Cuckney issues threat to City: Firms warned over Maxwell fund contributions

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The Independent Online
CITY firms that fail to contribute to the trust launched by the Government last month to help Maxwell pensioners may be excluded from privatisations and other work for the Government, it has emerged.

In an interview with the Independent, the chairman of the trust, Sir John Cuckney, gave a thinly veiled threat to the City that its reactions to the appeal to help pensioners who were defrauded of pounds 450m would affect the way the Government dealt with City firms, both directly and through their regulation, in the future.

Sir John, who retires as chairman of 3i this month, is heading a 30-strong team of civil servants assisted by an under-secretary of the Department of Social Security. The deeds of the trust have been agreed and will be signed on Tuesday when Sir John will launch an appeal for funds. So far it has received pounds 120,000 from the National Association of Pension Funds and pounds 50,000 from Watsons, the firm of consulting actuaries that advised on the Maxwell Communication Corporation pension schemes.

It is estimated that as much as pounds 250m may be needed to make up the damage to the Maxwell pension funds and restore payment of all pensions. However, Sir John and his team have not set a target as the amount needed may change as funds are found.

Sir John is expecting to be able to announce substantial contributions soon after launching the trust. It is hoped these will be enhanced by money from the Government in addition to the pounds 2.5m it has lent to the trust to enable it to restore pensions that have been stopped or cut.

To aid Sir John's appeal, it is understood that the Government will be wielding a big stick behind the scenes. City firms that worked for Maxwell companies might find it difficult to obtain work on privatisation issues and other Government-sponsored projects if they did not make substantial contributions to the fund.

'I would have thought how people react is one of a number of factors which will be taken account of at future beauty parades,' Sir John said.

Firms that worked for Maxwell - such as Samuel Montagu, Goldman Sachs and Smith New Court - have been involved in large privatisations in recent years, including British Steel, BP and the electricity companies.

In addition, Sir John made it clear that the question of self- regulation would also be an issue. On Thursday the Chancellor, Norman Lamont, criticised not only the body that regulated the Maxwell pension companies, the Investment Management Regulatory Organisation, but also the Securities and Investments Board.

Although the question of ending self-regulation was not mentioned, it is clear that within government circles it is still on the agenda.

'If the City wishes to apply self- regulation and there is some sort of hiccup it should be able to engage quickly in self-help,' Sir John said. 'It is a consideration that if the corporate sector is fairly speedily to make amends then it would produce a better atmosphere for any future legislation.'

The terms of the trust, when it is launched, will show that Sir John is looking for contributions not only from those who were involved with Maxwell but also from others in the City who are interested in restoring the City's reputation in the eyes of the public and the Government.

On Thursday, the SIB's chairman, Andrew Large, expressed similar sentiments, saying: 'The fact that such a massive fraud could be carried out reflects badly on the UK corporate and financial system as a whole as well as on a number of institutions and individuals in that system.'

A number of companies - including Britain's largest institutional investor, Prudential Assurance - have said they might not contribute because they are worried about how it would be interpreted. However, the contribution announced on Thursday by Watsons, the actuarial firm, could encourage others. Although only peripherally involved with Maxwell, it had harboured similar worries to the Pru's before changing its mind.

'We have good legal advice that a donation to the trust fund does not imply moral or legal liability,' Sir John said.

(Photograph omitted)

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