Maxwell, The Outsider

by Tom Bower

  Inevitably, when the annual results would be published in June, MCC's share price would suffer. This in turn would seriously undermine Maxwell's plans for future acquisitions because he would neither be able to raise extra money by issuing more shares nor, in a take-over bid, would people be willing to accept MCC shares instead of cash. There was also a second problem. He had begun borrowing money from banks using his own MCC shares as a guarantee. If the price of MCC's shares fell, the banks would demand more shares to guarantee their loans or would demand further assets. The published results for 1986 of just two private companies, Pergamon Holdings Ltd and Mirror Holdings Ltd, showed debts against his MCC shareholdings of nearly £285 million. In 1987, they would borrow a further £140 million. Other debts would be hidden behind nominee names which disguised the Liechtenstein connection. The combination of compartmentalisation, unsupervisable trading between the private and public companies, different financial year endings of the companies and Liechtenstein itself encouraged suspicion that money was being churned uncontrollably through the system. Just as in the 1960s, fulfilling his ambitions depended upon keeping Pergamon's share price high, in 1988 so much would depend upon MCC's price.

  Vigier heard none of this. Instead he was presented with Maxwell's standard formula to avoid unpleasant questions: gloss and hyperactivity. A video, he was told, 'a superb production', according to one of Maxwell's staff, would explain everything that the French audience needed to hear when Maxwell chaired the launch. And indeed they were right.

  At a packed meeting held in the picturesque Pavilion Gabriel at the bottom of the Champs Elysees on 29 January 1988, Maxwell regaled the three hundred brokers with humour, platitudes, boasts and little information. Le Quotidien de Paris had described him that morning as the inheritor of the 'crown of the oldest printer in the civilised world, after Gutenberg and a few others. He is a modern day emperor of the media. He has the stature, the charisma and the cash . . .' The only ripple in an otherwise flawless presentation was his snappy reply to a question about the Liechtenstein connection: 'That's private. It's none of your business.' Everyone laughed. Maxwell had made it into that type of occasion.

  Maxwell found little to amuse himself however across the Seine at Cognac Jay. At board meetings the previous September and November, he had sniped at Le Lay's management. At the first, posturing as a socialist, he had complained about the treatment of employees. Then, at the second meeting, he had condemned the lack of profits and, in the opinion of some, had only just restrained himself from demanding mass redundancies.

  Le Lay had watched Maxwell's gyrations with detached bemusement. The foreigner's forays were irrelevant to his daily task of turning TF1 into a profitable company. Less amusing in Le Lay's view was fan's obedience to his father and his long absences. Even when Ian was at Cognac Jay, meetings would be interrupted to take phone calls from his jetting father voicing a frequent complaint: 'Why are you letting them do this to us?' After eight months, the competing pressures were excessive -'Le Lay made his life difficult,' said one observer - and Ian resigned complaining of illness.

  His son's expulsion outraged Maxwell. Although he was unaware of the criticism, the Bouygues team had decided that their partner had been over-estimated. 'He is a one-man band. He has no one in France,' Le Lay murmured to his chief. To remedy that impression, Maxwell dispatched in mid-January Patrick Cox as his new representative. Cox, whose father was a founder of Britain's independent television news, had built a career in broadcasting. Soon after Cox's arrival, Maxwell admitted his own impotence: 'For the first time I found that I had responsibilities but no power. I can tell you that it won't happen again.' Cox was to be his agent to regain control. But far from smoothing ruffled feelings, Cox articulated his boss's emphatic opinions and compounded the disagreements with Le Lay, provoking an unfortunate comparison with his predecessor: 'Maxwell withdraws one small man and sends another.' The bitchiness reflected the new tension between Maxwell and Bouygues. Board meetings at Cognac Jay had become bear fights. 'Bouygues and Maxwell just shouted at each other,' says one of the smaller shareholders. 'They shouted slogans about knowledge banks, profits, satellites and TV jargon but they didn't seem to care about television. It seemed they cared less about television than about power. In fact they didn't seem to even listen to each other.' Bouygues, who suffers slight deafness would, on those occasions, seem 'selectively deaf. By May, when Maxwell and Le Lay met at Cannes, Maxwell effectively conceded that he had been outwitted by Bouygues and was powerless to control his investment. Le Lay was granted total control and within weeks Cox was recalled to London and soon afterwards resigned from MCC. It was not the only reverse Maxwell suffered.

  The publication of MCC's annual report in May had not been received with the customary praise Maxwell desired. Unease had crept into City analysts' attitudes towards Maxwell's boasts of 'nearly doubled sales and more than doubled profits' which he claimed took his company 'well on the way to achieving the objective ... by 1990 of a £3,000- to £5,000-million bracket a year [business] with profit growth to match'. Their sentiments hardened after close reading of the small print in the report finally revealed some hard facts about Maxwell's track record in the October crash. On page 47, in footnote 14 headed 'Fixed Asset Investments', the accountants revealed a loss of £49 million. Usually the heading 'Fixed Asset Investments' is unimportant. The sum listed in the previous year under that heading was a mere £600,000. Now it had exploded to £332.6 million. The reason was simple. The accountants had agreed to place the shares which MCC had bought and not resold under 'Fixed Asset Investments' because accountancy rules allowed any losses under that heading to be excluded from the corporation's annual profit and loss results. Accordingly, with the benefit of that creative albeit legal accountancy, Maxwell could still claim that MCC's profits had 'more than doubled'. When asked about this, Reg Mogg, MCC's finance director, claimed on Maxwell's behalf that the losses were not permanent but 'just a hiccup in the market'. Yet Mogg would soon know that the 'hiccup' was permanent. In the first six months of 1988 Maxwell's profits from his much vaunted Treasury investments had already fallen from £32 million to £9 million.

