Officers of J Rothschild said that Cazenove was given pretty much a free hand in the way it was allowed to use Rothschild's "firepower" in support of the Guinness share price.
Mr Mayhew, by contrast, claimed that he received advance approval for all purchases. Expressing "considerable unease about the practice of advance commitment of firepower to the bid broker", the inspectors say they think the Rothschild account "closer to the true picture".
They also question whether another support strategy adopted by Mr Mayhew would be within the spirit of the City Code and in particular general principle No 6. This concerned the purchase by Mr Mayhew on behalf of a client, indemnified by Guinness, of shares in the rival bidder, Argyll. These shares were then dumped on the market at opportune moments during the takeover battle so as to depress the Argyll share price.
The inspectors say that although Mr Mayhew was unaware of the indemnity, even without this element, they are disturbed by the stratagem.
The inspectors further express "surprise" that Mr Mayhew, in handling the share buying support of the American financier Meshulam Riklis, would not have known that Mr Riklis had a commercial interest in the bid in that he was a distributor of one of Distillers' best selling whiskies.
"Mr Mayhew was adamant, however, that he was unaware of Schenley's role as a Distillers' distributor .... He had not seen the newspaper reports and this information was never mentioned to him in his presence".
The inspectors express doubt that Mr Riklis gave his support for nothing, as he claims, in the light of the later assignment by Guinness of the Dewar's scotch whisky brand name to Mr Riklis.
Mr Mayhew was criminally charged over an aspect of the Guinness affair, but these charges were dropped before the case could reach trial. In this key episode, Tom Ward, a director of Guinness, indemnified Bank Leu in clear breach of the law in buying a large shareholding in Distillers at a price considerably in excess of the value of the offer so it could be voted in favour of Guinness. Mr Mayhew was responsible for processing the transaction.
However, the inspectors say they think it "most improbable that Mr Mayhew knew of the arrangement between Guinness and Bank Leu [the crux of the case against Mr Mayhew]; Guinness had no positive reason to tell him and every reason to seek to avoid the risk of Mr Mayhew refusing to purchase the shares without proper disclosures being made, which would have negated the purpose". On other aspects of the so called Pipetec transaction, the inspectors confess themselves at a loss to know whose account - that of Mr Mayhew or other key players in the transaction, is the more believable.
The inspectors detail without comment the crucial role played by Elliott Bernerd, now chairman of the publicly quoted Chelsfield property empire, in arranging the indemnified support of Violet Seulberger-Simon, sister of the property developer "Black" Jack Delal, on behalf of Morgan Grenfell.
Roger Seelig, former corporate finance director of Morgan Grenfell, is accused of giving the inspectors a false account of his role in arranging support from the American investment bank, LF Rothschild, Unterberg, Towbin (LFR).
Five senior executives of Morgan Grenfell, Guinness's merchant bank adviser, are accused of varying degrees of knowledge of what Mr Seelig was up to . All five continue to hold senior positions in the City and industry.
The inspectors say they find it "probable" that Christopher Reeves, then chief executive of Morgan Grenfell and now chairman of Merrill Lynch (Europe) was aware of the premium being paid to one of Mr Seelig's supporters for shares in Guinness.
"We find it surprising that Mr Reeves would have made no enquiry of Mr Seelig as to why it was necessary to pay such a large premium...Moreover we consider it likely that Mr Reeves was made aware by Mr Seelig, as the latter suggested to us, that the price was calculated [in a manner]..which should have alerted him to the possible existence of a backstopper arrangement".
Memoranda detailing the unwinding of the indemnity position with LFR were circulated within Morgan Grenfell and read at various times by Graham Walsh, then head of corporate finance at Morgan Grenfell, Donald Wells, divisional administrator and David Ewart, group finance director. Piers de Montfort, now a senior corporate financier at a leading City firm, is revealed to have had intimate knowledge of most aspects of the Seelig support operation.
The inspectors continue; "Other events during this period confirm that knowledge within Morgan Grenfell of Guinness' backstop (indemnity) on the LFR purchase was far from restricted.
"In August 1986, the subject surfaced in the course of discussions between Mr Ewart and the auditors, Spicer & Pegler [now part of Deloitte & Touche]". Mr Ewart told the auditors there was an unwritten agreement with Guinness that they will bear any loss incurred by the Bank on those shares.
"Having heard evidence from all the parties involved, we are quite satisfied despite Mr Ewart's strenuous denials, that he made a statement to the effect recorded by the auditors."
Mr Wells is accused of being "evasive and unhelpful" when the inspectors sought an explanation for the way in which the payment had been handled.
Both the Guinness and Distillers pension funds were pressurised into becoming a part of the support operation, the report reveals.
- Jeremy Warner
The cast list: Where are they now?
ERNEST SAUNDERS has re-established himself as a business consultant since his early relase from jail six years ago. Just this week he advised Carphone Warehouse on an acquisition. He lives with his wife Carole in some style in Dorset. He still receives an pounds 80,000 pension from Guinness.
TOM WARD has returned to his roots, running a small law firm in Annapolis, Maryland.
LORD JACOB ROTHSCHILD is head of the Millennium Commission, as well as the restorer of the Rothschild family fortunes and houses in Britain.
DAVID MAYHEW, 56, remains a senior partner in Cazenove, the blue-blooded stockbrokers.
SIR CHRISTOPHER REEVES is chairman of Merrill Lynch Europe.
OLIVIER ROUX is a management consultant with his own firm Talisman.
TONY PARNES is a London-based wheeler dealer in property and securities.
ROGER SEELIG runs his own business, "corporate strategic advice and farming'' at Tetbury, the Gloucestershire village where he lives.
LORD SPENS sits in the house of Lords.
"SIR" JACK LYONS, 82, was stripped of his knighthood following his trial, and is now retired in Florida.
GERALD RONSON is enjoying a spectacular comeback with his Heron group, a leading leisure park owner in Europe.
JIMMY GULLIVER, ex-chairman of Argyll , has since died.
EPHRAIM MARGULIES died last August.Reuse content