviolate and untouched. The only risk was to First Tokyo’s innocent investors. The evidence suggests that by February 1990 Lord Donoughue ought to have suspected the unannounced use of those shares. In September of that year, Kevin would offer some of those First Tokyo shares to Julie Maitland of Crédit Suisse as collateral for the £50 million private loan.

By November 1990, as Maxwell vainly searched for relief from the recession and from the rising interest rates on his total debt of $3.5 billion, First Tokyo’s £60 million was only a small part of his requirements. For more than a year, he had also been stock lending pension fund shares using the technique proposed by Trachtenberg and Smith. During summer 1989, on the Maxwells’ instructions, Trachtenberg had negotiated the use of pension fund shares to raise cash from John Di Rocco, head of Lehman Brothers’ International securities lending department. To conceal the scheme, the contract signed by Kevin on BIM’s behalf was made complicated. Lehmans would be given shares from BIM’s portfolio, and in exchange would give Treasury bills to Maxwell. Maxwell would immediately sell the bills back to Lehmans, who would pay him in cash. The end result would be that Maxwell had cash and Lehmans had the security of the pension fund shares. In theory, the pension funds would retrieve their shares after buying back the Treasury bills. In the meantime, the impression was preserved that the pension funds still owned the shares unencumbered.

There was one major obstacle to overcome to obtain that cash. On each share certificate, the owner was registered as BIM. To use those pension fund shares, Maxwell needed to invent a cover story to explain his entry into such an unusual transaction.

The reason provided by Trachtenberg to Di Rocco was that BIM needed cash so that it could reinvest the money in shares which would produce higher returns than its existing portfolio, while simultaneously retaining the investment benefit of the shares it pledged. To Maxwell’s delight, Di Rocco accepted the business. Whether the banker realized by specific inquiries that BIM was the manager of pension fund assets would remain uncertain and be subsequently contested. But he and his superiors did realize that the arrangement was ‘purely a funding exercise’, and their suspicions ought to have been aroused because the circumstances were so unusual. It was unusual in two ways: first, the bank was to pay the cash into Maxwell’s private accounts; and second, neither Trachtenberg nor Andrew Smith was a director of BIM. Indeed, Trachtenberg said he represented LBIIM, which was acting as BIM’s agent.

There was one final hurdle. Before the pension fund shares could be used for stock lending, Trachtenberg required Trevor Cook’s consent. At the end of October 1989, after reading LBI’s terms for stock lending, Cook, BIM’s manager, signed an agreement. But that agreement – between BIM and LBI – was different from the contract with Lehmans signed by Kevin on LBI’s behalf, which was not for stock lending but for a loan.

To Cook, everything appeared normal. Working in an open-plan office in Dorrington Street with files marked ‘Stock lending accounts’, he and his deputy Jeff Highfield received monthly accounts from LBI recording the value of the stock lending: Cook in turn would bill LBI for the agreed 1.75 per cent fee. Cook’s willingness to be helpful made the Maxwells’ task much easier. He never asked to see the contracts.

Throughout 1989, with Cook’s agreement, Maxwell had also been personally borrowing increasing amounts of money from BIM, rising from £5 million to £22.5 million. To extinguish the debt, Maxwell ‘sold’ to BIM privately owned shares, but publicly he did not reveal the change of ownership. ‘We’ll always give the pension funds first refusal to earn profits from our share deals,’ Maxwell had told Cook. To the manager, the offer appeared generous. Apparently he remained unsuspicious even when Maxwell’s £22.5 million borrowing during 1989 cost the pension funds £510,000.

Having established Cook’s willingness to accept directives, Maxwell summoned him in January 1990. ‘I have decided it would be in BIM’s interest to buy more MCC shares,’ he said. ‘The price is certain to rise.’ Cook agreed, without questioning Maxwell’s misplaced confidence. BIM would pay £63.2 million for MCC shares owned by Maxwell personally. Cook not only agreed to the ‘offer’ but did not demand that the shares be registered in BIM’s name. Instead, the shares remained registered as Maxwell’s property, and he borrowed another £26 million of the pension funds’ money to finance MCC. Cook would subsequently explain, ‘I didn’t realize the ownership could be abused.’

That March, Maxwell called in Cook twice more. The price of MCC shares was falling despite his prediction two months earlier and he wanted to push it back up. ‘I think it would be beneficial for BIM to buy more MCC shares,’ he said. Two deals were concluded, which were to lose the pension funds £7.4 million. On the 20th, BIM purchased a call option on 10 million MCC shares through Sheinberg at Goldman Sachs. Days before the end of the financial year, BIM paid £20 million for the shares, £2.4 million more than their worth, to boost MCC’s price. On 29 March, BIM sold 7.9 million MCC shares through Goldmans. In the second deal, BIM bought a call option from Goldmans on a further 10 million MCC shares for £18.9 million. One month later, the deal was booked to BIT (Bishopsgate Investment Trust, the nominee company used by Maxwell to retain pension fund shares and cash). The option, exercised on 29 June, cost BIM £5 million.

On 31 March 1990, the end of the financial year, Maxwell’s debt to the pension fund was still £13.5 million, so to remove it from the annual accounts he repaid it. The following day, he withdrew the money again. Thereafter his use of pension fund money rocketed. By 29 June, he had taken £105 million from BIM. To settle that debt, he told Cook that he was ‘selling’ to the pension funds his private stake in Invesco MIM and 5.4 million shares in Scitex, an Israeli high-tech company producing imaging systems for the publishing industry. Maxwell had bought 9.59 million Scitex shares (after rights issue) in December 1988 for $39 million or £24 million. Their value would rise to $220 million. The shares Maxwell offered Cook represented three-quarters of his stake in the company and would be worth £102 million.

Cook accepted this ‘offer’ too. He listed the Scitex and Invesco shares as part of BIM’s management of pension funds and removed Maxwell’s private £105 million debt from the accounts. But he failed to register the shares officially in Israel as owned by the pension fund. This, he explained, was ‘because I had signed a personal agreement with Robert Maxwell that he was holding the shares on BIM’s behalf. Even worse, he did not secure possession of the share certificates.

Maxwell’s complete control over BIM and the pension funds was, to his and Kevin’s increasing irritation, not duplicated at LBI, where a crisis had arisen among the directors. The cause was Mark Tapley, recruited as the new managing director in January 1990. Clean-cut, honest and ambitious to make his fortune in London’s rollicking financial markets, Tapley had been employed in the 1970s at J.P. Morgan and had been lured to LBI from Lehmans by Smith and Lord Donoughue on a generous salary for a three-year contract plus bonuses.

Within days of his arrival, Tapley had become alarmed by LBI’s administrative chaos, for which he blamed Larry Trachtenberg. He was also unhappy with Andrew Smith’s exaggerated claims about past performance and who, moreover, appeared to be trading in shares in what Tapley considered an unacceptable manner. ‘That’s a conflict of interest,’ he cautioned Smith. Soon afterwards, Smith returned to New York to establish LBI Inc. with £10 million capital provided by Maxwell, continuing his collaboration with Trachtenberg and Donoughue, although the latter referred to the American as ‘Adolf Smith’. ‘We must get rid of Trachtenberg,’ Tapley told Donoughue. ‘We must get him out of LBI.’ But Donoughue did not respond. By then, he had become Kevin’s confidant and no week passed without his name featuring in the Maxwell son’s diary.

On 1 April 1990, glancing at LBI’s 1989 accounts, Tapley noticed the high fees LBI was earning from the stock-lending programme. ‘Where are these fees coming from?’ he asked Trachtenberg. The American only replied, ‘It’s all done through Morgan Stanley with their guarantee.’ Tapley’s curiosity was not satisfied. Searching through the records of the stock lending, he came across the name of Thomas Christofferson, of Morgan Stanley. Christofferson was grateful to Kevin for placing LBI’s custodian business with his bank. It was an easy source of income. Until November 1991, Christofferson would, on demand from either Kevin or Trachtenberg, innocently sign letters and release share certificates which diverted the shares belonging to First Tokyo and others.

Although Tapley noticed that Trachtenberg was telephoning Morgan Stanley and ordering them to pledge First Tokyo’s shares to other banks as formal stock lending, reading LBI’s print-outs he was puzzled that they failed to identify the shares loaned. Instead, Trachtenberg’s oral instructions to Morgan Stanley were recorded on the computer only as ‘shares held on order of … bank’. Tapley demanded to know what was the authority for stock lending First Tokyo’s shares. ‘We’re doing it on Maxwell’s orders,’ stated Trachtenberg. He then added disingenuously: ‘We don’t know to whom the stock is being lent.’

Tapley’s initial concern had been that Trachtenberg was carelessly omitting to keep a record of his instructions to Morgan Stanley. By April 1990, he realized it was worse than that. His source was Jonathan Ford, a former Coopers accountant recruited by Maxwell to work in LBI. ‘I’ve been in the investment business for twenty years,’ said Tapley, ‘and I’ve never earned so much from stock lending. How do you do it?’

‘Because it comes from the Mirror Group,’ replied Ford with startling honesty.

Tapley gasped, ‘This is another conflict of interest. It will be forbidden by IMRO.’

Tapley appealed to Kevin. It was an unwelcome approach and Kevin repeatedly cancelled the appointment. When they finally met, Kevin agreed, ‘We must close that stock-lending operation down.’ But he made it clear that Tapley was no longer welcome in his office – he was disrupting the Maxwells’ operation. Of course the stock lending would not stop, but Kevin agreed with his father that it might be dangerous to dismiss the manager in breach of his contract. Better to keep him inside the tent and quiet. For his part, Tapley did not welcome the prospect of litigation with the Maxwells if he himself sought to break his contract, nor would he relish the loss of his high income in the middle of a recession.

Come July 1990, Tapley was still concerned by LBI’s stock lending of First Tokyo shares. ‘Why are you bothered?’ asked Trachtenberg. ‘It’s nothing to do with you!’ By then, Stuart Carson, LBI’s new compliance officer, responsible in the new self-regulatory era for ensuring fulfilment of statutory requirements, had consulted IMRO. The regulatory agency confirmed that IMRO rules did not forbid the conflict of interest prompted by stock lending. ‘It isn’t forbidden,’ reported Carson.

