by Tom Bower
Two months before the flotation, Greenslade joined the legions of Maxwell's 'Field Marshals' and was sacked like a thunderclap for giving a pessimistic interview to the UK Press Gazette, a trade magazine. 'It didn't help us,' admits one of the flotation team. 'We were impressed by Greenslade and his dismissal confirmed the suspicions about Maxwell among fund managers.'
Unrepentant, Maxwell relished the prospect of launching the sale. Those who crammed into the Mirror's headquarters on 17 April detected only glee as the proprietor presented his latest success of rising sales and zooming profits. The first question soured the occasion.
How, asked a young reporter, did Maxwell square his promises about the Mirror with the DTI Inspectors' damning conclusions in 1971 about his fitness to manage a public company? Maxwell could not disguise the pain. Twenty years had passed and he was still haunted by that calumny. 'The bitchiness of British journalists continues,' complained Maxwell, whose employees in the floors above were at that moment writing editorials and stories which would cause other individuals embarrassment and misery. 'This is a country which hates success,' continued Maxwell, forgetting that the sale of Mirror Group shares was forced by his own failure to manage MCC properly.
'I felt sick as a parrot,' says one of those advisers, who had been sitting beside Maxwell, whose frozen, pained face could be seen on television that night. 'A cheap shot,' moaned an adviser. 'It ruined the launch. I thought that was all forgotten, although I think it caused sympathy for him.' No one mentioned the disaster after the conference had limped to its early conclusion. More significantly, none of the bankers or brokers employed by Maxwell believed the journalist's observations to be relevant.
The victim's furore was not concealed. Such open scepticism would have been unimaginable twelve months earlier and his rage intensified when Derek Terrington, a City analyst who had critically stalked Maxwell for some years, issued a circular entitled, 'Can't Recommend A Purchase' because the shares were overpriced. 'CRAP' provoked a succession of complaints, threats and as near an admission of defeat by Maxwell as he ever uttered: 'It's the last straw.'
'We've got difficulties,' sighed a broker. Few major British institutions or major investors were prepared to buy the Mirror's shares. Unusually, the refusal by the Prudential and Mercury Asset Management was publicised. Anxious to raise more money, Maxwell argued that the shares should be sold at better terms. The bankers refused. The crisis was solved in New York.
In New York it was so different. Bolstered by his image as saviour of the Daily News, Maxwell was a king. John Gutfreund, the legendary emperor of Salomon Brothers, assured Maxwell, a fellow gambler with a high profile, of both respect and support. Where Samuel Montagu had failed, Salomon delivered buyers. Maxwell contrived a clamour of interest which generated rumours in London that British fund managers were scrambling for shares in New York. The publicists were working overtime, generating welcome comment in British newspapers about oversubscription. 'Even a one-eyed Albanian can work out there is going to be a premium to the issue price,' promised Maxwell in anticipation of a hefty profit for his admirers.
On 17 May, the shares were launched at 125p. Just before 2.30 p.m. Maxwell arrived at Smith New Court to watch the trade begin. Standing with Richardson behind the dealers' screens he watched as the sellers outnumbered the buyers and the price fell: 'He was surprised. He didn't believe there would be sellers. I don't think he understood the "Max Factor". He had the ability to blank that out of his mind.' Smith's client, who had not been offered any champagne, wandered off to make phone calls.
Salomon Brothers later admitted losses of £5 million on the sale. Some suspected that Maxwell had an arrangement to buy any surplus shares privately. Two weeks later, on 28 May, Maxwell quietly mortgaged 13 million Mirror Group shares to Samuel Montagu in return for more loans.
All those problems were forgotten on 18 May, the night after the flotation. Traditionally, every institution involved in those money-making exercises hosts a lavish celebration to toast themselves and discreetly seek more work. Maxwell, who hosted many generous champagne parties during his life, might well have thought, while dancing in the marquee at his home in Oxford, that once again his problems had been overcome. An outsider maybe, but equally a survivor. There would always be battles, but as he approached his sixty-eighth birthday, they seemed quite manageable. MCC would be safe under Peter Walker and Kevin. More companies would have to be sold off but that was not serious. For himself, he would indulge in his expanding newspaper empire, especially in New York where the Daily News's losses were already reduced, albeit continuing at about $30 million a year but expected to be zero by Christmas. In three weeks, the Daily News would sponsor New York's tickertape parade to welcome home those who had fought in the Gulf. He would be the host standing alongside the mayor as a guest of honour.
