Maxwell, The Outsider

by Tom Bower

  Paradoxically, Maxwell, who had issued more writs for defamation than anyone else in Britain, was merciless when others complained about his newspapers' wrongdoings. Throughout his ownership, Mirror Group newspapers lost more libel cases than any other newspaper. Few forgot his punishment in 1988 for vehemently refusing to authorise an apology to Koo Stark, the former girlfriend of Prince Andrew. Miss Stark was awarded record damages. In the view of those who were pursuing 'Mirrorgate', Maxwell was a sinner whose own pleas of innocence should be ignored. That pursuit, combined with the Panorama and Wall Street Journal reports, influenced sentiment in New York.

  In previous weeks, senior executives of Goldman Sachs in America had reviewed their relationship with Maxwell and become uneasy. The MCC shares were losing value, down to approximately 145p, a 100p drop in six months; the press reports were negative; and Maxwell was not, despite repeated requests, repaying the two loans worth over £80 million which were outstanding. The prevailing sentiment was clear: 'Maxwell isn't special to us. We should do what we feel we have to do.' Goldman began selling their entire holding of MCC shares. By 22 October, 25 million shares would be gone: 'We had gotten rid of everything that we were holding.' Insiders might reflect that Maxwell was losing one of his staunchest allies but Goldman later claimed that those sales were 'not significant'.

  Goldman were still holding 26 million MCC shares and 40 million Mirror Group shares as collateral for the $60 million loans. During early October, Maxwell was repeatedly urged from New York to repay one loan of about £25 million: 'We're not a bank but brokers. The money was lent on 27 March for seven days and now we want our money.' Using his charm, Maxwell attempted to calm the anger but apparently had no ability to repay the money.

  Goldman's were not the only creditors demanding repayment. Among the many European and American banks whose irritated voices he heard daily was the Swiss Bank. Their complaint, as Maxwell knew, was among the most serious. The loan was worth £57.5 million and the background to the deal was suspicious.

  It had started in 1988 when a private company owned by Maxwell called London and Bishopsgate Holdings had bought a 24.9 per cent stake in an investment fund called New Tokyo Investment Trust. The Trust, managed in Edinburgh, invested in Japanese stocks. Maxwell's representative on the Trust board was Bernard Donoughue, a former socialist academic who, having served Harold Wilson as a policy adviser, had switched ideologies and pledged himself to serve both capitalism and Maxwell.

  In January 1989, Donoughue argued that he could produce better profits for the Trust. The Scottish directors agreed that Donoughue and the Maxwell company should manage the Trust's investments for which a high fee would be paid.

  Donoughue's confidence was misplaced. By September 1990, the Trust had lost nearly half its money: down from £80.4 million to £46.3 million. As a solution, the Trust's board agreed that the stock could be 'lent out' to speculators, a specialised and legal activity on which fees can be earned.

  But in early 1991, the Scottish directors discovered that, unknown to them, the Maxwell company had been lending the stocks to other Maxwell companies. Maxwell had been using the stocks to cover his own debts. In the rows which followed, the Scots accused Maxwell of 'theft'. To placate the situation, in July 1991 Maxwell agreed to buy the Trust for £57.5 million, a generous price. Since he had no money to pay, Kevin Maxwell negotiated to borrow £60 million from the Swiss Bank. In the end, Maxwell drew only £55 million. The security offered to the Swiss Bank for the loan was the Trust's shares.

  Under the loan agreement, Maxwell agreed to deposit all the Trust's shares with the Swiss Bank and agreed not to use the shares as a collateral for any other loan. In August 1991, Maxwell received the money and the Swiss awaited delivery of the Trust's stock certificates. Despite repeated calls, Maxwell never sent the certificates. 'We were always fobbed off,' complained the Swiss Bank.

