by Tom Bower
Keyes arrived in Marylebone Road at 8.30 on a Saturday morning. At first Maxwell refused to see him, but he relented soon after. 'He was arrogant when I walked into his office,' recalls Keyes, 'and he just told me that he wasn't going to be told what he could do.' Keyes's response to such a taunt was to threaten a total shutdown. Maxwell's counter-response, which Keyes would hear repeated over the years, was categoric: 'I haven't got any time. I've got to catch a plane to Russia.' Keyes was equally dogmatic: 'Go to Russia, but you won't have a business when you come back.'
Like high-stakes poker, successful negotiations about money among tycoons or with union leaders depend upon many ingredients, but ultimately the outcome is decided by whose nerve cracks first. On this occasion, seeking to impress a left-wing union official by referring to a visit to Moscow positively rebounded. Keyes coolly waited while Maxwell fretted about missing his plane and then conceded the union's demands. 'It was my first fight and first victory against Maxwell,' recalls Keyes.
Keyes's victory contributed to Simpkins' immediate financial plight. The huge rebuilding costs had wiped out the previous year's £50,000 profit and left the company with a massive £98,000 loss. But that year's accounts would also reveal an unexpected item. Maxwell had repaid the £110,000 which he personally owed to Pitmans although under the original agreement it was to have been repaid by instalments over nine years. The reasons for the accelerated repayment will be explained later, but the methods Maxwell used would become controversial.
According to the accounts, it was Simpkins and not Maxwell who repaid Maxwell's personal debt. Because repayment was accelerated, Pitmans agreed to accept £98,000 instead of £110,000. The accounting methods used were ingenious but totally legal. With the help of Hambros, special preference shares had been issued to increase Simpkins' capital, but the cash which Maxwell had invested by purchasing the shares was immediately repaid to him by the company. The result of the money chase was that Simpkins paid Maxwell's debts to Pitmans and left Maxwell in complete control of the company, though he had paid no more than the initial £50,000. The extra money had come from Simpkins' own cash flow.
Maxwell had demonstrated his mastery of accountancy, a characteristic which recurs throughout his life. Accountancy, it must be emphasised, is not a science but an art, and the classification of any money is, within certain limits, quite legitimately subject to considerable personal discretion by the accountants. The immediate result of Maxwell's exercise of his discretion was that Simpkins' reserves were £45,000 poorer in actual cash than they had been at the beginning of the year. Since the company was still hovering on the verge of insolvency, it was a bold decision to take.
There was no secret why Maxwell was in such haste to repay the debt. In his bid to build an empire, he wanted a base in America where there was undoubtedly a huge market for British books and for Springer's journals. In 1952, he wanted to buy the British Book Center in New York, which was for sale.
Pitmans, who had a power of veto over any investment while Maxwell still owed money, could see no commercial sense in the venture. So Maxwell paid off the debt and was free to bid for the Book Center.
Pitmans' disapproval appeared to be well founded because the American company was bankrupt. The Book Center had been founded at the end of the war by B.T. Batsford, a British publisher, with the support of other companies, and ambitiously housed in a five-storey office block on the relatively fashionable East 55th Street. After three years the founders' hopes began to fade and Batsfords sold part of its controlling interest to a Conservative Member of Parliament, Captain Peter Baker MC, a well-known socialite who, everyone agreed, had fought 'a wonderful war'. After demobilisation, Baker had embarked on a mercurial career of establishing a publishing company, investing in a film studio and winning a seat in Parliament. Maxwell was very attracted to Baker, showing no obvious disdain for his politics. For at the turn of the decade Maxwell, who had never lost sight of his ambition to become a Member of Parliament, was in contact with several Tory politicians. Possibly Maxwell saw in Baker an entree into politics, but his friend's dazzling success was very brief.
