There are a number of lessons to be drawn from the ICAEW’s Joint Disciplinary Scheme report on the Maxwell auditors, which concluded that the Coopers & Lybrand audit team had “lost the plot”. But the question might justifiably be asked: why weren’t the lessons from the damning DTI report into Maxwell, published in 1973, passed on to the new generation of financial overseers of his operations? The JDS report treads a fine line between outright condemnation of the Coopers’ auditors and a degree of understanding that they were victims of one of the post-war business world’s biggest crooks. “On any view massive frauds were perpetrated, involving, inter alia, conspiracy, false accounting, and,” – crucially for the accountants involved – “the deception of auditors and advisors (including Coopers & Lybrand),” claims the JDS. But a glance back at the old DTI report reveals this state of affairs was not new to those charged with checking Maxwell’s dealings. “We reiterate that Chalmers Impey were not the auditors to any of the private companies and had no access to the other side of the transactions with those companies,” states the 1973 report. “If Chalmers Impey had been in a position to review the accounts of those companies in conjunction with those of Pergamon, history might have been different.” Not that this was a defence Coopers could mount, since it was auditing both the main public Maxwell vehicle (MCC) and the private companies that effected the pensions fraud. Indeed, as the JDS points out: “Coopers & Lybrand acted as auditors of nearly all Maxwell-controlled companies and their pension funds from 1972 onwards” – that is, a year before the final DTI report. Chalmers Impey had actually expressed their own level of 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. (Note the use of the vernacular – it’s strangely reminiscent of the JDS’s conclusion that Coopers “lost the plot” two decades later.) But condemnation was not total. “These comments should however be weighed against the extenuating factors …” it says. Sound familiar? It should. Despite all of Coopers’ failures to spot massively fraudulent share transfers between Maxwell companies – which Chalmers Impey could not have spotted, not being the auditor to the private side firms in the 1960s – the JDS took a decision that none of the accountants working on Maxwell audits should be struck off. For the 1990s investigation, the equivalent “extenuating circumstances” were that the senior audit partner of the Maxwell private side, John Walsh, was of the “old school” and both trusted Maxwell and thought he “had the measure” of him. “(Mr Walsh’s) attitude towards Robert Maxwell must inevitably have coloured the approach of his juniors,” states the JDS report. In other words, Maxwell bamboozled (at the very least) Walsh, who then dominated the audit team, whether forcefully or simply by dint of seniority, into accepting what he accepted. This ties in perfectly with the JDS conclusion that “there was no dishonesty on their part … It was the quality of work of the firm and individual Respondents which fell below that which was expected …” Walsh, sadly, died before the JDS inquiry. The report, rather honourably, gives him the benefit of the doubt, stating that “he has not had the opportunity to defend himself” and that “Mr Walsh might have been able to cast a different light upon matters expressly or impliedly affecting him.” Until, that is, it makes the assertion that he had been responsible for the entire audit team’s lack of objectivity in its dealings with his associate, Maxwell. Whatever the truth of Walsh’s relationship with Maxwell, he should certainly have known better than to think he could trust him or “have his measure”. “The position of an employee where an executive of Mr Maxwell’s calibre and dominating personality is concerned is an extremely difficult one,” said the 1973 report. Although that is different in substance to the accusation about Walsh and his juniors in the JDS report, the similarities are still striking. It says: “It would have been difficult for (Walsh’s) subordinates in seniority, whatever their status, to take a more mistrusting stance, when Mr Walsh reposed trust in Mr Maxwell and his doings to the extent that he did.” 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.