  MCC's profits were static and there was a crashing 30 per cent drop in earnings per share. Maxwell's ebullience, which seemed undiminished, puzzled the City. The price of MCC shares began to slip from their peak of 395p down to 250p - a decline which was exacerbated by a series of take-over failures.

  At the end of March Maxwell had announced a 'successful' A$800 million bid for David Syme and Co., an Australian publishing group which owns The Age. One month later, the deal collapsed. In May he had sold Mollis and admitted that his ambition to build an engineering company had failed. His only consolation was the purchase of a 30 per cent stake for $9 million in the Israeli newspaper, Ma'ariv.

  The purchase of the Ma'ariv shares signalled Maxwell's commitment to Israel. Through a network of contacts supplied by his lawyer, Yakov Neman, an orthodox Jew who is considered to be Israel's leading tax expert, Maxwell had established close relations with the country's leading political leaders. Skilfully he would avoid showing favour to either Yitzak Shamir or Shimon Peres, the opposing leaders of the two main parties, by giving each identical contributions. In August 1988, Ido Dissentchik, Ma'ariv's editor, invited Maxwell to dinner to meet President Chaim Herzog. Within minutes the two men discovered that they had served in the same army corps in Normandy. Both were soon immersed in discussing their respective wars, a friendly old warriors' reunion. Israel had become Maxwell's sanctuary from controversy and venom.

  Powerful by his mere physical presence, for the beleaguered Israelis, who felt themselves isolated, neglected and hated, Maxwell's enthusiasm was astonishing. 'Here was a foreigner saying we were wonderful,' commented Ehud Olmert, the minister of health who became a close friend, 'and he could open doors for us anywhere.' Stickers began appearing bearing the slogan, 'Maxwell buy me' as he invested $100 million, an unprecedented amount for any individual,
in chemical, publishing and high-tech industries. Maxwell proved his commitment by appearing at conferences in Europe and America to encourage other Jews to invest in Israel. The proof of his advice was his $39 million investment in Scitex would be realised for $302 million. ‘I’ve made money in Israel,' he preached, 'so can you.' Israelis applauded. 'No one else had said such good things about Israel,' was the common praise.

  It was at the end of the business day that his associates witnessed the true reason for his investment in Israel. Opening the windows of his Jerusalem office, Tommy Lapid, his office manager, watched the man stare out over the city and tears roll from his eyes. 'I feel close to my parents here,' he whispered in a manner which no one in London could imagine. 'I've tried all the world and I'm only happy here with you.'

  His success in Israel was matched by his glowing and growing confidence in France where, in the absence of any other activity, he decided to play his popularity to its fullest extent.

  Over the previous months the Italian Carlo De Benedetti had been battling to seize the ownership of Belgium's biggest corporation, La Societe Generale de Belgique. By June, the predator had been defeated but at great cost to the Compagnie Financiere de Suez which had bought about half of the SGB shares accumulated by Benedetti. Keen to reduce the stockpile, Suez had offered Maxwell 10 per cent of the SGB shares. The reply was positive but on one condition: that Suez agree to sell to Maxwell SGB's 5 per cent stake in Havas, France's biggest advertising and communications conglomerate which was partly state owned. Havas's future was still uncertain until the new socialist government had clarified how it intended to dilute the corporation's strongly right-wing management. It was an ideal opportunity for Maxwell since, frustrated at TF1, he judged that Havas under his control would be an ideal vehicle to assert his major status in France; especially because Havas had already obtained access to two channels on the TDF satellite. After securing tentative agreement with Suez, Maxwell began secretly buying another 5 per cent of Havas's shares on the market. With 10 per cent he would be Havas's largest single shareholder after the government. A full bid, he understood, depended upon the ElyseVs blessing.

  Unlike in America and Britain, the French head of state wields decisive influence in commercial affairs without any protest from the tight circle of key personalities who manage and influence the economy. French businessmen's activities on the Bourse are not governed by strict laws as on Wall Street but by political arrangements which are themselves subject to what the insiders agree to be in the supreme interest of France. It is those impenetrable privileged relationships which had deterred Murdoch from attempting any major deals in France. In contrast, Maxwell, who in repeated interviews had reiterated his 'Frenchness', believed by the end of June that he could count himself as one of those insiders. 'My friend the president' had tripped off his lips during several interviews in France that year, displaying his remarkable confidence in the relationship and the consequence of his Henry Kissinger style shuttle-tycoonery.

