BANKRUPT INCORPORATED

Canada has joined Colombia as a leading exporter of synthetic or designer drugs, flooding the global market on an almost unprecedented scale

2012-01-29T22:48:00.001Z

Canada has joined Colombia as a leading exporter of synthetic or designer drugs, flooding the global market on an almost unprecedented scale, police say. The RCMP have seized tonnes of illicit synthetic drugs that include Ecstasy and methamphetamine being shipped abroad after being “cooked” in make-shift labs in apartments, homes and businesses in the GTA. Police are now seizing more chemicals and synthetic drugs, which they say is favoured by young people, at Canadian border checks rather than the traditional cocaine, heroin or hashish that officers call drugs of “a last generation.” Most of the Ecstasy (methylenedioxymethamphetamine), meth or ketamine, a hallucinogenic used in “drug cocktails,” are smuggled from Canada by trucks, air cargo, human couriers or courier services to a network of traffickers. The U.S., Europe, Australia, New Zealand and Japan are the world-wide targets of these highly organised criminal syndicates, the Mounties said. Two Japanese students were arrested at Vancouver International Airport in 2009 after 47,000 Ecstasy pills with the “Chanel” logo were seized from their luggage. And, in November that year 400,000 tablets and 45 kgs of pot were seized in Michigan as it was being transferred from a small Canadian aircraft to a vehicle. The RCMP is working to stamp out the problem and have created a Chemical Diversion Unit (CDU) to target “rogue chemical brokers” who import and sell chemicals to organized crime cells to “bake” synthetic drugs for export. The force also created a Synthetic Drug Operations (SDO) whose members target clandestine drug labs in the GTA that are operated by crime cells and traffickers. “We execute search warrants once we locate a clandestine lab,” said SDO Sgt. Doug Culver. “These labs are dangerous with toxic chemicals and our members are specially trained to handle them.” His officers use hazardous material suits to enter a suspicious lab to ensure it is safe from corrosive chemicals before uniformed officers can enter. Police said an Ecstasy tablet, that usually features a harmless-looking logo, is sold for up to $15 each at Toronto nightclubs and the potency can last for about 10 hours. The tablets used to sell on the street for about $40 each two years ago. Supt. Rick Penney, who is in charge of an RCMP-GTA Drug Squad, said tonnes of chemicals and synthetic drugs are being seized by his officers. “We are talking tonnes and not kilograms,” Penney said. “This is becoming a matter of routine for us and it concerns me.” Penney said Canadian-made Ecstasy and meth are popular in Australia, New Zealand, Japan, the U.S. and some European countries. “Canada is a player on the global market,” he said. “We see a lot of synthetic chemicals passing through the Canadian border or going out of province.” He said some of the chemicals are purchased by criminals on the Internet from suppliers in China or India. “The majority of the drugs we seize in Ontario are for export,” Penney said. “This is a global problem and Canada is a big player.” The drug officers said Canada exports as much Ecstasy and chemical drugs as Colombia ships out cocaine. Police said synthetic drugs are the choice of young people because it is cheap, with a pill being made for 50-cents and sold for up to $15; lasts a long time; can be easily hidden and a tablet appears relatively harmless with a “cute” imprinted logo. Sgt. Brent Hill, of the Chemical Diversion Unit, said rogue brokers use fake names, companies or addresses to import the chemicals into Canada. Some use the name of legitimate companies and give fake delivery addresses, he said. He said the imported chemicals are resold by rogue brokers at exorbitant profits to organized crime groups originating from China, Vietnam and India, including criminal bike gangs in Canada. The chemicals are “cooked” into synthetic drugs. The CDU monitors more than 100 chemicals entering the country. Some are for legitimate industrial uses ranging from industrial cleaners to pharmaceutical products. Others are strictly for “baking” drugs. Hill shows a make-shift laboratory that was seized in a 2007 Scarborough bust in which three people were arrested. Officers seized two million units of Ecstasy and bags of chemicals at a residence on Pipers Green Ave., in the Brimley Rd. and Finch Ave. E. area. Jian Yao Quan, 24, and Yan Shi, 46, both of Scarborough, and Wan Shun Ling, 55, of Brooklyn, New York, were convicted of drug-related offences and will be sentenced on Feb. 14. A warrant has been issued for Wei Quan Ma, 43, of Toronto, who’s believed to have fled to China. During that raid, police found a 22-litre round-bottom heating mantle filled with chemicals being baked as vapors flowed through a hose taped at the top of the container to a large can filled with cat litter, that helps to absorb toxic gases to avoid leaving smells behind, police said. Hill said the mixture leaves a cloud of corrosive chemical hanging over the area that is harmful to people and is the reason why officers wear haz-mat suits to enter drug houses. “These labs pose a serious threat to the safety of the public and emergency first responders such as police, fire and ambulance workers,” Hill said. “Most chemicals in a clandestine drug lab are highly toxic, corrosive, explosive or flammable “ He said some unsafe labs can cause a fire or explosion that can lead to environmental pollution. Police said its common to find an Ecstasy pill containing a combination of controlled substances including methamphetamine or other controlled or non-regulated psychoactive substances. Some doses can be lethal and kill users. Officers point to the deaths of five B.C. young people since last August from Ecstasy laced PMMA, the same lethal chemical linked to deaths in the Calgary area. There have been about 18 Ecstasy-related deaths in B.C. in two years. “Some of these drugs are dangerous cocktails,” Hill said. “Crime groups are putting more addictive chemicals in some of the mixtures to get kids coming back for more. “These brokers are aggressively targeting the legitimate chemical industry. They continue to expand in a highly-lucrative market selling legal chemicals, regulated precursors and non-regulated psychoactive substances.” Officers said some unscrupulous brokers establish fake front companies, or claim to be legitimate companies to import chemicals into Canada. They fill out paperwork required by the Canada Border Services Agency but usually provide false information, police said. “The acquisition of chemicals is the choke point,” Hill said. “We are fully engaged with the legitimate Canadian chemical industry and monitor suspicious chemical transactions.” He said its a crime under Bill C-475 to possess, produce, sell or import “anything” if the person involved knows it will be used to produce methamphetamine or Ecstasy. “Crime groups with links to south-east Asia continue to dominate chemical-brokering operations,” the Mounties said. “There are criminal enterprises including individual operators and semi-legitimate companies that are brokering or procuring chemicals for synthetic drug production.” Police said some chemical shipments imported into Canada for industrial use are stolen by crime gangs to produce drugs. “Global demand for Ecstasy remains high,” Hill said. “Ecstasy continues to be the most sought-after and widely available controlled synthetic drug in the Canadian illicit market.”