Two palliatives were proposed. Jean-Pierre Anselmini, MCC’s French deputy chairman, was that same July temporarily appointed an LBI director. Tapley’s initial relief disappeared when Anselmini began to postpone important meetings. ‘You’re intransigent,’ he told Tapley in stilted English, ‘making the management more difficult by distressingly insisting upon standards against Smith.’ Tapley’s appeals to Donoughue were also rebuffed. Urging self-restraint, the peer told him, ‘We must try and keep this together. We’re a good team.’ Donoughue was supported by George Willett: ‘Don’t go to IMRO. Stop making distinctions between moral and legal issues.’ Tapley was persuaded to keep quiet by three men whose motives he found unclear. Tapley accorded Donoughue the nickname ‘Manuel’, the character in the television sitcom Fawlty Towers famous for his repeated claim, ‘I know nothing.’

At the end of the day on 3 August 1990, after many cancelled meetings, Tapley was finally admitted once more into Kevin’s office. ‘The stock lending must stop,’ agreed Robert Maxwell. Satisfied that he had got what he wanted, Tapley distributed a memorandum describing a newly reorganized LBI which would exclude Smith and Trachtenberg. Two hours later, Kevin telephoned, his voice betraying deep anger: ‘That memo must be withdrawn. It’s premature.’ During that short interval, Kevin had understood the implications for the empire’s survival of Trachtenberg’s removal.

In the course of successive meetings in late October and November, Tapley was convinced by Kevin and Donoughue that LBI would be reorganized. ‘We’ll get rid of the Max Factor,’ both pledged, referring to the negative influence of Robert Maxwell. Tapley was relieved. But in reality he had been sidelined. The Maxwells’ priority was to silence their critic while they sought cash from any source to sustain their increasing debts. In September Kevin had committed himself to his father’s scheme of arrangement. Searching through BIM’s monthly schedule of shares owned by the pension funds, he had noticed the name Euris, a French investment fund. Euris, he knew, did not issue share certificates. Instead, the only proof of ownership were the records held by the company’s secretary. Transfer of ownership was settled by a simple letter notifying a sale.

On 3 September 1990, Kevin wrote, as a director of BIM, to Euris’s company secretary instructing that 2.2 million shares worth £32 million had been ‘transferred’ from BIM to Pergamon Holdings, a transfer which contravened the trust deed. (The board minutes were signed by Kevin, Ian and Robert Maxwell, with Anselmini as a witness. BIM’s articles required two signatures for a transfer.) On the same day, Kevin pledged the shares to BNP, the French bank, as collateral for a private loan. He then kept silent about the transfer. Trevor Cook, BIM’s manager, was not told, and Euris remained listed on BIM’s schedule as a pension fund share. By any measure, it was unauthorized, but it was a mere curtain-raiser to the increasingly drastic measures undertaken by Kevin to raise cash during October.

His targets were two fund managers of pension fund shares. In October 1990, he asked the managers of Capel Cure Myers and Invesco MIM for the temporary return of shares owned by the pension funds for stock lending. On 8 October, Capel Cure, on Kevin’s instructions, sent shares worth £40 million for stock lending to Lehmans. Capel Cure’s covering letter explicitly informed the bank that the shares were owned by the Mirror Group Pension Scheme. The reason for their action, some suggest, was that an assistant director at Capel Cure appreciated that the pension fund shares were to be used as collateral for a loan rather than for stock lending and sought to protect his position.

The following day, 9 October 1990, Kevin and Cook, acting as BIM directors, instructed Invesco to send its pension fund portfolio worth £30 million to Lehmans. The letter, signed by Kevin on behalf of the Mirror Group Pension Scheme, assured Invesco that the shares would be used for normal stock lending and returned ‘within 30 days’. Lawrence Guest, a Mirror Group director and one of the fund’s trustees, was not told about the ‘stock lending’. He would only discover in November 1991. Initially, there was no reason for the other fund managers to suspect that Kevin’s instruction was not straightforward, but the arrangement did disturb Tim Daily, Invesco’s expert in stock lending. Daily, twenty-seven years old, was an ambitious, working-class trader born in Watford with just six O levels who unashamedly wanted ‘to taste the good things in life’. Hired in April 1990 to expand Invesco’s stock-lending business, he had recently been appointed the chairman of the International Stock Lending Association, the industry’s spokesman in dealing with both the media and the Bank of England. Among his targets for Invesco’s new stock-lending business were the Maxwell pension funds.

The news that Maxwell was intending to use a rival for stock lending was passed to Daily that same day, 9 October, in a panic telephone call from Peter Smith, his subordinate. Daily, in Naples, Florida attending a stock-lending conference, was chastened by the report. ‘It all sounds a little bit fishy,’ Smith told Daily, ‘and not quite as cut and dry as it seems.’ On hearing the news, he added, he had telephoned a friend at Lehmans and had been told that the portfolio was to be used not for stock lending but ‘purely as collateral for a loan’. Smith added that, to his surprise, Trachtenberg had also telephoned asking him not to speak to Lehmans. Daily decided to approach Mark Haas, the bearded and ambitious Lehmans securities executive responsible for negotiating the transaction with Kevin and Trachtenberg, who was also attending the conference in Florida.

Minutes later, Daily found Haas watching a game of pool. ‘Are you taking away our client for stock lending?’

‘No,’ replied Haas. ‘We’re doing a Treasury repo. Not stock lending. Maxwell is having trouble raising cash’ and was using pension fund assets. Haas knew that MCC, under pressure to repay debts, had asked Lehmans for a $15 million loan for one month. His superiors, after reading MCC’s accounts, had vetoed the idea out of fear of Maxwell’s ‘potential for manipulation [of] profits’ and because MCC’s accounts revealed assets of minus $2.2 billion because of the debts. Moreover, at Lehmans, the very nature of the transaction – whereby shares ‘borrowed’ by Kevin were exchanged for the final total of $83.9 million in cash and paid to Maxwell’s private company – enabled the bankers to understand precisely the unusual use that was being made of pension fund assets.

Haas did not reveal those details that day in Florida, but enough had been said to prompt Daily’s comment: ‘I don’t like the sound of it. It’s a bit dodgy.’

‘We haven’t had this conversation,’ replied Haas. ‘I know my half. You know your half. Together we know too much.’ Haas would deny this version of the conversation.

Daily ignored this advice and reported the conversation to Bob Southgate, his superior in London. Southgate’s reaction was, ‘It’s all very sensitive,’ referring not to Maxwell’s financial predicament, but to the fact that Maxwell owned a 20 per cent stake in Invesco MIM and was a friend of the fund’s chairman, Lord Stevens (moreover its president was Lord Rippon, a director of MCC). After a number of huddled conversations, Invesco’s managers agreed to accept Maxwell’s assurances.

In the event, the pension fund shares were exchanged with Lehmans for Treasury bills which were then cashed. The money was paid not to the pension funds but to LBI and then to Headington Hill Investments, Maxwell’s private company. The bankers’ apparent lack of concern that Maxwell might have been using pension fund shares to raise cash was reflected in their confused records. Haas was dealing with LBI, Maxwell’s private investment company, which allegedly was representing BIM, the pension fund managers. Yet in Lehmans’ records the depositor of the shares was recorded as ‘LBIIM’, a different entity, suggesting unusual carelessness by the bank.

Trevor Cook, meanwhile, was not only ignorant of the deal negotiated by Trachtenberg and Kevin with Lehmans, but when on 16 October Daily arrived at a Maxwell office in Shoe Lane to meet him and Trachtenberg, he remained unaware of the Invesco trader’s conversation with Haas. Daily had invited himself to present his expertise in stock lending. Towards the end of the meeting, Trachtenberg explained to Daily that LBI was paying 1.75 per cent for stock-lending fees. Although Daily realized that the figure was higher than normal, he said nothing. Cook also stayed silent: he knew that LBI’s fees might be high but he ‘had no point of reference’. Any doubts were offset by Donoughue’s presence within LBI. ‘I trusted Donoughue and he knew that we were stock lending the pension fund assets. I assumed it was all right,’ recalled Cook.

‘That was a load of rubbish,’ Daily said to his colleagues as they descended in the lift.

‘Don’t say anything here,’ replied one of the other occupants. ‘The lift’s probably bugged.’

Cramped into a small office on their return, Daily told his superiors, ‘It’s all wrong.’ The response was equivocal. To refuse to comply with their client’s request was out of the question, not least because Maxwell was a shareholder and a friend of Lord Stevens. So, on 19 October, after several telephone calls asking, ‘Is it all ready?’, Trachtenberg arrived in Invesco’s entrance hall and personally took the share certificates from Daily, signing a receipt. On one issue Trachtenberg was insistent: the transfer was temporary. The certificates were to be returned in thirty days.

To regularize the arrangement, Kevin and Robert Maxwell signed a contract. Kevin (on behalf of BIM) and his father (on behalf of the Robert Maxwell Group) agreed that RMG could borrow BIM’s stock. Although dated 1 October 1990, it appears to have been formulated at the end of 1990 to cover the Capel Cure and Invesco transactions. It allowed both Kevin and Trachtenberg to reinforce the claim they were making to Cook that pension fund assets were involved in stock lending. But Cook, although he was BIM’s manager, was not suspicious. After he had received a letter from Lehmans stating that the shares and Treasury bills ‘were held for your account’, he assumed that the pension funds were covered by genuine collateral of between 125 and 150 per cent. But he never actually saw any share certificates, nor did he ask to see anything. ‘I just got lists and letters,’ Cook later reflected ruefully, ‘from Trachtenberg on behalf of LBI.’ Everything, he believed, was held by the banks. He did not ask to see the Treasury bills nor did he realize that they had been cashed. ‘I should have checked the share certificates but I didn’t suspect anything. I was fooled.’

The deception was intentional. On returning to his office after meeting Daily, Trachtenberg had sent a revealing memo to Kevin about their arrangement: ‘I assured them [Tim Daily and colleagues] that LBI’s involvement was in a strictly advisory capacity, and that our [LBI’s] involvement in no way involved LBI utilizing stock in security transactions on its own behalf.’ The problem, he realized, was how to orchestrate ‘a clean transfer’ of the pension funds’ shares from BIM to the banks, concealing their true ownership. Kevin’s reply was not preserved.

At the end of this period of frantic activity, Kevin agreed over the weekend of 3 November to play poker with some friends in the City and host a firework party at Hailey, his home near Wallingford. It was a brief interlude before he secured the £50 million loan from Julie Maitland at Crédit Suisse and obtained the Berlitz share certificates.

