Yet the young Maxwell’s coolheadedness couldn’t undo the damage that his father may have wreaked upon the family’s media empire. In a stunning disclosure, the Daily Mirror revealed last week that Robert Maxwell had apparently made questionable loans and looted pension funds of Mirror Group Newspapers, the public company whose stock he controlled, all in a desperate attempt to keep other parts of his debt-laden conglomerate afloat. The amount of the freshly discovered debt now totals about $1.2 billion. The unraveling of Maxwell’s empire followed. Kevin and Ian Maxwell resigned as chairmen of Maxwell Communications Corp. and the Mirror Group; on Thursday, faced with possible liquidation by creditors, their father’s private holding companies filed for protection under British bankruptcy laws. As a result of the fiasco, speculation rose again that the tycoon’s still-unexplained plunge from the deck of the Lady Ghislaine last month was suicide. And the revelations showed with near certainty what few had the courage to say in public: only the press lord’s frantic and possibly illegal cash from one part of his empire to another had kept the entire edifice from collapsing, At the weekend, police were investigating reports that Maxwell had bugged the offices of his own executives who had questioned him about the pension-fund money. “This outcome,” says John Reidy, a media analyst with Smith Barney, “is on the outer edge of our fantasies.”
Even before last week’s events, insiders suspected the empire was teetering. But they kept quiet out of fear–or greed. In the years before his death, Maxwell went on a buying binge that many regarded as foolhardy, paying a whopping $2.6 billion for Macmillan Inc., the U.S. book publisher, in 1988. Through two private companies, Maxwell expanded rapidly around the globe, launching The European, an English-language weekly, and taking control of New York’s Daily News, the struggling tabloid. In recent months Maxwell had begun selling off properties, including the Berlitz language schools. But it was too late. “Recent acquisitions were not financially rational,” says analyst Bronwen Maddox, who probed Maxwell’s debt for London’s Financial Times. “At some point, reality was going to dawn.”
It dawned last Tuesday, when auditors told bankers that Maxwell had secretly borrowed about $530 million from the two public companies he controls, Maxwell Communications Corp. and the Mirror Group. Then they dropped a bombshell: Maxwell had also siphoned off an estimated $630 million from the Mirror Group pension fund. It appears that less than half is recoverable. “Ten days ago it looked as if the full debt of the Maxwell empire was $4.5 billion,” says Lorna Tilbian, media analyst at S.G. Warburg in London. “Now suddenly it’s $5.75 billion. When bankers realize there’s that kind of shortfall, they panic for the exit door.” Britain’s Serious Fraud Office promptly announced an investigation into the pension-fund disappearance. Transferring cash and stock into Maxwell’s other companies doesn’t necessarily violate the law. But the actions raise questions about whether Maxwell and his associates, Kevin and Ian included, were fulfilling their legal responsibility to safeguard the interests of Mirror retirees.
Some Maxwell employees now say they’re not surprised: the tycoon had long acted as though company pension funds were his own. “He saved the Mirror-but he certainly robbed it in recent years,” says Allan Davies, a retired Daily Mirror administrator. When Maxwell purchased the paper in 1984, says Davies, the unions were “alarmed” by his attitude. Says Davies: “He banged on the table … He regarded the pension surplus as money he could use, whereas the staff always regarded it as sacrosanct.” Such stories were whispered about on Fleet Street and London’s financial district, but Maxwell’s threats of libel effectively silenced his critics. John Kenny, a media analyst at Barclays de Zoete Wedd in London, admits that “we all believed him to be a crook. The great problem was that sort of attitude in public would have been met with a barrage of litigation. " Meanwhile, Maxwell’s lenders apparently didn’t scrutinize the soundness of the mogul’s operations, perhaps because they wanted to keep his business. Says one London analyst: “The banks, like lemmings, kept going over the cliff.”
Did Maxwell commit suicide to spare himself the anguish of total collapse? Most Mirror employees, says one manager, now believe Maxwell killed himself But Tom Bower, author of a tough Maxwell biography, doesn’t buy it: “He didn’t drown, so how did he die? There was no water in his lungs.” He’d also weathered huge financial scandal before, and was known to be a fighter. Official autopsy findings are expected this week from Spanish authorities; sources say the report will confirm that Maxwell died of a heart attack. That will offer relief to the Maxwell family, whose $30 million insurance policy would provide no benefits if Maxwell had killed himself.
The proceeds from Maxwell’s policy may soon be all his family has left. Virtually everything Maxwell owned appeared headed for the block last week-from the Lady Ghislaine to his private jet. Kevin and Ian may soon be unemployed and living off their private trusts. The Serious Fraud Office investigation may not spare them from scrutiny over the pension-fund transfers. On the advice of lawyers, Kevin Maxwell has refused to comment. Biographer Bower thinks the sons are blameless. “I don’t know that they’d have the objectivity to judge whether what [Robert] was doing was honest and proper. They’d been mesmerized.” That doesn’t satisfy some victims. Says Don Wood, vice chairman of the Association of Mirror Pensioners: “They are stewards of the company. And if they’re not responsible, then who in the hell is?”
Many experts predict the once mighty Maxwell empire will soon be history. Because Maxwell’s private and public companies are interwoven financially, all the pieces may now be up for grabs. Healthy properties, including Macmillan, should fetch high prices, while money losers like The European could shut down. Kevin Maxwell has vowed to keep the Daily News going–despite continued losses-but Reidy rates its chances of survival as “below 50-50.” Analysts predict the profitable Daily Mirror will be first on the auction block. In an editorial last week, the paper’s editors demanded that prospective new owners maintain its liberal traditions: “We fight for the millions … who have no other voice against public bullies and private cheats.” Ironically, it now appears that former owner Robert Maxwell was both.
