by Tom Bower
Meanwhile, the pork, after canning in Holland, was sold to East Germany in return for some thousands of tons of cement. After the British government refused to grant an import licence, the cement was sold to Canada for the foundations of the wooden houses. The chain seemed finally complete, but en route to Canada one Liberty ship sprang a leak that set the cement rock hard. On that transaction there were no profits for either Low-Bell or the Watford Chemical Company.
To the staff in the Marylebone Road, the antics of Hickey and Lassen were barely comprehensible, and, in the compartmentalised world which Maxwell created, that was the intention. Heyden remembers only the 'shadowy' Wallersteiner, who was forever coming in and out, while others jibed about the 'mysterious foreigner'. For those engrossed in rescuing Simpkin Marshall, the managing director's endless meetings with the ubiquitous Wallersteiner were frustrating. Some surmised that Maxwell was 'keeping his cards close to his chest' because he was reluctant, as an aspiring socialite and book magnate, to be seen in the grubby and unaesthetic world of pork and chemicals. In line with compartmentalisation, Simpkins' accountants did not prepare Low-Bell accounts. 'Barter was not the image he wanted to cultivate,' recalls one of his financial staff.
There were, however, pressing reasons for Maxwell's relationship with Wallersteiner. With Simpkins losing money, Wallersteiner's business was an enticing prospect for easily earned income. One year after their first meeting, on 3 July 1953, Maxwell was formally appointed 'confidential manager' of Wallersteiner's companies and was to be paid 20 per cent of their net profits. In 1969 Maxwell explained his motives: 'I would be able to control him and prevent him from doing any unsavoury business in Iron Curtain countries.' He added that this would add to his own profit and be to the benefit of the national economy. Within five weeks, on 14 August, Maxwell had persuaded Wallersteiner to take over Hambros' secured charge which by then had mounted to £320,000. Wallersteiner paid by way of a debenture which was not redeemable until 1958. Since Wallersteiner had already lent Simpkins £50,000, his commitment to Simpkins' success was greater than Maxwell's own. According to Wallersteiner, they celebrated their partnership by dining together at Les Ambassadeurs in Mayfair.
The following month, on 28 September, Maxwell asked Wallersteiner for more money. Wallersteiner claims that Maxwell assured him that Simpkins was thriving, and on that basis he lent a further £100,000, although Maxwell, by a special share issue, still retained control over the company. But Simpkins' costs continued to mount. A successful strike had led to increased wages while the volume of Simpkins' trade had barely increased. Yet there were limited successes. Two weeks after Wallersteiner's third loan, Maxwell persuaded thirty-five publishers to deliver their books on sale or return. Although he had achieved a singularly important breakthrough, 'The trade was simply suspicious,' says one of Simpkins' executives, 'and they had some grounds.'
In the summer of 1953, Coleridge suddenly resigned, so sparking a crisis of confidence. In the trade, the gossip was that the company was virtually insolvent. Publishers personally demanded that their accounts be settled. The behaviour of Otto Kyllmann of Constable was typical: he arrived at Maxwell House, told the taxi to wait, and burst into Maxwell's office, refusing to leave until he had received a cheque. There were also rumours that books which had been bought for export at a 50 per cent discount and ostensibly shipped to the Book Center in New York had been sold in Britain where the publisher's discount would have been 33 per cent. The fiddle, if it existed, was deemed to be the brainchild of a Simpkins employee who had joined the company before the war, and Maxwell would never have known what the trade long suspected. Although Simpkins had little prospect of recovering from bankruptcy, some observers claim that Maxwell was 'deeply worried', while others assert that there was no visible sign of concern. Simpkins' impending collapse might have been less alarming if his relationship with Springer, which supplied the bulk of Maxwell House's income, had not again been endangered.
Earlier in the year, Lange had summoned Maxwell to Berlin for a weekend discussion, in particular about the delay in payments. Maxwell, it was felt, was spending too much of his time on Simpkins' business at the expense of LMS'. Lange had heard privately from Orton that while Simpkins' costs had increased by 300 per cent, its turnover was up by only 180 per cent. But Maxwell arrived, employed his customary mixture of persuasive charm and salesmanship and departed after convincing his 'uncle' that the suspicions were unfounded because 'sales and profits had increased during the previous year by 24 per cent'.
