Guinness Four Are Found Guilty of Share-Trading Fraud

In 1990, the chief executive officer of Guinness and three other officials in the British brewery company were found guilty of accounting fraud and theft for inflating the price of company shares as part of a strategy to defeat a hostile takeover bid of Distillers Co., which Guinness wanted to obtain itself. The so-called Guinness Four supplied millions of pounds to buy Guinness stock, thus driving up the price of company shares and making Guinness appear as a more attractive bidder for Distillers.

Summary of Event

The Guinness Four trading-fraud scheme was scandalous on two counts. One, three wealthy businessmen conspired with the chief executive officer of Guinness brewery to buy a large number of shares of Guinness stock and thus boost the value of all company stock. Two, government authorities gathered and presented evidence at the trial of the four men in a manner that was later condemned by a higher court. The authorities had made several legal and procedural mistakes even before bringing the four to trial. [kw]Guinness Four Are Found Guilty of Share-Trading Fraud (Aug. 27, 1990)
[kw]Fraud, Guinness Four Are Found Guilty of Share-Trading (Aug. 27, 1990)
Saunders, Ernest
Lyons, Jack
Ronson, Gerald
Guinness Four
Parnes, Anthony
Boesky, Ivan
Saunders, Ernest
Lyons, Jack
Ronson, Gerald
Guinness Four
Parnes, Anthony
Boesky, Ivan
[g]Europe;Aug. 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]
[g]England;Aug. 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]
[c]Law and the courts;Aug. 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]
[c]Corruption;Aug. 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]
[c]Banking and finance;Aug. 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]
[c]Business,August 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]
[c]Trade and commerce;Aug. 27, 1990: Guinness Four Are Found Guilty of Share-Trading Fraud[02480]

The Guinness-Distillers takeover story broke in 1986 during the insider-trading trial of American stock trader Ivan Boesky in an unrelated case. Many in London financial circles considered the behavior to be noncriminal; even more believed it was not even scandalous. Share-price manipulation was a common practice in the mid-1980’s in both London and Wall Street financial circles.

The scheme involved the hostile takeover bid of Distillers Co., of Edinburgh, Scotland;Distillers Co. Scotland, a company that Guinness had plans to acquire itself. To ensure that Guinness would be the company that acquired Distillers, Chief Executive Officer Ernest Saunders contacted Jack Lyons, Gerald Ronson, and Anthony Parnes, all self-made wealthy businessmen, and asked for their help. The four coconspirators supplied millions of pounds to buy Guinness stock, thus driving up the share price. This made Guinness appear as a more attractive bidder for Distillers. No evidence exists, however, to show that Saunders or the other three sought to benefit immediately by manipulating the share price of Guinness stock, but all four stood to make considerable profits at a later date if the multibillion-pound takeover came through. Guinness did manage to acquire Distillers, renamed United Distillers in 1987.

The Guinness Four, as they came to be called, included millionaire stock broker Parnes, who began his career in finance as an office boy. Lyons, a financier, department-store owner, and philanthropist, left school at the age of sixteen to work in his father’s garment factory. Saunders’s parents fled from the Nazis in Austria when Saunders was a baby and had to start life over again in England. Ronson, a real-estate developer, quit school at the age of fifteen to begin earning his own money. By dint of hard work, street smarts, and well-considered risk taking, the four independently acquired considerable personal wealth and social standing, both of which would increase if they could pull off the Guinness takeover of Distillers on their own terms.

Little, if any, evidence exists to suggest that Saunders and colleagues did anything out of the ordinary in the takeover. In the mid-1980’s, stock ownership was still largely confined to institutions and wealthier individuals. The lifestyles of these individuals as well as their investment decisions were unfamiliar to ordinary people, many of whom envied the rich their successes and delighted more in their mistakes and downfalls.

Stock trading began to be computerized as well in the 1980’s, but it was still quite possible to move around large amounts of money without leaving a trail of evidence or arousing suspicion. In the 1980’s era of Reaganomics, under U.S. president Ronald Reagan and British prime minister Margaret Thatcher, making lots of money was celebrated, and no one closely examined the moneymaking process. Saunders, however, used company funds without the knowledge or permission of the Guinness board of directors, which caught the attention of company officials. It should be noted, though, that Guinness directors did not initiate the investigation into the actions of Saunders and his colleagues. Nor did the board call for charges to be brought against the four men.

