Auditors are not wayfarers, trouble makers, cowboys or money doublers (4)

Maxwell did recognize that some assets would have to be sold to help pay off debts. His sons, including Ian, 35, attempted to pursue that policy. They were able to raise more than $700 million by selling such assets as Macmillan Computer Publishing for $158 million and Berlitz International for $265 million. But with the deal market in a slump, there were few takers and even fewer good offers. To attract buyers, the Maxwells practically had to conduct a fire sale, selling assets for only a fraction of their worth. The Official Airline Guides had been on the auction block for months, for instance, but its likely buyer, Britain’s Reed International, was not willing to pay more than $500 million. Maxwell paid $750 million for the guide three years earlier. Even some of the deals thought to have been completed were in doubt. Company executives reported with some embarrassment that they were unable to locate stock certificates for Berlitz International that were integral to the completion of the sale of that firm to Fukutake Publishing of Japan.

While the Maxwells managed, by hook or by crook, to raise enough to meet a $750 million payment due in October 1992, they conceded they would be unable to meet a $1.3 billion obligation due in October 1994. Unsatisfied creditors, however, tried to go after the Maxwell family fortune. According to a leaked report by Bankers Trust and Coopers & Lybrand, Maxwell assets were estimated to exceed liabilities by about $350 million.

It was up to the courts to sort out the mess. The Maxwells acted to place the private company, the Robert Maxwell Group, into receivership after all attempts to raise fresh outside capital proved hopeless. John Talbot, the administrator appointed by the High Court to oversee the family’s private holdings, said Maxwell’s remaining assets were likely to be put up for sale. That included the Maxwells’ stock in Maxwell Communication as well as their 51% stake in the Mirror Group.

It could also include the Daily News. But that was not entirely certain. Only hours after the Maxwells declared insolvency, the New York City publication filed its own petition for bankruptcy in the U.S. in an effort to thwart any possible sale of the paper by the British administrator. In their determination to keep the paper open, Daily News unions expressed a willingness to make wage and other concessions. The paper was financially crippled earlier by a five-month strike that cost $1 million a day and that ended only after Robert Maxwell bought the paper. The News still remained unprofitable, perhaps prohibitively so. In a meeting with Daily News staff, Kevin Maxwell vowed to continue publication: “There is absolutely no question that the News will come out.” However, it remained unclear whether Maxwell could prevent the paper from being sacrificed to pay debts. Several potential buyers, including Mortimer Zuckerman, owner of U.S. News & World Report, expressed interest.

On the other side of the Atlantic, workers at the Daily Mirror expressed dismay and anger after it was revealed that Captain Bob, as the swashbuckling Maxwell was dubbed years ago by the British humour magazine “Private Eye”, had looted their pension fund and treasury in order to prop up his personal fiefdom. The transactions, which took place in the months before he died, were being probed by British authorities. Serious Fraud Office[SFO] agents raided the family headquarters at Maxwell House in search of documents relating to the missing pension funds. Still, bemoanedOssie Fletcher, the former editor of the Mirror Group’s Sporting Life, “we always assumed that the pension fund was untouchable.”

Not everyone shared Fletcher’s now shattered faith in Captain Bob’s empire and the media mogul’s fitness as a manager.  British regulators investigating his 1969 attempt to sell Pergamon Press concluded in a report that the murky relationships among Maxwell’s privately held businesses made him specifically unfit “to exercise proper stewardship of a publicly quoted company.” A principal author of that report, Sir Ronald Leach, (Senior Partner of KPMG) said “If anybody had taken the time and trouble to read and take notice of our report, they would have seen that what has been happening recently was happening 20 years ago.” The final collapse of his empire confirmed that Maxwell was less a media mogul than a master of a shell game.

It bears repetition that for Chartered Accountants and auditors, the point of convergence is public trust which is anchored on confidence in the independence, integrity and professionalism of auditors.  It is precisely to address these critical issues within the ambit of the public interest that the accountancy profession has been unrelenting through various platforms and institutions to restore its public image as well as redefine its role in society and the legitimate expectations of those who rightly rely on the accounts to show a true and fair view of the performance of the companies or organisations which have been audited.  In this regard the International Federation of Accountants [IFAC] has played a pivotal role, particularly under the leadership of the current president – Mrs. Olivia Kirtley.

The introduction and implementation of the International Financial Reporting Standards [IFRS] is indeed a huge achievement.

 

The arena for remedying the lapses which may have occurred and salvaging the reputation of chartered accountants has been expanded to inculcate training with emphasis on practical experience – hence the reversion to “articleship” in the U.K.

Beyond that is the emphasis on character as confirmation that it is not enough to merely pass the professional examinations, learning must be combined with trustworthiness, sound character, personal reputation and robust integrity.  This is further re-inforced by “continuing education” [MCPE] which national institutes are obliged to record and effectively monitor in order to ensure that learning is a life-time commitment – until retirement.  This is in addition to the encouragement of specialisation through various faculties:

·      Taxation

·      Insolvency and Business Recovery

·      Corporate Finance

·      Audit and Assurance

·      Information Technology.

 

(concluded)

J.K. Randle