City: Maxwell shame swept under carpet

IT'S NOW the best part of two years since Maxwell fell off his yacht, and all we've got to show for the financial scandal of the century from the City's regulatory authorities is two pathetically small fines - a pounds 750,000 fine on Invesco MIM and an even more paltry pounds 160,000 levy by the Securities and Futures Authority on Goldman Sachs, the premier US investment bank. Obviously that's not going to be the end of it; virtually everyone involved in the Maxwell debacle is still under investigation. The SFA has yet to pronounce on Lehman Brothers and Capel Cure Myers.

But if the Goldman Sachs experience is anything to go by, they don't have a great deal to fear. The City variety of watchdog seems to be a pretty toothless pedigree when it comes to meting out punishment - facing the onslaught of City's regulators, it seems, is an ordeal little more daunting than batting against the England cricket team. To a Maxwell pensioner pounds 160,000 may seem a substantial sum, but for Goldman Sachs it would hardly pay for the group's daily lunching tab. Certainly it's peanuts compared with the sort of fines Goldman might have expected in the US for similar misdemeanours.

Apologists will tell you that this is extremely unfair and unjust comment. The SFA investigated Goldman's involvement extensively, with the added benefit of being able to take into account the Serious Fraud Office's prior inquiries. At no point did any evidence emerge that Goldman or any of its personnel had participated in illicit conduct with Maxwell or were aware of any. The breaches of SFA rules, Goldman insists, were largely technical. Certainly they point to a failure of management control, which - in a firm that prides itself on playing by the book - should not have been allowed to happen, but in the end the breaches were no big deal. To have imposed a larger fine would have been totally inappropriate for the type of offences proved.

Well yes, sure, but the fact of the matter is that Goldman's involvement with Maxwell and his interests over the years was extensive, involving at times highly controversial and doubtful transactions. Not being aware that anything untoward was going on is a pretty feeble excuse, in an industry where adequate due diligence is meant to be paramount. By lending their names to Maxwell, Goldman Sachs and others helped legitimise what he did; if Goldman believed all was fine, well then it must be, most of us felt entitled to believe. If this were the US, the SEC would be making them pay in blood for their mistake, not with apologies and excuses.

City firms involved with Maxwell still face the prospect of extensive civil litigation, and there's also the possibility that regulators will take further and more draconian measures against any firm whose fitness and propriety is called into doubt either in forthcoming criminal proceedings or in the DTI report on MGN. For the moment, however, the regulators seem to take the view that piffling little fines are sufficient retribution. The City's shame is being gently swept under the carpet. It could only happen in Britain.