Auditor did not know of pounds 90m loan

A former Maxwell group auditor denied yesterday that there had been any "window dressing" in the way accounts were presented for the Mirror flotation in April 1991.

Accountant Peter Walsh, of Coopers & Lybrand, was asked by Alun Jones QC, defending Kevin Maxwell, about more than pounds 90m from the pension fund that was on deposit with the privately-owned Robert Maxwell Group just a week or two before the flotation. "I did not know that," said Mr Walsh but agreed that by the date of the flotation the inter-company balances were shown as nil.

Mr Walsh pointed out, on Day 24 of the Old Bailey trial, that he was not involved in any decision to finalise the accounts. But he did understand that Robert Maxwell had been told it was all right not to show the movement of cash between different Maxwell companies so long as the balance at the end of the accounting period was nil.

Questioned about his knowledge of unauthorised loans between Robert Maxwell's public and private companies, Mr Walsh denied he knew their size.

He said: "An auditor is not like a ferret pointed at a rabbit warren just to see how many rabbits he can catch. Someone is meant to tell him how many rabbits are down there to get and he can then decide whether they are big or bad or what."

He said there was no reason to believe the debts were substantial because they had not appeared on schedules prepared by accountant Robert Bunn, who is on trial along with Kevin and Ian Maxwell and financial adviser Larry Trachtenberg.

Mr Walsh believed that the documents gave a fair description of the position at the time. He expected directors and managers to tell the auditors what the real position was.

The accountant told the court how pounds 300m owed by Robert Maxwell's private companies to the Mirror Group was wiped out in a day by a clever piece of "financial engineering".

Mr Walsh, now retired, was giving evidence by video recording as he is too ill to appear.

A dividend was created by selling the titles of the newspapers to a specially-created company for pounds 500m. Mr Walsh agreed there was a "complicated arrangement involving the Midland Bank" to borrow pounds 500m for the new company to pay to the Mirror so it appeared that the Mirror had made a profit from the sale of the titles.

The Mirror then paid dividends to the private company which were set off against the pounds 300m the private companies owed to the Mirror. On the same day, the pounds 500m was paid back to the Midland Bank.

Robert Maxwell's sons, Kevin and Ian along with Bunn and another financial adviser, Larry Trachtenberg, deny conspiracy to defraud by misusing pounds 22m worth of shares in the Israeli company Teva belonging to the pension fund to try and prop up the ailing Maxwell empire after its founder's death.

Kevin alone denies a similar charge of conspiring with his father to misuse pounds 100m worth of shares in another Israeli company to pay private Maxwell company debts.

The trial was adjourned until today.