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Guinness directors showed 'contempt for truth'

Margaret Beckett spoke after the official report into the Guinness affair was finally published - 11 years after Department of Trade and Industry inspectors began their investigation.

Mrs Beckett said the Government's legal advisers believed an application for disqualification against those criticised in the report would not succeed.

The 309-page report detailed the "enterprise of deception" behind the illegal Guinness share support scheme.

At the time, Guinness was preparing a takeover bid for rival company Distillers.

The report's authors said: "We can see no reason why an operation with such deceptive purpose should be regarded as acceptable.

"In the most fundamental sense, it aims at the creation of a false market."

If Guinness had not acted illegally, another bidder for Distillers might have proved successful, it added.

The report's authors said they found the behaviour of Guinness's directors thoroughly shocking.

"Firstly, the cynical disregard of laws and regulations; secondly the cavalier misuse of company monies; thirdly, a contempt for truth and common honesty. All these in a part of the City which was thought respectable.

"Though the water has now passed far below the bridge, the depiction of these phenomena in this report may, we hope, go some further way to at least reducing their recurrence in the future."

Little new evidence about Saunders' role

The former Chairman of Guinness, Ernest Saunders, and two other men were jailed for their part in the share-support scandal during Guinness's £2.6bn takeover bid.

Mr Saunders was convicted of false accounting, theft and conspiracy, in 1990.

But his five-year sentence was halved on appeal. He was released from open prison after serving only 10 months when doctors said he was suffering from Alzheimer's disease, a permanent condition.

At the time of his appeal, a psychiatrist said he was unable to recall three numbers backwards and did not know who was President of the United States.

Mr Saunders health subsequently improved but his advisers denied he had made a "miraculous recovery" from Alzheimer's disease, suggesting instead his illness while in prison was stress-related.

Mr Saunders has since carved out a lucrative consultancy career while at the same time negotiating his £75,000 annual pension from Guinness.

Also jailed were stockbroker Anthony Parnes and tycoon Gerald Ronson, head of the Heron empire, who had agreed to buy Guinness shares as part of the illegal share-support operation.

Yet the report reveals little about the part played by Mr Saunders and his co-defendants.

However, city firms involved in the affair come in for heavy criticised.

Legal action delayed report

Publication of the results of the investigation has been delayed until now because of continuing legal action.

Last year the European Court of Human Rights decided Mr Saunders' trial had been unfair because he had been compelled to answer the DTI inspectors' questions.

In the mid-1980s, at the height of the Thatcherite era, Mr Saunders was heralded as one of the City's most brilliant marketing men and one of the shrewdest dealmakers on the corporate scene.

But his reputation was torn to shreds at his 1990 trial.

To win Distillers and its top whisky brands Guinness had needed to make sure its shares were worth more than those of its rival Argyll and did so by recruiting wealthy investors to buy shares and cover any losses.

Mr Saunders was supported by the cream of the City establishment during the Distillers bid.

Guinness's lawyers were Freshfields, merchant bankers Morgan Grenfell and Henry Ansbacher were also on hand, and the brokers were Cazenove, the most blue-blooded of City firms.

Lord Spens was forced to resign as Chief Executive of Henry Ansbacher - but was later acquitted of fraud.

He insists there was nothing wrong with the Guinness deal and says the DTI inspectors did not understand the rules of the takeover 'game'.

Lord Spens says the difference between winning and losing a takeover bid could easily be an executive's job and he said: "Takeovers are not genteel affairs, as the inspectors would have it.

"They are very, very serious, life and death businesses."

"Little has changed in the last 10 years. They are just called different names, the practices that went on in the 1980s."

He wants legislation introduced to replace the self-regulatory takeover code.

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