THREE Hunting for Cash – 19 November 1990

On Monday, 19 November, Kevin flew to New York on the evening Concorde. As usual he stayed at the Carlyle, the choice of many international tycoons as Manhattan’s most discreet yet sumptuous hotel. After shuttling between seventeen meetings with Macmillan executives and bankers the following day, he slept overnight on a British Airways Jumbo back to London. He had every reason to feel satisfied. Everyone he had met had appeared reassured by his self-confident manner, his deep-voiced, decisive tone and his air of efficiency. None would have guessed that the polite, well-dressed Englishman was concealing near-bankruptcy. Punctually at 6.30 a.m. the Jumbo glided on to Heathrow’s runway, and Kevin separated himself from his fellow passengers to be whisked through the special customs facilities, before being helicoptered by Captain Cowley to Maxwell House in Holborn to begin the day meeting Larry Trachtenberg. The pace was unremitting.

Robert Maxwell was at that moment flying to Los Angeles. Since 12 November, the Chairman had been travelling across America in what he called a roadshow to launch the Central and Eastern European Fund, a banking venture concocted with Merrill Lynch to entice financial institutions into investing $250 million on the basis of his expertise in the former communist countries. To Maxwell, short of money yet eager to exert the influence of a billionaire, the Fund was a last effort to grasp large amounts of other people’s money to be used for his own benefit. Over several days, he met bankers, pension fund managers and corporation presidents in an attempt to persuade them to earmark funds. For those like Katherine Pelley, one of the banking aides in his retinue, the roadshow was becoming a harassing adventure. Regularly late to meetings and delivering lacklustre speeches, Maxwell was proving to be a ‘nightmare’, a liability rather than an asset to his own ambitions. The burden of his deception was sapping his self-confident assertions of his financial prowess. Dispirited, he returned to London for an MCC board meeting, which was to be held at 5 p.m. on 23 November.

Regardless of his perceived troubles and bad press, Robert Maxwell believed that he could still count upon the support and sympathy of the six non-family directors who, though acknowledging that he was a difficult man, believed in his genius. Besides the executive directors Jean-Pierre Anselmini, Ron Woods, Richard Baker and Basil Brookes, the young acting finance director recruited from Coopers in 1986, there were two older non-executive directors: Lord Rippon, the former Conservative minister who had negotiated Britain’s entry into the European Union, and Peter Laister, a former managing director of Thorn EMI with a fair reputation in the City.

For all of them, the DTI inspectors’ damning judgment in 1971 that Maxwell could not be ‘relied on to exercise proper stewardship of a publicly quoted company’ was ‘history’. All of them had witnessed the ‘City process’ and tended to feel contempt, even ‘disgust’, for the slickers’ ‘behaviour around the carcass’. Maxwell impressed them on several levels: as a polyglot at the centre of an extraordinary network of relations with world leaders; as a newspaper tycoon who had broken the trade unions; and as a superman able to revive dying companies. Accordingly they were prepared to allow the Chairman near-dictatorial powers.

Of course, these men were well rewarded, especially Rippon. As chairman of Brassey’s, the military publishers owned by Maxwell, he was paid $100,000 per annum, and he drew generous expenses. On one occasion, Maxwell simply wrote a cheque for £10,000 at his request. For his part, Maxwell admired Rippon’s transformation of Invesco MIM, but it was Rippon’s bank, the Robert Fraser Group, which gave him the greatest help. Through Robert Fraser, Maxwell had pumped into MCC and Pergamon Holdings some of the money taken from the pension funds, and had completed three property deals to pump profits into MCC which later investigation would reveal to be dubious. In 1989, no less than 33 per cent of MCC’s profits were ‘one-off’ transactions with Robert Fraser recorded just before the announcement of the interim profits. In 1990, 43 Per cent of the Group profits were one-offs with companies incorporated in Liechtenstein and the Isle of Man or with BIM and Robert Fraser. But although he could count upon Lord Rippon, Maxwell knew that there were tensions with the other directors. Anselmini, the proud French banker, did not appreciate the way the Publisher ignored his title as deputy chairman, and failed to consult him. A newspaper revelation that Maxwell, to boost MCC’s share price, had gambled on a put option with Goldman Sachs had alarmed him. ‘You’re not the regulator’ was Maxwell’s response, surprised that the Frenchman should choose to protest now, since the Publisher had bought a similar option from Goldman Sachs of 10 million MCC shares in March 1990 and another from BIT for £18.9 million.

‘I don’t understand,’ sighed Anselmini. ‘You do not do what you say or say what you do.’ Maxwell had nevertheless abruptly promised not to repeat the ploy.

When eight MCC directors met on 23 November (without Ian Maxwell), Robert Maxwell anticipated some disagreement but, given that around the table were gathered well-paid subordinates whose devotion and above all loyalty had hitherto been unconditional, he expected them to exercise a degree of reticence. All of them had, after all, witnessed how MCC’s profits had been maintained only by his skilful property deals and currency speculation – transactions which had attracted the critics’ scorn and, more recently, some suspicion, but they had provided the company’s only respite from commercial decline. Two items dominated their agenda that day: finalizing the interim accounts, and agreeing the interim dividend.

As always, Maxwell’s priority was to maximize the profits. Only high earnings would support MCC’s share price. Kevin naturally sided with his father, a stance also adopted by the company’s auditors present at the meeting. Both Neil Taberner (for MCC) and Peter Walsh (for RMG), the faithful and all-too-unquestioning accountants from Coopers, were content to be used by the Chairman to fulfil his puff which featured prominently in the partnership’s annual report: ‘Coopers always gives an immediate response and always provides what I want within my deadline.’ In earlier years, Reg Mogg, MCC’s previous finance director, had with Taberner’s help legally transformed the debt-laden company’s accounts so that they boasted profits. Not the least of his successes was persuading Taberner in 1990 that the value of MCC’s ‘intangibles’ (its goodwill and publishing rights) was £2.2 billion. Coopers were not only generous in their valuations but were allowing MCC to retain an ‘intangible’ on its balance sheet even after the sale of a subsidiary. One year later, other accountants valued the ‘intangibles’ at £300 million.

Ron Woods, the tax expert and MCC director, had already seen the in-house accountants’ preliminary treatment. Nearly all the proposed profits had been earned from foreign exchange speculation. Unlike the non-accountants, he noticed that the auditor had bowed to Maxwell’s pressure in allowing the foreign exchange profits to be placed above the line to boost overall profits, while camouflaging losses in the ‘transition account – reserves’. Taberner knew precisely what Maxwell expected from his accountant.

That creative treatment provoked no dissent. Instead, a row erupted over the proposed dividend. Maxwell wanted shareholders – of which he was by far the largest – to receive £44.5 million in cash. One consequence of Coopers’ treatment of MCC’s accounts, certified as ‘fair and true’ for the shareholders and Inland Revenue, was the concealment of the company’s net liabilities: Analysts would later discover that in 1989 the company’s real liabilities had been £684 million, in 1990 they had risen to £859.2 million and during 1991 they would zoom to £950.2 million. But the reality of those debts was not apparent in the published accounts. Anselmini, knowing the company’s precarious state, condemned the notion of a pay-out. He was supported by Richard Baker, the rough managing director. Although Baker’s office walls were covered with Pirelli calendars of semi-nude girls and although visitors had to endure his crude jokes, it was his integrity which had secured Maxwell’s original ‘war chest’ in 1988 to finance the Big One, the acquisition of Macmillan. Bankers trusted Baker, and ten banks had pledged £200 million each, an event celebrated with a champagne party on board the Lady Ghislaine. But in the years since then Baker’s loyalties had frayed. Now, for the first time, he opposed Maxwell’s demand for an increased dividend. The company’s finances, he argued, were too perilous. A lot of the published profits, he knew, were illusory and there was simply no cash to pay for a dividend. To Maxwell’s fury, he was supported by Woods.

After a thirty-minute explosion of emotion, Anselmini gave way, having been assured that Maxwell would take his dividend in shares. But in the vote Baker and Woods remained opposed, though they were outvoted by the other six directors. Over the following three days, Baker and Basil Brookes, the thirty-four-year-old finance director appointed at the board meeting on 23 November, argued for a compromise statement that ‘a satisfactory outcome for the year is dependent upon the disposals’. Much of the empire would need to be sold to raise money to repay the loans – a self-defeating strategy. Both men visited Kevin at home. Baker’s persistence had infuriated the Maxwells and, despite his loyal service, he was instantly excommunicated. He had little option but to take early retirement, allowing Kevin to inherit his powers. Robert Maxwell was delighted. Baker had been too straight. Whenever the Maxwell private companies had bought or sold something from MCC to boost profits, Baker had argued MCC’s case too strongly. A cash dividend would now be paid; and the accounts, without a caution, were approved. Anselmini did not protest. The empire took another lurch towards doom.

With that issue settled, at 9.30 a.m. on 26 November Maxwell flew by helicopter to Farnborough to board the Gulfstream for Vienna. As he gazed at the print-out of the day’s programme, his sense of his own importance was appreciably enhanced. He noted that Charlotte Thornton, his pretty new secretary (‘A diluted successor to Andrea Martin,’ commented Woods), had listed the telephone numbers, much as if he were a head of state, of the two Mercedes which would meet him at Vienna airport. He would be driven to the Imperial Hotel, the capital’s best, to dispense a succession of newspaper interviews before handing over a cheque for £15,000 to the director of the national library at a ceremony attended by Franz Vranitsky, the Austrian prime minister. Altogether, his profile would be raised in that small, former Nazi state.

The highlight of the visit was that evening’s dinner arranged by Ulrike Pöhl, the wife of Germany’s central banker. A private room had been reserved at the Steirer Eck, one of Vienna’s best restaurants, to entertain the Austrian prime minister and his wife. Although Betty was listed among the guests, Maxwell had not bothered to invite her. At the end of an enjoyable meal – it was especially agreeable for Maxwell, who had taken the opportunity to lecture the prime minister about the confidences shared with him by the world’s leaders – he pushed his plate back and announced, ‘Well, I’ve got to get to America.’ The admiring gaze of his hosts was like a tonic, dispelling any doubts: the Austrian politician could not claim to have an executive jet at his beck and call.

At ten o’clock that night, Maxwell boarded the Gulfstream. The divan bed was already prepared. An adventure movie was in the video machine. A bottle of Perrier and one of Dom Pérignon 1982 were ready to be opened, and because Maxwell enjoyed a second dinner the fridge was filled with food prepared by Martin Cheeseman. Clearance was given to Captain Hull to take off. After refuelling at Luton, the Gulfstream headed for Atlanta, Georgia, a ten-hour flight. As usual on the transatlantic flight, Maxwell swallowed a sleeping tablet and slumped into deep unconsciousness.