  By October, as the pressure from Goldman, Citibank and other financial institutions was intensifying, the Swiss Bank began issuing threats. Just as in his reply to Goldman, Maxwell could only resort to charm and platitudes. Kevin Maxwell promised sufficient cash to make up any shortfall. Although apparently at one stage Kevin reportedly admitted that the shares had been sold, he later said he knew nothing about the deal. Equivocation seemed the best cover for embarrassment. Unimpressed, the Swiss threatened to call the Fraud Squad. Maxwell was in trouble. The Trust's shares were no longer under his control. Either they had been sold or pledged as collateral elsewhere.

  At that moment in New York, the senior directors of Goldman Sachs decided that Maxwell was no longer a valued customer. They wanted repayment of £25 million. 'Let's pull the plug' was reportedly the decision-making phrase. From London came a final plea. The image of the 'ugly American' undermining a British firm would be unhelpful. That was rejected. On 30 October, New York someone 'at the highest level' issued an ultimatum: 'Repay now or we'll sell some of the collateral.' Across the city, the directors of Citibank had also decided to sell some MCC shares held as collateral because Maxwell had failed to repay his debts.

  Throughout his career, Maxwell was accused of committing many sins but he had always honoured the timely repayment of his bank loans. For the first time, he seemed unable or unwilling to fulfil his obligations.

  On 31 October, Goldman Sachs sold 2.2 million MCC shares: 'We gave him a warning.' The gravity of this transaction for Maxwell could not be overstated. Formal notification to MCC of that sale could be delayed for two business days. Deliberately, Goldman decided not to release the news: 'We wanted to save the pain and hoped we could slip it out when no one noticed.'

  On Monday 4 November, Goldman Sachs officially informed MCC of the sale. After waiting twenty-four hours, MCC's company secretary told the Stock Exchange of the sale. Citibank also

  sold some MCC shares that morning. It was not announced as required by the regulations.

  It was 1 p.m. on 5 November when a short announcement streamed across all brokers' monitors baldly stating that Goldman's percentage holding of MCC had declined. No comment was added. No other broker could have known immediately that Goldman had dropped the Sword of Damocles.

  One hour later, at 2 p.m., a Goldman executive watching the monitor gasped. MCC's price 'began to tank. Everyone was selling.' Eric Sheinberg had started making his way towards the Mirror building. The rumours were already circulating that Maxwell was missing.

  17

  On the evening of Wednesday 30 October, Angus Rankin, captain of the Lady Ghislaine, was telephoned by a secretary in the Mirror office in Holborn and was told that Maxwell would be flying down to Gibraltar the following day to board the yacht.

  Maxwell was suffering a cold, 'one of the filthiest colds he'd ever had', according to Michael Richardson. For ten years Maxwell had also suffered from pulmonary oedema, a congestion of the lungs which causes asphyxia and can damage the heart. Considering his weight, twenty-two stone, and the lack of one lung, Maxwell took advice to travel to the sun to recover: 'I'm going for five days to the sunshine to get rid of this cold and then I'll be fine.'

  As day broke over London, at 6.30 a.m. on 31 October, Maxwell left his Holborn apartment, went to the helipad on the roof of the Mirror building, and flew to Luton. Neither a secretary nor his valet was accompanying him. Travelling to the yacht without a secretary was not unusual. His suitcases, brought separately by car, had already been loaded. The Gulfstream was soon airborne for a three-and-a-half-hour flight to the British colony.

  Rankin was waiting when the jet landed. The captain of the Lady Ghislaine had been employed by Maxwell for about one year. None of the ten remaining crew had served for more than six months. Some say that Maxwell was in a bad temper when he stepped into the sunshine. Others, including Rankin, report that he was his usual self.

  Maxwell was certainly better tempered after a stewardess stepped ashore just before 4 p.m. when the yacht set sail for Madeira, 600 miles away. The voyage took two days. When the Lady Ghislaine docked
in Funchal, Maxwell was driven into town, and then returned to the boat to be taken to the Desertas beach to swim. Maxwell enjoyed swimming in the nude and he enjoyed snorkel diving. That evening, the yacht sailed back into Funchal harbour. Maxwell visited a casino and returned to the boat for the night.

