Sterling payment blocked: Robert Fraser objects to pounds 23.5m payment

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ROBERT FRASER, the former merchant bank whose links with the late Robert Maxwell are being investigated by the Serious Fraud Office, is blocking proposals for a pounds 23.5m cash payment to shareholders of Sterling Trust, the financial services shell company.

The objection by Fraser, which controls 51.5 per cent of Sterling's shares, has angered minority shareholders in the company, formerly known as Dewey Warren. They point to promises made by Sterling's board on two occasions to distribute the cash in the company, which is worth more than pounds 25m. The repayment is worth at least pounds 1 a share.

Fraser, run by financier Colin Emson, surrendered its banking licence last September. It has also emerged that the SFO has investigated its links with Maxwell, who controlled a large stake in the company and whose son, Kevin, sat on Fraser's board from 1986 until 1990.

The Bank of England forced Maxwell to cut his stake in Fraser in March 1991, eight months before he died, at a time when Fraser had a pounds 12m deficiency in its shareholders' funds. Until then Maxwell had an investment worth 40 per cent of the group's capital, though his voting power was restricted to under 15 per cent, the level at which the Bank of England demands prior approval.

Shareholders representing more than 43 per cent of Sterling's capital are expected to show their anger at the group's annual meeting this morning.

There is also an extraordinary meeting next month at which the capital repayment proposal was to be voted upon. The proposal is recommended by Sterling's board and its financial adviser, Phoenix Securities, but Fraser's objections have made this meeting essentially irrelevant.

The capital repayment came about after the Stock Exchange cancelled Sterling's listing, a step it often takes when shell companies have a large amount of cash and no discernible business.

Fraser has yet to come up with an alternative proposal, although it is planning to put three of its directors on to Sterling's board - Mr Emson, John Bottomley, who headed the banking side of Fraser until it lost its licence, and Robert White, the former head of Fraser's property side.