Awaiting him were endless meetings across the USA, in Florida, Illinois, Washington, New York and Minneapolis, to persuade more bankers and pension fund managers to invest in his Central and Eastern European Fund. Getting control of their money had become important to his survival, but to his irritation Merrill Lynch was failing to deliver eager investors. A telephone call to Kevin reconfirmed their precarious financial position. Supporting MCC’s share price was proving expensive: the £50 million loan from Crédit Suisse had been spent, as had the $84 million raised through Lehmans. Maxwell’s needs seemed limitless. He ignored any suggestion that his strategy was flawed, that he was spending too much to save the company and losing any chance of survival.

FOUR Misery – December 1990

The financial crisis was made worse by his loneliness. On 2 December, Maxwell awoke in the Halekuani Hotel in Hawaii. Anyone else welcomed at the airport by the presentation of garlands around his neck would have gazed at the blue Pacific and at the soft yellow sand and have marvelled at life in that paradise. Maxwell could contemplate only his imminent eight-hour flight to Tokyo, where he was to spend three days peddling his Fund to expressionless Japanese bankers and fund managers. No one cared how he felt. One message from London caused particular anxiety.

John Cowling had just arrived in Dorrington Street to carry out the audit of the 1990 accounts for BIM and the pension funds. A partner in Coopers since 1988, Cowling was accompanied by John Mellet and Clare Gardner. Since their completion of the 1989 accounts, much had changed and it was Maxwell’s fervent hope that those developments would remain concealed. But it was not long since he had praised Coopers for ‘always [providing] what I want within my deadline’, and the omens seemed favourable that he would receive the familiar service.

A tremor at the end of November when two IMRO officials had paid their first visit to BIM’s office had fortunately proved short lived. Although it was flagged as a ‘routine visit’, Cook reportedly was ‘in a bit of a flap’. Robert and Kevin Maxwell had beckoned him to the Chairman’s office at 4.30 p.m. on 21 November to offer reassurance. ‘There’s no need for any concern. Get Stuart Carson in to help,’ Maxwell had advised. LBI’s compliance officer was a lawyer recruited from Lautro, another government regulatory agency. Maxwell hoped that the inspectors could be steered in the right direction if they demanded sight of the pension funds’ share certificates. In the event, the Maxwells’ nonchalance infected Cook and he managed to greet the IMRO officers in an unconcerned manner. Just as the Maxwells anticipated, the bureaucrats proved to be incompetent. The two inspectors – described by both Highfield and Cook as ‘young and inexperienced’ – had stayed for one day. Their only recommendation was that BIM needed to improve its documentation. ‘A bit of an anti-climax,’ concluded Highfield.

Cowling’s visit, Maxwell feared, would be worse. There were good reasons for his concern. Since the last accounts, dated 30 June 1989 and covering the previous eighteen-month period, his private companies’ debt to BIM, despite the recent settlement, had risen to £40 million. Moreover, to any practised accountant, the pension funds’ involvement in Maxwell’s share sales on the eve of the financial year’s end would have suggested questionable window-dressing. Yet Cook’s fear that Cowling would complain about the delay in repaying the debt proved unfounded: he had underestimated Maxwell’s relationship with the partners at Coopers, whose tolerance, understanding and willingness to take the Publisher’s assurances on trust were a great comfort to him.

Taken together, Maxwell’s 400 companies were by far Coopers’ biggest clients, producing annual fees of £5 million. Although he occasionally feigned innocence about taxation, Maxwell possessed an astute understanding of accounts and accountants. Twenty-five years earlier, he had tyrannized John Biggs, the stuttering, alcoholic auditor of Pergamon, into approving his fictitious accounts and concealing the fraudulent management of his first public company. Such tactics were no longer appropriate. Instead, he resorted to a charm offensive, smothering with eyewash John Cowling, Neil Taberner, Stephen Wootten and Peter Walsh, all Coopers accountants responsible for different branches of the empire.

John Walsh had been auditing Maxwell’s companies since 1970 and prided himself as ‘one of the trusted old faces’. In 1991 Walsh explained in a self-congratulatory memo to his colleagues that Coopers’ close relationship with Maxwell was unusual since, though he had ‘used almost every lawyer, every broker and every merchant bank in London, he has been totally loyal to Coopers … because we stood by him in the 1970s when everyone else avoided him (National Westminster Bank is in a similar position)’.

Recognizing the importance of Maxwell’s accounts, Coopers had even established an office in nearby Plumtree Court from where they had easy and continuous access to the Maxwell finance departments. The accountants adopted a trusting approach towards the Maxwell empire – believing that it was the directors’ responsibility to compile the accounts and indicate any problems. ‘An auditor’, Walsh would fondly repeat, ‘is not like a ferret pointed at a rabbit warren just to see how many rabbits come out.’ Walsh would also defend the absence of any discussions between the Coopers auditors working for the empire’s different segments. Maxwell’s canny compartmentalization between MCC, RMG, BIM and many other companies was willingly self-imposed by Coopers upon themselves. ‘I never spoke to Neil Taberner,’ Walsh would admit. That self-denying ordinance was vital to the auditors’ subsequent claims that they had not known of the huge inter-company loans between Maxwell’s public and private companies, including BIM. ‘Auditors are not given crystal balls,’ argued Walsh, in support of his professions of ignorance. Responsibility for the accuracy of the accounts, the Coopers men endlessly repeated, rests with a company’s directors, and that was a responsibility which the Chairman was pleased to accept.

To aid him in that task, he looked out for those weak but ambitious Coopers employees who could be recruited to work directly for him. The presence within the empire of young men like Basil Brookes and Jonathan Ford, and retired senior auditors like David Corsan (who had previously audited the whole Maxwell empire), tempted by higher salaries, made that disingenuous eyewash easier to dispense inside the auditors’ headquarters. The beneficial result was that, consistently in previous years, the value of MCC’s assets and its profits had been wildly inflated. Maxwell’s £49 million losses after the 1987 crash were relegated to an obscure footnote; suspicious currency speculation featured as trading profits; while the valuation of ‘intangibles’ at £2.2 billion was eight times higher than their true value. Coopers’ annual blessing of Maxwell’s fabrications had allowed his regular boast about ‘record profits’ to pump up both MCC’s share price and his own self-esteem.

Pinpointing the chaos in BIM’s accounts should have been an uncomplicated task for Cowling. In 1989, an auditors’ report had mentioned that Maxwell appeared to control BIM – ‘a high-risk company easily influenced by senior management’ – and criticized the supervisory systems as ‘poor’. An internal Coopers memorandum about the pension funds’ investments highlighted the risks of stock lending and the funds’ growing stake in MCC, prompting the auditor’s comment that Maxwell’s management of the fund as his personal vehicle free of any independent, basic controls was ‘risky’. One year later, matters were made worse by the apparent confusion of information sent to Cook by Larry Trachtenberg. Although BIM’s investments, income and payments to pensioners had been systematically recorded, Cook complained to Cowling that he was ‘confused about the income from stock lending. We’re going backwards and forwards, and we’re getting contradictory information.’ He claimed to be puzzled because LBI had not submitted proper accounts to BIM. ‘Nothing they give us makes any sense,’ Cook told Cowling. ‘It’s all late, incomplete or wrong.’ Since Cowling was also LBI’s auditor, it seemed that he was ideally placed to unravel the confusion.

Cowling could be forgiven for thinking that Cook was foolish. After all, Cook had received regular statements from Trachtenberg but admitted not to have calculated BIM’s actual income. Moreover, he claimed to be baffled about the interest accruing to BIM because, to avoid handing over cash, Trachtenberg had told him that he was also investing the interest payments. In the event, Cowling did not criticize either Cook or Trachtenberg.

Imposing not so much a Chinese wall as a concrete one around himself, Cowling had not discussed his task with his Coopers colleagues working on other Maxwell companies’ accounts. Nevertheless, within days he noticed that pension fund money had ‘disappeared’ because the systems, controls and records of BIM and LBI were chaotic. He also discovered that important details about the stock lending were ‘unknown’.

When Maxwell returned to London in the early hours of 7 December, he could only hope that Cowling could be placated if he unearthed any discrepancies. His major concern was that Cowling would ask to see the actual share certificates rather than photocopies. Since many of them were held by the banks, that would pose a tricky problem. Maxwell’s first conversations with Kevin seemed encouraging. To comply with the law governing the formal submission of annual accounts, Cowling had agreed to sign BIM’s accounts immediately, although his work could only be completed over the following weeks.

Relieved by that outcome, in the run-up to the Christmas holidays Maxwell closeted himself with lawyers. Despite the millions spent in legal fees over the years, he had won few victories in the courts, yet his threats of litigation often served his purpose, silencing enemies and deterring creditors. Not surprisingly, his massive expenditure on lawyers galvanized most of the profession to offer him their services unconditionally. But, contrary to his practice with accountants and bankers, he made no effort to retain the services of the large, prestigious partnerships mushrooming around the City. Instead he sought individuals who could be relied upon to devote themselves – personally and professionally – more than wholeheartedly to his cause.

In-house he relied upon Oscar Beuselinck to manage his writs for defamation against the growing number of critics. Although the seventy-one-year-old solicitor had represented Private Eye against Maxwell in 1986, he had agreed to work for the Publisher at a salary twice as large as he had expected.

The second in-house lawyer was Debbie Maxwell. Preoccupied by the need to defend several writs against Maxwell for payment of millions of pounds in unpaid fees and damages for broken contracts, she had become renowned for asking her employer, ‘How shall I describe this: half full or half empty?’ At 10 a.m. on Sunday, 9 December, she was sat discussing a more serious problem with him. Increasingly her name was being used as MCC’s compliance officer, and in three memoranda she had warned the Chairman that his secret purchase of MCC shares broke company law, infringed stock exchange regulations and damaged the interests of the pension funds. Unable to persuade him to cease these transgressions, Debbie Maxwell resigned her compliance duties and was subsequently criticized for not revealing her knowledge to the statutory authorities – the police, IMRO, the Department of Trade and Industry or the stock exchange.

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.

