Donoughue paid pounds 1.2m by Maxwell in three years

ROBERT MAXWELL paid Lord Donoughue of Ashton pounds 1.2m during the three years he spent working for London and Bishopsgate International Management, the modestly profitable private firm which managed some of the Maxwell pension fund money.

The peer, a Labour frontbench spokesman in the House of the Lords, received a pounds 500,000 advance under a share option agreement, a salary of pounds 180,000 a year and a further pounds 250,000 in compensation when he lost the job. He also had the use of a pounds 500,000 property in west London. During his time at LBI, the firm averaged profits of pounds 180,000 a year.

The House of Commons social security committee heard yesterday that pounds 50,000 of the compensation payment was tied to a confidentiality clause. Lord Donoughue rejected a suggestion from David Shaw, MP for Dover, that this was 'hush money'. He said the payment was part of a standard commercial confidentiality agreement.

Lord Donoughue left LBI in July 1991 after confronting Maxwell with his misgivings about LBI's stock-lending - one of the practices that enabled Maxwell to steal hundreds of millions of pounds of pensioners' money.

Lord Donoughue said he had agreed to leave LBI before the disagreement with Maxwell. His concerns were professional and internal, and did not extend to fears about wrong-doing.

'I was not protesting to Mr Maxwell that he was doing anything that was illegal or improper,' he said. He was concerned that lending stock to other Maxwell companies was 'in my view . . . not best practice'.

Lord Williams of Elvel, deputy leader of the Opposition in the Lords and another former LBI director, told MPs how he continued to work part-time for Maxwell, at pounds 30,000 a year, for years after he found himself unable to maintain an executive relationship with Maxwell.

Lord Williams said Maxwell had good connections in the City of London with firms keen to do business with him. 'He had a good entrepreneurial reputation. He had the sort of entrepreneurial spirit which Britain needs, to quote the Prime Minister.'