  Knowing the importance of the Elysees attitude towards the Havas deal, Maxwell arranged to visit Mitterrand's assistant Jacques Attali in the palace on the morning of 17 June. The topic for discussion was not Havas but Maxwell's intention to make a generous donation to the presidency.

  Like his recent predecessors, Mitterrand's intent to bequeath an edifice of his reign to the City of Paris was widely known. In May 1987, two years before the Bicentenary celebrations, Edgar Faure had suggested that La Grande Arche, an office block then under construction by Bouygues, should be the symbol of the Bicentenary just as the Eiffel Tower commemorated the first centenary. The Arche is a radical cube building, measuring 110 by 106 metres, which is clearly visible when looking up along the Champs Elysees and through the Arc de Triomphe. Faure further suggested that the Arche should house a new Rights of Man organisation to symbolise the revolution. On 24 June Mitterrand formally endorsed Faure's 'good idea'.

  Over the following months, Faure sought rich donors to finance the Rights of Man organisation. Among those willing to contribute was Maxwell who in return for his money was made Faure's deputy. On Faure's death, Maxwell assumed the presidency. His arrival at the meeting to confirm his appointment at the skyscraper Defense building was characteristic. 'A helicopter arrived on the roof,' recalls the Organisation's secretary, 'and Maxwell emerged followed by a blonde secretary carrying a portable typewriter.' After his appointment, he departed and was not seen again for the remainder of that year although the Organisation's future was in grave doubt. In Britain, the appointment would be erroneously translated to suggest that Maxwell was the second-in-command of the whole celebration, a mistake which remained generally uncorrected.

  By June 1988, the Arche's future use had become a potential political embarrassment. The entire basement area - 16,000 square metres below ground without a single window - was unsold. Maxwell's visit to Attali in the Elysee was to offer a solution. He and the Caisse Depot would buy the white elephant through a joint company called SAGA. Maxwell's contribution for five-eighths of the shares would be approximately Frs 175 million. A further Frs 150 million would be needed to fit the interior despite its limited potential. As a further act of generosity, Maxwell dedicated the area to stage the Bicentenary events. Having received Attali's thanks, Maxwell prepared himself for an appearance that night on Apostrophes, France's widely watched literary chat show.

  Maxwell had become a well-known personality in France by June 1988. Besides frequent references in the financial press to investments in printing plants, film production companies and reconfirmation that he would launch both the European and a popular daily, which in view of the socialist victory would be centre-left rather than centre-right, he had just published his authorised biography. His appearance was, by anyone's reckoning, polished and appealing except for one slight hitch.

  While the other invited guests were discussing the Elysees unseen but powerful influence in financial affairs, Maxwell, unwilling and unable to act the wallflower, interrupted to deny the thesis: 'I don't agree at all.'

  He in turn was interrupted by a young and smiling financial journalist, Stephan Denis: 'But even you Mr Maxwell, if you need something, you go to the Elysee.'

  Maxwell: 'Not at all ... '

  Denis, rapier-like and with a laugh: 'You were there this morning.'

  Without a visible blink, despite the loud scoffs of the other guests, Maxwell explained that he had visited the Elysee to make a donation. After the programme, Maxwell approached Denis who was quite clearly well connected: 'How did you know?'

  'Because we passed each other in the corridor,' replied Denis who agreed to meet Maxwell for lunch. There would only be one topic: the identities of France's powerbrokers. The Englishman's interest was not simply to promote his businesses but to feed his unsatisfied lust for political intrigue and influence. France, with its centralised powerhouse, was a marvellous playground for a frustrated would-be politician.

  But it was time for celebration and two days later would be Maxwell's sixty-fifth birthday. As a devotee of parties, especially his own, his wife had organised no fewer than four parties over that weekend in Oxford for 3500 guests. The cost would be at least a quarter of a million pounds. The closest five hundred guests received invitations to 'a Gala Dinner and Dance to celebrate the fortieth anniversary of Pergamon Press and the sixty-fifth birthday of its founder'. As was customary, the marquees had been set up, the best wines ordered, the finest food prepared, the music arranged and the gifts organised. Instead of the previous year's fine leather toiletry case, Betty Maxwell had decided upon something more pragmatic. Each guest was to find a copy of the recently published authorised biography of their host by his faithful employee, Joe Haines. Since sales had been sluggish, the hosts could be forgiven for combining their natural generosity, instinctive self-promotion with commercial necessity. Disposing of surplus stock had always been an intriguing feature of the star's business career.

  The book's publication had been promote
d enthusiastically by Maxwell. Gleeful appearances on television and radio had been accompanied by the Maxwell stories about his unemployed father and his revelations about his Liechtenstein trust. Under the reassuring headline in the Daily Mirror, 'The truth about the money in Liechtenstein: the answers will amaze you', Maxwell announced that he had amassed no less than £1 billion in the tax haven. How he had earned that fortune remained unexplained but its eventual destiny was, he said, fixed - 'My children will not get a penny' - because everything would go to charities. It was an interesting shift from his earlier assurance that the money would go both to charities and to 'all my relatives not resident in Britain' which had not precluded his children. But there was some consistency that his children would have to make their own way in the world.