MCC investigators find 'fraudulent' forex profit

FICTITIOUS foreign exchange profits of pounds 36.9m have been uncovered by accountants investigating Maxwell Communication Corporation, according to a document filed yesterday in a New York court.

As a result, almost half of a surprise pounds 81m foreign exchange dealing profit in the 1991 accounts of MCC now appears to have been fraudulent, and more could come to light as investigations progress. The foreign exchange profits were the largest part of group profit before tax of pounds 145.5m.

Forged MCC records claimed the profits were made in dealings through an investment bank - understood to be Goldman Sachs in New York - but in fact the transactions did not take place and no record of them appeared in the bank's books. Goldman confirmed that its name had been used withouts its knowledge in the MCC documents.

The administrator, Price Waterhouse, is checking through deals going back to April 1989 to see if there were other similar transactions on the foreign exchanges.

David Lee, in charge of investigation work on MCC at Price Waterhouse, said in London that 'certain transactions which apparently generated significant foreign exchange profits approaching pounds 40m may well never have taken place. Our suspicions were aroused from looking at photocopy documents substantiating these transactions which had certain unusual characteristics'.

The documents were four memoranda addressed to the late Robert Maxwell which displayed uneven typefaces and looked as if certain parts of the text had been substituted for other text. So far nobody has been able to shed light on what happened.

Mr Lee added that 'as a result of a lack of confidence in the financial records, investigations are continuing'. It is believed that a number of further dealing records do not match documents held by other parties.

The accountants are sifting through more than 200 crates of files at a number of MCC offices and reviewing more than 100 bank accounts through which a total of more than pounds 18bn in transactions passed from December 1989 onwards.

According to the court document, the administrators found three forward rate transactions 'purportedly entered into' by MCC in November and December 1990 and a further closing spot transaction on 28 March 1991. It says: 'The financial institution allegedly involved has stated that it has no record of these four transactions and accordingly it appears the transaction may never have taken place.'

MCC records appeared to show that the proceeds were paid to it through a Maxwell private company on 4 April 1991. The payment existed but appears to have been a partial repayment of an inter-company debt.

The court filings say that the administrators are considering legal action against MCC's auditors, Coopers & Lybrand, as a result of the foreign exchange and other transactions that they have investigated. They have requested access to Coopers' MCC files.

Coopers said it knew of no reason from the information reported to it to suppose the accounts did not give a true and fair view, and added that it was normal for auditors to be asked for records.

The administrators believe that this and other claims, including an attempt to recover shares in Berlitz and moves to recover money from five banks including Barclays in preference actions, could lead to total recoveries of up to dollars 300m after tax.

After administration costs of pounds 43.2m, but excluding the dollars 300m of possible further claims, the administrators expect to recover between dollars 781m and dollars 1.364bn. This would give a range of payments to creditors between 22 and 43 per cent of what they are owed, but successful litigation would raise this range to 31 to 52 per cent.

Administration costs include pounds 24.6m to Price Waterhouse and pounds 7.8m to the solicitors Norton Rose.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine