Maxwell, The Outsider

by Tom Bower

  To describe his approach as squirarchical is not to be critical but merely acknowledges that, in the context of a hunting and shooting constituency, the Labour Member of Parliament's unorthodox lifestyle was not incongruous. Receptions, tea parties and meetings in his large mansion endeared him and his wife to most of his party workers. His constituency never suffered from a common Labour Party malaise of poor organisation. On the contrary, his machine was so well oiled that it aroused, among the traditionalists, irritation and eventually outright anger.

  Soon after his re-election in 1966, Maxwell had revamped the party organisation. At the grass roots, so-called Polling District Committees were established in every village where no party group had previously existed. Like the branches, these 'committees', even if they represented no more than two people, had the right according to the constituency's recently revised rules to send delegates to the all-powerful General Management Committee meetings, the constituency's governing body, to which Maxwell was answerable. Within a short time, Maxwell's support on the GMC was overwhelming and had aroused resentment among the working-class members who lived in the railway town of Wolverton.

  Frank Atter, who had been a Labour Party supporter effectively since birth, was one of those who had become uneasy about the effects of the MP's organisational reforms. Atter, who had sat on the original selection committee in 1959 and was impressed by Maxwell, had gradually become disillusioned: 'We began to get the feeling that unless you were a one hundred per cent Maxwell man, you were side-stepped. Ordinary party members were losing control to his own staff and that wasn't healthy.' Maxwell, complained Atter, was not sympathetic to the democracy which was natural to the Labour Party. It was said that he just did not like opponents or critics. Party meetings rarely debated the government's performance or policies and never questioned their own Member's opinions.

  Jim Lyons, Maxwell's agent in the constituency, suffered more than others his MP's reluctance to consult but he suffered in silence, even when he was severely embarrassed. One such case was Maxwell's announcement that he would resign if his bid for the News of the World was successful. Lyons had been neither forewarned nor consulted. He concealed his surprise and spoke for many in saying that he hoped his bid would fail because 'We would not like to lose him.' But, by election time, Maxwell was uneasy about his agent. Lyons was not as attentive to the party organisation as Barnard had been and had not maintained the vital canvass of all the electorate. Although he had been warned by the regional agent, Geoff Foster, about his performance, Lyons had not worked as hard as Maxwell expected. Irritated, he had excluded Lyons from most decision-taking and had reduced his responsibilities. Headington Hall had gradually become the de facto party headquarters where important meetings, often summoned without Lyons's knowledge, were held, and where official papers were stored. Even the constituency's budget was beyond Lyons's control. Most Labour members agree with Bryan Barnard that in the approach to the election the constituency was not 'as well organised as before'.

  By spring 1970, the tide had turned for the Labour government. The appalling succession of economic crises which had cost the government its popularity, suddenly seemed to have been overcome. Exports were rising and Britain was for the moment no longer the sick man of Europe. In mid-May, the opinion polls swung in Labour's favour. The Conservatives seemed vulnerable to Wilson's derision as heartless and incompetent politicians who could be mercilessly lampooned as 'Yesterday's Men' or the 'Selsdon Man'. The Prime Minister decided to make a dash for victory and announced a general election for 18 June. The party's slogan, 'Now Britain's strong - let's make it great to live in', was not to every candidate's taste, but it satisfied Maxwell.

  (Below left) Gunthcr Heyden. recruited to LMS in Berlin, sitting on Maxwell's first Cadillac, in London in 1950. Ownership of foreign cars for British subjects was forbidden, so the car was not registered in Maxwell's name.

  (Below right) Kurt Wallersteiner. Maxwell's partner in the hectic-barter trade, an investor in Simpkm Marshall and later a convicted fraudster.

  (Above) After more than a decade in the wilderness. Maxwell astonished his critics when in April 1981 he bought the British Printing Corporation and, with the support of Lord Kearton, saved the company from bankruptcy and earned himself new respectability in the City.