Recession causes 2,000 heart attack deaths

2012-01-28T15:44:00.001Z

Since 2002 the number of people dying from heart attacks in England has dropped by half, the study conducted by Oxford University found. But within that, regional data revealed there was a 'blip' in London that corresponded to the financial crash in 2008 and continued through 2009. Heart attack deaths have dropped due to better prevention of heart attacks in the first place with fewer people smoking and improvements in diet through lower consumption of saturated fat. The treatment of people who do suffer a heart attack has also improved leading to fewer deaths with faster ambulance response times, new procedures to clear blocked arteries and wider use of drugs such as statins and aspirin. The research published in the British Medical Journal showed around 80,000 lives have been saved between 2002 and 2008 as deaths from heart attacks declined.

Businessman Asil Nadir would have needed banknotes 300 times the height of Nelson's Column to balance the books of his empire

2012-01-27T17:41:00.001Z

Businessman Asil Nadir would have needed banknotes 300 times the height of Nelson's Column to balance the books of his empire, the Old Bailey hears.

He has said when pounds were taken out in London, equivalent amounts in Turkish lire were placed in a subsidiary firm in northern Cyprus.

Philip Shears, QC, prosecuting, said the claims were "not credible".

Mr Nadir, who is accused of stealing nearly £150m from his Polly Peck empire, denies all the charges.

The 70-year-old, who lives in Mayfair, central London, is facing 13 sample counts that he stole more than £34m from PPI between 1987 and 1990.

The prosecution has accused the tycoon of transferring millions of pounds through a complex series of companies and trusts in an attempt to hide his actions.