But by September the reservoir of goodwill had practically disappeared. Orton told Hovel that the local authority in London was once again threatening to order the closure of Maxwell House on the grounds that it was a fire hazard. Maxwell's only hope of reprieve, said Orton, was to use his influence at the Ministry of Labour. Hovel was particularly struck by Coleridge's resignation and by Maxwell's refusal to 'properly exploit' the Germans' advice. 'We regretfully came to the conclusion', says Hovel, 'that too many sales were being lost by poor advertising. It was not completely Maxwell's fault that we felt that it was time for a friendly divorce.'
The formal letter, couched in mournful terms, was sent in November. The official reason cited for the break was the new German exchange regulations which required payment in dollars for exports to America. Tonjes noted with regret that they rarely saw or even heard from Maxwell anymore. Ferdinand, however, was delighted by the break. In a letter to his nephew Bernhard, who was attempting to establish a Springer publishing house in New York, Ferdinand warned against any relationship with Maxwell and Bernhard accepted the advice: 'Maxwell has proved to be a difficult person to do business with.' Maxwell had proposed to Bernhard that he invest in the new company, but Bernhard's rejection was emphatic: 'We don't want him as a person who wields any influence here.'
Legally, Maxwell could have forestalled the break for one year but since he had bought Simpkins without Springer's approval he was on weak ground. That weekend Maxwell and Lange agreed to an amicable, partial separation under which Maxwell relinquished his exclusive selling rights throughout the world but was allowed to represent LMS in some areas. The new arrangement would amply suit his latest ambition: to tap the vast reservoir of scientific journals published in the Communist bloc countries which had never been read in the west.
The first public hint of the strategy which would earn its architect his first million pounds was a small article in Der Telegraf, Maxwell's old newspaper, on 19 January 1954. After long negotiations, the Soviet government had agreed to consider Maxwell's proposals to translate and print Russian scientific papers in the west. Since there were no direct flights, the easiest route was via East Berlin. Maxwell arrived at Tempelhof airport in West Berlin, where he gave an interview to the newspaper. He described himself as the publisher and director of the 'world's biggest bookseller, Simpkin Marshall', as the director of a 'London merchant bank' which hoped to conclude some barter deals with the Russians (presumably Wallersteiner's Anglo-Continental Exchange) and as the first publisher from the free world to negotiate for the sale of scientific books with the Soviets.
Anne Dove walked alongside Maxwell in the middle of the night across the snow-covered Kurfurstendamm, watched by armed Russian soldiers, into the Soviet zone. By arrangement a taxi was waiting to take them to the airport. These were pioneering forays behind the Iron Curtain but Maxwell was by then a seasoned traveller. Maxwell and Dove stayed in Moscow for two weeks. The Russians constantly refused to answer Maxwell's questions and to give a date for the next round of negotiations. Between the meetings, Maxwell was confined to the hotel with a minder with whom he played chess. During the negotiations themselves, Maxwell and Dove were plied with vodka. But Maxwell, according to Dove, was always well prepared. 'He ate loads of yogurt to line his stomach. I ate caviar. He knew all the tricks.' At the end, Maxwell could wait no longer and returned to England without a firm contract. 'As we crossed the Channel he breathed a sigh of relief and said how pleased he
was to be home. Being British meant more to him than anything else. "I feel safe," he would say to me.'
The contrast between his patriotism and the long trips to the Iron Curtain countries did not pass unnoticed by the British security services. Soon after their return, Anne Dove received a private call from a source she well recognised. She was invited to come for a 'discreet chat with an anonymous man in an unnumbered room in the War Office'. The purpose was explicit. 'They wanted me to vouch for his loyalty. Of course they trusted my judgement.' It was not the last occasion that Maxwell's good business contacts with the Communist bloc were suspected as a cover for sinister activities, especially after Mezhdunarodnaya Kniga, the Soviet publishing house, granted him an exclusive contract for the western world. But that did not prevent Dickie Franks, the head of M.I.6's DP4 section, approaching Maxwell. Franks' task was to recruit British travellers to the Communist bloc and he approached Maxwell for assistance and information. Maxwell gave Franks the benefit of his observations but little more.
