Select Committee on Standards and Privileges Seventh Report


Analysis

100.  Drawing upon the factual evidence contained in the relevant documentation[96], my interviews with Mr Robinson and other witnesses, as well as information from other sources, I have attempted in the following paragraphs to set out my own understanding of the sequence of events relating to the alleged payment of £200,000 to Mr Robinson.

101.  In respect of some aspects of the alleged payment I am in a position to say with reasonable certainty, because of the strength and reliability of the evidence, what happened and what part was played by Mr Robinson. In relation to other issues, however, where the evidence is either not so clear-cut or lacks the necessary corroboration, I have formed a view on the balance of probability as to the likely pattern of events. In other cases, where the evidence is weak or non-existent, I have offered what seems to me to be the most credible explanation—particularly where no alternative account has been provided.

Was a payment expected for Mr Robinson's management services to Lock?

102.  There is no doubt that Mr Robinson entered into discussions about the provision of management services by Transfer Technology Ltd to Lock on the basis that this was a normal business transaction for which payment, in some form, would be made. The exchanges, in the form of meetings and correspondence, between Mr Robinson, Mr Stoney and Mr Kevin Maxwell went into considerable detail about the nature of the management services to be provided, the timescale of the commitment, and the form the remuneration should take. On the last point, there were lengthy negotiations about whether a flat rate fee was appropriate or whether a profit-related element should be included—Mr Robinson's original preference. The correspondence also shows that Mr Robinson drove a hard bargain, succeeding in increasing the agreed fee to £200,000 from the initial offer of £150,000.

103.  The extent of Mr Robinson's personal involvement in the management support package for Lock was demonstrated by his frequent references to his own proposed role as executive chairman of the company. In the outline management services agreement which Mr Robinson drafted and sent to Mr Kevin Maxwell on 3 May 1990, the senior management personnel to be provided to Lock International from within the resources of Transfer Technology Ltd were spelt out in detail and there was an explicit reference to Mr Robinson's commitment (three days a week, falling to two) as chairman and chief executive.

104.  On the instruction of Mr Stoney an entry was included in the October 1990 management accounts of Hollis Industries plc (as owners of Lock) making provision for a payment of £200,000 for chairman's emoluments. During its previous inquiry the Committee concluded that this entry was probably an error, since Mr Stoney could not then recall that such a payment was ever made and there was no other supporting documentary evidence to verify the accuracy of the relevant item in the Hollis Industries plc accounts.

105.  This is, of course, no longer the case in view of the new documentation relating to the payment (in the form of nominal ledgers and cashbook entries) which have come to light as a result of the activities of the administrators of Transfer Technology Ltd, Hollis and Pergamon AGB. This additional documentary evidence was set out earlier in this memorandum[97] and I return to it in more detail later.[98]

106.  The final and most important evidence that Mr Robinson expected to be paid for his services to Lock was the invoice he raised for that purpose on 24 October 1990,which was drawn up on his home writing paper (headed "Orchards") and which requested that the cheque be made payable to Transfer Technology Ltd.

How vigorously did Mr Robinson attempt to secure payment of the fee of £200,000?

107.  Mr Robinson accepts that he made a number of attempts to secure the settlement of the invoice for £200,000 which he had sent to Hollis Industries plc. This is borne out by Mr Stoney's letter of 26 November to Mr Kevin Maxwell in which he said, referring to Mr Robinson's invoice:

    "I understand from Geoffrey Robinson that at a recent meeting with him you agreed that Hollis Industries would pay Geoffrey a fee for management services of £200K.

    I enclose herewith a copy of this invoice and would be grateful if you would approve this.

    Geoffrey has chased me a couple of times on this matter."

108.  Mr Robinson's consistent contention has been that, whatever expectations he may have had of a payment for the services to Lock International, he never in fact received it. To the obvious question, namely why he should suddenly have abandoned his attempts to obtain a payment which was due to him and which had been agreed by Mr Kevin Maxwell, Mr Robinson's response is that when it became clear that the proposed company restructuring was proceeding as planned and that the management benefits he had brought to Lock would be carried forward into the enlarged group, there seemed no further point in pursuing the matter. This explanation is difficult to accept, given the lengths to which Mr Robinson had gone to negotiate the best possible terms for the contract with Lock and to demonstrate his own personal commitment to it, and in view of the efforts he had already made during the negotiations for the sale of Transfer Technology Ltd to ensure that the agreed fee was paid.

