MTM's founder jailed for two years for fraud

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The Independent Online
Richard Lines, the founder and former chairman of MTM, which was once the UK's second-largest fine chemicals company, was jailed for two years yesterday for fraud which wiped pounds 250m off the company's share price in 1992.

Lines, 60, was also disqualified from acting as a company director for five years. Thomas Baxter, 45, the former finance director, was jailed for six months and disqualified from acting as a company director for two years.

Jailing Lines, Judge Grigson said at the Old Bailey: "Ambition motivated him, not greed, but he persistently and deliberately proved to be dishonest." The judge told Baxter he had failed in his duty.

Lines, of Great Ayton, Cleveland, set up MTM in 1984 after 11 years at ICI and before that a 15-year career in the Royal Navy. Through MTM he made millions and in 1991 he took home pounds 3m after selling shares in the company with which he bought a pounds 1.8m farm in north Yorkshire. He was also awarded an OBE.

The company commissioned a book to tell the story of its rapid growth for which Sir John Harvey-Jones, the former head of ICI, wrote the foreword.

MTM was floated on the Stock Exchange in 1986 after which it made a series of global acquisitions to become, by 1991, the second-largest fine chemicals company in the UK.

The two men were convicted in December on charges brought by the Serious Fraud Office and North Yorkshire Police fraud squad.

Lines was convicted of two offences of conspiring to account falsely and one offence of making misleading, false or deceptive statements. Baxter was convicted of one count of conspiracy to account falsely and another of making misleading, false or deceptive statements. He was acquitted on a further account of conspiring to account falsely.

The SFO's investigation began after the collapse of MTM's share price in March 1992 from 226p to as low as 25p. Baxter and Lines lied to analysts and investors about the the true state of the company's financial health just days before it issued a profits warning.

The prosecution also argued that Lines took advantage of the previously buoyant share price to fund the acquisition of Hardwicke Chemicals in 1990 and by selling shares after key announcements containing false information as to the profitability of the company.

"Mr Lines' elaborate schemes to falsely enhance the company's share price led to its collapse with a loss of pounds 250m. In putting his dishonest plans into effect, he also corrupted several of his employees," said Stephen Myers, the SFO lawyer in charge of the case.

"Not only did institutions and pension funds lose money but so did small investors who could ill afford the loss," said Mr Myers.