Invesco defies regulators: SIB orders group to pay millions into Maxwell fund after it broke the rules (CORRECTED)

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CORRECTION (PUBLISHED 27 JUNE 1993) APPENDED TO THIS ARTICLE

IN AN unprecedented act of defiance against the City's regulators, Invesco MIM, the fund management group, is refusing to comply with an order from the Securities and Investments Board to make a substantial contribution to the Maxwell Pensions Unit set up to help victims of the Maxwell fraud.

The SIB ordered Invesco to contribute several million pounds to the fund immediately after fining it pounds 750,000 plus pounds 1.6m in costs last week over 55 breaches of City regulations.

The Independent on Sunday has also discovered that Invesco has paid nearly pounds 10m in compensation to the 52 executives who have left the group in recent months. These include pounds 180,000 to the former finance director, Ratan Engineer, pounds 460,000 to the former chief executive, Nicholas Johnson, and nearly pounds 150,000 for the last months of Lord Stevens' contract after he stood down as chairman in April.

The SIB wants Invesco to swell the coffers at the Maxwell Pensions Unit, which has so far failed to raise a significant amount of money. It has relied on voluntary contributions from the City, but most firms are unwilling to contribute while litigation over the Maxwell affair is still pending.

They are concerned that it will be taken as an admission of guilt and that they will not be able to offset voluntary contributions against any fines that might be imposed on them by the courts later.

The largest voluntary contribution to the unit to date has been pounds 1m from Goldman Sachs, the US investment bank.

Invesco has repeatedly refused to contribute to the unit - which is headed by Sir John Cuckney, chairman of Royal Insurance - although three of the 55 charges related to Invesco MIM's handling of funds within the Maxwell pension scheme.

Lord Stevens said at last year's annual shareholders' meeting that the group had no obligation to the Maxwell pensioners.

This position was reiterated by Norman Riddell, who took over as chief executive of Invesco just six weeks ago.

He implied that so long as the Mirror Group pension scheme continued with its legal action against Invesco, his group would not contribute to the fund.

'When you go into a shop to buy an orange, why should you pay for it twice?' he asked.

The legal action by the Mirror pension fund alleges that Invesco and four other companies - Bank of America, Credit Suisse, Capel-Cure Myers and Lehman Brothers - were negligent in allowing shares from the scheme to be used as collateral for loans to Maxwell private companies.

The pension fund is claiming pounds 88m which it says was taken from it. In addition, its lawyers, Travers Smith Braithwaite, have put in a claim for aggravated damages that could push the total demanded above pounds 200m.

After the longest investigation conducted since the Financial Services Act came into force five years ago, the Investment Managers Regulatory Organisation (Imro) found Invesco had been guilty of 55 charges of misconduct, including three relating to the Mirror Group scheme.

The charges stated that Invesco did not keep Imro sufficiently informed about its concerns over how assets under its management were being used; that it did not tell the trustees that it no longer had possession of these investments; and that it allowed the investments to be transferred to a third party without instructions to that effect from its customer.

Mr Riddell said the problems had arisen because of the culture that existed in the firm, which thought it was still operating in an era before the Financial Services Act came into force.

As part of the fall-out from the problems, Invesco's chairman, chief executive, finance director and head of compliance have all left the company, along with 18 other senior executives and 30 other staff.

Mr Riddell said all had been paid out for the remainder of their contracts. He would not say how much this had cost, but sources close to the company gave an estimate of up to pounds 10m.

This compares with the pounds 9.5m in compensation that Invesco paid to investors in Drayton Consolidated, an investment trust managed by Invesco, last October after it admitted that Drayton's shareholders had not been fully informed about pounds 40m lent to an unquoted Scottish confectionery company, Alma Holdings, which collapsed last year.

Invesco had two directors on Drayton's board, Lord Stevens and Alexander Reid, investment director. It has admitted to having only a 14 per cent stake in Alma, but its loans in effect meant it owned 97 per cent of the company.

CORRECTION

IN OUR 6 June edition, we incorrectly reported that Invesco MIM had been fined by the SIB when in fact the penalty was imposed by Imro.

The company has asked us to point out that it was not ordered by the SIB to make a contribution to the Maxwell Pensions Unit fund.

(Photograph omitted)

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