Cowling’s questions raised doubts in Cook’s mind. Three days later, on 8 February, he met Maxwell and asked for assurances about the stock lending. Since the beginning in December 1988, over £200 million of pension fund shares had been passed over on Maxwell’s orders to Trachtenberg. ‘Everything’s fine,’ said BIM’s chairman, not revealing that at 3 p.m. that day Kevin would telephone Julie Maitland to ask for a further $3 million loan guaranteed as he knew by pension fund shares.

Cook’s sanguine response to this reassurance did not immediately placate Cowling. By mid-February, the auditor had become puzzled by Trachtenberg’s vague replies, especially after he had provided two different lists of the pension fund shares held by LBI. There were other good reasons for Cowling’s unease. He had not seen any written authorization for the stock lending from BIM’s directors; and there was a letter from Mark Haas of Lehmans confirming that the pension fund’s shares handed over by Invesco were held as ‘collateral for loans in connection with the stock-lending agreement’. (Haas would subsequently claim that either Trachtenberg or Cook had composed the letter.)

In an attempt to clarify his confusion, on 13 February Cowling listened to a telephone conversation between Cook and Trachtenberg. ‘Can you put the whole position in writing because it seems you’re doing collateral swaps which aren’t authorized?’ asked Cook. Trachtenberg’s replies clearly contradicted his earlier explanations. Talking about Lehmans, he actually mentioned ‘collateral swap’, a term which should have alarmed Cowling.

Although Trachtenberg did accurately say, ‘There was no stock-lending position with Lehmans on 5 April 1990,’ he confused the auditor by saying of the later agreement, ‘The Treasury bills are held as collateral for the stock’ for BIM’s account. Subsequently Cowling received a similar assurance from Mark Haas, who stated in a letter that the BIM shares were held as collateral under the stock-lending agreement. In fact, Haas knew this was not conventional stock lending, only pure borrowing against collateral.

By then, other matters should also have aroused the auditor’s suspicions: Maxwell had ‘invested’ £5 million of BIM’s money in the Robert Fraser Group, the private bank chaired by Lord Rippon; BIM had ‘deposited’ £69.7 million in cash with LBI; a Maxwell private company had ‘borrowed’ £37.6 million cash from the pension funds; and BIM’s stake in MCC had doubled from 13 to 25 million shares.

There was one simple chore which Cowling should have undertaken to complete his audit. The original certificates for all the shares managed by BIM ought to have been seen and ticked off the inventory. Cowling’s problem was that the certificates were scattered in more than one dozen places and in several countries. Instead of demanding sight of each certificate from Trachtenberg, he was content to be shown photocopies or to listen to the American’s oral explanation that the missing certificates would be produced in the future. ‘Don’t worry, it’s all part of the normal stock-lending arrangements,’ gabbled Trachtenberg, and the auditor was persuaded.

To prove the point, Cowling was shown certificates for 1 million shares in Banco Commercial Portugues. Although owned by BIM, Maxwell had already pledged the shares against a loan. Among other certificates promised was one for 12 million MCC shares ‘lent’ by BIM to LBI. Trachtenberg had pledged those shares with Goldman Sachs and, to cover that discrepancy, he offered a polite letter to Cowling simply stating that LBI ‘held’ the share certificate.

Cowling would return to Cook towards the middle of February: ‘I’ve received all the information I need from LBI. Everything’s fine.’ Since Cook was not an accountant but an administrator, he gladly accepted Cowling’s assurances. ‘It’s miraculous,’ thought Highfield. ‘They say there’s no problem any more.’ He reasoned that after all LBI was staffed by men – Tapley, Donoughue, Ford, Carson and Trachtenberg – of higher qualifications than himself.

Cowling’s only caveat was that he would send a letter to BIM listing the serious problems to be solved. There were, he would write, ‘control deficiencies and weaknesses’ in BIM and confusion because share certificates were kept in Various locations’. He noted a catalogue of errors in BIM’s accounting system and stated that ‘LBI’s systems had collapsed.’ His conclusion was that there was need for a substantive review, ‘due to lack of basic controls’. But he did certify that the pension funds possessed £792 million, adding that the interest earned from lending money to Maxwell was £0.5 million and that ‘this should please the pension fund’. The audit was completed. Maxwell’s special arrangements remained concealed.

Robert Maxwell greeted the news of Cowling’s self-deception by immersing himself among the famous and rich to discuss the world’s problems. Constant travel was not only a distraction from what he still believed were temporary difficulties but immunized him from reality. He flew to Davos in Switzerland to address the World Economic Leaders. After a dinner at the Fluela Hotel, where he reassured the chairman of Crédit Suisse of his empire’s well-being, he basked in the limelight of constant receptions and meals, happily anticipating his own lecture on ‘Acquiring Media in Eastern Europe’. Naturally, when he delivered the lecture, Maxwell did not confess that his own efforts in Berlin, Sofia, Prague, Zagreb and Moscow were proving expensively unprofitable. Instead he boasted about his close relationships with presidents and ministers across the continent, especially with Mikhail Gorbachev. That relationship, cemented in Minneapolis, Minnesota in June 1990 during their joint consecration of the $100 million Gorbachev Maxwell Institute, had propelled Maxwell’s self-esteem to new heights. Although he had unfortunately forgotten to contribute his promised $50 million towards the institute, founded with the lofty intention of uniting the world’s scientists, the pictures and soundbites of Gorbachev praising Maxwell and warmly shaking his hand had been profitably flashed by satellite around the globe.

That impression of influence was the reason for the request by Yitzhak Shamir, Israel’s prime minister, for Maxwell to visit Jerusalem on 12 February. Shamir needed Maxwell’s help in passing a message to Gorbachev about the danger posed by Iraq should the war with Kuwait spread to Israel. The proximity to power and his importance in Israel, where every minister made himself available, gave Maxwell special pleasure. At the end of twenty-four hours of meetings in Jerusalem he flew on to Zagreb to meet Rudi Perpich, in order to finalize preparations for Maxwell’s hoped-for television and newspaper empire in Croatia. Perpich, hired as Croatia’s lobbyist after his defeat in the Minnesota elections, knew how to impress Maxwell. Lunch had been arranged with President Tudjman to celebrate the signing of letters of intent, an encounter which took place on former President Tito’s Mediterranean island, in the breathtaking villa compound. Perpich watched Maxwell’s spirits rise as he savoured the treatment normally accorded to heads of state. By the second day, Perpich was impressed to find that the visitor had, within his first twenty-four hours on the island, learnt sufficient Croatian to speak with the president without an interpreter. On their return flight to London, for Perpich’s benefit Maxwell reflected at length upon his own glory, ignoring the cost of flying 6,000 miles to earn nothing. At £3,500 per hour, the Gulfstream’s journey cost over £90,000 – £50,000 for the flight plus £42,815 for insurance in a war zone.

Maxwell’s distance from reality struck Rupert Murdoch, who had at last fulfilled a long-standing and much postponed visit on 11 February. ‘We are two big publishers,’ Maxwell had boomed on the telephone, ‘and we should talk.’ Murdoch’s secretary had taken the precaution of warning Maxwell that her employer could not be kept waiting and that he had precisely forty minutes before the next appointment. Their recent but rare encounters, thought Murdoch as he ascended to the ninth floor of Maxwell House, had invariably been characterized by Maxwell’s bombast and Murdoch’s teasing response. Ever since he had outwitted Maxwell in 1969 to win the News of the World, Murdoch’s capacity to irritate him had grown.

At ten minutes past four, five minutes into their meeting, Murdoch’s impatience with Maxwell was turning into contempt. With few pauses for breath, Maxwell was boasting about his worldwide diplomacy, especially his intimate relations with the Kremlin and with the leaders of Israel. His self-indulgence had bemused and then silenced his visitor. At the end of forty minutes, Murdoch asked: is there anything else we need to talk about?’

‘No,’ replied Maxwell with a satisfied grin. In his opinion, he had proved his importance to his rival.

As Murdoch descended to the street, he exclaimed, ‘What was all that about? He’s ludicrous.’

Even for Maxwell, the glow was brief. Five days later, at seven o’clock on the morning of 16 February, he was once more sitting in his kitchen, switching television channels while George Wheeler applied L’Oréal to his hair. The Gulf war, one month after the first Allied attacks, dominated the airwaves, especially on Murdoch’s Sky channel. Once again, Maxwell was morose. The previous evening, after landing by helicopter on the roof, he had deliberately stayed away from the cocktail party to mark Richard Baker’s retirement as managing director of MCC: disloyalty was unforgivable. He would also ignore the invitation to Andrew Lloyd Webber’s Berkshire estate that evening to celebrate the composer’s wedding. He struck that idea out of his mind. Betty could go alone. Maxwell’s thoughts were on his journey the following day to Istanbul to meet the president of Turkey. The $40,000 flight would allow him to speak to the president about the country’s participation in the Gulf war for one hour before returning home for dinner with President Zhelev of Bulgaria.

Maxwell’s interest in Bulgaria, that irrelevant and impoverished Balkan people’s republic, was irrational. Although he confided to Sir John Morgan, a former British ambassador who had joined his staff, that he felt sentimental about the country which had helped him during his escape from the Nazis in 1940, his investments in a school for business management, a newspaper, a television station, a hotel chain and a bank were costing millions without any chance of profits. Ognian Doynov, his Bulgarian adviser and a disgraced former member of the Politburo who had replaced Morgan, appeared to some to be encouraging Maxwell’s waste of money. Paid £110,000 annually plus a motor car and free company flat, Doynov could not, however, be blamed for Maxwell’s waning interest in his expensive fantasy. ‘The Bulgarians’, noted Brian Cole, Maxwell’s fixer in that country, ‘did not trust Maxwell. They just wanted his money.’ Among those travelling to Sofia as part of the team to invest MCC’s money was Helen Liddell, a future Labour member of parliament, employed as director of personnel and public affairs at the Scottish Daily Record, part of Mirror Group Newspapers. Maxwell, with Liddell in attendance, paid out millions but received little more than a royal welcome in return.

Maxwell’s reveries about international stardom were disturbed by Kevin, who was about to fly with Anselmini to Zurich on a mission to reassure the bankers that new anxieties about the empire were groundless. Kevin’s solution was radical. More of the empire needed to be sold, he urged, despite the poor prices they might earn. The recent sale of their shares in TFI, the French television station, had prompted, a temporary rise in MCC’s share price – the market had not realized that some of the shares were in fact owned by the Maxwell pension funds. More sales were needed. His father agreed and added another ploy: ‘We’ll have to buy more shares.’ By 19 February, Maxwell officially owned 68.1 per cent of MCC, an increase of about 5 per cent over three months. A genuine market for the shares had practically ceased to exist.

