by Tom Bower
The very next day Maxwell arrived in New York accompanied by Paul DiBiase, representing Kerman, and Lawrence Banks, representing Fleming. Over the following seven days the teams from both sides met daily. Throughout the weary, continuous negotiations, the major issue was Pergamon's accounts. The queries were always answered by production of the now completed 1968 report, which, as the Pergamon team emphasised, had been officially certified by Chalmers Impey. Two other obstacles were also removed. Since Maxwell's private companies were such an integral part of Pergamon's operations, he agreed to sell an option for their sale on generous terms; and on Schwartz's insistence Maxwell agreed to sign a warranty that 'Maxwell has no knowledge that [Pergamon's] financial statements are inaccurate, taken as a whole.'
Under the agreement, Leasco would bid 37s for each Pergamon share (at the time they were trading at approximately 27s). Maxwell would get a mixture of cash and Leasco stock in return for his own 34 per cent of Pergamon shares. He was to be deputy chairman of the main Leasco company and chairman of Leasco World Trade Company. In total, the bid valued Pergamon at £25.4 million, of which Maxwell and his family would receive over £8 million.
In New York on 17 June, amid considerable excitement, Maxwell and Steinberg signed the agreement that Leasco could launch a formal bid for Pergamon, subject to Maxwell allowing a team of accountants appointed by Leasco to have complete access to every Pergamon file, bank statement, inventory and employee so that all their remaining questions would be satisfactorily answered. Several bottles of champagne were opened and everyone in the room laughed with relief. The impression of those who witnessed the two outsiders clink glasses was that a happy marriage would not easily be achieved but the two protagonists genuinely exuded a desire for a relationship.
The celebration was cut short. Maxwell insisted that they fly immediately to London to announce the deal the following day, just twenty-four hours before his deadline expired. As they dashed to Kennedy airport, phone calls were made to Jacob Rothschild and Richard Fleming asking them to arrange a press conference.
The following morning, instead of driving directly from Heathrow airport to the Rothschild bank, Steinberg first called to see Peter Stevens, his manager in Leasco's Knightsbridge office. 'Baby, do I have a deal for you,' cooed the beaming Steinberg as he walked through the door. Stevens was appalled when he heard the details. ‘I live in Britain,' he told Steinberg, 'and I hear the grass growing here. What I hear about this guy isn't good.' Steinberg was unimpressed, least of all by Stevens's criticism that publishing and computers didn't mix because data banks were a gimmick. Nothing would sway Steinberg. He believed in Maxwell and in Pergamon. There was brilliance and energy which he could harness.
8
The reception at Rothchilds was warmer. Steinberg was excited by the number of journalists who had crowded into the conference room: 'I was amazed that it was so significant.' The two smiling businessmen sat flanked by their two sullen-faced bankers in a packed robin of bemused journalists. Maxwell did most of the talking, which provoked the impression that it was he who was taking over Leasco. As the champion of the ‘I'm Backing Britain' campaign, he had to explain the apparent contradiction. Britain, he answered, did not have the finance or knowhow to develop a computer-based information-retrieval system. The deal would also benefit Britain's precarious balance of payments. Nearly everyone seemed satisfied.
There was only one slight blot on an otherwise ideal marriage announcement. It was a question from Robert Jones, an authoritative writer on business affairs for The Times. 'What is Pergamon's overdraft?' he asked. Maxwell replied, '£500,000.' Jones immediately countered that Pergamon's report coming out the following day showed £1.9 million. Politely but firmly Maxwell insisted that the position had much improved in the previous six months. For Steinberg, sitting nearby, the exchange was 'curious. I didn't understand the significance at the time.' As the journalists left he asked Maxwell for an explanation. 'That man', replied his jubilant partner, 'has been persecuting me for years.' There was a germ of truth in Maxwell's exaggeration. Jones had for long been sceptical about Pergamon's affairs and had some months earlier been contacted by Richard Millett, Butterworths' former chairman, who had not ceased to investigate ILSC's finances. Jones would make only brief mention of his exchange with Maxwell in the following day's newspaper, but Steinberg would seek him out a few weeks later.
