Maxwell, The Outsider

by Tom Bower

  Yet the fate and handling of Maxwell's stake in Extel displayed his rehabilitation in the City. He announced that the shares were to be auctioned and requested sealed bids. Acting on his behalf was his old contact Michael Richardson, who in 1969 at stockbrokers Panmure Gordon had represented Pergamon's interests but had resigned when Leasco's bid collapsed. In 1981 Richardson became a managing director at Rothschilds, the merchant bank which had fought on Leasco's behalf against Maxwell. In 1986 Richardson and Rothschilds were acting for Maxwell and were delighted to offer their services for his future deals. Apparently, the events of 1969 were forgotten. Maxwell was too important and was spending too much money for Rothschilds to spurn his business on an old matter of principle. Others in the City, discarding similar prejudices, would soon follow their lead. In the Extel case, Maxwell's shares were sold to David Stevens of United Newspapers at a profit, in theory, of £5 million.

  In fact, it was impossible to ascertain what real profits were earned by Maxwell's interventions because, as will be seen shortly, despite his cultivated image of adroitly juggling a dozen balls which all produced profits, the truth was often different. While he dealt, a collection of highly paid executives waited permanently and forlornly outside his office for his decisions and approvals. Those delays caused incalculable losses. But it is a maxim of big business that one deal leads to another and that a high profile encourages a 'player's credibility'. Image is sometimes as important as substance and by August 1986 Maxwell had projected himself as a major and irresistible entrepreneur who led a corporation with surging profits. The key to that transformation was a 'corporate restructure' which, although dull in layman's terms, turned a sow's skin into a silk purse. The editorial section of Mirror Group Newspapers was legally separated from the printing presses, which had been transferred to a new subsidiary of BPCC, the strike-free British Newspaper Printing Corporation (BNPC). Accordingly, Mirror Group Newspapers, which was owned by Pergamon (Maxwell's private company), contracted with BNPC to print its newspapers. The contract increased the flow of money and new profits into BPCC, so enhancing the public company's balance sheet. Similarly, the sale of Pergamon journals increased BPCC's turnover and profits. Consequently, in August 1986, Maxwell could confidently announce that BPCC's pre-tax profits in the first six months had no less than doubled and Maxwell's image and substance coincided to pave the way for an important coup.

  In City jargon, having your 'paper accepted' means that you are creditworthy. When Maxwell had tried to buy Waddingtons two years earlier, he had offered cash because no one would risk taking BPCC shares in exchange for Waddingtons' shares or 'paper'. After announcing BPCC's mid-1986 profits, Maxwell's credit-rating changed. BPCC shares, which in 1981 had traded at 12p, were worth 298p, and Maxwell's promises of greater profits to come were taken at face value. In August, Maxwell heard on the City grapevine that there was dissatisfaction with the management of the Philip Hill Investment Trust and that the Trust was for sale. He offered £355 million but said that he would only pay in newly issued BPCC shares. The Trust's shareholders were City institutions who for fifteen years had looked askance at the bidder, but after skilful lobbying by mutually trusted City operators they were prepared to concede that he now possessed financial credibility and to accept his offer. Within twenty-four hours of the purchase, Maxwell had sold most of the Trust's investments for cash and used the money to buy two American printers, Webb Co. Inc. and Providence Gravure, enabling him to become the second-largest printer in America. Within the Square Mile it was hailed as a masterstroke. Overnight, BPCC was bigger and richer, and the blitz of media attention devoted to the constantly photographed and interviewed Maxwell increased his self-esteem. The Midas touch could clearly, he felt, be extended to any venture. At that moment he was presiding over the Commonwealth Games in Scotland, which he had himself saved from catastrophe.

  Edinburgh had been awarded the Games in 1980 and, at the time, the organisers had been told by ministers that, since the event was expected to be self-financing, they should not expect any government aid. The estimated cost was £14 million, a pittance compared to the Los Angeles Olympics, which had raised £340 million and had actually ended with a surplus. But six years later, on the eve of the opening ceremony, the chairman of the Edinburgh Games organising committee, Kenneth Borthwick, a wholesale confectioner and former Lord Provost of the city, privately acknowledged that he had failed to secure sufficient sponsorship contracts. Some blamed his amateurism, but excuses were irrelevant at the end of May. With just eight weeks left Borthwick was anticipating that the deficit might amount to £5 million. Without extra money the Games would not be able to start and the proud city would be embarrassed. In some panic, Borthwick secretly appealed to the government for help, but Malcolm Rifkind, the minister for Scottish Affairs, unhesitatingly refused and suggested that he might approach the nation's rich. Among Borthwick's thirty-seven pleading letters addressed to names culled from the Financial Times was one to Maxwell.