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  Maxwell might have expected his task to have been made more difficult by the adverse publicity about Pergamon. Yet party workers reported that his troubles in the City were barely mentioned during the three-week campaign. Voters were impressed by his constituency record and were not influenced by his apparent failure to win promotion. That he could cite as parliamentary achievements only his membership of 'UK parliamentary delegation to the Council of Europe' and the vice-chairmanship of its Committee on Science and Technology was irrelevant. His management of the Catering Committee was not mentioned. Some did notice that no senior government minister was prepared to speak on his behalf in the constituency, a surprising omission for a marginal.

  The campaign, organised by Betty, his sons and his secretaries, did not differ from those of previous years. Charging around the constituency, his head sticking out of the top of a bright red Land Rover like a commander leading the assault, Maxwell's energy, oratory and charm won him warm ovations. The highlight of his speeches was his condemnation of the Conservatives' proposed legislation to prevent wild-cat strikes. 'This is not the way to run a country,' he said about Tory leader Edward Heath's ideas. 'This is one of the stupidest things anyone has tried to foist on this country.' Fifteen years later, he would praise Mrs Thatcher's anti-union legislation as a godsend and admit that it was the basis of his revived fortunes.

  But after the first week of the campaign he recognised his difficulties. His new Conservative opponent, William Benyon, was superior to his predecessor, and the Conservative Party machine had been successfully overhauled. In comparison, Lyons had, he felt, failed dismally.

  In the light of the unexpected national swing towards the Conservatives, Maxwell had perhaps only an even chance of holding his seat. Benyon won by 2,521 votes but the swing was less than half the national average. Although that was some consolation, the result was nevertheless a bitter blow for Maxwell. The television pictures showed a fallen face and glistening eyes, but he was gracious in defeat.

  Away from the cameras, both Maxwell and his wife were, like most defeated politicians, desolate that their mammoth efforts and unswerving dedication could so easily and so ungratefully be disposed of. In all of Maxwell's other defeats, it had been possible to launch an immediate counter-attack. The democratic vote could not, however, be challenged. Instead, the Maxwells sought a scapegoat. On 4 July, three weeks after the election, the GMC set in motion the censure of Jim Lyons. In ten days, no less than six resolutions expressing no confidence in the agent were passed. Lyons says that he was not notified that any of the branch meetings were discussing his conduct and was not even invited to attend his own branch meeting. Frank Atter is rueful: ‘If they win, they say it was a marvellous candidate; if they lose, they blame the agent. Maxwell just went too far.'

  10

  With members of the legal profession Maxwell maintained an uneasy, bitter-sweet relationship. Lawyers thrive on interpreting, redefining and bending rules to suit their cause, but will always resort, when in doubt, to the law's preference for certainty. In contrast, if aspiring tycoons diligently obeyed every rule, their ambitions would be stymied. They normally choose to avoid the courts as unmanageable, unpredictable and therefore dangerous. Maxwell was the exception. By 1970, he had earned a contrary reputation as a breathless challenger of rules, but also as a most litigious person who would readily appeal to the courts to assert his rights. Paradoxically, he found the intellectual frisson of the lawyer's craft exciting, but he was also frustrated since his very reliance upon their expertise denied him total mastery of his fate. Nevertheless, until 1970, his combination of energetic determination and unique bravado usually cowed many
defendants into reluctant submission. To the interested observer, Maxwell seemed positively to enjoy his appearances in the witness box and when sitting with his lawyers in the well of the courtroom. That changed during the Board of Trade inquiry.

  Until 1970, Maxwell normally relied upon his confidant and business partner Isidore Kerman for legal advice. But once the inquiries into Pergamon began, Kerman was precluded from acting because, as a director, he was required by the inspectors to be a witness. The exposure of Maxwell's relationship with other lawyers therefore coincided with his intensive recourse to the courts to defend himself. Maxwell first consulted the solicitor

