The UK government's report into Robert Maxwell's tenure as Mirror Group Newspapers chief has revealed the vast extent to which his pension fund abuses went unnoticed, and in some cases ignored.
The report, released by Department of Trade and Industry, whilst laying the principal fault at Maxwell's doorstep also attaches varying levels of blame to several city institutions. It also outlines several proposals that the authors would like to see implemented.
The two firms that have received the most blame are investment bank Goldman Sachs and auditors Coopers Lyband & Deloitte. Goldman Sachs, the investment bank Maxwell principally dealt with must bear a substantial responsibility in respect to the manipulation (by Maxwell) in the stock market, the report stated.
Coopers & Lybrand Deloitte are also singled out as the report claims that the firm knew about Maxwell's usage of pension funds to prop up MGN's share price and that they failed to report this to the pension scheme’s trustees.
Although the report's authors claim that the majority of the recommendations they made in 1995 have been implemented, it believes that there are still some issues that need to be addressed. In particular, the report would like to see more training and assistance being given to trustees. Additionally, they would like to see severe sanctions, being imposed upon companies that do not report fraud and encouraging the secondment of staff from leading firms to regulatory bodies, as part of a normal career.
Additionally, the reports authors would like to see regulatory reform of securities markets to provide more control over firms that operate on a trans-national basis. This would ensure fair, open and transparent conduct, according to the report. They also call for more detailed guidance to be given on the auditing of business empires.
One other firm that comes in for criticism is Morgan Stanley. It failed to report to either a regulator or Bishopsgate Investment Management (BIM) a $135m overdraft run up by London & Bishopsgate International Investment Management, another Maxwell company. According to the report, staff at Morgan Stanley Trust Company thought the overdraft had not been deliberately created.
Although the report clears the pension fund's trustees of any blame, they did unwittingly allow Maxwell an even greater opportunity to run his companies and pension funds as if they were one. The report notes that under a deed dated March 1988, the majority of pension fund assets of all Maxwell related companies were transferred to a Common Investment Fund (CIF). The sole trustee of the CIF was BIM.
According to the report, information that would have uncovered the abuses was withheld from the trustees, and that to the best of their knowledge, the funds were doing well.
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