Guinness Four

The Guinness share-trading fraud was a major British business scandal of the 1980s. It involved the manipulation of the to inflate the price of Guinness shares to thereby assist Guinness's £4 billion takeover bid for the Scottish drinks company Distillers. Four businessmen were convicted of criminal offences for taking part in the manipulation. The scandal was discovered in testimony given by the US stock trader Ivan Boesky as part of a plea bargain. Ernest Saunders, Gerald Ronson, Jack Lyons and Anthony Parnes, the so-called Guinness four, were charged, paid large fines and, with the exception of Lyons, who was suffering from ill health, served prison sentences. The case was bought by the Serious Fraud Office.

The defendants bought shares in Guinness plc to, by supporting its share price, enable Guinness to take over Distillers, a much larger company. The Distillers board favoured Guinness as partners and were facing a hostile bid by Argyll. The Guinness executives guaranteed without limit the defendants' losses if the value of their Guinness shares dropped; this gave the defendants an unfair advantage in what should be a fair market. 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 invested US$100 million with an American arbitrage expert, Ivan Boesky, to invest in shares; it was said that the fee for managing this amount was Boesky's reward for supporting the Guinness share price. Boesky was charged in New York on another matter and mentioned this payment under questioning. This information was passed on to the DTI corporate inspectorate in London, leading to an investigation in which Saunders' other secret share price support arrangements were unveiled. It also emerged that Saunders' arrangements had not been revealed to, nor sanctioned by, the Guinness board. Saunders was said to have misdescribed this sum in Guinness's accounts, though some believed that it was properly an off-balance sheet item. At that time, $100 million was a very large percentage of Guinness's annual profits.

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