Among those scenting a profit from the dismantlement of the empire was Robert Pirie, the Rothschild Inc. banker blamed by many for his part in the crisis after he had advised on the $2.6 billion purchase of Macmillan. Although Maxwell had insisted in the glory hours of winning the battle that he would never sell any Macmillan asset, the American publisher’s break-up was inevitable. He had begun selling Macmillan assets in December 1989, although the $131 million he received in a public offering for 44 per cent of Berlitz had been a disappointment. This remedy in any case bore a sting: each sale after the Berlitz disposal would attract tax, reducing the proceeds.

On a recent Saturday morning, Pirie had drunk coffee with Maxwell in London. ‘A client wants to buy Pergamon Press,’ he smiled, asking the Publisher whether he would sell.

‘Yes,’ said Maxwell, agreeing that Rothschilds could investigate Pergamon’s accounts on behalf of their client. But before the bank completed their investigation Maxwell told the banker that he was out of the running. The sale of Maxwell’s jewel, the foundation of his fortune, was already under way – codenamed ‘Project Tokyo’ – convincing the dispirited founder of the empire that it was time to contemplate retirement. The purchaser was Elsevier, a Dutch competitor of Pergamon.

The arguments seemed incontrovertible. MCC was suffering from the ‘Max Factor’: his own presence was devaluing his company’s value. Recent resignations had compounded his troubles, and window-dressing was no longer a sufficient cure. Only his retirement would improve the image and the share price.

Kevin’s proposed successor as MCC chairman was Peter Walker, the Conservative member of parliament and former cabinet minister who had earned his millions in the 1960s with Jim Slater. Their controversial partnership had introduced a new era of unit trust investments in Britain, only to culminate in disaster and scandal long after Walker had departed. Walker, however, had secured his fortune and went on to become a successful politician.

The idea of recruiting Walker had first been mooted by Sir Michael Richardson, MCC’s new stockbroker and the chairman of Smith New Court, which also employed Walker. Richardson, who had willingly accepted MCC as a new client after Maxwell had dismissed Laing & Cruickshank for failing to puff his shares, had first dealt with Maxwell twenty-five years before, when he had floated Pergamon shares on the stock exchange. In the decade after the Pergamon scandal in 1969, he had enjoyed only occasional contact with his erstwhile client, but that changed during the 1980s with Maxwell’s resurrection. During those boom years Richardson had established himself in the City’s higher echelons, reputedly becoming close to Margaret Thatcher, and switching to N.M. Rothschild, the bankers, where he earned a fortune. Like so many in the Square Mile, he wanted to believe, when MCC became a client in 1989, that Maxwell was ‘squeaky-clean’. Sensitive, obliging and knighted for his polished performance in the City, Richardson would plead gullibility in the face of Maxwell’s self-salesmanship, coupled with his promise of enormous fees. In recognition of that special relationship, Richardson had given the speech of thanks in 1988 at Maxwell’s grandiose sixty-fifth birthday party for 500 of the great and the good in Oxford – it was ‘the party of the decade’, Richardson had declared extravagantly, before claiming that their relationship with Bob had ‘enriched’ all his guests’ lives.

Peter Walker’s introduction to the Maxwells was undertaken by Richardson, whose admiration for the politician, as for Maxwell, was unconditional: ‘He’s as tough as they come.’ The result had been an invitation for Kevin to dine, on 21 November 1990, at Walker’s home in Cowley Street, Westminster. That evening, Kevin had propositioned the politician to become MCC’s chairman. The notion appealed to Kevin because, as he observed his father’s increasingly erratic performance, he had, with his mother’s encouragement, developed the desire to run the whole show himself. Walker was seriously interested. The two men had found they had enough in common: lean, mean, ambitious, self-admiring and brutally self-interested.

Three months later, at nine o’clock on 12 February 1991, Richardson and Walker visited Robert Maxwell to discuss the terms for what Sir Michael called ‘an ideal solution’. The outline was blessed by Maxwell and, over lunch two days later, Kevin and Walker settled more details. To Kevin, one of the empire’s problems seemed to have been resolved. Walker would be paid £100,000 per year and would, in addition, benefit from the executives’ ‘incentive’ scheme. He was promised, over the following three years, 605,380 MCC shares in three instalments, and he would receive them free. At that date the shares were worth £1,350,000.

Kevin’s thirty-second birthday fell on 20 February. As a treat, he chartered a Falcon jet and invited three other couples to fly at 7.30 in the morning from Heathrow to Venice for lunch, staying overnight at the Pensione Accademia. The cost could be charged to the company because he would briefly attend a board meeting of Panini, a sticker manufacturer which his father had bought in an expansionary fit and which was losing money.

While his son took a break, Robert Maxwell flew to the American southern states, to relaunch his Central European Fund. Within two days he had tired of the seven-day programme, which was costing £140,000 and flew instead to Miami to inspect the Lady Ghislaine after her repairs. Once there, he decided that the new captain was unsuitable. Summoned to the bridge, the American seafarer was fired for dereliction of duty: he and the first officer had been absent from the boat shortly after Maxwell arrived.

Adding to the army of those dismissed caused Maxwell no concern. Once he had tired of people, their departure was convenient. No one, he believed, other than himself, was entitled to any security of employment, an opinion which he probably did not discuss over lunch with Norman Lamont at 11 Downing Street on 27 February – a meeting which the new chancellor of the exchequer could not subsequently find in his diary.

SIX Vanity – March 1991

A night-time telephone call from New York on 5 March 1991 pushed Maxwell further into his indulgent fantasy, sending him off on an adventure that would dangerously compound his plight. The caller was Sidney Gruson, a director of Rothschild Inc. and formerly a renowned journalist and editor of the New York Times. Ever since the Macmillan deal, which had netted Rothschilds $17 million in fees (albeit extracted from MCC only after substantial pressure), Gruson had known that Maxwell was ‘fishing for an American newspaper’. At one time, Gruson had started negotiations with the Reverend Sun Myung Moon (founder of the Unification Church, or Moonies) to buy the Washington Times and had flown to London. Going straight to Maxwell’s office from Heathrow, he was greeted by the Publisher’s then personal assistant Andrea Martin: ‘I’m afraid Mr Maxwell cannot see you.’

‘That’s not important,’ replied Gruson. ‘All I want is a men’s room.’

When he emerged, relieved but anticipating either a long wait or a swift return to New York, he found Maxwell in his socks anxiously searching for him. That was Maxwell’s charm – so different from Kevin, characterized by Gruson as ‘an unmitigated shit without his father’s flair’. Plans were completed for the two men to fly to South Korea, the Reverend Moon’s homeland, but the proposed deal collapsed.

Next Gruson had suggested a bid for the National Enquirer, a sensation-seeking tabloid. A team of Maxwell’s ‘experts’ toured the newspaper’s Florida offices and discussed the project at length, only for Maxwell to baulk at the price – in retrospect a missed opportunity, for the profits were enormous. Gruson’s next proposal, the purchase of the New York Daily News, was different. One of three tabloids in New York, the News in its heyday was the nation’s largest daily with a circulation of 2 million. But in March 1991 its staff had been on strike for nearly five months. Although published and sold throughout the dispute by non-unionists, its circulation had collapsed to 300,000 and its advertising revenue had practically disappeared, aggravating its accumulated losses since 1980 of $250 million.

The Tribune company of Chicago, owners of the Daily News, had adopted abrasive tactics which had in Chicago successfully broken the unions’ power. But in New York politicians and even the police, guided by self-interest, had supported the strikers. ‘Stay strong,’ Governor Mario Cuomo urged strikers, who had been burning delivery trucks and intimidating non-strikers. ‘You’re fighting for all of us.’ The problem had been made worse by the naivety of the Tribune company, whose senior executives in Chicago could not understand the ruthless competitiveness of New York’s Jews and mobsters and ignored the reality that New York City was not a suitable location for printing newspapers. Unable to cope with the violence and the daily losses of $700,000, the company’s management had threatened that unless the strike ended by 14 March the newspaper would be closed permanently. Closure, however, would cost an estimated $100 million in redundancy payoffs to the workers.

The Daily News was suffering an illness which Maxwell believed he could cure: overmanning by a rebellious and corrupt labour force, crippling restrictive practices, uncontrolled expenditure, antiquated print machinery and weak management. Over the previous years, he had stayed in contact with Jim Hoge, the News’s erudite and handsome publisher and president, who counted Henry Kissinger among his friends and owned a fashionable Manhattan address. From time to time, Maxwell or Sidney Gruson would discreetly telephone Hoge to ask if the paper was for sale. Politely Hoge would decline their offer.

That changed when the Tribune company issued its ultimatum to the unions and started to look for buyers. Maxwell declared his interest, but told Hoge that he refused to become involved in a competition. His participation would depend upon other bidders leaving the arena. ‘He played it according to Hoyle, the whole way’, remarked Hoge, comparing Maxwell to the bridge master. On 5 March, Gruson gave Maxwell the all-clear. The Tribune company had offered to pay Maxwell $60 million if he took over the liability within ten days. On the same day, Hoge told George McDonald, coordinator of the nine trade unions involved, to telephone Maxwell in London. McDonald, a generous-minded Democrat stalwart, knew that his call was crucial. Without any competing bidders, the newspaper’s existence depended upon Maxwell’s decision. Even McDonald, a seasoned fighter, was nervous when he made that night-time call. Maxwell’s position was potentially powerful and the unionist’s weak. But McDonald’s fears soon dissolved. ‘Do you think it’s worth my while to come?’ was Maxwell’s surprisingly meek response.

‘We’ll give you concessions,’ answered McDonald. Ten minutes later he felt he had achieved more with Maxwell than he had in two years with the Tribune group. Maxwell, he sensed, was hooked. ‘You know,’ he later reflected in his strong New York accent, ‘owning the Daily News is like a visiting card for sheikhs, kings and queens. It opens the door for people and I guessed he wanted it that bad. He could taste it.’

Bestriding an apparently irreconcilable dispute was honey to Maxwell. Not since he had defeated the Mirror Group’s unionists during the 1980s had such an opportunity arisen, and it was in the same city where Rupert Murdoch had lost a fortune before abandoning his attempt to modernize another tabloid, the Post. Nevertheless, a more rational man, confronting such massive and unresolved problems as Maxwell was, might have shied away from new time-consuming tasks at that stage. Maxwell, however, saw the Daily News not as a distraction from his other problems but as a solution to them.

