Great frauds in history: Robert Maxwell

Robert Maxwell looted millions from the pension fund of the Mirror Group, wiping out shareholders and condemning pensioners to poverty.

Robert Maxwell was born Jan Ludvik Hoch in modern day Ukraine (then part of Czechoslovakia) in 1923. He escaped to France during World War II and made his way to Britain, where he joined the British Army.

After buying the rights to distribute German academic papers, he took over a small academic publisher, which later became Pergamon Press. During the 1980s he aggressively expanded his business empire, with the result that, by the end of the decade, he owned a string of companies, including Macmillan Publishers, the Daily Mirror and New York Daily News.

What was the scam?

Having taken on large amounts of debt, and following the launch of a string of expensive failures, Maxwell was reduced to shunting money between his companies to give the impression they were profitable, repeatedly changing the dates on which they reported earnings, in order to fool auditors. When this wasn't enough to keep his empire going, he looted money from the pension fund of the Mirror Group in an attempt to prop up its share price.

What happened next?

With his businesses on the brink of collapse, Maxwell was reported missing from his yacht on 5 November 1991. His body was later discovered in the Atlantic Ocean, an apparent suicide (officially considered an accidental drowning). His bankers called in their loans, and his looting of the pension fund was discovered. By 1992 his sons Kevin and Ian were forced to declare bankruptcy.

In the end, Maxwell's firms were liquidated and his sons were put on trial for fraud (they were ultimately acquitted).

Lessons for investors

While Mirror Group shareholders were wiped out, arguably the biggest losers were the pensioners whohad £460m looted from their fund. Despite a partial government bailout, as wellas money from the investment bankers who advised Maxwell, most pensioners had toaccept a 50% cut in the valueof their pensions. Perhaps all this mess could have been avoided had the people dealing with Maxwell heeded the words of the government investigation of the shadowy dealings at Pergamon in the 1970s, which concluded that "he is not in our opinion a person who can be relied on to exercise proper stewardship of a public company".

Recommended

Inflation, energy crisis, strikes – have we gone back to the 1970s?
Investment strategy

Inflation, energy crisis, strikes – have we gone back to the 1970s?

Merryn and John talk about rising prices, productivity and the state of the labour market, plus are bond investors really the adults in the room, and …
15 Oct 2021
Why actively managed funds don’t outperform in bear markets
Funds

Why actively managed funds don’t outperform in bear markets

The idea that active funds should outperform in bear markets is logical and compelling. Sadly it’s also wrong
15 Oct 2021
Inflation isn’t transitory – but what does that mean for markets?
Inflation

Inflation isn’t transitory – but what does that mean for markets?

With US inflation at its highest for 13 years and prices rising fast around the world, markets have come to realise that this is no longer “transitory…
14 Oct 2021
Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load
Silver and other precious metals

Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load

For investors, silver is incredibly frustrating. It has more potential than almost any other metal, but that potential is never realised. So why has D…
13 Oct 2021

Most Popular

Inflation is still one of the biggest threats to your personal finances
Investment strategy

Inflation is still one of the biggest threats to your personal finances

Central bankers and economists insist inflation will be gone by next year. We're not so sure, says Merryn Somerset Webb. So if you haven’t started to …
1 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021