  Maxwell and the Mirror Group had been approached for money more than one year earlier but, despite their profitable newspaper interests in Scotland, had refused their support. In the meantime, however, the Mirror Group in Scotland had been involved in a bruising battle with all its employees on the Daily Record and Sunday Mail to enforce an extension of the working week and obtain the unconditional acceptance of new technology. When the negotiations had failed, 1,050 printers and journalists were overnight deemed by Maxwell to have 'dismissed themselves' and, in a familiar pattern, a deadline was imposed to negotiate a survival plan. As the dispute stretched into the third week, barbed wire appeared around the premises and emotions became inflamed. Memories of Maxwell's behaviour at the Scottish Daily News were rekindled and he was castigated for resorting to Tory anti-trade union laws and for emulating Murdoch's methods at Fortress Wapping, despite his own jibe that the Australian's was 'not the British way of doing things'. Undeterred, Maxwell invited his 'ex-employees' to reapply for their jobs on his terms. Finally, in April 1986, the unions conceded a 30 per cent cut in the labour force and agreed to abandon their traditional work practices. But Maxwell's overwhelming victory had scorched his image, so Borthwick's request to save the Games came as an attractive opportunity to repair the damage and, in a favoured phrase, 'to be of service to my fellow man'.

  On 19 June it was announced that Maxwell and a team from the Mirror Group would assume responsibility for the Games' finances. The Mirror's front page blazed, 'Mirror Saves the Games' and the Record trumpeted 1 Record Saves the Games', but both agreed that their owner would become chairman of the company managing the event, although the confusion over what his help implied was evident on the first day. For Borthwick, saving the Games meant that Maxwell would pour in a few of his many millions to remove the deficit. Suffice to say that this was neither Maxwell's understanding nor his intent.

  Maxwell believed in self-help. In offering his money for the Scottish Daily News or for the Labour Party, he stipulated that he would match the amount raised by those seeking assistance. 'If I just gave,' he once said, 'they would do nothing themselves.' When he accepted Borthwick's offer, there was, in Maxwell's view, no commitment to contribute a penny.

  ‘I guarantee unconditionally that the Games will go ahead,' he told a press conference on his arrival on 19 June, four weeks before the opening ceremony. 'I hope you will agree that there is nothing more important than that.' Attempts to extract from him an indication of whether he had promised to contribute any money were shrugged off. Instead he assured everyone that he would seek new sponsors so that the Games did not become a burden for the taxpayer. Under his command, he promised, 'There will be no deficit at all.' When pressed to reveal his secret plan, he smilingly acknowledged his financial acumen but urged his sceptical audience to understand that 'Jerusalem was not built in a day. We have got quite a few weeks left.' The sceptics remained unconvinced and suspected what he would repeatedly have to deny: ‘I hope that will put paid to any nonsense
about my being in this business to hijack the Games for the benefit of the Daily Mirror or that the Mirror and Record are going to have any special privileges or that I or any of my family will be handing out medals.'

  For four weeks, Maxwell and his associates enjoyed a honeymoon period to produce the £4 million which had eluded the hapless Borthwick. On 18 July, six days before the Games started, it seemed that he had indeed performed a miracle. Maxwell announced his success to a group of what he now unlovingly called 'hacks': 'When it comes to elbow-twisting on a major scale I am particularly good at it. . . . The Games are financially secure. The job is virtually done.' In other words, he had found £4 million, and he even suggested that there would be a surplus. To prove how the money was pouring in, he pulled from his pocket a letter from a well-wisher in London which pledged the sum of two pounds. 'It is unbelievable,' he pronounced, alluding to the avalanche of donations.

