Press baron damned as early as 1973

There are a number of lessons to be drawn from the DTI’s report on the Maxwell affair – but the question might justifiably be asked: why weren’t the lessons from the first damning DTI report into Maxwell, published back in 1973, passed on to the new generation of financial advisers to his operations?

Just a glance at the old DTI report – an investigation into the affairs of Pergamon Press – reveals this state of affairs was not new to those charged with checking Maxwell’s dealings.

Chalmers Impey, auditors to the public Pergamon but not to Maxwell’s private companies, had expressed concern about the relationships between the public and private companies in a letter to Pergamon directors as early as 1966.

‘In our view it is undesirable that there should be a trading relationship between a public company and another company which, while not a subsidiary, is subject to any measure of common control so as to leave room for the suggestion that the profits of the public company might be inflated or deflated as a result of such a relationship,’ said the auditor.

Admirable as it was to make such a warning to Pergamon’s board, the DTI had no hesitation in condemning the firm.

‘We are driven to the conclusion that Chalmers Impey should not have been satisfied by Mr Maxwell’s ever ready explanations and that they failed to rumble him,’ said its report.

It’s often said that with the benefit of hindsight, things could have been different. But the existence of the DTI report removes the lack of hindsight defence from those charged with auditing Maxwell after 1973.

Links

£10m Maxwell report slams auditors

Timeline: The Maxwell scandal

Report recommends ‘comfort letter’

Maxwell report calls for audit rotation