Was a cheque for £200,000 paid by Pergamon AGB for management services provided to Hollis Industries plc?

109.  There is compelling evidence that a payment of £200,000 was made by Pergamon AGB in December 1990 and that its purpose was to settle an invoice for management services provided to Lock. This evidence is as follows:

    —   Pergamon AGB's computerised cashbook for December 1990 recorded an outgoing payment of £200,000 for "Mngmt Chg Hollis Ind"[99] by cheque no. 001751

    —   Pergamon AGB's bank statement showed a debit of £200,000 on 11 December 1990 through cheque no. 001751

    —   Mr Stoney, Pergamon AGB's director of finance at the time, had written on Mr Robinson's invoice "Paid—recharge Hollis"

    —   Pergamon AGB duly invoiced Hollis for £200,000 for management services on 31 January 1991.

110.  Given the apparent intention, as expressed in Mr Stoney's note on the invoice, that Hollis Industries plc should ultimately bear the cost of the £200,000 management fee, it is at first sight odd that the Hollis bank statements showed no sign of a debit of that amount during the relevant period.

111.  It is possible that Mr Stoney meant simply that the cost should be treated as an expense of Hollis Industries (which, of course, it was), rather than of Pergamon AGB. This explanation is all the more credible in the light of Mr Kevin Maxwell's remark that the confusion over which of Hollis Industries or Pergamon AGB would actually pay the fee probably reflected "the fact that Hollis Industries had no surplus cash or facilities, whereas Pergamon AGB did." And Mr Maxwell pointed to his father's habit of using "treasuries like that of Pergamon AGB to settle group-wide invoices, with internal book-keeping entries being made to reflect appropriate inter-company credits and debits." The implication of Mr Maxwell's statement is that, although Hollis Industries was invoiced by Pergamon AGB for the £200,000 management fee, the payment may have been treated as a group-wide transaction, perhaps to be regularised later by an accounting adjustment between the companies concerned.

What route did cheque No. 001751 follow?

112.  It is not possible to establish with precision the date[100] on which cheque no. 001751 was drawn on Pergamon AGB's account since the relevant documentation, in the form of returned cheques and cheque stubs, is missing. It can be stated with some certainty, however, that the cheque must have been written between 26 November 1990 (when Mr Stoney sent Mr Kevin Maxwell a memo asking him to approve the payment) and 7 December 1990, the probable date on which the cheque was paid in at the Tavistock Square branch of the National Westminster Bank. (This second date is based on applying normal processing times for cheques to the date of the corresponding debit on Pergamon AGB's bank statement, 11 November 1990.)

113.  It may be significant in this context that a board meeting of Central and Sheerwood took place on 7 December 1990. Amongst those present, in addition to Mr Robinson, were Mr Stoney and Mr Kevin Maxwell, who had joint authority to sign cheques for £200,000 drawn on Pergamon AGB's account.

114.  The National Westminster Bank no longer holds any documentary records which would enable the payee account of cheque no. 001751 to be identified. The cheque itself would almost certainly, in line with standard banking practice, have been returned to Pergamon AGB, where it cannot now be found.

115.  The National Westminster Bank's files do, however, show that a credit for £200,000 was transferred from its Tavistock Square branch on the same day—7 December 1990—to its Colmore Row branch in Birmingham.

How likely is it that the two payments of £200,000 were part of the same transaction?

116.  The National Westminster Bank has stated that it could not "unequivocally link" the debit of £200,000 on Pergamon AGB's bank statement and the credit for an identical amount which was transferred to the bank's Colmore Row branch in Birmingham on the same day as cheque no. 001751 was paid in at the Tavistock Square branch.