  David Freeman, a Labour supporter who had built a successful commercial practice in London's West End. Freeman selected as their advocate Morris Finer QC, who had earned a glowing reputation among his profession as the master of reducing the most complicated facts to a digestible and persuasive argument. Finer's supreme credential for arguing Maxwell's case was that he had recently investigated on behalf of the Board of Trade the collapse of John Bloom's washing-machine company, Rolls Razor. Freeman believed that Maxwell's greatest obstacle would be to secure a fair hearing, and there was no one better suited to argue that Leach and Stable were bound by what are known as the 'rules of natural justice' than a former inspector himself. Maxwell was fortunate that his representatives were skilled and sympathetic and had also grown up in humble circumstances, but he was unable to desist from interference. Many of the conferences at the Temple became tetchy debates between Maxwell and the eminent barrister who, with grisly foreboding, could anticipate a judge's unsympathetic reaction. 'Maxwell was always barking orders,' recalls one of those present. 'He was very clever, very intelligent, very hard-working, but utterly impossible.'

  The two inspectors, Owen Stable QC and Ronald Leach, both enjoyed redoubtable reputations. Stable was rated a high-flyer at the commercial Bar who had a good chance of appointment as a High Court judge once the inquiry was completed. As the lawyer, it was Stable's duty to ensure that the proper legal procedures were observed. Leach was an accountant and a senior partner of Peat Marwick Mitchell. Although he was considered to be among the nation's most senior practitioners, his appointment was not without its critics. As president of the Institute of Chartered Accountants, he was open to the charge that he might seek to deflect the widespread disillusion with his profession which the Pergamon affair had provoked. Yet these were common and inevitable vulnerabilities which would not ordinarily have affected his impartiality. Notionally, their appointment and the rules of procedure they would follow were no different from those of any previous departmental inquiry: the hearings would be in private and, while each person would receive a transcript of his own evidence, Maxwell would not have access to the transcripts of other witnesses. The inspectors' report would be confidential except for the portion which the government decided to publish. The core of their task was to undertake an investigation into Pergamon and to report on whether the shareholders 'had been given all the information they might have expected'. They were not adjudicating as in a trial.

  Maxwell, however, believed that his circumstances were exceptional: Pergamon was still trading apparently profitably; the Leasco bid had provoked enormous controversial publicity; the past eighteen months had convincingly proven the City's and Fleet Street's antagonism towards him; an interim inspectors' report could be used by Leasco in pursuit of its claims in New York; and the inquiry would hamper any bid for Pergamon once the Price Waterhouse report was published. Among his unpublicised concerns was the inspectors' determination to investigate his private companies. That, he felt, was a sensitive area which should be barred to a government inquiry ostensibly concerned with a public company. He therefore sought, as a condition of his co-operation with the inquiry, guarantees that he would have the customary protection of natural justice afforded by a court of law - namely, that he could be accompanied by his lawyers, that his lawyers could cross-examine all the witnesses and that they would have full access to all the evidence which the inspectors were considering and make submissions about all that evidence. Lastly, he demanded that, if the inspectors came to any conclusions unfavourable to himself, they would be bound to offer him a chance to answer those criticisms.

  The inspectors disagreed. On 1 December they wrote to Maxwell to explain that while they were 'most anxious that no one affected by our inquiries should feel that he has been unjustly treated at our hands' they could not agree to unrestricted access to the transcripts of what were quite intentionally private meetings. The negotiations made no further progress and Maxwell threw down the gauntlet: he would only answer questions if ordered to do so by a court.

  In early April 1970, the inspectors appealed to the High Court to order the Labour politician to answer their questions without further guarantees. On Maxwell's behalf, Finer appeared before Mr Justice Plowman and argued that, as Maxwell was 'under suspicion', he had the right to demand that the 'freedoms and safeguards woven into the fabric of life in this country' as in a judicial inquiry would be observed.

  In reply, the inspectors made a concession. They were not bound, they argued, by the rules of natural justice because they were undertaking an investigation and submitting a report whose publication was by no means a foregone conclusion. However, they assured the Court that they would not submit a critical report without giving Maxwell an opportunity to answer any points which they raised, although they would provide only a broad description of their complaints. Plowman supported the inspectors' argument and ordered that Maxwell answer their questions. Maxwell appealed.