Judge orders search of News of the World executives' computers in bid to find out if key hacking evidence was destroyed

2012-01-20T12:11:00.001Z

A judge overseeing the settling of hacking claims by victims of News of the World has ordered executives' computers be searched. Senior managers at News Group Newspapers – the parent company of the News of the World – were criticised by Mr Justice Vos, the judge supervising the settlements. Jeremy Reed, who is acting on behalf of several victims of phone hacking, said that when the News of The World moved offices in 2010, computers used by journalists accused of hacking were destroyed. He disparaged their reaction to a request in 2010 from lawyers for the actress Sienna Miller to retain emails that might be relevant to a phone hacking claim. Within three days, the judge said, ‘a carefully conceived plan to delete emails was put into effect at the behest of senior management’. He said the evidence raised ‘compelling questions about whether you concealed, told lies, actively tried to get off scot free’. He ordered the company to search a number of computers, adding that there was evidence that management had a ‘startling approach to the email record’.

News International faces FBI phone hacking probe

2012-01-20T09:35:00.001Z

Yesterday the company paid the actor £130,000 after accepting that it had published stories gleaned from hacking his phone. One of the articles News International accepted had come from phone hacking was a 2003 story in the News of the World which referred to telephone calls Law’s assistant Ben Jackson had made to him when he arrived at an airport. It is believed the airport was John F. Kennedy airport in New York. News International’s admission has led the US authorities to investigate whether a crime took place on American soil. It is thought the possibility that Law’s phone was using an American network at the time could lead to offences having been committed under US law.

Pumpkin Patch closes UK stores

2012-01-19T20:15:00.001Z

400 employees across 36 stores in the UK face an uncertain future after the New Zealand-based company said it no longer made sense to maintain its loss-making British business. It is the latest in a string of retailers to run into trouble as consumers reign in spending. The company will continue trading online and in non-UK businesses in Ireland and internationally, administrators said in a statement. Only its UK stores are affected. Pumpkin Patch has already closed five UK stores with 60 workers being made redundant in Cambridge, Cheshire Oakes, Leeds, Swindon and Uxbridge. The company's administrator, Deloitte, said it would continue trading most UK stores as it explored options.

Peacocks To Axe 249 Staff In Cardiff As Administrators Take Action

2012-01-19T20:14:00.001Z

The troubled fashion retailer Peacocks is set to axe more than 200 staff, its administrators KPMG have announced. Just 24 hours after the company went into administration, KPMG said 249 workers at its headquarters in Cardiff were going to lose their jobs. The administrators said the cuts follow "a commercial review of the staffing levels of the business." Chris Laverty, from KPMG, said: "No stores have been closed and will continue to operate as normal whilst we actively search for a buyer for the business." 266 staff will remain at the head office and work with the administrator while a buyer for the company is found. Peacocks has 611 stores and 49 concesssion in the UK Peacocks entered administration after apparently failing to persuade its lenders to agree to a debt-for-equity deal. The fashion chain, which has 611 stores and 49 concessions across the UK, is owned by hedge funds Och-Ziff and Perry Capital. Its like-for-like sales rose 17% over the Christmas period and the company said it was benefiting from its ability to react quickly to fashion trends. Bonmarche, which is also owned by the Peacock Group, has not yet entered administration but filed a notice of intention to appoint administrators on Monday. It employs 3,800 staff and operates some 394 stores in Britain.

Kodak files for bankruptcy protection

2012-01-19T20:13:00.001Z

Company that pioneered the digital camera eventually brought down by its failure to invest in its own ground-breaking invention To all intents and purposes it is the end of the "Kodak moment". More than 130 years after a "not especially gifted" high school dropout, George Eastman, founded the camera company that dominated photography for most of the 20th century, Kodak Eastman filed for bankruptcy protection in the US on Thursday. The company which once sold 90 per cent of the film used in the US and made a type of film - Kodachrome - so beloved by amateur and professional photographers that Paul Simon wrote a hit song about it, finally succumbed to the digital revolution which left its products obsolete after years of ferocious competition from more light-footed rivals in the Far East. The company, whose little yellow film boxes could once be found throughout the world, had tried to reinvent itself as a manufacturer of printers to capitalise on its reputation as the best for film printing. But despite the closure of 13 factories, 130 processing labs and 47,000 job losses, the business had little choice but to file for chapter 11 bankruptcy protection. The filing lists its assets as worth $US5.1bn - but its debts stand at $US6.8bn.

