Promises to bankers 'broken'

The Maxwell Trial: Day 64

A New York banker from Lehman Brothers told an Old Bailey fraud trial yesterday that as a cash crisis in the Maxwell empire reached a crescendo after the tycoon's death he and his colleagues were a "group of very anxious people looking for answers".

Joe Gregory the 42-year-old head of Lehman's fixed income division, said broken promises over reduction of debts had undermined the bank's confidence in the Maxwell group.

After Maxwell's death on 5 November 1991, when he fell off his boat in the Atlantic, there was talk of the Israeli government coming forward to help his debt-plagued empire, but two weeks later it was clear there would be "little help from outside players".

The banker, who had a staff of 400 reporting to him world-wide when he was still in his thirties, told the jury that, when he became head of fixed income, Lehman was turning over $90bn (pounds 58bn) to $110bn. The figures had reduced since then.

Asked about a telephone call from a Maxwell executive to his home at 5 o'clock one morning, he said brightly: "I was awake."

Earlier the court had heard that when he was telling Kevin Maxwell on a transatlantic telephone call how he wanted a reduction in Lehman's exposure, Kevin had interjected to say: "This is bullshit."

Mr Gregory was asked yesterday about problems that arose in September 1991 over the pension fund company, Bishopsgate Investment Management, offering Teva and Scitex shares as security to Lehman.

Lehman was then about to get involved in underwriting an issue of Scitex in New York and when it was discovered the company was already holding shares in the Israeli pharmaceutical company a "Chinese wall" difficulty arose.

In addition, Lehman discovered that the Israelis had imposed blocks on the open sale of both Scitex and Teva.

The following month he had a "difficult" telephone conversation with Robert Maxwell over the problems and about a recall notice issued by Lehman.

Mr Maxwell's concern was that any publicity about the notice would cause him further difficulties with shares he owned, particularly those in Maxwell Communications Corp.

Kevin Maxwell, his brother, Ian, and former Maxwell aide, Larry Trachtenberg, all deny conspiracy to defraud by misuse of pension fund investments. The trial was adjourned to today.