  Maxwell's strategy now led to his first break with a legal adviser, his solicitor David Freeman. There was a clash of personalities and a sharp disagreement about whether they could refuse to co-operate with the inspectors. Since Maxwell was committed to fight the inquiry 'tooth and nail', he rejected any hint of concession and transferred to his friend John Silkin, the Labour Member of Parliament.

  In July, Morris Finer re-argued his case in the Court of Appeal. Lord Denning agreed that the inspectors had to be fair and abide by the rules of natural justice because reputations and careers could be affected by their findings. Quite explicitly, Denning said that the inspectors had to give Maxwell an outline of any charge against him, so allowing a fair opportunity for correction or contradiction. But he rejected Finer's argument that the inspectors were bound to allow Maxwell the opportunity to rebut any adverse evidence and to cross-examine witnesses. The crux, according to Denning, was that the inspectors were investigators and needed flexibility. In the public interest, speed was essential and Maxwell was bound to help. If he refused, he would be in contempt of court and he could 'expect no further mercy'.

  On 4 September 1970, Maxwell appeared for the first session of questioning at 11 Ironmonger Lane in the City. Displaying no apprehension, Maxwell treated the inquiry over the following months as a regrettably unavoidable chore to be slotted into his increasingly hectic schedule. He was energetically relaunching his business activities, a relaunch neatly coinciding with Denning's judgement.

  In a four-page circular to shareholders, he announced that, supported by a major publisher who was still undecided, he would announce a bid for Pergamon once the Price Waterhouse report was published. Were he to win control, Maxwell also promised that he would assume the management for 'up to two years. . . until the company was on its feet again9, and then hand over to a younger man. He postulated that he would offer 25s per share for a further 23 per cent of the shares which, combined with his own 28 per cent holding, would leave Leasco stranded.

  Maxwell prided himself on the timing of the announcement. Steinberg was once again fighting for survival as Leasco's fortunes tottered. Its share price, after slumping from $33 to $10, had dropped another $5. As a consequence, under a complicated series of warranties which had financed its purchase of the Reliance Insurance Group, the fall of its share price had triggered demands for Leasco to repay loans worth $31.9 million, an enormous bu
rden. For the Americans, arranging the rescheduling of those loans in New York was infinitely more important than the time-consuming management of Pergamon.

  The board meetings in Oxford, Schwartz and Stevens had discovered, were taken up by interminable discussions about finances and accounts and rarely about the business itself. The Americans decided that their attendance was a waste of time and selected Dr Felix Kalinski to replace Bello on the board as a full-time appointment. Kalinski, who had been recruited from the CBS television network in New York by a firm of headhunters, was a former West Point graduate and a decorated combat pilot who demanded and received the then enormous annual salary of $80,000. Leasco hoped that Kalinski, as a full-time director, would monitor Pergamon's recovery pending delivery of the Price Waterhouse report and would protect their interests from the ever-ubiquitous presence of Maxwell.

  On several occasions during the year, Maxwell had attempted to effect a reconciliation, either by approaching intermediaries or on one notable occasion by booking every available trans-Atlantic flight in order to be on the same plane as Steinberg. Having finally trapped the American in the first-class cabin at 39,000 feet, he unsuccessfully attempted to discuss a settlement of their differences. 'I think he just took the next flight out of Kennedy back to London,' recalled Steinberg.

  More sober negotiations had started between Maxwell and d'Avigdor-Goldsmid in June under the chairmanship of Lord Aldington. Maxwell offered, in return for his reappointment as a Pergamon director and the cessation of the litigation against PPI in New York, to merge his family companies and PPI into Pergamon while both Leasco's and his own shareholdings would be committed to a trust pledged to support the board. Pressured by the Americans, who vetoed any proposal which included Maxwell's return, d'Avigdor-Goldsmid initially rejected the peace offer but after the middle of 1970 had become resentful of the New Yorkers' antagonism. Quite simply, d'Avigdor-Goldsmid disliked disagreements and was insulted by the Americans' dismissive criticisms of his role as an independent intermediary.