Spanish Banks' Bad Loans Keep Rising

2012-01-19T03:22:00.001Z

The bad debt ratio of Spain's banking sector rose for the eighth consecutive month in November to a new 17-year high, while deposits and loans shrunk further as the country edged towards a double-dip recession, data released Wednesday by the Bank of Spain showed. According to the data, 7.51% of loans held by banks were more than three months overdue for repayment in November, up from 7.42% in October. It is the highest percentage recorded since November 1994, and contrasts with bad debt levels below 1% of all loans in the years prior to the country's 2008 property bust. High unemployment, falling house prices and the sluggish economy likely will cause bad loans to continue to rise throughout this year and into 2013, said Gonçalo Guarda Garcia, an analyst at Portuguese brokerage BPI. Lenders have been struggling to cope with steep losses on loans extended to the real-estate and construction sector, as the country tackles the deepest economic downturn in decades and an escalating debt crisis in the euro zone that has sharply reduced their access to financial markets. Mr. Guarda Garcia also said he expects loans to shrink at a faster pace this year as lenders reduce risk on their balance sheets. The November data showed banks had cut lending by 2.54% on the year, while the pool of deposits fell at an annual rate of 2.14%. The new Spanish government said earlier this month that after stalling in the third quarter, the economy had contracted in the fourth quarter of 2011 and is set to shrink further this quarter. Overall, €134.1 billion ($171 billion) in loans were non-performing in November, up from €131.9 billion in October and €104.7 billion a year earlier. Banks had set aside a total of €73.82 billion to cover these soured loans at the end of November, up from €62.2 billion a year earlier. The amount of provisioning will likely rise sharply next month, as many of the country's lenders are expected to set aside a large chunk of their earnings to cover loan losses. As of November, Spain's banks had total of €1.79 trillion in loans outstanding, down from €1.84 trillion a year earlier.

Royal Bank of Scotland can switch off firms' life support

2012-01-16T23:23:00.001Z

The downfall of the Peacocks fashion chain has turned a spotlight on the fact that taxpayer-owned Royal Bank of Scotland is wielding the power of life and death over hundreds of financially stretched companies. The decision by RBS that it did not want to swap debt in Peacocks for a stake in the business – in contrast with fellow lender Barclays, which believed the company was viable – is just one of many such dilemmas it will face in the coming months. Thanks to the gung-ho approach to lending taken by previous management, RBS is saddled with a huge exposure to the struggling retail and property sectors. Its new bosses have to decide whether to back these companies and hope they can trade their way out of difficulty, or whether to pull the plug – and all under the glare of publicity. RBS faces a storm of criticism over its decision to walk away from Peacocks. But the reality is there are no easy ‘right’ answers on its treatment of the ailing store chains clogging its loan books. Withdraw support, and the bank stands accused of failing to back British firms and of letting down the workers who bailed it out with their taxes. But if RBS continues to pour money into companies with no hope of ever recovering it, then taxpayers will lose even more in the long run. As well as Peacocks, RBS is also a lender to ailing music seller HMV and Clinton Cards, along with Premier Foods, the makers of Angel Delight, and tour operator Thomas Cook. Others include Endemol, the production house behind Big Brother, and hotel chain Jurys Inn. The legacy of the loan-happy Goodwin years is so large that the bank’s ‘restructuring’ division, which tries to get financially strapped borrowers back on their feet, employs no fewer than 1,000 staff. The bank claims it strives to keep businesses afloat wherever possible, as that gives it the best chance of having its loans repaid. But a spokesman said: ‘There are some, though, where their time is up.’ The bank supported failed nightclub operator Luminar for a long period before it, and fellow lender Lloyds, pushed the firm into administration. It also carried on lending to social housing group Connaught after a series of profit warnings, though eventually it fell into administration too. The restructuring unit is run by Derek Sach, a former private equity boss at 3i. He claims that in 2010, the latest full-year figures available, it dealt with around 1,000 British businesses, saving 64,000 jobs and that fewer than 10 per cent went into insolvency. Sach runs his own private-equity style operation within his empire, by taking stakes in the distressed firms he considers to have a strong chance of being profitable in future. This tactic of taking a share in a company at a rock bottom price when it is in trouble is a tried and tested technique among private equity operators. RBS is essentially trying to beat them at their own game. It has taken share stakes in luggage firm Samsonite and care home operator Four Seasons, among others. Insiders at RBS believe Peacocks is trying to make political capital out of the fact the bank is state-controlled. ‘We are damned if we do lend to companies in trouble, and damned if we don’t,’ said one executive. Peacocks has announced its intention to appoint an administrator and has lined up KPMG. It now has a 10-day window of opportunity to find new backers before the administration actually happens. It may yet find a white knight. But for RBS, there will be many more such difficult decisions for the companies it has on life support in the coming months.