117.  Nevertheless, the evidence that the two payments were linked is persuasive, namely:

    —   it is unlikely (though the bank cannot absolutely exclude the possibility) that two entirely separate payments for such large sums were made on the same day, one into and one out of the Tavistock Square branch

    —   Transfer Technology Ltd and Mr Robinson held accounts at the Colmore Row branch

    —   Mr Robinson's notebook shows that on 7 December 1990 he telephoned the Colmore Row branch to ask for an account number for Transfer Technology Ltd, and that he wrote underneath "one down, one to go". (Mr Robinson was at that point still expecting his £150,000 fee from Central & Sheerwood which was eventually paid on 19 December 1990[101])

    —   the credit which was transferred to Colmore Row was handwritten, indicating that the person who paid in the Pergamon cheque for £200,000 already knew the payee's account number.[102]

118.  Although these various factors could be coincidental, in my view the combination of circumstances is too striking for that to be the case. I therefore believe that it is not unreasonable to assume that the two payments of £200,000 were part of the same transaction.

119.  Mr Robinson has pointed out that, according to the relevant documentation, the receipt of £200,000 was recorded in Transfer Technology Ltd's books one day before the debit of the same amount appeared in Pergamon AGB's bank statement.

120.  This timing certainly calls for some explanation. A possible sequence of events is that the person who paid in cheque no. 001751 at Tavistock Square on 7 December (or someone acting on his or her behalf) informed Transfer Technology Ltd that a credit of £200,000 had been transferred to the company's account. In the expectation that the credit would reach the account within two or three working days, the sum was entered as a receipt in Transfer Technology Ltd's books for 10 December. A further possibility, as the National Westminster Bank has confirmed, is that the cheque could have been processed more quickly than standard banking practice would imply, enabling it to have reached Transfer Technology Ltd's account on 10 rather than 11 December 1990.

121.  Mr Robinson, when asked what alternative explanation he could offer for the various items of documentary evidence pointing to the conclusion that the payment by Pergamon AGB of £200,000 ended up in Transfer Technology Ltd's accounts, told me: "I think there was a cock-up in the accounting procedure."

122.  Of course this possibility cannot entirely be ruled out. But I do not regard this is a satisfactory response by Mr Robinson in view of the cumulative weight of the documentary evidence. Nor, in any case, does it account for the significant information provided by the National Westminster Bank, whose accuracy has not been challenged.

What was the payment of £200,000 to Transfer Technology Ltd used for?

123.  The purpose of the £200,000 credited to Transfer Technology in December 1990 appears to have been to reduce the level of indebtedness to the company of Roll Centre. The evidence pointing to this conclusion is that:

    —   a receipt of £200,000 was recorded in Transfer Technology Ltd's books on 10 December 1990 (this was subsequently confirmed by an entry in the company's nominal ledger for 30 December 1990)

    —   the schedule provided by Transfer Technology Ltd to Ward & Rider[103] on 3 March 1991 shows that £200,000 out of the debt of over £500,000 owed by Roll Centre to Transfer Technology Ltd was paid off on 10 December 1990.

Why was it necessary to reduce Roll Centre's debt to Transfer Technology Ltd?

124.  The need to reduce the Roll Centre debt to Transfer Technology Ltd arose directly from the proposed sale of the latter company to Central and Sheerwood. The debt consisted of two distinct elements: the balance due on payment for a machine sold to Roll Centre by Transfer Technology Ltd; and a loan to Roll Centre. It was the second element which potentially posed a problem for the disposal of Transfer Technology Ltd. This was because any outstanding debt to that company would be carried forward into the new company formed from the take-over by Central and Sheerwood. Since Mr Robinson was to be on the board of the new company, a loan by Central and Sheerwood to Roll Centre—a company in which Mr Robinson had a significant element of control and a material financial interest—might be construed as a loan to Mr Robinson. Loans by plc companies to their own directors are prohibited under sections 330-338 of the Companies Act 1985. Accordingly, if the sale of Transfer Technology Ltd to Central and Sheerwood was to proceed, that part of the Roll Centre loan attributable to Mr Robinson would have to be extinguished.

Is it possible to be certain that the payment of £200,000 which originated from Pergamon AGB was the ultimate source of the funds used to pay off part of the Roll Centre debt?