  The following day, Sunday, Maxwell was seen eating on the ship's stern, chatting to Rankin who would later say that Maxwell was in a 'very good mood'. Maxwell decided to stay on the boat for its next 250-mile hop to Tenerife. It had not been a straightforward decision because he was committed to another eighteen hours at sea. He was due to give a speech to the Anglo-Israeli Association in London on Monday evening.

  At 10 a.m. on 4 November, the Lady Ghislaine sailed into Darcena Pesquera, the fishing port two kilometres north of Santa Cruz. Maxwell's Gulfstream was waiting at the island's southern airport near Los Christianos for the return flight to London. Fishermen at the quayside would later say that they overheard Maxwell arguing with the chef Robert Keating about the absence of lobster on board for lunch, but Keating denied those reports.

  Just before lunch, the yacht sailed south to Pons de Abona, a secluded spot, where Maxwell swam. Throughout that day, Maxwell was using the two telephones. All the reported accounts of that day's calls agree that Maxwell was in good humour despite his complaints to Ian that his cold made him feel unwell. Father and son were telephoning back and forth jointly compiling his speech for that evening. Ian had realised that, as so often in the past, his father would expect the son to deliver his speech.

  In between those calls, Maxwell had also been speaking to Samuel Pisar, a French lawyer and Auschwitz survivor, to whom he had become increasingly attached during his growing involvement in Israel. Their jovial conversation included references to Maxwell's nomination to receive the Legion d'honneur, France's highest award, and an exchange of jokes which Maxwell had included in that evening's speech.

  On the darker side, there were calls from Kevin about Goldman's decision to sell MCC shares from the collateral, about the Swiss Bank's threats to call in the Fraud Squad; there were calls from two French banks, the Paribas and the Credit Lyonnais, both anxious about loan repayments; and a host of calls about deals on the Stock Exchange. Among the latter was Michael Richardson who, after discussing MCC's market price, set a date to meet the following day to discuss a forthcoming deal. By the end of those conversations, the Ghislaine had returned to Santa Cruz.

  As Maxwell stepped ashore that night, Betty Maxwell was telling the organisers of the dinner in London that he was too unwell to attend. At 8 p.m., as Maxwell got into a taxi driven by Arturo Trujillo, Ian read his father's speech. It was a hawkish attack on President Bush's decision to freeze loans to Israel: 'We Jews of the Diaspora and of Israel are willing to go into hock ourselves ... No one can understand the world today and no one can understand Israel and the Jewish people unless they can appreciate how close Hitler came to wiping us out.'

  Squashed into a Toyota Camray, Trujillo pushed the front seat back to allow more room for Maxwell's legs while they drove, at Maxwell's request, to the best hotel in town.

  Wearing a beige blazer, check trousers and a blue baseball cap, Maxwell walked into the Hotel Mencey, an elegant turn-of-the-century building at the top of a steep hill in the town's centre. It was 8.25 p.m. Trujillo escorted Maxwell to tip the staff that their customer was important and then waited outside.

  The waiters could hardly fail to notice their latest guest in the empty restaurant. When Maxwell ordered a beer, the waiter immediately brought two 'because he was so big'. Maxwell chose a green salad followed by hake with clams in a parsley and mushroom sauce. While he waited, he ate an asparagus mousse dip. Some waiters would later comment that Maxwell seemed quite content although 'agitated' when his portable telephone to the Ghislaine failed to function. He was not short of breath. After puffing on a Havana cigar, he paid his £24 bill and bid farewell. Seeing that he had forgotten his jacket, a waiter raced after him. 'Maxwell', he later said, 'seemed preoccupied.'

  As he squeezed back into Trujillo's waiting taxi, Maxwell mentioned that the meal was 'very good' and asked for a cup of coffee. Trujillo drove to the El Olimpo, a well-known bar where Maxwell sat outside, drinking a cappuccino, while continuing to talk on the portable telephone. After fifteen minutes, Maxwell paid and asked Trujillo about flamenco shows. Since the nearest was thirty-three kilometres away, he abandoned the idea and ordered the taxi to return to the harbour.

  At 10 p.m., Maxwell drove up to the Lady Ghislaine. Amid some laughter, needing an extra 1000 pesetas for the tip, he borrowed a note from the crew. It was the last debt which he would incur. It would not be repaid.