In Neal Street Maxwell was triumphant and began circulating the enormous new offering to potential customers using the LMS subscribers' list. 'As a result of Captain Maxwell's visit to Moscow last January,' it read, 'a wide range of Soviet scientific books is now available.' The letter was written on LMS paper and among the first recipients of his advertisement in June was Ferdinand Springer, who claimed that he knew nothing about the deal. It was another crucial moment in Springer's relationship with Maxwell since they were on the verge of signing a new agreement.
Tonjes Lange had felt considerable doubts about any new arrangement because Maxwell had proved uncontrollable and had avoided summoning a board meeting for the past two years. Nevertheless sentiment and Maxwell's irrepressible charm had always swayed his doubts and he had agreed that Maxwell could retain some exclusive world selling rights. The new advertisement arrived as the lawyers were clarifying some final details. Ferdinand was apoplectic. 'We demand', he wrote to Maxwell, 'an immediate and complete break between us and LMS.' Condemning the 'serious breach of trust', Springer wrote that he regretted taking the final step but blamed Maxwell's 'misuse of our loyalty'.
Maxwell personally negotiated the break on 2 July 1954 in Heidelberg, under which he agreed to dissolve LMS and operate under the name I.R. Maxwell & Co. Ltd. Springer gave Maxwell exclusive rights until 1959 in the British Empire, France, China and Indonesia at the same discounts. Maxwell, seemingly unconcerned, asked only that the break be kept a strict secret and flew directly to New York. On his return he wrote to 'My dear Onkel Lange' and promised 'a smooth handover' at the beginning of 1955.
The divorce was not smooth. Within four weeks Maxwell was protesting that Springer had broken the agreement. Lange counter-charged that Maxwell was guilty of the same; in particular that Maxwell, instead of ensuring the swift disappearance of the name Lange, Maxwell & Springer had actually printed his new notepaper with the subtitle 'Formerly Lange, Maxwell & Springer Ltd', a clear breach of his promise not to use the name in the future. Over the following months, Springer would repeatedly complain that Maxwell's staff were trying to hang on to old contracts or offer cut-rate terms in territories where they no longer enjoyed exclusivity. But by then Maxwell was fighting for his reputation in London.
The discord with Springer coincided with Simpkins' unstoppable slide into insolvency. In the book trade, the easiest method of directly influencing the apparent financial state of a company was through the accountant's valuation of the stock. Tom Clark, Simpkins' accountant, tried within the law to paint the best picture of the company's financial state, but his view proved to be too optimistic because one year later the stock which he had valued at £180,000 was written off as worthless. Clearly, the accountants were fighting a losing battle. Only Maxwell's determination delayed the inevitable. On 3 May 1954, he turned again to Wallersteiner for help. In a late-night meeting in Marylebone, according to Wallersteiner, Maxwell presented a predated contract which extended his own control of the German's companies in exchange for more shares in Simpkins and a right to 20 per cent of Simpkins' profits. Wallersteiner claims that he signed the following day. The background to what seems like inexplicable generosity or folly appears in Wallersteiner's own explanation to the Sunday Times in 1969. The businessman claimed that he feared retribution from western governments and Intelligence agencies for his barter deals with the Communist bloc and that Maxwell had promised him protection. His account must be read with caution because he has subsequently been convicted and imprisoned for several frauds. For his part, Maxwell claimed that Wallersteiner's 'investment' was actually his own money earned by the Watford Co. from the barter deals.
Whatever the truth, soon after signing, the partners had a bitter argument which ended with Wallersteiner, whose total investment in Simpkins was by that time £470,000, threatening to call a creditors' meeting. This was clearly a tense moment for Maxwell because it could have provoked Simpkins' immediate closure. In a pattern which would be repeated on many occasions over the coming years, Maxwell called Isidore Kerman, his solicitor. That night, Maxwell swore a twelve-page affidavit. It was unequivocal: 'Based upon their present trading position, their goodwill and their prospects . . . [Simpkin Marshall] are not only capable of carrying on their present business, but can look forward to considerable improvement and increase of their trade.' Then Maxwell swore that Simpkins, 'apart from their considerable fixed assets, have an excess of current assets over current liabilities of approximately £450,000'. The following morning Kerman obtained a High Court injunction which forbade Wallersteiner to endanger Simpkins' survival by alleging that the company was bankrupt. Here was an astonishing state of affairs. Subsequently Maxwell always correctly asserted that Simpkins was insolvent throughout his ownership, yet his sworn statement suggested the contrary.