125.  As I have already observed, it is stretching coincidence beyond the bounds of credibility to regard the payment of £200,000 by Pergamon AGB which was debited to their account on 11 December 1990 as having no connection with the credit of the same amount recorded as having been received by Transfer Technology Ltd around the same date. But in any case there is evidence to indicate that the money originating from Pergamon was probably the source of the funds used to pay off part of the Roll Centre debt, in particular the facts that:

    —   Mr Robinson, when asked whether a payment of £200,000 due to him for management services had been used to reduce Roll Centre's indebtedness to Transfer Technology Ltd said he could no longer recall the precise means by which this had been achieved; however, he offered no other plausible source of funds for this purpose (during our first interview Mr Robinson speculated that the money might have come from either his brother or Madame Bourgeois[104]; at our second meeting he did not include his brother as a possible source)

    —   Mr Robinson's personal bank statements for the relevant period show him to have been heavily overdrawn and thus lacking the necessary liquid funds to relieve the Roll Centre debt by £200,000

    —   when I put this fact to him and asked whether, at the time, he had other liquid assets elsewhere, Mr Robinson told me that he could have raised a loan himself for this purpose; however, he has provided no evidence to show either that he would have been in a position to do this or that he in fact did so.

    —   the Coopers & Lybrand long form report of 1990 stated that Roll Centre was "experiencing serious cash flow and trading difficulties" at this time, making it unlikely that it could have found a sufficiently large sum from within its own resources.

126.  Mr Davis, the then finance director of Transfer Technology Ltd, told me that he drew the potential problem over the Roll Centre debt to the attention either of Mr Robinson himself or of his assistant, Mrs Price. Although Mr Davis did not recollect anybody having offered to pay off the relevant part of the debt, he believed that Mr Robinson probably gave him "the usual response: 'Don't worry about it'." Mr Davis also confirmed that: "that payment (of £200,000 in December 1990) was treated as a reduction of the Roll Centre debt".

127.  When I asked Dr Ahmed, the former managing director of Transfer Technology Ltd, whether he was of the view that Mr Robinson would have been involved in organising this payment to settle part of the Roll Centre debt he replied: "If this money is paid by Roll Centre and it is part of payment of his loan then Mr Robinson will be aware of this, and he will be doing that." And although Dr Ahmed was not himself aware of any arrangement to use the £200,000 from the management fee for this purpose, he did not regard this as necessarily surprising, particularly if the payment had followed an indirect route. As he put it: ".... if it was put in our account direct, I think we would have known about it. If it had a little bit of a tour before coming to us this would be a different situation."

128.  Taking all this evidence into account, my view is that Mr Robinson undoubtedly had a clear motive for reducing the Roll Centre debt and that he also had access to the means to do so, in the form of the £200,000 payment by Pergamon AGB for management services provided to Lock by Mr Robinson and his company, Transfer Technology Ltd.

129.  Given Mr Davis's clear recollection that he raised with Mr Robinson (or Mrs Price) the significance of the Roll Centre debt in relation to the sale of Transfer Technology Ltd Central and Sheerwood, it is, to say the least, surprising that Mr Robinson appears unable to remember with any precision either his own role in reducing Roll Centre's indebtedness or the source of the funds which were used for this purpose. This vagueness on Mr Robinson's part is all the more concerning in the light of the passage contained in the Coopers and Lybrand long form report on Transfer Technology Ltd which, referring specifically to the Roll Centre debts, stated that Mr Robinson had indicated that he was "prepared to offer a personal guarantee as to the recoverability of these amounts, and [was] currently making arrangements to pay £200,000 into The Group."[105]

130.  That this undertaking by Mr Robinson was duly fulfilled was confirmed by Mr Robinson's letter of 11 February 1991 offering to guarantee the outstanding loans to Roll Centre and stating: "Less repaid in December 1990 £200,000".

Was the Pergamon AGB cheque for £200,000 made payable to Mr Robinson personally?