The newspaper headlines on 19 June reflected the infectious enthusiasm and hope portrayed in the photographs, placed alongside the articles, of the two laughing tycoons at their press conference. Everything seemed perfect. The next stage was, in theory, a pure formality. Leasco's bankers, lawyers and accountants would write the document which would spell out the formal offer to Pergamon's shareholders. Heading the taskforce was Rothschilds, who would co-operate with Leasco's accountants Touche Ross to undertake a detailed investigation in London and Oxford.
On that same day, Maxwell was deeply immersed in plans for his next venture, the purchase of the Sun newspaper from IPC. He had announced his interest two weeks earlier, in the midst of his negotiations with Steinberg, and had pledged that the paper would be 'loyal to the Labour movement'. He harboured high hopes that his third attempt to win control of a newspaper, financed by the sale of his Pergamon shares, would prove successful. At noon, his negotiations were to be temporarily interrupted as he presented Pergamon's 1968 annual report. The brochure's purple front cover encapsulated his achievement. Under a bold headline 'Profit Growth', the profits for 1967 were shown as £1,541,000 and those for 1968 as £2,182,000. In his personal statement, he credited the 'substantial increase in profits' to 'internal growth', and reaffirmed his confidence in ILSC's 'bright and profitable future'. But when he arrived at the AGM in Belgrave Square he was already troubled.
Just before the meeting, halting and stuttering as always, John Briggs had told Maxwell that he had just been visited by Colin Simpson, a reporter from the Sunday Times, who had intimated that he possessed information that the auditing procedures adopted by Chalmers Impey for Pergamon's accounts were questionable. Maxwell was outraged. A few telephone calls confirmed that several other Sunday Times reporters had spoken to former Pergamon employees within the last twenty-four hours. After trying unsuccessfully to contact the Sunday Times editor, Harold Evans, Maxwell wrote directly to the proprietor of the paper, Lord Thomson. His letter's subheading showed that he feared the worst: 'Maxwell, Crook or Paranoiac. An Insight exposé for publication in the next edition of the Sunday Times. . . .'The contents were equally sensational. Reporters on Thomson papers, Maxwell claimed, were intending to 'rely on and repeat' information 'from disgruntled ex-employees' which was 'not only completely false but grossly defamatory'. The information, he continued, was being offered 'at the instigation of Rupert Murdoch' and he called on Thomson to terminate the 'scurrilous attack on me'. Within hours two more letters were hand-delivered to Evans - one from Maxwell and the other from Isidore Kerman. The politician's language in the letter to Evans seemed particularly intemperate: 'I am reliably told that the team is burning the midnight oil so they can complete their dirty work in time.' In a further letter the following day, he described the Insight team as 'poison weed scribes'. Both the journalists of the Insight team and Evans were stunned. 'Quite honestly, we couldn't understand what he was on about,' recalls Godfrey Hodgson, then editor of Insight.
In 1969, the Sunday Times was, in the judgement of many professionals, the best weekly newspaper in the world. Under Evans, the paper consistently set new and original standards in journalism and presentation. Insight was a concept, created by Evans, which would later be dubbed 'investigative journalism'. Essentially, a team of prominent Sunday Times journalists and 'stringers' in Britain and throughout the world would, at the request of the Insight editors, either search for original and formerly unpublished information or try to establish the truth behind a major public event. As the individual journalists submitted their stories to London, the editors analysed the combined
information and wrote the story which appeared in the newspaper. Expense was rarely an obstacle to a scoop and it was quite normal for a dozen or more highly qualified journalists to contribute to a single story. By 1969, Insight had firmly established itself as the nation's agent to reveal serious scandals in the City, in industry, in government and generally wherever the powerbrokers of society had hitherto trod without fear of exposure. Its successes had already earned its editors quasi-legendary status among their peers. Revelations about the insurance scandals perpetuated by Emil Savundra and the Vehicle and General company, investigations into John Profumo and Kim Philby, and exposes of frauds in the wine and antiques world had all earned the Insight label sterling credibility. The mere mention that an Insight investigation was under way was often sufficient to imply that the subject had committed a wrong and had cause for concern. The corollary, which would be fiercely denied by members of the Insight team themselves, was that they behaved like self-appointed avenging angels whose conceit and arrogance blinded them to any facts, even the truth, if those facts did not suit their preconceived prejudices. This was undoubtedly Maxwell's reaction when he heard that Insight was preparing a profile.
