Barclays had worries about MCC last July

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The Independent Online
BARCLAYS BANK had serious worries about the financial position of Maxwell Communication Corporation, Robert Maxwell's main public company, as far back as July last year, it emerged yesterday. MCC collapsed in December owing more than pounds 1.5bn to banks.

In a judgment handed down by Mr Justice Hoffman yesterday, it was stated that Barclays started cutting its exposure to MCC when the company failed to fulfil its side of a foreign exchange transaction on 15 July last year, the day before it was announced that Lord Walker, the former cabinet minister, would not become chairman of the group.

'On 15 July 1991 MCC defaulted on a foreign exchange contract,' Mr Justice Hoffman said. 'As a result, Barclays began to cut its exposure.'

Maxwell wrote to Barclays saying that the default was 'all a terrible mistake' and that the matter would be immediately sorted out. However, former senior executives at MCC have said that at the same time the group failed to honour its side of foreign exchange contracts with at least four other banks - two Swiss, two Japanese. One of these has confirmed that there was a problem with foreign exchange contracts at that time.

The Lord Walker announcement, which followed a story in the Independent, caused a sharp drop in MCC shares and a crisis of confidence among its bankers.

In the statement it was said that MCC had decided to demerge its US companies and that Lord Walker had decided he did not want to be chairman of a demerged group. The demerger plans were dropped a few weeks later and Lord Walker left the MCC board in September.

There was a meeting of MCC bankers on 18 July to which Lord Walker was invited. He said he could not attend because he had to travel to the University of Wales, where he was being granted an honorary degree.

He sent a letter to the bankers, which said that he had suggested the demerger and that 'my decision not to become chairman was, of course, made on the basis that it would be absurd for me . . . to preside over this new company'.

However, in a later interview Lord Walker said that he was told by Maxwell on 11 July that 'his services would no longer be needed'.

Contacted at his Worcester home yesterday, Lord Walker said he had no knowledge of the financial crisis engulfing MCC when the announcement of his departure was made in July.

He confirmed that Maxwell told him to go, but said that there was no contradiction between that fact and the letter to bankers mentioning his own decision to go. 'I concurred with his (Maxwell's) decision,' Lord Walker said.

Asked why he could not attend the bankers' meeting on the Friday afternoon when the investiture was not until Saturday, Lord Walker said that he needed to leave London in the morning to pick up his five children from Worcester and be in Wales in time for a dinner in the evening.

Lord Walker is understood not to have been offered use of Maxwell's helicopter or either of his two private jets.

When Lord Walker left MCC, he was given pounds 100,000 in cash, a pounds 50,000 car and 201,000 shares, which he immediately sold to the long-term executive compensation scheme of MCC for around pounds 340,000. He said the shares were sold to the scheme because this was a condition of his remuneration package.

Separately, it has emerged that the shares given to Lord Walker were purchased on the open market by MCC's brokers, Smith New Court, a few days earlier.

The ruling by Mr Justice Hoffman came in a case between Price Waterhouse, administrator of MCC, and Barclays. PW is trying to force Barclays to pay back dollars 30m ( pounds 15.5m) that it received from MCC in November last year, claiming it is a preferential payment as defined under the US bankruptcy code.

Barclays said the case should be heard in the UK, where the payment is unlikely to be deemed preferential, but Mr Justice Hoffman ruled that PW can sue it for return in the US. Barclays still has dollars 50m outstanding in loans to MCC.

Mark Homan, the PW partner heading the administration, welcomed the decision but would not say when PW would be taking any action against Barclays.

PW has also been given leave in the US for enforced access to the accounting record of PH (US) Inc, the Delaware company where Kevin and Ian Maxwell were, until recently, directors. It is believed to be controlled by the Maxwell Charitable Trust in Liechtenstein.