Past Times goes into administration

2012-01-16T23:20:00.001Z

Gift retailer Past Times has fallen into administration and confirmed 507 staff were made redundant before the move. The private equity-owned group, which last week shut 46 stores and 72 temporary stores, said KPMG had been appointed as administrator to the loss-making business following weak trade. An additional 67 redundancies were made on appointment, comprising 30 from the Past Times head office in Witney, Oxfordshire, and 37 from its warehouse, leaving a central workforce of 31. The remaining business, comprising 51 stores and 500 employees, is continuing to trade under the control of the administrators in the short term with an "orderly wind down" planned in the event a sale cannot be sealed. Past Times made the announcement as clothing retailer Peacocks revealed it planned to appoint administrators to the business, raising doubt over the future of 11,000 positions. Past Times is understood to have suffered over Christmas despite heavy discounting and its range of Downton Abbey-themed memorabilia. The group sells a wide range of toys and gifts, including teddy bears, mugs, jigsaws and puzzles and stationery. The group is owned by private equity firm Epic, which itself bought the chain out of administration in 2005. Past Times is the latest in a long line of retailers to collapse into administration. Outdoor retailer Blacks Leisure and lingerie chain La Senza were recently bought in a pre-pack administration deal, while Peacocks and Bonmarche will both appoint administrators in the next 10 days.

RBS puts 13,000 jobs at risk as it pulls the plug on Peacocks

2012-01-16T23:19:00.001Z

Royal Bank of Scotland was last night branded ‘deplorable’ for pulling the plug on fashion retailer Peacocks – putting 13,000 high street jobs at risk. The taxpayer-controlled bank withdrew from last ditch talks to save the store chain yesterday, threatening the biggest retail collapse since the demise of Woolworths three years ago. Its move forced Peacocks, which has more than 700 shops in the UK and abroad, to announce it will go into administration in ten days unless new investors are found.

Tax adviser guilty of fraud scheme

2012-01-16T06:09:00.001Z

A professional tax adviser from Bedfordshire has been convicted of trying to defraud honest taxpayers of £70 million, HM Revenue & Customs (HMRC) said. David Perrin spent his cut of the stolen cash on expensive second homes, exotic holidays, works of art and luxury cars, a spokeswoman said. The 46-year-old, of Leagrave, Luton, Bedfordshire, was found guilty at Blackfriars Crown Court and will be sentenced next month, she added. Perrin, deputy managing director at Vantis Tax Ltd, devised and operated a tax avoidance scheme which he sold to wealthy taxpayers in order to exploit the law on giving shares to charity, she said. The scheme allowed him to pocket more than £2 million in fees from unsuspecting clients. He used a network of finance professionals to advise more than 600 wealthy clients to buy shares, worth a few pence each, in four new companies he had set up, the spokeswoman said. He then listed the companies on the Channel Islands Stock Exchange and paid people money from an offshore account to buy and sell the shares simply to inflate their price. The share owners then donated 329 million shares to various unsuspecting registered charities and tried to claim £70 million tax relief on a total of £213 million of income and company profits. This was based on the shares being worth up to £1 each, rather than the pennies they were originally bought for. Perrin also used the bogus scheme to claim money back, the spokeswoman said. The scheme proved so popular that Vantis employees performed a smug celebratory song at their annual conference, to the tune of I will Survive, she said. It included the verse: "They should have changed that stupid law, they should have buggered charity, but they have left that lovely tax relief, for folks to pay to me." Jim Graham, HMRC criminal investigator, said: "With his knowledge of the tax system, Perrin thought that he was one step ahead of both HMRC and the law. "This cynical fraud not only stole millions of pounds from taxpayers, but also conned innocent charities into accepting gifts of virtually worthless shares, just so Perrin could inflate his own criminal earnings." Perrin was charged with cheating the revenue by dishonestly submitting and dishonestly facilitating and inducing others to submit claims for tax relief which falsely stated values of shares which were gifted to charities. He will be sentenced on February 9 and confiscation proceedings are under way, the spokeswoman said.

