Bank 'funded deal for tycoon to wipe out pounds 300m debts'

The Maxwell Trial: DAY 19

A complex plan that enabled the tycoon Robert Maxwell to make debts of pounds 300m disappear from the Mirror Group accounts was described to an Old Bailey fraud jury yesterday.

The scheme, a piece of "financial engineering", was the brainchild of former tax inspector Ron Woods, who became a director of more than 100 Maxwell companies after joining the group. He said that by using his "lawful" manoeuvre the pounds 300m was there one day and gone the next.

One of the key themes in the case so far has been the way the late tycoon was able to transfer hundreds of millions of pounds around his business empire, from public to private "family" companies, and how pension fund assets were used in a similar way.

Mr Woods revealed that the disappearing act was needed because in April 1991 - seven months before the tycoon's mysterious death - Maxwell was preparing to sell off 49 per cent of the Mirror Group in a public shares flotation.

He wanted the flotation to go ahead without the accounts showing the pounds 300m debts which represented inter-company loans owed by his private companies to the Mirror Group.

The plan, which enabled the debts to be wiped out, was described as "financial engineering". The complex deal was funded by the Midland Bank, whose officials spent a whole day and night at Mirror headquarters in Holborn Circus, central London, as the details were worked out, Mr Woods said.

His idea was to use "revaluation reserves" to remove the loans from the Mirror Group balance sheet, he told the jury. This involved valuing the titles of the various group publications, such as the Daily Mirror and Sunday Mirror. A price for them was set at pounds 500m.

Mr Woods said that the titles were bought by an entirely new company set up within the Mirror Group. The funds to make the purchase were provided by the Midland Bank, which earned a fee for agreeing to help operate the plan.

Within a 24-hour period the cash moved around Maxwell's labyrinthine business empire in a complete circle.

At the end of the day the Mirror Group still owned its titles in the various publication and the pounds 300m in inter-company debts had been removed from the balance sheet.

Mr Woods said that it was characteristic of Maxwell to move assets around his group and that included assets of the pension funds.

Kevin Maxwell, 36, denies conspiring with his father in the months before his death off the Canary Islands in November, 1991, to defraud the trustees and beneficiaries of the pension fund by misusing pounds 100m worth of shares in the Israeli company Scitex to pay the debts of private Maxwell companies.

Kevin, his brother Ian, 38,Robert Bunn, 47, the former company accountant and Larry Trachtenberg, 42, the former financial adviser, deny a similar charge involving pounds 22m worth of shares in another Israeli company, Teva, in an attempt to save the Maxwell empire from collapse in the days after Robert Maxwell's death.

The trial was adjourned until today.