But first he needed to settle MCC's annual accounts and the overriding issue was familiar. He wanted to present glowing results. As before, one snag was overwhelming. Nearly all the publishing profits had been wiped out by interest payments. Only £13 million remained as profits from publishing. But by the time he had finished, the accounts showed that MCC had earned pre-tax profits of £145.5 million. Half of those profits were apparently earned from currency speculation and most of the remainder from sales of the company itself. Other accountants, using other standards, would suggest that MCC earned at best a net profit of £6.3 million or, at worst, an actual loss of £6.35 million. Coopers & Lybrand nevertheless approved MCC's interpretation. Similarly, Coopers approved the valuation of MCC's intangibles at £2.41 billion and its assets at £2.81 billion.
In May, the market price of MCC according to the share price, was £1.2 billion. But the real value, after deducting debts, was barely £400 million. Others suggested that MCC was worth minus £1.3 billion. But on one fact all interpretations agreed: Maxwell's presence was vital to securing the continuation of the collateral on the loans. His presence alone, charming the bankers and brokers, juggling their pressing demands for repayment, maintained the impression of calm. Only he understood all the parts of the whole and how to keep the rickety edifice together. Maxwell understood the 'Max Factor' to imply that he was the glue that kept the company from disintegration. Yet among his undisclosed ploys was to pledge shares owned by the Mirror Group pension fund as collateral for his loans. Possibly £200 million, and later estimates would claim nearly £600 million, was raised in a manner which was, at best, a clear breach of the regulations even if he had been ultimately able to repay the fund. But Maxwell's need for money had become so rapacious that the option of repayment was no longer realistic. Maxwell needed hundreds of millions of pounds to pay interest on debts and to pay for his failed gambles on the price of stocks, gilts and currency. The so-called 'ring fence' which the bankers Samuel Montagu claimed had been constructed around the Mirror's funds had been effortlessly penetrated.
On 15 July, Maxwell's new strategy began to collapse. Peter Walker announced that he would not be taking over Maxwell's chairmanship of MCC. In any other context, Walker's reasons would have seemed sensible. He explained that, after examination, it was clear that MCC, which he had told Richardson was a 'terrific company', had become an American company. He recommended that it should be demerged and run from New York, but for personal reasons he did not want to leave Britain. Sceptics remained unconvinced.
As he pondered Walker's resignation and announced that he would continue as chairman while searching in New York for a bank who would mastermind the American flotation of MCC, Maxwell realised for the first time the dangers ahead.
Both MCC's and Mirror Group's share prices had begun falling. Since the flotation of the Mirror Group in May, the price of MCC shares had slipped from its peak of 241p and was heading towards 141p. Mirror Group shares were falling from 125p towards 80p. The headlines spoke of 'Maxwell's nightmare' but no outsider knew the full details.
On 26 July, wrestling with private debts which were estimated as high as £1 bill
ion, Maxwell mortgaged another 27 million Mirror Group shares to Samuel Montagu, bringing the estimated total to 40 million. He also turned to Goldman Sachs, who had been holding 26.3 million MCC shares as collateral (whose value had temporarily risen), and on 5 August borrowed a further £20 million which was secured by 40 million Mirror Group shares as collateral. Goldman had lent Maxwell about £100 million. Many other loans were arranged, including one to finance a currency gamble with Citibank, America's leading bank. As always, the loan was secured against MCC shares. It was a sign of desperation. Having wasted millions on interest charges and on his lifestyle, Maxwell was playing the markets to make up the shortfall. If he failed, the consequences were unthinkable.
One loan however remained undisclosed. Both public companies had 'lent' Maxwell's private companies an estimated £300 million.
Another loan carried a particular danger. Under an agreement, Maxwell would be in default of a £170 million loan if his stake in Mirror Group fell below 50 per cent, which would happen if Goldman Sachs ever sold their 40 million Mirror Group shares. Privately, Maxwell feared what Kevin Maxwell would later describe as 'meltdown'.
At noon on 11 September, Maxwell attended in the Mirror building what would be his last annual general meeting. His multicoloured tie was stained. Not even his two sons, both so humiliated in the past, had dared warn their father.
