Guinness is good for you" claimed one of the best known and most successful advertising campaigns of all time.

But right now Guinness isn't doing much good for anybody, least of all the City of London (the home of Britain's financial and investment markets) which is rapidly gaining the reputation of being run by a bunch of crooks and racketeers.And what's bad for the City is also bad for the government, or rather a Conservative government because of its many close links with big business.

The opposition Labour Party, which until recently had been assiduously wooing bankers and industrialists in an effort to convince them of the acceptability of a Labour government, has now switched tack and declared war on the City.

The change of direction for Labour could prove a powerful vote-winner, since the scandals at Guinness PLC, the giant drinks group which produces

Guinness stout as well as a whole range of other famous beverages including Gordon's gin and Johnny Walker and Bells whiskies, have made headline news in Britain.

The huge salaries earned by those working in the City as a result of Big Bang already is something of an embarrassment when the countrywide level of unemployment remains so high. With allegations of illegal share dealings by

Guinness and its merchant banks and details of links with disgraced Wall Street financier Ivan Boesky now emerging, calls for tighter supervision of Britain's securities markets are coming from all sides.

Even the prime minister hinted that the government might be prepared to reconsider its policing arrangements for the City of London. New laws introduced to strengthen investor protection provide for a system for voluntary self-regulation under the supervision of the Securities and Investment Board.

Responding to demands in Parliament for the SIB to be given wider powers to investigate and prosecute in cases of abuse during mergers and takeovers, Mrs. Thatcher replied that it was far too early to conclude that self- regulation was not good enough and that a full statutory system should be introduced - her carefully phrased answer interpreted by some as an indication that the matter could come under review.

The trouble started a year ago when Guinness PLC became embroiled in a bitterly contested battle for The Distillers Co. PLC, the Scottish whisky and gin group. In one of the biggest U.K. takeovers of all time, Guinness finally beat off a rival bid from Argyll Group PLC to gain control of Distillers at a cost of 2.5 billion ($3.7 billion).

Ernest Saunders, Guinness chairman and chief executive, who had transformed the group from a modest family concern to a huge international conglomerate during his five years at the helm, immediately angered institutional investors by reneging on a promise to install a prominent Scottish banker, Sir Thomas Risk, as non-executive chairman of the expanded group. In stead, he took over that position himself.

Mr. Saunders weathered that storm. It was a few months later that his nightmare really began when two Department of Trade and Industry inspectors walked through the doors of Guinness' headquarters and started investigating details of the Distillers takeover.

What has emerged over the past six weeks has ruined the prestige of two merchant banks and one management consultancy firm, destroyed several careers, and left a very large question mark over the ethics and morals of those working in the City of London.

In order to ensure the success of its bid for Distillers, which involved a share swap, Guinness mounted a secret operation in support of its own shares, in violation of the Takeover Code, in order to push the price up and ensure that its own offer was more attractive than Argyll's.

Guinness' merchant bank advisers, Morgan Grenfell, have been dragged into the scandal because of its role in orchestrating the illegal share-buying campaign and one of the bank's top corporate financiers who masterminded the Distillers takeover, Roger Seelig, already has resigned. Others at Morgan Grenfell, including its chief executive, also may be forced to quit as the investigations continue.

Another merchant bank, Henry Ansbacher, is deeply involved because of its

purchase of 2.15 million Guinness shares at the height of the bid battle. Ansbacher claims the shares were bought on behalf of Guinness which pledged to indemnify Ansbacher for any losses incurred because of the transaction.

Guinness, though, insisted that the money held by the merchant bank, which matched the cost of the share purchases, was an interest-free deposit.

Neither does the intrigue stop there. Guinness already has admitted it invested $100 million in a fund managed by Ivan Boesky. And when Mr. Saunders was finally sacked last Wednesday two other directors also were asked to resign. One was Dr. Arthur Fuerer, chairman of Bank Leu, the Zurich bank that blew the whistle on the illicit activities of Dennis Levine who, in turn, revealed the insider dealing network of Mr. Boesky.

Another casualty of the affair is the former Guinness finance director, Olivier Roux, from the Boston management consultancy Bain and Co., who resigned after admitting his involvement in the secret support operation for

Guinness shares.

Even the government has not come out unscathed, with some opposition members of Parliament calling for the suspension of the Trade and Industry Secretary Paul Channon, who is a member of the Guinness family (although there is no question of any involvement by Mr. Channon in the affair.).

Indeed the Guinness family, along with the non-executive board members, has now taken charge of trying to restore the company's reputation, dismissing the three directors, downgrading the position of its stockbrokers Cazenove, and bringing in another firm of stockbrokers, James Capel, to work alongside Cazenove. A new chairman, Sir Norman Macfarlane, was appointed last week.

The day after taking over, Sir Norman sent a letter to shareholders admitting that the company's auditors had identified a series of invoices totaling around 25 million paid to unnamed advisers at the height of the Distillers' battle.

There seems bound to be further blood-letting as the DTI inspectors continue their investigations. And the City's critics are now raising questions about the proposed takeover by the conglomerate BTR PLC for glassmakers Pilkington Bros. PLC, whose shares rose sharply just prior to announcement from the DTI that the bid would not be referred to the Monopolies and Mergers Commission.

The City now needs to act fast to clean up its act if it is to escape stricter regulation and avoid becoming an issue during the next general election campaign.

The health of the British economy hinges very closely on the success of the City, but nevertheless, there is unlikely to be much sympathy from the country at large for what is seen as a highly privileged and extremely well- paid section of the community if insider dealing, market manipulation and other abuses are found to be widespread.

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