Hodgson, who initiated the idea in the paper, insists that their early inquiries were completely innocent and devoid of any ulterior motives. Hodgson, then thirty-five years old, had been educated at Winchester and Oxford, and had only recently returned to London from Washington where he had reported the 1968 Presidential elections. He had not particularly welcomed his assignment to Insight since he saw himself as a gentle, intellectual analyst rather than the merciless investigator. Yet his interest in Maxwell was not entirely a passing whim.
Millett had not confined his suspicions about ILSC encyclopaedia sales to Jones. Like all professions, the literary world thrives on gossip, and anything new about Maxwell, whose unpopularity repeatedly touched new peaks, was particularly welcome. It was not long before one of London's more eminent literary agents passed on the gossip to Hodgson. With Maxwell so regularly in the news and the contradiction of the socialist millionaire so evident, Hodgson sent out messages to Sunday Times correspondents and stringers throughout the world asking them to check the authenticity of Maxwell's claim about his sales of Chambers encyclopaedia during the world tour. By early June, a number of replies tended to support Millett's allegations and Hodgson tried to arrange an appointment with Maxwell.
The approach was unsuccessful since Maxwell was immersed in the negotiations with Steinberg. But by coincidence, on 4 June, Maxwell announced his bid for the Sun newspaper, which included details of a 'survival plan' involving massive staff cuts and new methods to finance his proposed tabloid Sun. Since Fleet Street has always shown an inexhaustible fascination in its own affairs, Hodgson suggested to Bruce Page, the Sunday Times managing editor for features, that a profile of the would-be newspaper proprietor was timely. Page, an intelligent and committed investigator, shared Hodgson's enthusiasm. Their instinct seemed doubly rewarded when, two weeks later, on a Wednesday night, Rothschilds announced a press conference concerning Maxwell for the following day. Reporters were rapidly dispatched to collect information for a profile of Maxwell which would appear in that weekend's edition. Twenty-four hours later, Maxwell's aggrieved letters brought their plans to a sudden halt.
Maxwell's explanation in 1973 for his eccentric onslaught against the Sunday Times was: 'it seems to be a fashion of journalists in this country that if somebody gets to the top or tries to get there, then it is fair game to try to bring them down.' It is debatable whether Maxwell was 'on top' in June 1969 but indisputably it was the most critical moment in his career. The failure of all his bids in 1968 and his tactless political gaffes had generated a steady stream of abuse from many quarters, much of it unfair and defamatory but nevertheless provoked by what many viewed as irritating self-promotion. His bottomless reservoir of energy and self-confidence had apparently protected him from the wrath of his critics but, if caught unawares, he would concede that the vituperation in the City and in Westminster had exacted its toll. Selling Pergamon and buying the Sun offered to him a new and exciting opportunity which he would not allow his enemies to destroy. The Sunday Times, he feared, was their new vehicle.
But during the early afternoon of Friday 20 June, Maxwell had second thoughts about his tactics towards the newspaper. In the course of a telephone conversation, Evans reassured him there was not a Murdoch-inspired vendetta and accordingly Maxwell offered to come to the Sunday Times building to meet the Insight team for 'some straight talking'. 'They have worked on it', he told Evans, 'and it would only be fair for me to talk to them.'
The exchange which occurred in Evans's office that afternoon would have a profound effect on what became known as the Pergamon/Leasco affair. Both Page and Hodgson claim to have been severely shaken by Maxwell's written onslaught and consequently approached the occasion both indignant and unbenign. In what the two journalists reported as a 'rambling conversation', Maxwell described his conviction that Rupert Murdoch had inspired the Sunday Times and others to launch the attack. Indeed, he had sent a letter that day to Murdoch threatening a writ for defamation to prevent further publication of the 'vicious smear material which you caused to be manufactured during the battle for the News of the World9. Maxwell explained that he was selling Pergamon because he found it impossible to succeed in Britain.