Bringing the stock-trading scandal to the international stage, Saunders also had provided Boesky with millions of dollars to manipulate Guinness stock prices on the New York Stock Exchange. Boesky was the undisputed “king of greed” on Wall Street during the 1980’s. He was the leader in insider trading, that is, using private information to make very lucrative, illegal investments. Like the Guinness Four, Boesky was not the only person on Wall Street using insider information for personal or client profit. He was, however, much more flamboyant and his trades much larger and more public than other traders. His obvious delight in flaunting stock-trading procedures attracted the attention of U.S. Securities and Exchange Commission (SEC) investigators.

The SEC began investigating Boesky on charges of stock fraud. Boesky told the investigators that Saunders had been a business associate. This information was turned over to inspectors with the British Department of Trade and Industry (U.K.) Department of Trade and Industry (DTI), who opened an informal investigation into Saunders’s activities. The Guinness Four cooperated with the DTI investigation.

On August 27, 1990, the Guinness Four were found guilty of false accounting and theft (and, for Saunders, conspiracy), fined millions of pounds, and sentenced to prison for up to four years. The defendants did not dispute their actions, but they argued that what they did was business as usual in the world of hostile takeovers. Many in financial circles agreed. The Guinness Four argued that takeovers often involved share-price manipulation, but to DTI investigators, this “business-as-usual” argument was irrelevant.

Shortly after the Guinness Four were convicted, suggestions began to surface in the media that the authorities investigated and prosecuted the four because Boesky, Saunders, and Lyons were Jewish and were first-generation wealthy businessmen. The Guinness Four immediately appealed their respective convictions and prison sentences. Parnes’s sentence was reduced to twenty-one months. Lyons was fined four million pounds in lieu of serving any prison time due to ill health. Ronson was fined five million pounds, but his sentence was reduced to six months. Saunders, the person in charge of the share-price manipulation, was originally sentenced to five years in prison, but his term was later reduced to thirty months and then to ten months. His attorney argued that Saunders suffered from dementia associated with Alzheimer’s disease. Saunders later claimed to have recovered from the disease, which, if true, would have been a modern medical miracle.

British prime minister John Major also seemed to side with the Guinness Four. Only reluctantly did he strip Lyons of his knighthood, while assuring him that his services to the United Kingdom, including his many charitable activities, were still deeply appreciated. Many of those charitable organizations continued to proudly display Lyons’s name as a major benefactor.


In 2001, the European Court of Human Rights European Court of Human Rights (ECHR) ruled that the initial Guinness Four trial was unfair. The court found that information gathered in the course of the informal DTI investigation, in which defendants cooperated, should not have been used to bring criminal charges against the four. The four had essentially been forced to testify against themselves, a violation of the legal right to silence. The ECHR did not rule that the Guinness Four were innocent, only that their trial had been marked by legal and procedural mistakes.

The European parliament has since amended the law to make evidence obtained under any type of compulsion or in a civil investigation inadmissible in criminal proceedings. The Guinness Four were not acquitted, but the procedures for gathering evidence in possible stock-fraud cases changed. Despite repeated attempts, the convictions of the four were not formally overturned. Furthermore, the court refused their appeal for financial compensation on the grounds of procedural miscarriage of justice. Saunders, Ernest
Lyons, Jack
Ronson, Gerald
Guinness Four
Parnes, Anthony
Boesky, Ivan

Further Reading

  • Coenen, Tracy. Essentials of Corporate Fraud. Hoboken, N.J.: John Wiley & Sons, 2008. An introductory guide to the white-collar crime of corporate fraud, written by a forensic, or investigative, accountant.
  • Davies, Peter. Current Issues in Business Ethics. New York: Routledge, 1997. Several case studies examine the relationship between individuals and businesses as well as the making of ethical and unethical decisions.
  • Podgor, Ellen S., and Jerold H. Israel. White Collar Crime in a Nutshell. 3d ed. St. Paul, Minn.: West, 2004. Chapters on white collar crime and corporate fraud, written in a concise and accessible format. Includes a breakdown of securities fraud, tax fraud, corporate criminal liability, conspiracy, and bribery.
  • Steger, Ulrich, and Wolfgang Amann. Corporate Governance. Hoboken, N.J.: Wiley, 2008. Using case studies, this text examines patterns of ethical and legal problems in corporate governance in both the United States and internationally. Governance concerns arise especially as companies try to boost the bottom line. Brief discussion of the Guinness Four share scandal.

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