Top former art dealer faces 87 charges after fraud probe

2012-01-16T06:04:00.001Z

One of Australia's former leading art dealers, Ronald Coles, faces up to 10 years in jail after being charged today with 87 offences relating to an alleged multimillion-dollar investment art fraud scheme. Mr Coles, 64, was ordered to appear at Gosford police station at 10am today. Fraud Squad detectives formally charged him following an "extremely protracted and legally intricate" two-year investigation into his business affairs. Under the Crimes Act, Mr Coles was charged with 77 counts of "larceny as a bailee" and a further 10 counts of "director/officer cheat or defraud". For more than 30 years, Mr Coles specialised in fine art by some of Australia's most celebrated artists, including Sir Arthur Streeton, Eugene von Guerard, Brett Whiteley and Norman Lyndsay. Advertising on national radio and television, he offered clients an opportunity to boost their life savings through the purchase of investment art, which he bought and sold on their behalf, using their superannuation funds. NSW Police launched Strike Force Glasson in January 2009 after a Fairfax investigation unearthed dozens of investors who were missing millions of dollars in lost art and money, all allegedly retained by Mr Coles. Today's police charges relate to more than $8 million in financial loss to a total of 43 clients nationwide. Mr Coles failed to make conditional bail of $50,000. It is understood he offered a car and paintings as surety but they were refused. He is due to appear at Gosford Local Court shortly.

RBS to cut 3,500 jobs in investment bank shake-up

2012-01-12T09:59:00.001Z

The Royal Bank of Scotland (RBS) has said it is planning to cut 3,500 jobs, with most of them to happen this year. The cuts are part of a reorganisation and shrinkage of its investment bank. The losses, which will be split between its UK and international offices, come on top of 2,000 cuts announced earlier. Its "wholesale banking" business, which provides services to large clients including investment banking services, will be split into separate "markets" and "international banking" divisions. The markets division - which comprises RBS' main trading activities - will focus on the bank's traditional strengths of debt, currency and money markets, the bank said in its statement. The wholesale banking division will provide services for the bank's biggest clients. These will include corporate advisory services transferred from its investment bank - such as helping major companies borrow money by issuing bonds - as well as cash management and payments services. The bank has already shed some 30,000 employees over the last two years, 22,000 of them in the UK. "It is a disgrace that while on a daily basis, stories are emerging about the massive bonuses at the top of the bank, increasing numbers of jobs are being cut from amongst the hard working staff," said David Fleming of the Unite union. Continue reading the main story “ Start Quote For a bank that has shed 30,000 jobs over the past couple of years, a further 3,500 departures may not seem massive” Robert Peston Business editor, BBC News Read Robert's blog Markets took the statement well, although many of the details had been flagged up in advance. RBS's share price rose 6.8% in morning trading, outperforming other banks and other large companies on the FTSE 100 index. Cutting back The bank said that it planned to close or sell off other business lines, such as those dealing with shares and stock markets, as well as its business advising companies on mergers and acquisitions. It is also looking to dispose of its corporate brokerage, Hoare Govett. These business lines were ones that had been added or expanded only in recent years under the leadership of former chief executive Sir Fred Goodwin. Continue reading the main story Royal Bank of Scotland Group RBS also said in its statement that the size of the balance sheet - the total loans and investments - of its former investment banking division would be reduced by more than a quarter, from £420bn to £300bn, over three years. This will enable it to cut its borrowing from wholesale money markets - which evaporated during the 2008 financial crisis, threatening the bank's collapse - by £75bn. "The overall aim is to improve profits and reduce risks," says the BBC's business editor, Robert Peston. "Which matters to most of us, since taxpayers are sitting on losses of £26bn on the £45.5bn they invested in RBS to rescue it." However, he also notes that the business lines being disposed of were not the ones responsible for causing RBS its huge losses during and after the 2008 financial crisis. UK clients RBS said the restructuring was also designed to prepare the bank for new UK regulatory requirements for banks to ring-fence their core UK operations from their riskier investment banking activities. Continue reading the main story Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: Investment bank Investment bank Investment banks provide financial services for governments, companies or extremely rich individuals. They differ from commercial banks where you have your savings or your mortgage. Traditionally investment banks provided underwriting, and financial advice on mergers and acquisitions, and how to raise money in the financial markets. The term is also commonly used to describe the more risky activities typically undertaken by such firms, including trading directly in financial markets for their own account. Glossary in full The bank's dealings with British small and medium-sized companies will accordingly be transferred away from the new international banking division, and handled via its UK banks. There was no mention of any specific downscaling of its international operations. However, there has been speculation that its operations in the Irish Republic - including Ulster Bank, which RBS bought in 2000 - and in Australia may be affected Chancellor George Osborne announced the change in strategy at the bank in December 2011. "Investment banking will continue to support RBS's corporate lending business but RBS will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding," Mr Osborne told Parliament in December. Mr Osborne's announcement came in the wake of a report into the bank by the Financial Services Authority in December 2011 which pointed to "errors of judgement and execution" by RBS management which led to its failure in 2008. The bank is now 82%-owned by the UK government after taxpayers injected £45.5bn of new capital into RBS.