Despite protestations from shareholders about his debts, Maxwell reaffirmed that he was, as always, 'confident' about the future. 'Take the criticisms,' he advised, 'with a pinch of salt. Your company's future is secure.' Sitting as far away from Maxwell as possible was Peter Walker, wishing he was somewhere else. Negotiations for the sale of at least eight assets, Maxwell continued, were underway. No one mentioned that, even if successful, those sales were insufficient to cover the debts. Asked about the permanency of his tenure, Maxwell replied, 'At the age of sixty-eight I can give no such assurance.' There was also a protest. The 'Pergamon 23', employees who had been dismissed in a bid to win recognition of their trade union in Oxford, protested about a socialist's 'conduct prejudicial to the Party'. It was an old struggle which Maxwell had long ignored. The protesters were treated to a tirade accusing their union, the NUJ, of being led by Trotskyites.
It was vintage Maxwell. Those around could only marvel at his resilience and apparent lack of concern: 'You could shoot bullets at Maxwell and they would just bounce off his broad, armour-plated bum,' marvelled an admirer. Two reports ruffled that ostensible calm.
A front-page article in the Wall Street Journal headed, 'Bloated Empire', describing what were his well-known problems in London, unsettled his New York bankers. The second report, a BBC television programme called The Max Factor shown on Panorama, caused him greater worry.
Throughout the week prior to the 23 September transmission, Maxwell had bombarded BBC executives to prevent the programme's transmission. When he failed, both his Sunday newspapers condemned the BBC executives as 'jackals'. Among his fears was that Panorama would be examining his management of the pension fund. To his relief he discovered that the topic had been dropped. Nevertheless, the programme's implications were worse than he had imagined. Nisha Pillai, the reporter, not only covered his debt and concealment activities, but also revealed that Maxwell had personally organised bogus bingo games for Mirror readers: 'It was Mr Maxwell himself,' reported Pillai, 'who decided to run a dishonest game and cheat his readers.' The dishonesty charge, gleefully repeated by Maxwell's rival newspapers, provoked a cascade of threats by Maxwell but they failed to dent the BBC's official endorsement of the allegations.
The unease about Maxwell's management now erupted in MCC's boardroom. On 4 October, Jean-Pierre Anselmini, his deputy chairman, resigned. Although it was later reported that the Frenchman was annoyed that Maxwell broke his promise not to take cash as a dividend payment, Anselmini was reportedly also provoked by the revelation of Goldman Sachs second 'put-option': 'Jean-Pierre just did not like it anymore that Maxwell did not consult him as the deputy chairman felt was his due,' observed an eyewitness in Maxwell's office. Three weeks later, Harry McQuillen, the president of Macmillan in America, already preceded by seven other senior executives, also resigned. 'The resignations just encouraged more calls from bankers,' confides an insider.
On the ninth floor, Maxwell was struggling with a genuine crisis.
At that moment, not more than two hundred yards away, in the headquarters of the small, independent publishers Faber & Faber, Matthew Evans, its chairman, could barely contain his excitement. Amid secrecy over the previous weeks, Evans had been preparing the sale of an American book called The Samson Option which purported 'stunning disclosures' about the politics and deployment of Israel's secret nuclear bomb. Written by Seymour Hersh, who was styled as an 'award-winning American writer' and an 'icon of America's army of investigative reporters', this book would clearly be an embarrassment to Maxwell.
To increase British sales, Evans had asked the author to include a special British angle. Hersh volunteered that he possessed proof that in 1986 Robert Maxwell had knowingly assisted Mossad, the Israeli intelligence agency. Hersh outlined Maxwell's responsibility for the plight of Mordechai Vanunu, an Israeli technician who in 1986 had sold information and photographs of Israel's secret bomb to the Sunday Times.
Vanunu's deal had become complicated because the same information had been offered to the Sunday Mirror but instead of accepting the scoop, Maxwell's newspaper had published an article ridiculing Vanunu's account as 'a hoax, or even something more sinister - a plot to discredit Israel'.
Before the Sunday Times's publication, and despite precautions, Vanunu was lured out of his hiding place in London by a Mossad honey trap, kidnapped in Rome, and flown to Israel where he was sentenced to eighteen years' imprisonment. Hersh claimed that the Mirror's foreign editor Nick Davies, at the request of Maxwell, had intentionally revealed Vanunu's hideaway in London to Mossad and that the Mirror's smear of Vanunu was dictated by Maxwell in co-operation with Mossad.