In an uneasy truce over the following days, a new agreement was fashioned which froze their respective claims. Maxwell had an effective call on all Watford's profits and Wallersteiner would have to wait four years for repayment of the loans. But Maxwell did agree to accept Brigadier Alfred Critchley as Simpkins' chairman. Wallersteiner had met Critchley, a Canadian soldier and the first chairman of BO AC, through Count Vanden Heuvel and hoped to use his Establishment contacts for future barter deals in North America.
Critchley immediately hired the prestigious accountancy firm Peat, Marwick, Mitchell to investigate Simpkins' plight. Simultaneously, Maxwell hired a smaller firm of accountants, Chalmers Wade, who had direct experience of the publishing trade, 'to investigate [Simpkins'] trading arrangements' but not the company's finances. Chalmers' recommendations were identical to Maxwell's own survival plan, which he had presented to London's publishers four years earlier. But the report did contain one observation of future relevance. A sale of books from Simpkins to another company owned by Maxwell had been entered in the accounts as worth £105,000. But investigation revealed that the Maxwell company had the right to return the books, which somewhat coloured the accuracy of the entry as an irrevocable 'sale'. Fifteen years later, the same queries about accountancy practices would be raised during the investigation of Pergamon's affairs.
A third investigation was undertaken by Wallersteiner's own accountants. Like Peat, Marwick, they would eventually declare the company insolvent but they also reported an unforeseen discovery. Simpkins' biggest single debt, no less than £111,335 (it would subsequently increase to £117,000), was owed by Maxwell's own company, the Book Center in New York.
Peat's report also revealed similar inter-company transactions. In the previous year, Simpkins, despite its parlous state, had lent £211,599 to other companies which were controlled by Maxwell himself and had charged no interest. The money, commented Peat, Marwick, was not a normal trading loan, but amounted to 'financial assistance'. They also reported that Maxwell's affidavit describing Simpkins' surplus as £450,000 was erroneous. He had ignored Simpkins' debts of £524,813 which, after various computations, left an actual deficit, in their opinion,
of £12,173 in net tangible assets. Although every assessment depended on an individual accountant's interpretation, the sharp contradiction between Peat, Marwick's report and Maxwell's unequivocally optimistic version was seized upon by London's publishers.
Before the report was finalised, events moved swiftly. In November, Maxwell admitted that Simpkins was insolvent and appealed to the Publishers Association for support by adopting Chalmers' recommendations. His argument, as explained in two articles for Time and Tide, seem thirty-five years later reasonable and sane. 'British publishers', he wrote, 'are now issuing a record number of more than 24,000 books each year. This is larger even than the United States with three times our population. Yet here in Britain publishing is still largely regarded as an occupation for gentlemen. In the United States it is a very big business run on hard economic commercial lines. Why are British publishers so reluctant at facing the facts?'
The facts were, wrote Maxwell, that the publishing industry needed to 'modernise itself and take seriously the promise of giving a better service to authors and the book-buying public . . . otherwise the United Kingdom publishers will lose a great deal of their traditional export markets.' In June 1954 there was to be a World Book Fair in Earls Court, but Britain's leading publishers, including Macmillan and Heinemann, were refusing to exhibit, which reflected their old-fashioned, undynamic attitude towards exporting. 'Many British publishers are now congratulating themselves that the American attempt to take over the British publishing houses has been repulsed. But they are wrong in adopting this self-congratulatory attitude. The truth is the American publishers have now decided that there is hardly anything here worth buying.' His ardour for reform was unlikely to endear itself to the Association, whose xenophobia would bar all refugee publishers from a seat on their council for some years. In January, the Association rejected the survival plan. The writing was on the wall, but Maxwell was well prepared. Frank Beckwith was sent to New York to arrange that the assets of Book Center and LMS were legally separated from Simpkins. The earlier appointment of Maxwell's sister Brana Natkin, who was an American citizen, as a Book Center director would effectively prevent the British receiver from gaining access to the company's records. In London, a new office and headquarters for Maxwell's other businesses had already been purchased in Fitzroy Square. The news on 14 April that a petition for the winding up of Simpkins had been presented to the High Court triggered his evacuation plan.