In early 1952, Baker was drinking heavily and suffering financial problems. Maxwell lent him £13,500. Just months later, in May, Maxwell agreed to cancel the debt in return for Baker's 1,215 shares in the Book Center, which gave Maxwell a major interest. There still remained a $78,000 (£27,857) debt which the Center owed Batsfords. Maxwell's negotiations produced an apparently good deal. For £7,000 and a further £3,606 he obtained Batsfords' 334 shares and complete control. Although the shares were bought by Maxwell personally, a cheque for £9,666 was paid by Simpkins and charged to the debt owed to Maxwell. It was totally legal because, according to the accounts, Simpkins was still in debt to Maxwell, but the sagacity of that transaction would soon be queried by independent accountants. However, in mid-1952 it seemed to outsiders that Maxwell's success was impressive.
Within one year of the meeting at the Savoy, Maxwell was operating from a major property in central London, and controlled Simpkin Marshall, LMS and the Book Center. He seemed set to become a major international book-distributor, with a lifestyle to match. He had moved from suburban Chiswick to Claygate, a substantial detached residence in Esher which housed his family (now expanded to four children with the birth of girl twins). His business interests were accompanied by intense socialising. Through Anne Dove he was introduced to a succession of luminaries including two Labour politicians who also seemed set on stardom. The first was Francis Noel-Baker, son of the Labour veteran, and the second was Hugh Gaitskell, the Labour Party leader. Many of Maxwell's former employees remember the stir that Gaitskell's arrival at Maxwell House caused, but none remembers it better than Bill Keyes who watched it from outside. Keyes was on picket duty in one of the regular strikes for a wage increase. As Gaitskell approached the entrance, Keyes asked him to respect their picket. 'He just ignored us,' says Keyes.
Coleridge understood why Maxwell was currying friendship with politicians. During one conversation Maxwell confided that his ambition was now to become Prime Minister of Britain. His self-confidence was shared by Betty. 'My husband', she told Coleridge, 'can do anything,' and that included governing the country. Endearingly, Maxwell did not believe that his birthplace and religion were obstacles. Few of those around him, however, especially his fellow refugees, could see any suggestion that Maxwell embraced any particular political philosophy: he seemed to be motivated largely by the desire to increase his wealth. But others like Anne Dove believed that Maxwell wanted power, particularly political power.
Anne Dove understood his ambitions better than anyone and often held parties for him to meet the influential people whom she knew. Admiringly, she watched her boss in action: 'He always made a point of learning something from everybody. It was his instinct.' He always made a beeline for those who were important and, with the skill of a seasoned actor, played a matching role: 'He had respect for power, which was a natural outcome of his character.' He was also, she recognised, abrasive in handling people. Dove pointedly states, ‘I often made him undo unfair things like dismissals. It was his best quality. He always knew when he was wrong and quite humble.' But in the euphoria of his success, no one else noticed that characteristic or the appearance of the first cracks in his ambitions. The initial cause emanated from Heidelberg.
Tonjes Lange's first reaction to Maxwell's purchase of Simpkin Marshall had been cautiously optimistic. Although the take-over was effected without his knowledge and was contrary to their agreement about his exclusive employment for LMS, the publicity Maxwell had attracted in London convinced both Lange and even Ferdinand that they were associated with someone who was rising very fast in British society. In particular, they were impressed by the Bookseller's prediction that LMS would become part of Simpkin Marshall and '480,000 clients all over the world will be served specialist books and up-to-the-minute information'. Despite the fear that LMS's fortunes might suffer because Maxwell's efforts would
be diverted to his new interests, both believed that there might be advantages in the massive amount of new capital which Maxwell would presumably have at his disposal. Consequently, throughout 1952, they tried to help and advise Maxwell in the organisation of his new business, although to their disappointment he ignored their suggestions. His very ambition, they felt, was a major cause of the friction.
