This was just a small item in the catalogue of losses set out yesterday by David James, the company doctor who recently took over as LEP chairman, as he sought and obtained shareholders' approval for the group's rescue deal.
Mr James described the removal of the border between East and West Germany as 'untimely'. Any recovery of the customs duty which arose proved impossible: 'The vodka had been drunk and the cigarettes gone up in smoke; (and) before any recovery of the duties could be undertaken, the Soviet army had departed'.
Mr James told the shareholders' meeting in London that failure to approve the refinancing would bring about LEP's winding-up. This would have 'horrendous consequences', not only for shareholders, but also for the group's 10,448 employees, its trade creditors and its pensioners.
LEP's pension fund would have faced a large deficit because its trustees had used about 60 per cent of the scheme's money to buy LEP shares and properties at prices above their current value.
David Hammond, chief executive of ADT, the security services group which owned 27 per cent of LEP before the rescue, suggested the banks were getting too much out of the refinancing. The deal leaves the banks owning 85 per cent of the company, in exchange for cancelling pounds 180m of debt.
Mr James recognised that the banks might be the principal beneficiaries, but he found it hard to see that 'any interest is disadvantaged by this reconstruction'.
LEP's disastrous property investments and excursions into making T-shirts and gold-mining left it with a pounds 235m loss, wiping out shareholders' funds.
Mr James may try to recover some of this money through legal actions. His targets include the Trading Alliance Corporation (TAC), an LEP subsidiary which was intended to provide trade finance but which ended up using its banking facilities to fund US clothing companies. LEP has written off pounds 23.1m in relation to this affair.
John Read, LEP's chairman until last November, was a director of TAC. However, LEP says that it was not told of TAC's investment in the garment companies until 'very late' last year. Although LEP's board gave consent for some guarantees to be issued, it disputes giving consent for certain loans that were made.
LEP is already suing Mr Read for alleged negligence and breach of contractual and fiduciary duties. Mr Read is claiming pounds 1.7m in compensation for loss of office.Reuse content