The way is still clear for a tyrant and a fraud

It was the largest fraud in modern British corporate history. The crime was blatant: the theft of more than pounds 400m from the Maxwell pension funds. The culprit was obvious and well known. The prosecution had an open-and-shut case. Sadly, there was one insurmountable obstacle: Robert Maxwell, the mastermind of the fraud, was dead.

So, instead of Maxwell himself being put on trial, his underlings-in- chief, two sons, Kevin and Ian, and Larry Trachtenburg, a former business adviser, were called to account for what happened. They were charged with raiding the company pension fund to prop up Maxwell's failing empire.

We will probably never know what went through the jurors' minds as they acquitted all three yesterday. But by the end of the trial it is fair to assume that the jury saw them as the victims, not the perpetrators, of a corporate tyranny that threatened to rob so many people of their pensions. They accepted the contention that Maxwell had kept secret from his lieutenants the way that assets belonging to the pension fund were being illegally used to bail out the company.

Robert Maxwell was a terrifying individual. Kevin told the court: "I was in awe of him as a child. I was frightened. The domination was part- physical, part-charismatic, and he also dominated by virtue of his success. He was capable of being extremely charming to people, he was capable of being winning, but he was also capable of verbal brutality in meetings, public dressing-downs not only of his children but also his senior managers."

Maxwell was a dictator, operating in a environment where no-one dared to confront him. It is not surprising that Robert Maxwell was so at ease with the authoritarian governments of eastern Europe. He found his natural home in the modern corporation, one of the last bastions of unfettered power, where the usual rules of democratic societies - accountability, openness and checks on power - are often weak, if not waived altogether. Who would dare to question Maxwell when he was founder, chief executive, chairman, court of appeal and arbiter of all?

It would probably have been very neat for many people if the Maxwell sons had been convicted yesterday. The whole affair could then have been written off as an evil family conspiracy. There will be some who will feel cheated by the acquittals, who want to see the Maxwell family pay. Yet the acquittals help us to focus upon the significance of the fraud for the way our companies and pension funds are run.

Robert Maxwell did not act alone. There were a string of accomplices who are still at large. Those accomplices are the blatant and easily correctable weaknesses in the way that large companies are governed. Maxwell was able to commit his crime because he was able to exploit these shortcomings. Maxwell's crime was a gross abuse of power. The only way to ensure that such crimes cannot be committed again is to ensure that such abuse of power is not possible.

As a result, Maxwell still casts a long shadow over corporate life. He was able to continue to commit his crimes over many years only because several watchdogs failed in their task of protecting the interests of ordinary people, in this case, pensioners.

The roll-call of institutions that might have taken action to prevent Maxwell is long and illustrious. In 1971, a Department of Trade investigation concluded that Maxwell was unfit "to exercise stewardship of a publicly quoted company". The court heard that Maxwell's accountants, KPMG, knew in 1988 that Robert Maxwell was using pension fund investments as collateral for his takeover bids. Coopers & Lybrand, another firm of accountants, denied in court having known for a decade that the tycoon was moving assets around his empire.

Whatever warning signals there may have been, Maxwell remained in charge not only of a major company but of the pensions of thousands of people. The root of the problem was the untrammelled power Maxwell had as chairman of his empire. The economy needs strong and dynamic entrepreneurs, with the drive and vision to create businesses. However, our publicly quoted companies should be run in a professional and trustworthy way. Seen in the light of the Maxwell fraud, the Cadbury reforms to corporate governance, which would strengthen the role of independent directors, take on a great significance.

Yet the reforms introduced after this scandal would not prevent another tyrant doing what Maxwell did. The new Pensions Act offers some protection - from next year, pension funds must be able at all times to meet the pension entitlements of members. Some members of the fund must be appointed as trustees. And if a fund is rendered insolvent, a levy on the rest of the industry will meet its liabilities.

But these controls would not stop another Maxwell. The Government should have required appointment of an independent custodian for such pension schemes and stopped employers playing any role in administering them. That would have removed the temptation to use pension fund assets to support the company. Similarly, the Act should have insisted on much greater transparency about the way these funds are managed. Instead, the Government has endorsed the paternalistic culture of occupational pensions, which is so clearly inadequate for protecting ordinary individuals.

Against these repeated failures before and after the Maxwell scandal, the Serious Fraud Office's failure to secure convictions is relatively minor. The SFO was right to prosecute. The jurors came to their verdicts after serious thought - they took nearly two weeks to deliberate, indicating the seriousness with which they viewed their role. The case was not, as some would argue, too complicated. It did not hang on a technicality, but on whether or not the jury accepted the defendants' word that they knew nothing of the fraud. In short, it is wrong to conclude that acquittal is a mark of the failure of an ill-judged prosecution.

Could more corporate tyrants like Maxwell emerge? Yes. Could such a tyrant keep his dealings secret? Certainly. Have we done enough to protect pensioners and workers from such abuses of corporate power? Not at all. The horse is long bolted and still the stable door is swinging on its hinges.