Wonga stops targeting students after Twitter protests

2012-01-11T23:56:00.001Z

Short-term lender Wonga.com has announced that it is taking down information on student finances from its website following accusations it was encouraging undergraduates to take out one of its high-interest loans. Earlier Wonga.com came under severe criticism after its website claimed that its loans can offer students "a little more financial freedom and independence". The claim attracted outrage on Twitter. One user, Neale Gilhooley, tweeted: "A pox on loan company #Wonga offering students loans at a sharking 4,214pc APR." On the "student loans" section of its website, Wonga.com says these government-backed loans – despite their very low interest rates – could encourage people to borrow too much. Student loans currently attract interest at 1.5pc or 5.3pc, depending on when they were taken out. "It's pretty hard not to get carried away when you're a student on a budget and have the option to borrow large amounts of money with a student loan. But the problem with student loans is that they potentially encourage you to live beyond your means," the website says. "They're intended for living and education costs, but it's all too easy to fritter away the money once you have it. Wonga encourages responsible borrowing because, depending on your trust rating, you can borrow as little as £1 up to £1000, as long as you can repay it within a month."

Little Chef to cut 600 jobs in 'aggressive' rebuilding strategy

2012-01-11T23:54:00.001Z

He's been slimmed down, fattened back up again and placed under the care of celebrity pal Heston Blumenthal, but now "Charlie", the symbol of Little Chef, will be disappearing from 67 locations across the country, putting up to 600 jobs at risk. The private equity owners of the 54-year-old roadside restaurant chain shut 18 loss-making outlets on Wednesday and will close another 49 next month. Graham Sims, Little Chef's chairman, said the closing stores were "losing money to a very large degree" and had to be shut to allow the remaining 94 sites to survive. He said the 18 restaurants boarded up on Wednesday were losing "in excess of £10,000 a year before rent" and had "dragged down" the rest of the company. The closure programme comes five years after the turnaround specialist RCapital rescued Little Chef – and 3,500 jobs – from administration. Since then, the company has tried to reposition itself away from its greasy-spoon image by drafting in the Michelin-starred Blumenthal to jazz up the menu. Blumenthal's Big Chef Takes On Little Chef was a hit for Channel 4, but his new menu – including coq au vin and braised ox cheeks – only made it in full to three restaurants. Blumenthal, who collects a "minimal fee" for his help, will be kept on to advise the chain about menu ideas and food provenance. Sims said the three restaurants transformed by Blumenthal "probably wouldn't have survived" without the celebrity chef's intervention. Sims, whose first job was flipping hamburgers at Little Chef in 1997 before he rejoined the company in the top job three months ago, said the chain was struggling because it had not been "aggressive" enough. "The problem is Little Chef has in the past never been brave enough to make a big change. I don't want to nibble at it any more – I want to make big changes." He said Little Chef, which began life as an 11-seat restaurant in Reading in 1958, would have to "shrink to grow". He said it was also finally time for Charlie to face up to competition from other, faster, alternatives up and down Britain's motorways. But he did not seem to be daunted by the fight ahead. "I used to run BP in the UK and created BP Connect and the BP Wild Bean Café," he said. "Now I'm going to start attacking BP. I will compete with those other restaurants and fast-food brands. This is a great opportunity for the great travelling British public." Grab-and-go takeaway, which is already available at 13 Little Chefs, will be rolled out across the rest of the network this year, but Sims insists it will be "quality quickly takeaway" not "just a dirty greasy takeaway". At the same time, Little Chef will keep its favourite dishes, including the Olympic Breakfast, which continues to go down well with its 9 million annual sit-down customers – including Sims, who eats at least one a week and recommends customers "don't eat the day before". "I have very big aspirations to grow our business," Sims said. "There are sites that I can comfortably invest in and see more jobs." After that, there are plans for a new franchise operation of 40-50 new restaurants. But there are no plans to expand to other countries yet.