131.  Mr Robinson denies having received the payment of £200,000 which had been agreed with Mr Kevin Maxwell and which was submitted to Mr Robert Maxwell for his approval. It goes without saying that Mr Robinson's position is harder to sustain if it can be shown that the relevant cheque was made out to him personally.

132.  The first and most obvious point to make in this context is that the documentary evidence which could prove conclusively one way or the other whether Mr Robinson (or some account controlled by him) was the payee—namely the cheque itself and the stub—are both missing.

133.  But this does not mean that there is no evidence at all which bears upon the issue. Relevant circumstantial evidence exists in the form of the handwritten note by Mrs Caddock on Mr Robinson's invoice -

    "Geoffrey is not registered for VAT. Proposes make cheque payable to him personally"

134.  This note was written on a 'post-it' sticker and was not therefore an integral part of the invoice, nor was it dated. Nevertheless, Mrs Caddock confirmed in her evidence to me that the handwriting was hers; that the note was added sometime in early December 1990; and that she recalled the telephone call from Mr Robinson which gave rise to it.

135.  Moreover, Mrs Caddock strongly maintained that she would not have written the note in the terms she did unless Mr Robinson had specifically asked for the cheque to be made out to himself. Had he wished the cheque to be made payable to a company other than Transfer Technology Ltd. that is what Mrs Caddock would have recorded on the invoice.

136.  Also relevant is the Pergamon AGB cashbook voucher recording a payment of £200,000 to 'Orchards'. This document (which is dated 31 December 1991) was almost certainly written up after the event by the administrators as part of the process of regularising Pergamon AGB's books and tracing individual payments. Even so, those responsible for processing the cashbook voucher appear to have associated the payment of £200,000 with Mr Robinson's invoice—hence the use of the name 'Orchards' as the payee.

137.  On the basis of this evidence, and particularly that of Mrs Caddock—whose credibility I have no reason to doubt—I have formed the view, on the balance of probability, that the Pergamon AGB cheque for £200,000 was made payable to Mr Robinson.

138.  I have addressed the issue of the identity of the payee on the Pergamon cheque because it formed part of the series of allegations in Mr Bower's book, on which Mr Heathcoat-Amory drew in formulating the complaint against Mr Robinson. This matter is not, however, of crucial significance since, as I understand it, the cheque could have been endorsed over to a different payee.

Why did Mr Robinson not stick to his original intention to have the cheque made payable to Transfer Technology Ltd?

139.  If, as I consider likely, the Pergamon AGB cheque for £200,000 was made out to Mr Robinson personally, the question arises: why did he change his mind after originally indicating on the invoice that the payee should be Transfer Technology Ltd?

140.  My understanding of the reasons behind Mr Robinson's decision to ask for a personal cheque is necessarily based to some extent on speculation—given the haziness of Mr Robinson's recollection of these matters and the absence of supporting evidence. Some matters are, however, clear:

    —   Mr Robinson was keen to conclude the sale of Transfer Technology Ltd. to Central & Sheerwood

    —   the assets realised by the sale would have transformed his financial position (which, as indicated earlier, appear to have been difficult in 1990, with a large personal bank overdraft outstanding and cash flow problems at Roll Centre)

    —   the sale value for Transfer Technology Ltd, as agreed between Mr Robinson and Mr Robert Maxwell, was based on a tenfold multiple of profits.

    —   a straightforward payment of £200,000 into Transfer Technology Ltd. in the form of a management fee might have fed through to the company's profit and loss account, and could therefore have inflated the sale value by up to £2 million (ten times £200,000).

141.  It is possible, therefore, that Mr Robert Maxwell made it a condition of agreeing to the £200,000 management fee that it should be paid in such a way that it could not—from his point of view—artificially inflate the price to Central & Sheerwood of acquiring Transfer Technology Ltd.

142.  If this explanation of Mr Robinson's motives is substantially correct, it would have provided a reason for him to use the money probably paid to him through Pergamon AGB's cheque in such a way that it could be applied to the reduction of the Roll Centre debt.

143.  The documentary evidence suggests that the most probable route was that Mr Robinson, or someone acting on his behalf with knowledge of the Transfer Technology account number, paid in the cheque to the National Westminster branch in Tavistock Square and this was transferred directly into Transfer Technology Ltd's account at Colmore Row.