Fresh from plotting his new empire in Eastern Europe (he had flown for a night to Berlin), he began discussing with Ian McIntosh, of the British bank Samuel Montagu, the sale of 49 per cent of Mirror Group Newspapers, insisting that he should receive £500 million in cash. He desperately needed money and hoped that he might raise a better price selling shares in New York. Unfortunately, however, despite his acquisition of Macmillan, he was unknown to American investors. This weakness was mentioned by Charlie McVeigh of Salomon Brothers, chosen after a beauty parade as the project’s New York brokers for the flotation. McVeigh, a ‘handsome goy’, employed as much for his charm as for his talent, was accompanied by Nancy Peretzman, a stylishly dressed, tough investment banker who had caught Maxwell’s eye when she thwarted his bid in 1986 to buy the magazine Scientific American. Together they had stressed the Publisher’s need to overcome his anonymity in Wall Street. Over twenty-four hours, Maxwell calculated that buying the Daily News could solve several problems.

After an emergency session with George Wheeler – Maxwell had spotted a single grey root – he boarded the Gulfstream at six o’clock on Wednesday, 6 March at Farnborough to fly to Whiteplains, New York. His headquarters would be the Waldorf Astoria in Park Avenue rather than the Helmsley Palace on Madison Avenue. During his last visit to the Helmsley there had been a row. His special telephone fittings in the three floors of the presidential suite had been removed by the US Secret Service when the rooms had been occupied by President Bush, and they had not been replaced. Maxwell had exploded, refused to pay his bill and vowed never to return.

As he arrived at the Waldorf more flamboyant than ever, no one could have guessed his financial predicament. Even Maxwell had probably forgotten it somewhere across the Atlantic. To those whom he met over the following three weeks he was ‘Mr $4.4 billion’, a conjured estimate of his wealth. The combination of money and power attracted Americans, most importantly Charles Brombach, the Tribune’s president. Charming Brombach, who had so misjudged New York’s unions, was not a problem for Maxwell. In a pattern which he had repeated on hundreds of previous occasions, he pulled out a copy of his own biography written by Joe Haines, the idolizing Daily Mirror columnist, from the piles which were always stored on his Gulfstream, on his yacht and even in his hotel suite, and presented it as his visiting card, just as he presented the same volume to the heads of every nation which he visited. Unlike the heads of state, the Chicago Brahmin actually read the hagiography and was convinced by its portrait of ‘a great family man, a brilliant entrepreneur and a brave soldier who could bring the unions to heel’. Brombach understood the difference between his own company and Maxwell’s. ‘We were looking at a fifty-year investment. He was sixty-seven years old and wanted to enjoy a piece of his lifetime’s ambition.’ It would be another vanity purchase.

The public announcement of Maxwell’s interest preceded his arrival in New York. ‘I’m negotiating to save the newspaper,’ he boomed soon after touch-down. Although there were only nine days left in which to finalize a deal, he threatened that the unions had just five, until 11 March, to capitulate to his demands. The following morning he met McDonald on the tenth floor of Macmillan’s Manhattan offices. The union leader had already said, ‘Maxwell will not be granted “management rights” but we will of course consider any demands he makes.’ The hint of concessions, albeit limited (the unions were determined to deny the aspiring proprietor the absolute power of hiring and firing), had been music to Maxwell, who had demanded that 800 of the 2,300 employees be dismissed but had rashly conceded, ‘I’m not asking for “management rights”.’

At the meeting, McDonald noticed another sign of weakness when Maxwell announced, ‘I want the paper.’ True to form, their conversation was marked by the tycoon’s particular charm and cordiality, precisely what McDonald had been warned about by a British trade union leader: ‘He’s a scoundrel. Get everything down on paper. He charms the birds off the trees and then shoots them.’ McDonald knew that he had a deal if all nine unions on the paper gave a few concessions for the redundancies which the Tribune company was funding.

The negotiations followed Maxwell’s favoured pattern. Each union was given its own office so that he could shuttle between the fiefs, playing upon old rivalries. This kind of theatre gave him the opportunity to shine – as a printer, a publisher and a professional. ‘I know newspapers and trade unions better than anyone else,’ he told Robert Pirie, once again advising on behalf of Rothschild Inc. ‘Leave the negotiations to me.’ The banker watched Maxwell and Charlie Wilson, quickly flown from London, moving from office to office in a punishing schedule saying ‘yes and no often to things they didn’t understand’.

‘I bet Murdoch couldn’t beat this,’ smirked Maxwell to Hoge for the umpteenth time.

‘These are the concessions you need from the unions to make profits,’ warned Hoge. But Maxwell ignored the advice. ‘He doesn’t analyse,’ grimaced Hoge. ‘He wants the newspaper.’

Maxwell wanted the publicity just as much. Television camera crews and journalists were encouraged to camp in the Macmillan building to await appearances and pronouncements. ‘The progress made was terrific,’ proclaimed a grinning McDonald after the first day. The crisis hit at the weekend when, inevitably, Maxwell reneged on his earlier promises. He said after all that he wanted the ‘management rights’ which the unions had adamantly refused to concede. It was a good moment for Maxwell to play his ace. ‘I’m going back to London now,’ he told the startled negotiators on Saturday evening, 9 March. As he passed through the waiting journalists his parting judgment was intentionally ominous: ‘I’m not so optimistic.’ He added, ‘When I pass a belt, I can’t resist hitting below it.’ This was vintage Maxwell, exhibiting the qualities which a decade earlier had humbled Britain’s print unions.

Yet his return to London on Saturday night was not really an example of astute tactics. Rather, it was under the orders of Kevin. Maxwell was obliged, said his son, to attend Betty’s seventieth birthday party. For weeks his diary had included the engagement, embellished with an instruction in capitals to ‘KEEP FREE’. He had already missed the family dinner that evening in Oxford.

One hundred and fifty guests had been invited to ‘Betty Maxwell’s Special Birthday’ in the Dorchester Hotel’s Orchid Room. Included among the throng were the Duke of Bedford and Lords Forte, Sieff, Stevens, Weidenfeld and Young. Other well-known City celebrities were Eric Sheinberg, Richard Branson and Sirs Kit McMahon, Alastair Morton, Frank Roberts and Michael Richardson. Among the more controversial guests were Jean Baddeley, Sir Edward du Cann, Lady Duncan-Sandys, Vivien Duffield, Joe Haines, Lady Porter and Gerald Ronson. The most expensive guest was Boris Pankin, then the Soviet ambassador in Prague. His account for staying overnight at the hotel, paid by MCC, would amount to £2,011.

The family had attempted to inject humour into the celebration, although others would remark on the gauche taste. Each of the ten tables was named after one of the houses inhabited by the Maxwells in London, Oxford and France, and not forgetting the Lady Ghislaine. The main course was Lamb Meynard (Betty’s maiden name) served with Légumes du Maurier (Maxwell’s adopted name when he met Betty). The wines, costing £95 per bottle, were grand cru. The £250,000 dinner, to be paid for by MCC, was certain to be memorable – but not in the manner Betty’s children had intended.

Arriving late, Maxwell appeared distinctly uncomfortable. As he mingled with his guests, he made little effort to pretend he was enjoying the occasion. His presents to Betty – jewellery and an elegantly bound book describing their life – had been arranged without his knowledge by someone else. After picking at his food, constantly glancing at his watch and ignoring his wife, Maxwell rose. While his guests were still eating, Maxwell began uttering a short speech about his negotiations in New York, practically forgetting his wife. ‘I’ve now got to leave for New York,’ he ended, already walking towards the door, abandoning his guests and family with their forks in mid-air and their mouths open in astonishment. With barely a farewell, he walked through the exit. He would neither wait for the dance nor see the midnight trumpet fanfare with the champagne toast. His wife could cut her birthday cake without him. She could make her own speech without him. He did not care that she was upset. Betty was his doormat. And she would sleep the night in the hotel – she was not welcome in his penthouse.

Outside, in Park Lane, Maxwell fumed, not about the wretched affair he had left behind but about his temporary chauffeur. He needed to reach the Battersea heliport before it closed and had no confidence in the man. Cursing, he abandoned the hapless chauffeur on the pavement, heaved himself into the driving seat and sped furiously towards the river. Within the hour he was flying back to New York. The thought that he could have flown on Concorde the following morning and so not have missed anything did not occur to him.

During that seven-hour flight he could muse on his new adventure. Owning the newspaper would be compensation for other recently failed ambitions. He had considered buying Paramount Pictures, and one year before had even bid for Sears Tower in Chicago. After a weekend’s negotiation, it had become clear that his sole interest was in securing a name-change for one of the world’s tallest buildings. ‘If I buy this,’ he had said, ‘it must be a condition that it will be renamed Maxwell Towers.’ Shortage of money had eventually curtailed the negotiations. But this time he would succeed. Here was a deal made in heaven: he would acquire a newspaper, and not only for nothing – he would actually be paid for assuming the ownership. He knew he would still be losing $1 million every week thereafter but the prize, the fame and $60 million in cash was too great to ignore. He needed that money badly even if he would soon need to pay it to the print workers.

During his absence, Charlie Wilson had continued the negotiations, alleviating fears that Maxwell might back out. They’re rewriting what we don’t like,’ McDonald reported to his colleagues. Maxwell’s bluff had been called when the union leader had telephoned London: ‘Come back. We’re still talking.’

Maxwell’s eagerness disturbed Hoge. ‘You’re giving too much away,’ he warned. ‘You’re throwing away money on overtime. If you don’t fight hard now, you’ll lose.’

Maxwell was uninterested. ‘Yes, yes,’ he smirked condescendingly. ‘Don’t worry. I know my business.’ He would renegotiate later, he reckoned. Getting the newspaper was all that mattered.

