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".