Gerald Ronson

ITN - Guiness trial, September 1990

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• published: 01 Oct 2010
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SEE MY HISTORY PAGE ON FACEBOOK : https://www.facebook.com/pages/Alan-Heaths-History-Page/173472422695696 The Guinness share-trading fraud involved an attempt to manipulate the stock market to inflate the price of Guinness shares to assist a £2.7 billion takeover bid for the UK drinks company Distillers. Ernest Saunders, Gerald Ronson, Jack Lyons and Anthony Parnes were to buy shares in Guinness plc, and by supporting the share price Guinness would be able to take over Distillers, a much larger company. The Distillers board favoured Guinness as partners and were facing a hostile bid by Argyll. The prosecution relied on a new law; the defendants claimed that supporting a share price with a guarantee was an unusual but longstanding market practice. Saunders had raised USD100m to invest in shares. At that time, $100 million was a very large percentage of Guinness's annual profits. There was an investigation in which Saunders' other secret share price support arrangements were discovered and it emerged that Saunders' arrangements had not been revealed to the Guinness board. Guinness paid $38 million to 11 companies in at least six countries to buy $300 million worth of Guinness stock. Half of the stock was bought by Bank Leu. The news item shown here is from September 1990 when the following sentences were given: Ernest Saunders, former Guinness chief executive. Jailed for 5 years, halved on appeal, for false accounting, conspiracy, and theft. Jack Lyons, financier. Fined £4m for theft and false accounting. Stripped of his knighthood. Anthony Parnes, City Trader. Jailed for 30 months, reduced on appeal to 21 months, for false accounting and theft. Gerald Ronson, businessman and best known as a visible donor to charities. Jailed for a year, and fined £5m, for false accounting and theft. In May 1991, Saunders and his co-accused appealed against their convictions. The guilty verdicts were upheld, though his sentence was halved after medical evidence was produced to suggest he was suffering from a mental illness. Saunders was suggested by doctors at Ford Open Prison possibly to be suffering from premature Alzheimer's disease, a common form of dementia; if this was a correct diagnosis, he made a recovery unique in medical history. Alzheimer's, like all dementias, is usually incurable, being a progressive degenerative disease of the brain. Saunders has since maintained that he must have been depressed. The press presented it as Saunders being deceptive and ridiculed him and the decision to release him. After work by lawyers for Parnes and Ronson in unearthing material about SFO investigations into other support operations, which they said should have been disclosed before the trial, a second appeal hearing was granted; the appeal court upheld the convictions. A DTI report that was finally released in 1997 clarified that the biggest buyer of Guinness shares to support the bid was J Rothschild Holdings. The £28.7 million spent by his company exceeded the £25.1 million support from companies owned by Gerald Ronson, who was jailed for his role, but there was no criticism of J Rothschild. The main reason was that other supporters were paid for their help and were given indemnities against losses, but J Rothschild received no payment. The Report's inspectors said that the firm's motive was to create a favourable climate for obtaining future business from Guinness's City advisers, the stockbrokers Cazenove and the merchant bank Morgan Grenfell. J Rothschild issued a statement saying it was pleased that the report had at last been published and making clear that the firm was not a party to the wrongdoings identified in the report. It read: "Guinness shares were purchased for proper commercial motives. J Rothschild was subject to no obligation to disclose the share purchases. The arrangements were, and were regarded as, perfectly normal at the time." After the takeover the Guinness plc share price increased and settled to about three times its value before the takeover. Saunders could argue that he had discharged his duty to his shareholders. While this benefited the Guinness family enormously, their percentage of shares in the reformed company dropped to about 6% and their last director retired in 1992. Guinness plc had also negotiated a compensation package in 1988 for those who owned Distillers shares at the time of the takeover, which was accepted. Having had their sentences reduced on appeal, the defendants also tried to reverse their convictions but a final appeal to the House of Lords failed in 2002.