Maxwell Saga Turns into A Giant Legal Wrangle
LONDON (AP) _ One of Robert Maxwell’s most enduring legacies may be to the courts.
″The empire is now passing into the hands of lawyers,″ said Derek Terrington, an analyst with the London investment firm Kleinwort Benson Securities.
What began as a mystery at sea last month when the flamboyant publisher perished off his yacht has turned into a giant, trans-Atlantic legal wrangle.
While the mystery surrounding his death persists, lawyers and accountants have rushed to court to protect the interests of the Maxwell companies, creditors, and pensioners.
Many Maxwell companies have taken shelter in U.S. bankruptcy court or under similar court protection in Britain. Britain’s Serious Fraud Office is pursuing four separate inquiries.
Maxwell’s son Kevin, recognizing the possibility of criminal prosecution, has asserted his right to silence.
The Maxwell companies, mindful of their shareholders and employees, want most of all to survive, and secondly to recover funds allegedly diverted by the late patriarch. Pension funds want their assets restored. The creditor banks want repayment.
Among the claims to be sorted out:
-Investigators have alleged that Robert Maxwell diverted more than $1.2 billion from his public and private companies and their pension funds to keep his empire going. Related to that are allegations that Maxwell used the money to buy shares in his company, thus illegally shoring up stock prices.
-A group of 43 British banks is owed $2.4 billion by Maxwell Communication Corp. PLC, which this week sought bankrupcty protection in New York and London.
-Most of Maxwell’s private companies, including the pension fund management company alleged to be a key to Maxwell’s manipulations, have sought protection from British courts. Administrators are now running their affairs.
-Swiss Bank Corp. has complained that it didn’t receive collateral for a loan amounting to $100 million to a small Maxwell company called Adviser 188 Ltd.
-Mirror Group Newspapers PLC has filed suit against the Maxwell family, seeking to recover missing funds.
-Maxwell Communication has sued in Britain to recover shares of its subsidiary, the Berlitz language schools. Maxwell Communication had agreed to sell the shares to a Japanese publishing company but discovered that the shares had been pledged to Swiss Volksbank and Shearson Lehman Brothers as collateral for loans.
When he died Nov. 5, Maxwell left behind more than $4 billion liabilities, far exceeding his assets. He allegedly pledged assets - mainly shares in his companies - to more than one party. As in the Berlitz case, there are competing claims.
The result of these legal maneuvers will be a breakup of the empire. Mirror Group likely will find a new owner, and Maxwell Communication will be at least pared down, if not broken up and sold off.
The liquidators have said some of the smaller private companies will find buyers; some, maybe even the Daily News in New York, will be closed.
The Maxwells likely will end up with little or nothing.
Mirror Group, the profitable, publicly held publisher of five British newspapers, so far has not sought court protection. However, 51 percent of its stock is owned by Maxwell interests, which are now run by court-appointed administrators and the controlling interest is for sale. There are two potential buyers, the publisher Pearson PLC, and the Mirror Group’s own management.
The Serious Fraud Office, a British prosecuting agency, is pursuing these strands: allegations of an illegal effort to support the price of Maxwell Communication’s stock; the management of pension fund management; money missing from Mirror Group; and the complaint from Swiss Bank Corp.
The U.S. attorney’s office in New York reportedly is investigating suspicious financial dealings.
Maxwell Communication, which owns Macmillan and other operations in the United States, sought bankruptcy protection to gain time to come up with a restructuring plan. Under Chapter 11 protection in the United States, management remains in control while it tries to rescue the company. But in Britain, the court appoints an administrator who may require a debt restructuring or asset sales to satisfy creditors.
Robert Maxwell’s two main private holding companies, Robert Maxwell Group Ltd. and Headington Investments Ltd., have obtained court-appointed administrators who plan to sell assets to pay debts.
The administrators, headed by Arthur Andersen and Co. partner John Talbot, won’t say when they plan to close money-losing, unsold properties.
In addition to the family’s stake in the Mirror Group, the administrators control its 68 percent stake in Maxwell Communication as well as some 400 private Maxwell companies.
Swiss Bank Corp. went to the British court and got a receiver named for Adviser 188, the Maxwell company which Swiss Bank Corp. says owes it $100 million. Under British law, any creditor can seek the appointment of a receiver, who has the power to liquidate the company to pay off the creditors.
The Mirror Group’s civil suit resulted in court orders freezing each of the Maxwell brothers’ private assets up to $364 million.
A court also has appointed a provisional liquidator for Bishopsgate Investment Management Ltd. a private Maxwell company that managed most of the Maxwell pension funds. Bishopsgate is the company that is believed to be the main vehicle through which Robert Maxwell allegedly transferred assets.
The provisional liquidator, Neil Cooper of the accounting firm Robson Rhodes, has begun a separate civil proceeding to recover missing funds.
It is in those proceedings that Kevin Maxwell had decided to invoke his right to silence to protect against self-incrimination, his lawyer has said.