The source of Hersh's information was Ari Ben-Menasche, an Israeli, whose fraudulent claims to be a former Mossad officer were believed by Hersh. 'I checked his story carefully,' said Hersh.
Hersh believed Ben-Menasche's tale that after 1983 he and Davies had been secretly selling weapons to Iran with the full knowledge of George Bush, then the vice-president, and Yitzhak Shamir, the Israeli prime minister. The Israeli claimed that when he recruited Davies as an intelligence 'asset', he was unaware that Davies was a journalist. Davies, known in the Mirror as a flash would-be entrepreneur, denied involvement in arms dealing.
The publication of Hersh's book on 20 October 1991 was greeted by writs for defamation by Maxwell and Davies. Hersh's defamatory allegations were legally unreportable.
Two days later, encouraged by Maxwell's critics, a Member of Parliament, protected by Parliamentary privilege, expressed concern in the House at the allegation that: 'The Daily Mirror and its proprietor Robert Maxwell have maintained a close relationship with Mossad.' Protected by the legal right to report Parliamentary statements, every newspaper repeated Hersh's allegations. 'Maxwell man named as spy', was the headline which associated Maxwell with Davies. 'Mirrorgate' was born and Maxwell was under renewed pressure.
At Faber, Matthew Evans could not believe his good fortune. Creating publicity is a publisher's nightmare but successfully provoking a controversy is a publisher's dream. Flown to London, Hersh was presented before a packed news conference. Although his hesitant performance was disappointing, even sceptics were well disposed to anyone providing ammunition against Maxwell who, in typically exaggerated language, had condemned the allegations as 'ludicrous, a total invention'. Maxwell had accepted Davies's denials, especially one critical allegation by Hersh suggesting that Davies had visited Ohio, USA, in 1985 to buy arms from an American dealer. 'Forgery', screamed a Mirror headline condemning a letter which apparently connected Davies with the Ohio negotiations. 'I swear I've never been to Ohio in my life,' p
leaded Davies.
'You Liar', replied the Sun two days later. A photograph was published which proved Davies had visited Ohio. Davies apologised for his 'lapse of memory' but on 28 October was fired. The Mirror's credibility sank, closely followed by Maxwell's reputation whose link to Mossad's kidnap of Vanunu seemed proven. 'Mirrorgate' had become a gripping scandal selling newspapers and books.
Despite the book having been unpublished originally because the legal proof was deemed to be insufficient, Hersh had persuaded Evans that the Vanunu case was a mere symbol of Maxwell's close involvement in Mossad operations. According to Hersh, Maxwell had, on Israel's behalf, dealt in weapons, laundered money and had even paid Ben-Menasche a commission for transferring Israel's weapons.
Although Evans would later admit that Ben-Menasche had not been completely proven as '24 carat', Evans had been assured by Hersh that there were 'other unnamed sources' who confirmed his information. Evans discounted the credibility of Maxwell's unspecific denials. But to others it was clear that Maxwell was innocent for several reasons.
Firstly, in 1985 Maxwell had peripheral connections with Israel. Secondly, 'Irangate' had proven Israel's ability to ship arms to Iran since 1982. There was no reason for Israel to seek Maxwell's assistance. Thirdly, Maxwell had just bought the Mirror and had absolutely no knowledge of the arms trade. There was simply no occasion for him to become involved.
Maxwell's displays of temper were not unusual but during those last days of October even those habitually around Maxwell in the Mirror's headquarters remarked upon the vehemence of their employer's anger. Outside, there was no sympathy. Maxwell's complaints about unfair allegations - when his fortune and status had been earned by encouraging his own newspapers to turn a merciless spotlight on so many innocent individuals -provoked smears about hypocrisy. The intensity of 'Mirrorgate' reflected the delight among his critics of turning the spotlight back on to a habitual accuser. Memories were still fresh about Maxwell's sermon in 1984 describing the importance he attached to the rights of privacy and the avoidance of prurience. He had soon forsaken those values. His newspapers had been happy to expose the visits by Major Ronald Ferguson to a London massage parlour but no word was allowed of Maxwell's own indiscretions. Maxwell had initially approved the publication of photographs in the People of Prince Harry urinating in a park but might have been differently minded had his own grandchild been photographed. The publisher had authorised the payment for a colour spread of the nude Princess Stephanie of Monaco in her private pool with a boyfriend, but might well have objected if his daughters were similarly compromised.