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Friday, 30 March, 2001, 11:11 GMT 12:11 UK
Q&A: What does the Maxwell report mean?

The DTI has released its report into the Maxwell affair nine years after Robert Maxwell's empire collapsed and news of the pension fund theft first emerged. BBC News Online explains what the report means

Why was there a DTI report?

Following the death of Robert Maxwell in November 1991, his business empire collapsed as it emerged that its debts vastly outweighed its assets.

It soon emerged that over 400m was missing from the pension funds.

Robert Maxwell presided over an empire of some 400 companies and frequently channelled money between companies.

The report was set up to look into the reasons behind the collapse of the company and more particularly, the flotation of Mirror Group Newspapers in the months prior to his death.

Why has the report taken so long?

Two inspectors from the Department of Trade and Industry were commissioned in 1992 to look into the Maxwell business empire.

Their focus was the flotation of Mirror Group Newspapers in 1991.

The report was delayed as Kevin Maxwell, his brother Ian and a Maxwell family adviser stood trial on charges brought by the Serious Fraud Office.

All three were later acquitted on all counts and the inquiry resumed.

Who does the report blame?

The DTI report says Kevin Maxwell bears a "heavy responsibility" for the collapse of his father's business empire. It also lays some blame at the door of leading City institutions.

These include Goldman Sachs, a broker to some of Maxwell's business, Samuel Montagu, the bank which advised on the flotation, and Coopers & Lybrand, auditors to the Maxwell empire.

Crucially, it says primary responsibility lies with Robert Maxwell, the company's founder, and the only man to know what was really happening.

Will the report result in any prosecutions?

The report is unlikely to result in any further prosecutions after the |Maxwell brothers were cleared of wrongdoing in a criminal trial.

But there is speculation that Kevin and Ian Maxwell may be banned from holding company directorships.

The DTI may yet decide to do this on the basis of the inspectors' findings in the report. It says it is "taking legal advice before deciding on whether directors disqualification procedures are appropriate".

It would be difficult to take further action against many of the institutions blamed.

Some have been taken over or no longer exist in the same form.

Samuel Montagu, the bank which advised Robert Maxwell on the flotation, is now part of HSBC, while Coopers & Lybrand is now part of Price Waterhouse Coopers.

PriceWaterhouse Coopers has been heavily fined by the accountancy watchdog for Coopers & Lybrand's conduct in the affair.

Goldman Sachs was found to be innocent of any wrongdoing in a criminal enquiry.

Could it happen again?

Robert Maxwell took over 400m from his companies' pension fund, leaving 32,000 pensioners fearing for their future financial security.

Since then, the pensions law has been tightened up, with funds required to keep a minimum balance and a new regulatory authority, OPRA.

There is also a pensions compensation board which would pay up to 90% of pension claims in the case of fraud.

Some of those who campaigned for compensation for the Maxwell pensioners say it could happen again.

Even pensions lawyers say it would be difficult to stop a determined criminal, though it should be more difficult.

The report does recommend "severe sanctions" against companies which do not report fraud.

It also calls for more detailed guidance on the audit of labyrinthine empires such as Maxwell's.

Does the report damage the City's reputation?

In short, yes - although the report revealed nothing new.

Prior to any flotation, a prospectus is prepared, which should, in theory, provide information for potential shareholders in that company.

Given that in the months prior to the flotation, Robert Maxwell had been taking money from the pension funds, its critics say that close examination of the books should have revealed what was going on.

On top of that, Robert Maxwell had previously been the subject of a Board of Trade investigation in 1971, which found that he was "unfit" to run a public company.

The report concludes that "the most important lesson from all the events is that high ethical and professional standards must always be put before commercial advantage."

It adds:"The reputation of the financial markets depends on it".

What are the Maxwell brothers doing now?

Since being acquitted on charges for fraud, Kevin Maxwell and his brother Ian have resumed careers in business.

Now Kevin is chairman of Telemonde, a telecoms supplier, an area he has specialised in since 1993.

Since 1995, Ian has been a publisher at Maximov Publications, which specialises in publications about Russia and the former Soviet countries.


Analysis

Maxwell's entourage
Links to more Business stories are at the foot of the page.


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