By then, gauging precisely how to impress New York, Maxwell had ordered the Lady Ghislaine to speed from Miami and moor on the marina by New York’s 34th Street, not far from the United Nations building. Ranked as he was by Forbes magazine as Britain’s sixth richest citizen personally worth £1.2 billion, his yacht – like his Oxford mansion – confirmed that Maxwell ‘lived like a king with kings’. In this floating headquarters, Maxwell dreamt of entertaining the emperors of America’s media: men like Steve Ross, Larry Tisch and Ochs Sulzberger. In the event his first guest on board was Jim Hoge, the News’s publisher and president. ‘I am going to buy your newspaper,’ boomed Maxwell standing in stockinged feet to protect the thick-pile white carpet. ‘A whore’s rug,’ mused Hoge, who was nevertheless, like even the most hard-boiled New Yorkers, impressed by the vessel. ‘Maxwell’s walk-out didn’t work,’ he later observed. The Publisher would do anything to get the paper. The unions knew that he wouldn’t walk away.

On Monday morning, 11 March, the day of his self-imposed deadline, Maxwell sat across the negotiating table from Steve Ratner of Lazards, who had vouched to the Tribune company for his probity after consulting Bob Pirie of Rothschilds. In the Publisher’s absence they had been negotiating the Tribune’s payment to him. Pirie’s demands, made amid paroxysms of emotion, had bounced off Ratner’s array of cold calculations. ‘We want $70 million,’ burbled Pirie. ‘No way. $65 million is final,’ replied Ratner, knowing full well that the Tribune would indeed pay the extra $5 million to clinch a sale. Maxwell agreed to extend the deadline. Two days later, despite his passionate rhetoric, Pirie surrendered. Maxwell always demanded sycophants as advisers, and Pirie, keen to remain on the gravy train, failed to restrain his client’s own excitement. Ratner and the Tribune executives smiled at Pirie’s failure to get the last $5 million. Fed by his regular walks through the Macmillan lobby, surrounded by eager journalists and waving television cameras, Maxwell became infected by his own prominence and gradually lost the freedom to say the deal was off. The deal with the Tribune was only half the battle. Next, he needed to conclude the employment contracts with the trade unions.

At 11 p.m. on the 13th as Maxwell sat exhausted on the Lady Ghislaine drinking, unusually for him, vodka and orange, McDonald rang. ‘If we don’t sign tonight,’ he said, ‘it’s all off.’

‘Come down,’ said Maxwell, visibly not at his best when McDonald walked shoeless into the state room. For once the Publisher showed no appetite for attempting a last squeeze of the lemon. Thirty minutes later he clinched a deal which supposedly saved $72 million a year on costs. But he lost on critical issues. It was, McDonald would admit, ‘not the best he could have won. Maxwell could have got more concessions. We weren’t hurt as much as we might have been.’

Ratner was less diplomatic: ‘He was so arrogant and unreceptive to advice. He could have got a much better deal if he had driven harder. He lost tens of millions.’

‘We’re in danger of soon making a profit,’ Maxwell said with a smile as he approached waiting newsmen in the lobby of the Daily News building on 42nd Street. His red bowtie glowed incongruously below the plebeian blue Daily News baseball cap, artfully jammed on to his head. In classic Maxwell-speak, he announced a deal which was ‘historical and unprecedented’. Watching from the side as Maxwell basked in the publicity, Hoge understood the new owner’s motives as he stood amid cheering and weeping News employees. Maxwell then led the jubilant, ever growing throng towards the printing presses. The headline was already set. ‘Roll ‘Em!’ screamed his newest acquisition. As, with a great fanfare, he pressed the button to print 1 million copies, the headline was changed to ‘Cap’n Bob bites the Big Apple’. They were genuinely dancing in 42nd Street that night – on the pavements, in the road itself and on the delivery trucks. ‘Let’s see if Murdoch can beat this,’ shouted Maxwell, enraptured by the enthusiasm.

With the cheers still ringing, he was next led along Third Avenue by Pirie to Mr Fu’s, the ‘best Chinese restaurant in town’. As he sat down to spicy fish, John Lindsay, a former city mayor, led the applause for the man who had saved the News.

By daybreak, Maxwell was the news. ‘Brit saves Daily News’, blared a rival’s headline as the Great Saviour allowed himself to be sucked into a rapacious publicity machine. Every television and radio station beamed his voice across the city as he declared his love for New York, just as on earlier occasions he had expressed his love for Holland, Canada, Russia and Israel. Over the following six months, he pledged, he would remain as a ‘hands-on’ publisher. Maxwell, the star, was surrounded by genuine admirers. It was a glorious moment for him.

The previous night, John Campi, the newspaper’s energetic publicity director, had told Maxwell, ‘I want you at nine a.m. at the News stand outside 42nd Street. I’ll collect you from the boat. If you don’t turn up for this, the press will never show up again.’ With unusual punctuality, the Publisher arrived, donned a News hat once again and played to the hundreds who appeared. ‘Go, Maxwell!’ they yelled as autograph hunters thrust newspapers under his nose and women begged to get near the city’s latest hero. ‘I’ve been with celebrities all my life,’ thought Campi, ‘but this is big. He’s the biggest ticket.’

New Yorkers are not easily impressed, yet few remained unswayed by the Briton’s style. Living on board the Lady Ghislaine, Maxwell was repeatedly featured on television news programmes in whatever pose he desired: the mega-tycoon, interrupted by phone calls, receiving a parade of shoeless guests in the splendid state room bedecked with photographs of himself greeting world leaders. As the city bosses paid their respects, he was not averse to comparisons with Randolph Hearst. His presence was felt, and nowhere was it bigger than on his own newspaper’s front page, where – in all seriousness – he declared himself to be ‘a peacemaker’.

Once back inside the News building, the returning strikers discovered that the joviality was strictly confined to the streets outside. Lex Maxwelliana now ruled. Telephone operators were cursed for failing to man the switchboard twenty-four hours a day. Others were cursed for failing to leave their posts and greet their new employer. Among the first to be fired were 130 security men, spluttering bewilderment about who would protect the middle management from the ire of the returning strikers. Little did they realize that the managers were the next in line to be fired. The peacemaker’s presence was abruptly imposed: ‘When I call, I require instant service.’ Somewhere from beyond a voice counselled, ‘When Maxwell shouts “jump”, just ask, “how high?”’

‘Bob, you’ve lost the very people who can help you,’ sighed Hoge, who had decided weeks earlier to resign. His employer was oblivious to all but one mantra: ‘I bet Murdoch couldn’t have done this.’ To underline his challenge, Charlie Wilson was ordered to launch a new newspaper in New York, the Racing Times, to compete with Murdoch’s Racing Form. The gambler was going for broke.

Meetings, orders, summonses and declarations poured forth from a man whose task was herculean. Restoring a newspaper’s morale, motivation and style required the energy and leadership which were Maxwell’s forte. This was a rerun of the Daily Mirror in 1984, a challenge which only Maxwell was either sufficiently courageous or foolhardy to undertake. With time and money, he was sure of success. Juggling had always eventually proved profitable.

In the first days the omens were not good. Important writers were still deserting; advertising revenue remained poor; and the value of the Tribune’s shares zoomed up by $1 billion just for having paid Maxwell $65 million to get rid of the problem newspaper.

Only gradually would Maxwell realize that this was not Britain: that his ban on overtime would need to be revoked; that the replacement for the managers would need to be ex-union men; that the newspaper’s distribution was controlled by the Mob; and that, unless he remained in New York, his revolution would dissipate. All that was ignored. For his real desire, as the representative of a new constituency, was recognition.

Throughout the negotiations, Maxwell had known that Hoge was due at the end of that week to attend the celebrated Gridiron dinner at the Capital Hilton in Washington. The hosts were the nation’s top satirists and their guests were the president, senators, judges, bankers and the Great and Good of America. Maxwell wanted to attend that dinner. Indeed, some in the Tribune camp believed that his haste in signing the agreement with the unions was to qualify for the invitation. This he duly did.

The occasion required tails. Having just risked millions which he did not have, Maxwell naturally showed no hesitation in requiring Bob Cole, his spokesman, to be dispatched by Concorde from London with his best suit. Cole would be given a $200 tip. ‘Buy something for your wife,’ said Maxwell with underwhelming generosity.

Having enjoyed the most expensive meal of his life, he revelled in the attention. Never had he featured more in newspapers. He stayed in Washington overnight. The following day, Hoge was invited to a private lunch for about twenty-five at which President Bush was guest of honour alongside Generals Schwarzkopf and Powell, leaders of the victorious US forces in the Gulf war. Maxwell, understanding only too well the power of association and endorsement from American presidents, ensured not only that he was invited but that he was seated next to the president. During that meal, Bush’s face gradually fell as he glumly sat through a monologue about Maxwell’s triumphant peacemaking between Gorbachev, Shamir, Thatcher and other leaders. Oh my God,’ Bush groaned to an aide as he departed. ‘Absolutely terrific!’ cried Maxwell to John Campi on his return to New York.

The extravaganza showed the symptoms of the Last Hurrah. For the next week, Maxwell remained in New York to manage the News. To recover the circulation and demonstrate his skills as the master of promotion, he rented a clipper moored in the Hudson River and invited past advertisers to a grand party serenaded by a band named New York Pops. In response to his own advertisement, ‘We’re Back – Buy Us’, the circulation soared from 300,000 to 700,000, a hopeful sign but still too low a figure to produce profits.

The only interruption to the euphoria was a report from Kevin. Oblivious of the celebrations on 42nd Street, several banks were pressing for more collateral or repayment of debts. Kevin had summoned Basil Brookes, the young finance director of MCC: ‘The private side needs a £75 million loan.’ Brookes, although it was obvious to him that the banks were squeezing, agreed to the temporary transfer. There seemed no reason to refuse. Neil Taberner, the Coopers partner, had raised no problems over the 1991 audit, and the finances appeared sound. By way of further reassurance, Kevin added, ‘We’ve agreed the terms to sell Pergamon.’ The £446 million paid by Elsevier, the Dutch publisher and competitor, was a good price, and the rationale for the sale was convincing. Scientists in the future would not read magazines, but would obtain their data through computers. Pergamon and its books, explained Kevin, represented an adventure past its prime, overtaken by electronic publishing, and MCC was retaining those rights. Brookes agreed, but after reflecting that MCC would lose the prodigious cash flow generated by Pergamon he insisted, ‘We will have to issue a press release warning that MCC’s profits will be down.’ Kevin paused. Profit forecasts were among the icons which his father held sacrosanct. Anything other than ecstatic predictions were inconceivable. But according to stock exchange rules Brookes was right. Kevin telephoned New York. ‘No. Absolutely not,’ shouted Maxwell. The last contact with reality had clearly been lost in the midst of New York’s adulation. But there was no alternative, Kevin decided. Only one method of persuasion could succeed: a personal conversation.

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