Turning to Hodgson, Maxwell said, 'I've checked you out with David Astor [then proprietor of the Observer] and I'm surprised to discover that you're an honest man.' Hodgson was unimpressed. 'Mr Maxwell,' he retorted, 'you remind me of a chef in the restaurant where I once ate dinner. I tasted the mayonnaise served with my lobster and sent it back because I suspected it wasn't fresh and even possibly from a Heinz bottle. It had barely arrived in the kitchen before the chef rushed into the dining room screaming, "Who's accusing me of lying in here?'" Maxwell had failed to allay Insight's suspicions and the journalists remained hostile.
Nevertheless, Maxwell agreed with Evans that he would co-operate in a profile. Not only did he genuinely feel that he had nothing to hide but he also probably believed that his very co-operation would enable him to control the journalists. In return, Evans guaranteed by letter that Maxwell would 'see' the text of the profile before publication and, while denied any powers of veto, they would 'discuss' any disagreements. It was a highly unusual concession for a newspaper and would inevitably hinder the Sunday Times time-table. On the other hand, Maxwell was a public figure who had suffered a series of wounding defamations and clearly feared that his critics would readily pour out their embittered distortions. Evans calculated that Maxwell's co-operation was worth the risk. On 24 June, Page and Hodgson arrived in Fitzroy Square for their first interview with Maxwell. 'The meeting began', recalls Hodgson, 'with Maxwell offering me a copy of the Great Soviet Encyclopaedia and ended with him threatening to hang me from the dome of St Paul's.'
ILSC dominated their discussion. The journalists wanted to know, first, how many sets of Chambers encyclopaedia Maxwell had sold during his world tour and, secondly, when ILSC's accounts would be published-.—After conceding that his claims for sales in India were possibly mistaken, Maxwell asserted that ILSC's accounts would be published 'at the end of the month'. Both Hodgson and Page knew from other sources the impossibility of meeting that target and pressed the politician to substantiate his optimism. Dismayed that his word was being challenged, Maxwell became agitated and shouted, ‘I don't owe you a fucking thing.' The three men parted on a sour note. Hodgson felt particularly insulted: 'From the outset, Maxwell tried to dehumanise and treat me as an object to be bribed and cajoled. I resented it terribly.' The die was set for Insight to embark upon the newspapers most expensive and time-consuming investigation.
Page and Hodgson were diligent researchers with huge resources at their disposal. Within four days they had obtained detailed and revealing statements from two key ILSC executives about the state of the business, with the reliable promise of mo
re information in the future. Meanwhile, Maxwell again complained to Evans about the two journalists' 'very impertinent questions' and voiced his concern about an affidavit which had been sworn by a former employee of Chalmers Impey who alleged 'irregularities' in Pergamon's accounts. Insight, whose notebooks were being filled with innumerable allegations but few provable facts, began searching for reliable sources. Among their targets were the bankers, brokers, lawyers, government officials and businessmen who were deeply immersed in the Leasco bid.
The take-over process had already lurched into an unconventional pattern. Normally, Pergamon's shares would be purchased after all the investigations had been completed and the formal offer document issued. But on 20 June, just two days after the announcement of the bid, Rothschilds began buying Pergamon shares, on Leasco's orders, on the Stock Exchange. The reason for Steinberg's precipitate action before his accountants had even arrived in Oxford is disputed. Maxwell claims that the first he heard about the purchases was from Rothschilds. Steinberg claims that it was Maxwell who suggested the strategy during a phone call in which Maxwell reported the real possibility of a counter-bid for Pergamon. Leasco, Maxwell is alleged to have urged, should act with haste. In contrast, Steinberg insists, 'I didn't even realise shares could be bought on the open market before the formal offer had been published. It's not allowed in New York. It was Maxwell who encouraged me.' Maxwell vigorously denied that account. In the event, by 11 July, Rothschilds had bought just over 600,000 shares worth over £1 million in the name of nominees at an average price of just over 35s per share. Steinberg was pleased because the price was considerably less than their true worth as estimated by Fleming in New York just six weeks earlier, and it was also less than the bid price of 37s. The American was wholeheartedly committing Leasco to the take-over before he had satisfied himself about Pergamon's accounts.