In May 1952, Maxwell opened a LMS office in New York at the Book Center's premises despite Ferdinand's and Tonjes Lange's objections. His motives were to challenge Springer's two American competitors, Walter Johnson and Stechert. To staff the new office, Maxwell hired Albert Daub, a German refugee who was Stechert's sales director. Explaining his tactics to Lange, Maxwell declared his assumption that with Daub he would inherit most of Stechert's customers. He was quickly disillusioned. His prey had no influence with the customers and his former employers were delighted to be rid of him. Another attempt by Maxwell to hire expertise also misfired but in a different way. Charles Hutt was recruited from Butterworths and brought enormous expertise. But months later, he was lured away by Johnson with all his inside knowledge.
These miscalculations were exposed towards the end of 1952 just when Springer's staff were searching through the London files for other reasons to reopen their bid to recover control of Springer's exports. Among their discoveries was the payment of £10,000 for a series of lacklustre 'Book of the Month'-type promotion campaigns which had little connection with scientific books; moreover, sales of Springer's new publications were static, and Shudian of China, Springer's old customer, was refusing to place any new orders because half of his order made eighteen months previously had not been delivered. The case they made against the London connection seemed convincing.
Maxwell ignored Springer's complaints. He was preoccupied by the uncertain finances of Simpkin Marshall, as those in his office recall: 'He was forever on the phone to Sir Charles Hambro.' The banker had loaned Simpkins £74,000 and was still personally well disposed towards Maxwell. But his fellow directors had become uneasy about the bank's link and wanted to end the commitment. At first Hambro resisted and negotiated to secure the loans against Simpkins' assets. But even that was insufficient for Hambro's colleagues and in early 1953 Maxwell was asked to find a new source of finance. Some years earlier he had borrowed money from an Armenian carpet dealer called Nassim Sakuto, whom he had met in Berlin. Sakuto claimed to have sold carpets to Goering and was trying to reclaim his property. It was an unlikely story but he was prepared to lend Maxwell money in return for a share of future profits. On Orton's advice the relationship was terminated and Maxwell now needed an alternative source of money. He turned to Kurt Wallersteiner, a German refugee, with whom he was closely involved in barter deals.
Wallersteiner was a talented organic chemist and chartered chemical engineer who had developed a series of international trading companies, most notably the Watford Chemical Company and the Anglo-Continental Exchange. They met at a lunch at the Athenaeum Club in spring 1952 hosted by Major John Whitlock, the clubbable Butterworths executive with an interest in science.
The two refugees immediately achieved a close rapport, especially since Maxwell still retained an interest in barter. Wallersteiner at the time was supplying pharmaceuticals and chemicals to East Germany, which, like all Communist countries, had little convertible currency and paid instead with East German products. Wallersteiner was attracted to the precarious trade by the big profits earned by deals with the Communist countries at the height of the Cold War. But the perpetual juggling act required skill, and Wallersteiner would occasionally come unstuck, as when he was stranded with one and a half million babies' feeding bottles in a Hamburg warehouse. When the two men met, Maxwell also had a pressing problem. He needed to liquidate the barter 'payments' made by the Chinese and Yugoslavs for the supply of Springer journals, although he seemed better able than Wallersteiner to terminate the juggling act profitably.
Throughout the post-embryo period of building his book-marketing interests, Maxwell had nurtured Low-Bell's business. The era of extreme shortages still prevailed and fortunes could be earned by skilfully negotiating through the tangle of government controls to supply a much needed commodity. Soon after they met, Maxwell offered Wallersteiner the services of his own team, Bill Hickey and Paul Lassen. Lassen, the junior of the duo, recalls that while 'Waller would set the deals up, Maxy would have to rescue him from the mess.' In recognition of his services, Lassen's wages would sometimes be paid by the Watford Chemical Co.