  During that penultimate week, the Games had become beset by a further albatross. In protest against Mrs Thatcher's refusal to countenance sanctions against South Africa, the Afro-Asian members had resorted to the same protest which she had encouraged for the Moscow Olympics after the Soviet invasion of Afghanistan. Thirty-two nations declared that they would boycott the Edinburgh Games. If the Games were now not short of funds, there was a definite lack of competitors. Caught in the maelstrom of international politics, Maxwell was spokesman to the world about the sorry fate of the competition. Only his irrepressible energy and unfounded optimism could support his pronouncements that the Games would go ahead, be a success and not incur an enormous deficit. But four days before the Games started, on 20 July, when the daunting repercussions of the boycott had registered, Maxwell suddenly acknowledged that there was again a deficit and that the Prime Minister would be expected to pick up the bill.

  His contradiction inevitably provoked those whom he had labelled 'hacks who normally ask silly questions'. They could not tally the arithmetic and asked him to reconcile the statement he had made on 16 July that the £4 million deficit had been overcome with his latest claim that while the boycott would cost £1 million, the deficit was £2 million. Two Scottish journalists, Derek Bateman and Derek Douglas, persistently asked him for explanations since he had also earlier said that the Mirror Group 'had contributed £1 million to the Games'. Spotting an unequal equation did not require the skill of a City analyst, as Maxwell admitted when he rushed from their interrogation saying, ‘I certainly needed this job like a hole in the head.' In all the newspapers other than those owned by the Mirror Group, Maxwell was attracting the blame for a disaster of others' making and was receiving neither sympathy nor gratitude for his efforts. Yet most would have acknowledged that without him the Games would have collapsed before their opening. But the goodwill was fast dissipating as the background to the bargain price became exposed.

  During his many press statements before the Games, Maxwell had emphasised that the deficit had disappeared and he denied 'hijacking the Games' for his personal prestige and his newspapers' profits. Yet every day during the competition, the nation's television, radio and newspapers were saturated by his image and words. Edinburgh, a growing chorus chanted, had become the venue of the 'Maxwell Games'. Maxwell hung a gold medal around the neck of the decathlon champion Daley Thompson, he stood next to the Queen and Prime Minister on the dais, and the Mirror Group's red and white colours dominated the stadium and its scoreboards. His presence became so pervasive that at one crucial moment during the last day's closing ceremonies when Maxwell drew the winning ticket for the 'Save the Games' competition, the Queen had disappeared from the dais and BBC Television stopped broadcasting from the Games and returned to the studio. As Bateman and Douglas wrote, 'Immediately after the tombola drum and the Maxwell entourage had departed, normal service was resumed.'

  Soon after the Games ended, Maxwell announced that the deficit was £4 million, which was exactly the sum when he had arrived. The company managing the Games had been bankrupt throughout the proceedings and it fell to Maxwell as its chairman to explain the discrepancies since Whitehall still refused to cover the deficit. 'If Mr Maxwell is really concerned about his creditors,' a minister confided to the press, 'he and his Mirror Group should make good the losses in recognition of the huge publicity he's got. It's a flea-bite to him.' Maxwell was clearly under renewed pressure to reconcile all his conflicting statements and, in the wake of the enormous publicity he and his businesses had enjoyed, to quantify his personal contribution. Before the Games, BPCC's accountants, Coopers and Lybrand, had estimated that if Maxwell contributed £4.3 million (that is, the whole projected deficit), 'it would produce a significant commercial advantage to yourself. Yet Maxwell apparently (since he declined to quantify his contribution) was unwilling to pay more than £250,000 and possibly as little as £100,000. Instead, he tried first to raise money from national corporations. Now that the Games were over, his efforts proved even less successful than before the event. Secondly, he tried to extract money from the British government and those nations which had boycotted the Games. That also proved fruitless. His third target, Ryoichi Sasakawa, surprised everyone. Sasakawa, an obscure eighty-seven-year-old Japanese, had, according to Maxwell, 'devoted himself to world philanthropy' and claimed to control an $8.4 billion empire. Over the previous twenty years, Sasakawa had given away, said Maxwell, $12,000 million, a sum which reduced his own fortune to minuscule proportions and the

  £4 million deficit to a financial irrelevance. But considering the philanthropist's background, Maxwell's endorsement was decidedly odd. During the war, Sasakawa had commanded a sizeable fascist army and in 1945 he had been interned by the Americans for three years as a suspected war criminal. But imprisonment had been his good fortune since among his fellow inmates were the architects of Japan's peacetime prosperity who, on the basis of their close friendship, afforded him lucrative opportunities. Forty years later, on 13 October, Sasakawa authorised Maxwell to unveil their joint rescue package.