144.  Mr Robinson could also have done this—though this has to be a matter of conjecture—by paying the Pergamon cheque into some account controlled by him (other than one of those for which statements have been provided by Mr Robinson) or indeed, into an account made available to him for this purpose by some other person sympathatic to his objectives. He could then have arranged for an equivalent sum to be paid out of that account—either to Roll Centre, on the understanding that the intention was to place the company in funds to pay off that part of its debt to Transfer Technology Ltd. which could be attributed to Mr Robinson, or directly to Transfer Technology Ltd. with a similar aim. Reducing indebtedness in this way would not, I am advised, have flowed through to the company's profit and loss account and thus inflated its sale value.

145.  But a further possible reason why Mr Robinson might have wished to avoid treating the Pergamon AGB cheque for £200,000 as a payment for management services (and a possible explanation for his reluctance to admit to having received the money), is the question of taxation. This was an issue raised in Mr Heathcoat-Amory's second letter of complaint.

146.  The advice I have been given suggests that, if Mr Robinson had personally taken the £200,000 as a direct payment for management services, and had treated it accordingly for accounting purposes, it would have been liable to income tax, and possibly VAT, after deduction of relevant expenses. Similarly, if the payment had gone into Transfer Technology Ltd's accounts as a fee for services it would have been liable to VAT and thereafter to corporation tax (likewise, after deduction of relevant expenses). In either case the net sum available to apply to the repayment of the Roll Centre debt could have been greatly reduced—perhaps by as much as 50 percent.

147.  If, on the other hand, the transaction had been so arranged that the funds paid to Transfer Technology Ltd were applied directly to the reduction of the Roll Centre debt, the £200,000 received by Transfer Technology Ltd would not have been treated as income for accounting or tax purposes, thus avoiding both VAT and corporation tax and any possible effect on the profit and loss account. The advantage of this device would therefore have been that it maximised the sum available to pay off part of the Roll Centre debt, whilst meeting the conditions which may have been set by Mr Robert Maxwell for authorising payment of the management fee.

Is this description of the circumstances surrounding the payment to Mr Robinson, if accurate, consistent with the principal allegation in Mr Bower's book, on which Mr Heathcoat-Amory's complaint was based?

148.  Assuming that the description of events surrounding the £200,000 payment—and Mr Robinson's part in them—is accurate, it does not precisely correspond to the central allegation in Mr Bower's book, on which Mr Heathcoat-Amory's complaint was founded. This was that Mr Robinson had solicited and accepted a management fee from Hollis Industries, the cheque for which was paid into an account controlled by Mr Robinson for his immediate and personal benefit (and that Mr Robinson had sought to conceal this fact).

149.  None of the personal financial records provided to me by Mr Robinson supports Mr Bower's allegation, interpreted literally, although I cannot, of course, be sure that I have had access to records of every account controlled by Mr Robinson in 1990.

150.  In practice, I do not regard this distinction as significant. The essential point, according to my analysis of the circumstances surrounding the £200,000 payment, is that the arrangement Mr Robinson employed for handling the management fee paid by Pergamon AGB was designed to facilitate (by removing any legal obstacles relating to directors' loans) the sale of Transfer Technology Ltd to Central & Sheerwood—a transaction from which Mr Robinson, as virtually the sole shareholder of Transfer Technology Ltd, stood to make a considerable personal financial gain.


96   See paragraphs 33-35 Back

97  See paragraph 35. Back

98  See paragraphs 109-123. Back

99  Hollis Industries being the parent company of AM Lock and Lock International. Back

100  Or the payee; see paragraph 35 (footnotes 27 and 29). Back

101  See paragraph 41 and paragraphs 174 and 175 in the conclusions section of this memorandum. Back

102  See paragraph 35, second item relating to 7 December 1990. Back

103  Solicitors for Central and Sheerwood plc at the time of the merger with Transfer Technology. Back

104  See paragraph 53 and footnote 49. Back

105  Emphasis added Back


 
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