The deals invariably involved a triangle formed by west Europe, China and East Germany. Occasionally, everything went through smoothly, one such transaction being the supply of indigo-blue dye to China via East Germany. Other deals were initiated through LMS's supply of British and American books and journals, which would be part of a normal barter deal. But Lassen remembers a series of transactions which ended in desperate phone calls, frantic flights across Europe, threats to extract money which was owed and endless negotiations to sell a bewildering and occasionally exotic array of foods, chemicals and hardware which were located in Customs' warehouses at ports around the world. Lassen particularly remembers shipments from China of silk, eggyolk spray and tea. It was a characteristic of the period that obtaining import permits was a precious skill which in the barter trade became invaluable when Maxwell or Wallersteiner wanted to close the circle and collect the money. Lassen was often the fireman who rushed off to 'liquidate' the deal. Successfully he negotiated for the silk, worth more than £1 million, to be sold to Debenhams, and for the egg yolk to be bought by cake manufacturers in the Midlands; while the tea, which had been obtained in exchange for cement, was, he proudly recalls, liquidated within three days: 'I knew nothing about tea but I found a broker in London who put his nose into the sample and said it was excellent. I flew to Rotterdam and air-freighted the cargo to Britain within three days. Maxy was very pleased and gave me a one hundred pound bonus.'
Lassen unsuccessfully fought shy of Wallersteiner's more dubious deals, especially the purchase of the antibiotic streptomycin in America, which were done without Maxwell's knowledge. Washington has always been sensitive about its trade with the Communist bloc and its prejudices were never more intense than at the height of the Korean War. For the sly entrepreneur who managed to break the American trade embargo and supply the Communists' urgent needs, the profits were commensurate with the risk. In 1952, Wallersteiner had bought streptomycin in America, which had been shipped to Holland. Surreptitiously, the boxes were relabelled and, with false shipping documents, forwarded to China. In return more silk arrived in Europe. Lassen collected the payment in East Berlin from 'Diamond Jim' in bundles of dollar notes. According to Lassen, who was 'unhappy' about crossing into the east, 'Waller was caught on that deal and someone in Europe was imprisoned.'
No deal however reached the bizarre proportions of Wallersteiner's shipment of chemicals to East Germany bartered for an assortment of china, glass and textiles which were shipped to Argentina. The Argentinians in turn shipped two thousand tons of pork bellies to Britain but to Wallersteiner's horror the British Ministry of Food condemned the meat as sub-standard. With his costs mounting daily, Wallersteiner searched for a solution. Part of the shipment was sent to Holland for canning while the remainder was sold to Austria under the guise of a bilateral barter deal between two nations. Anne Dove stayed with Maxwell at the Hotel Sacher in Vienna for that complicated transaction. 'It was absolutely hilarious,' she recalls, 'like a music-hall comedy where strange men were constantly coming in and out and hiding behind doors and curtains while Maxwell and Wallersteiner argued about the deal.' It was one of the rare occasions when Dove realised that Maxwell's right hand did not know what his left hand was doing. 'The meat was so old', says Dove, 'that I warned Wallersteiner that he would poison a whole nation but everyone just thought it was a hoot.' Among the strange cast helping Maxwell and Wallersteiner to conclude the deal was Sir George Franckenstein, GCVO, an Austrian-born noble
man, diplomat and financier who was naturalised as a British citizen in 1938 and received a knighthood in the same year. Franckenstein had fallen on hard times but still had enough connections in his homeland to convince Austrian officials that they should accept that Wallersteiner was the representative of the fictitious state of the Oceania Republic and agree to exchange the pork for prefabricated houses. It fell to Hickey and Lassen to find customers for the houses.
In typical Maxwell style, the new project was attacked with gusto. Since the lack of housing in the post-war period was an emotive political issue, Maxwell had high hopes of profits. A prototype, installed with electricity and plumbing, was erected in High Wycombe and government officials were invited for inspection tours. Nobody responded. Four months later, Maxwell's team finally secured an interview at the Ministry where, according to Lassen, 'We were treated like children.' Rejected by the government and also by the building societies, their efforts were deployed to selling the houses to Canada, America and Cyprus.
