LONDON — Kevin and Ian Maxwell were pleading with British authorities early today for a last chance to salvage the remains of a financial empire that stands in rubble, the legacy of a larger-than-life father who turns out to have been much less than he seemed.
By mysteriously falling from his yacht into the Atlantic last month, Robert Maxwell himself escaped the fast-approaching exposure of his massive financial improprieties.
But as fresh allegations surfaced that Maxwell had played a shell game involving more than $1 billion in the assets of his global publishing businesses, a British court took steps to see that the sons would be called to account.
On Monday, a British High Court judge froze Kevin Maxwell's worldwide assets, said to total $810 million, and ordered the two sons to surrender their passports.
Early today, an appeals court freed Kevin Maxwell to fly to New York for talks aimed at saving the New York Daily News.
But as suspicion about the sons' role in the financial turmoil deepened, they were ordered to help investigators locate an estimated $700 million in cash their father had allegedly grabbed from the pension funds of the Mirror Group newspapers he controlled--money he is accused of using to prop up other debt-ridden family business interests.
Kevin Maxwell, 32, also put his London mansion up for sale.
"We have a mortgage like everyone else," his wife, Pandora, told reporters.
The Daily News, now in bankruptcy proceedings, is one of the Maxwell family holdings allegedly buoyed by funds siphoned from the publicly held British firms that the family dominated.
The latest developments capped one of the more rapid and spectacular business collapses in memory--a debacle marked by ever more bizarre revelations, with Maxwell tagged as everything from a friend of Israeli spies to a KGB stooge.
Meantime, British authorities, European bankers and Maxwell associates are trying to figure out how so Gargantuan a fraud--by so public a figure--could have gone so long undetected. While Parliament plans to examine apparent loopholes in British financial regulations, blame also is being assigned to British libel laws, which the portly publisher is said to have used to bully his critics into silence.
Besides Mirror Group--publisher of the Daily and Sunday Mirror newspapers in London--Maxwell owned a majority stake in Maxwell Communication Corp., whose U.S. interests include the Macmillan publishing house, Official Airline Guide and Collier's Encyclopedia.
Family interests included the weekly European newspaper, newspapers in Eastern Europe and Kenya, and British soccer teams, as well as the Daily News.
But at its core, the empire was hollow; the private and public companies' combined debt exceeds $5 billion.
Last week, most of the Maxwell family assets--including the majority stakes in Mirror Group and Maxwell Communication--were placed in the hands of British bankruptcy administrators. Britain's Serious Frauds Office was investigating not only the missing $700 million in pension money but also an additional $400 million in assets allegedly taken improperly from the public companies and pledged as collateral for new loans.
Meanwhile, efforts to complete the sale of Berlitz International to Japanese interests--a sale designed to raise a desperately needed $260 million for Maxwell Communication--was stalled upon the discovery by executives that some of the Berlitz stock has disappeared.
Maxwell's biggest burst of financial deception evidently began only months before his death.
Over the summer, the price of stock in his public companies began falling. But Maxwell had been using shares in his public companies as collateral on bank loans that totaled about $1.33 billion. With share prices falling, the banks began calling for more security on their loans.
The accounting firm Coopers & Lybrand Deloitte, chief auditors for most of Maxwell's interests since the 1970s, said it traced some of the siphoned-off money, including about $144 million used to prop up the European and the Daily News. Coopers this week characterized the misuse of pension funds and other assets as desperate steps that were sure to have been detected within a short time.
"The whole episode was doomed to failure," a Coopers spokesman said.
Word that Maxwell's legerdemain was falling short in the weeks before his death has fueled speculation that his death in waters off the Canary Islands may have been a suicide. Still, there were reports Monday that an autopsy report delivered to the Spanish judge who will rule later this week on Maxwell's cause of death points to natural causes.
On Monday, Theodore Kheel, an unpaid adviser to the Daily News' unions, said it appeared that no funds had been removed from the tabloid's pension funds. But the fact that pension money from the London-based Mirror Group apparently had been used to pay some of the Daily News' operating expenses raised further doubts about the New York tabloid's ability to survive.