  Not wanting to sleep alongside the bleak wharf overshadowed by bare rock, Maxwell ordered Rankin to set off to sea for the night. Although Maxwell occasionally suffered from seasickness, the water this night was calm. Rankin was given no instructions about the ship's course and made a random choice.

  Once out of the harbour, Maxwell telephoned Pisar, held a conference call with Rabbi Feivish Vogel of the British Lubavitch to discuss the recovery of Jewish archives from the Lenin library in Moscow, spoke to the Daily Mirror's editor, and later heard from Ian a report about the dinner. 'He was in good form despite his cold,' recalled Ian. The Lady Ghislaine was cruising slowly a few miles off land. Ian's last exchange with his father was confirmation that he would be back in London the following day. 'See you tomorrow,' ended Ian. 'You bet,' replied his father, the last words he is known to have spoken to his family.

  It was around midnight at the beginning of 5 November. The Lady Ghislaine was sailing, according to the captain, from Tenerife across to Gran Canaria and would then sail southwards five miles off the island's east coast.

  Two members of the crew were on watch, two engineers were on duty below and the captain was on the bridge. The surveillance video was not operating which was normal at sea. At 4.25 a.m., a member of the crew reported seeing Maxwell on the deck. He was wearing a three-quarter length, V-neck, buttoned nightgown. Twenty minutes later, Maxwell called up to the bridge. The air conditioning was too high, he complained. Sometime after that call, Maxwell got out of bed, walked out of the cabin, locked the door, and walked on to the deck. The boards were moist and he was not wearing slippers.

  One can only speculate about his thoughts. Paramount would have been the plight of his self-styled empire. In his mind there were problems but he did not harbour even a subconscious admission that his edifice was tottering towards collapse. Critics might suspect fraud and contrive to find the evidence but he relished a struggle for survival and possessed the strength which other mortals could neither comprehend nor command. So there would be a fight, but he was certain of victory.

  According to the best reconstruction by Spanish police and the pathologists in Madrid, Maxwell walked to the rear of the yacht. While standing by the thin metal rail, possibly urinating, he suffered a heart attack, lost his balance and fell into the sea.

  The cause of the attack was a chronic defect in his heart. As he struggled consciously or unconsciously for survival, his luxury craft unwittingly glided towards its rendezvous with his Gulfstream jet. On board the yacht was that month's Playboy magazine. A twelve-page interview recorded Maxwell's boasts about his achievements. Within the narrative, amid his name-dropping and descriptions of interrupting phone calls from presidents and prime ministers, Maxwell had suddenly anticipated his death: ‘I too have a contract that expires one day - with the good Lord.' The fearless fatalist could not have anticipated the conditions of the contract's termination.

  Since no water was found in the lungs, the pathologists concluded that Maxwell's last moments were spent gasping above the water as the heart attack came to its ultimate conclusion. They could neither determine how long the attack continued nor how long the victim remained conscious.

  According to Rankin, the Ghislaine dropped anchor at Los Christianos at the southern tip of Tenerife at 9.45 a.m. The craft had covered about s
ixty miles. Later an employee of the local jetfoil said he saw the boat on arriving for work at 7 a.m., but that was subsequently discounted.

  In London, Kevin was being interviewed by Bronwen Maddox of the Financial Times. Maddox had completed a trawl through dozens of annual reports at Companies House filed by Maxwell's private companies and produced the most detailed scheme disentangling the web of Maxwell's empire. After a review, Kevin commented, 'Yes there's a lot of it', but suggested there were fewer companies than before. Although the records suggested that the Maxwell companies owed about £2.2 billion, Kevin added, Tor the first time in years it's really not much of a strain on us all.'

  Elsewhere in the building, there was a meeting with a group of financial advisers including Michael Richardson. Everyone present was aware that MCC's half yearly results due shortly would, for the first time, show a loss. Combined with the threats from Swiss Bank, Goldman Sachs and others, Kevin's protestations of good health were ingenious theatre.