Maxwell cash crisis 'worse than expected'

The Maxwell Trial Day 74
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The Independent Online

Kevin Maxwell was told: "No sacred cows" and "cash is now the name of the game" when he called in an accountant to help him deal with the crisis he faced a few days after his father's death, the Old Bailey fraud trial was told yesterday.

Richard Stone, head of corporate finance at Coopers & Lybrand, said that those were two of the rules he applied when he began working for Kevin Maxwell on 11 November 1991.

Mr Stone said on Day 74 of the trial that he quickly found that the cash situation was worse than he first feared. He warned Kevin Maxwell that he was not prepared to embark on the exercise unless he had the right to report everything to the banks which were worried about their exposure.

On 25 November 1991, Mr Stone made a presentation to about 200 bankers who attended a meeting at the Chartered Insurance Hall in the City of London and disclosed that the "private side" of the Maxwell group had bank debts of pounds 887m. The banks agreed a "well-organised standstill" was the best prospect for them and for the survival of the Maxwell empire. Five days later Mr Stone learned for the first time that the pension funds were in deficit by an estimated pounds 380m.

Alun Jones QC, defending Kevin Maxwell, said that had Mr Stone checked with Steve Wootten, one of his firm's audit partners, he would have known that Mr Wootten had been looking into the pension fund situation for about two weeks, on the instructions of Kevin Maxwell.

Mr Stone said that he had not sought information from Coopers & Lybrand's audit partners, who had prepared the Maxwell group companies' accounts, because he wanted an independent view of the situation in making his report to the banks on Kevin Maxwell's instructions.

By 3 December 1991, when another meeting with the bankers took place, the creditors faced a totally different position because of the "vast" inter-company borrowings which had been revealed, said Mr Stone.

He said it was about this time that he was told by Kevin Maxwell of a possible "white knight" equity investor on 30 November or 1 December 1991. The investor was prepared to inject pounds 400m into the group, Kevin Maxwell told him.

The banks issued a deadline for the end of the week, which was not met, the court heard.

Kevin and Ian Maxwell, together with a former Maxwell aide, Larry Trachtenberg, all deny conspiracy to defraud the pension funds by misuse of investments.