  By unilaterally rejecting various accounts and charges from contractors, Maxwell claimed that the deficit had been reduced to £3.2 million. To settle the remainder, he announced that Sasakawa was prepared to contribute £1.3 million and Maxwell would personally pay £700,000 on condition that the British government paid £1 million. To his delight, the ball was firmly placed in Whitehall's camp, but only for the briefest moment. The government reaffirmed its refusal to provide a subsidy. By 1988, the deficit had grown to £3.8 million and there was still no solution in sight, despite his claim that 'all outstanding debts have been settled'. Maxwell had moved on to many other ventures but he had enjoyed saving the Games.

  The first casualty when Maxwell emerged from the morass in Edinburgh in September 1986 was a project which was very close to his heart - the proposed London evening newspaper. For years Maxwell had aspired to challenge the monopoly of the Evening Standard, which was owned by Lord Rothermere and which he had unsuccessfully sought to purchase. Although the sale of evening newspapers in London had declined from two million in 1960 to half a million in 1986, Maxwell believed that the capital was big and wealthy enough to support two newspapers. In April he had appointed Magnus Linklater as the paper's first editor and the projected launch date was set for October 1986. During those summer weeks while Maxwell was 'saving the Games', Linklater had great difficulty in gaining access to the one person who could endorse a series of vital decisions and authorise critical expenditure. By the time Maxwell emerged from Edinburgh, Linklater feared that his creation might be stillborn unless the launch was postponed.

  Linklater, then forty-four, is an Old Etonian who, with a successful career on the Evening Standard, Sunday Times and Observer, was naturally ambitious for an editorship; Maxwell's proposals seemed very attractive. Although the newspaper's editorial offices would be adjacent to the Daily Mirror in New Fetter Lane, the venture was to be on what Maxwell described as a 'greenfield site' and would espouse his oft-vaunted ideals for printing a newspaper. The journali
sts would set the pages using computers while the traditional unions would be excluded by contracting out the printing to other national daily newspapers whose presses were idle during the daytime. Even distributing the paper from the five locations would be entrusted to a new organisation, Newsflow, instead of the established wholesalers who used union labour. 'We are breaking free of the Mirror and old Fleet Street attitudes,' said Maxwell, but his absence in Scotland had delayed crucial negotiations to contract three essentials: the printing, the computers and the distribution. On his return, Linklater and Bill Gillespie, the chief executive, faced the unpleasant task of persuading their employer to delay publication and therefore reverse his public commitment. Their problem was symptomatic of his organisation's weakness. 'No one ever says to Maxwell, "It's your fault,'" recalls one executive. 'There's fear in confronting him with reality and equally there is fear of being caught concealing reality. Even the strongest hearts avoid those face-to-face sessions because when he voices his anger it lacerates and bruises.' When the truth was unfolded, his explosion was predictable but he reluctantly agreed. Since it was close to Christmas, they recommended that the next optimum launch would be early February 1987. But in accepting their advice, Maxwell added an emollient which proved that there was a heavy price for his persistent juggling.

  Among Maxwell's several reactions was to dispatch a team to the United States to investigate the feasibility of a twenty-four-hour newspaper. Eleven years earlier, one of the conditions he had set for his final contribution to the Scottish Daily News was acceptance by the unions of a twenty-four-hour newspaper, and his hankering for the concept had never dimmed. The commercial attraction was simply that, while the editorial content changed during the day, the advertisers were guaranteed readers in both the morning and the evening. The overriding disadvantage to the publisher was the increased labour costs. Maxwell's fact-finders, who included Linklater, travelled to New York, Detroit and Florida to taste the American experience and returned convinced that the idea was unprofitable, if only because, despite the propaganda, there were no genuine and profitable twenty-four-hour newspapers in America. 'Most of the newspapers we visited had abandoned or retained only a vestige of the concept,' said Linklater. Maxwell dismissed the findings of their report.