Europe Banks Hoarding Cash Resist Draghi Bid to Avoid Crunch

2012-01-11T16:02:00.001Z

Banks are hoarding the European Central Bank's record 489 billion-euro ($625 billion) injection into the banking system, thwarting attempts by policy makers to avert a credit crunch in the region. Almost all of the money loaned to 523 euro-area lenders last month wound up back on deposit at the Frankfurt-based central bank instead of pouring into the financial system, ECB data show. Banks will use most of the three-year loans to meet their refinancing needs for this year and next, analysts at Morgan Stanley and Royal Bank of Scotland Group Plc estimate. “It's illusory to think that the measure will translate into credit generation,” Philippe Waechter, chief economist at Natixis Asset Management in Paris, said in an interview. “It will assuage some of the anxiety banks have regarding their liquidity needs. But they've engaged into a massive overhaul of their strategy and shrinkage of their balance sheets, which is, coupled with the deteriorating economy, not compatible with increasing credit.” Governments are urging European banks to keep lending to companies and individuals while requiring them to raise an additional 114.7 billion euros of core capital by June to weather a deepening sovereign-debt crisis. Instead of raising equity, most lenders across Europe have vowed to meet capital rules by trimming at least 950 billion euros from their balance sheets over the next two years, either by selling assets or not renewing credit lines, according to data compiled by Bloomberg. ECB Deposits That has stirred concern among policy makers that banks will cut lending and throttle growth in the euro region. Banks have been parking almost all extra liquidity from the ECB loans back at the central bank. Barclays Capital estimates firms used 296 billion euros of the Dec. 21 three-year loans to replace maturing shorter-term ECB borrowings. That left only 193 billion euros of additional money for the financial system. Overnight deposits with the ECB have jumped by about 223 billion euros since the loans to a record 486 billion euros, suggesting the central bank funds haven't so far reached customers. Banks account for about 80 percent of lending to the euro area, making them “crucial to the supply of credit,” according to recently installed ECB President Mario Draghi. By contrast, U.S. companies rely more on capital markets for financing, selling bonds to investors. Refinancing Needs The ECB lending, and a follow-up loan offering on Feb. 28, won't ease the pressure on banks to shrink, say analysts including Huw van Steenis at Morgan Stanley in London. “The ECB loans will largely be used to pre-fund 2012 and some of 2013's bank refinancing needs, but it will not stimulate lending,” Van Steenis said. They will “just stop it falling off precipitously.” Euro-area banks have more than 600 billion euros of debt maturing this year, the Bank of England said in its financial stability report last month. The first ECB loan offering should help cover about two-thirds of that amount, Goldman Sachs Group Inc. analysts say. Morgan Stanley's Van Steenis estimates banks may reduce assets by as much as 2.5 trillion euros in two years, a process known as deleveraging. The volume of loans to households and companies in the 17- nation euro area shrank in November for the second consecutive month, the ECB said on Dec. 29. Loans were still up 1.7 percent over the year-earlier period, slowing from a 2.7 percent increase in the 12 months through October. Merkel, Sarkozy When granted, loans are getting costlier for borrowers. Since July, interest margins have increased, with investment- grade borrowers in Europe paying an average of 91.6 basis points more than benchmark rates, up from 84.4 basis points during the first half of 2011, according to data compiled by Bloomberg. A basis point is one-hundredth of a percentage point. “We must avoid a credit crunch for our economies,” European Union President Herman Van Rompuy said on Jan. 9. “The recent measures by the European Central Bank on a long-term lending facility for the banks are welcome in this context.” The European Banking Authority, which oversees the region's regulators, asked banks on Dec. 8 to retain earnings, curb bonuses and raise equity to boost core capital before resorting to cuts in lending. The EBA followed both French President Nicolas Sarkozy and German Chancellor Angela Merkel in urging banks to keep lending. Sarkozy said on Oct. 27 that he had asked firms to shift “almost all” of their dividends into strengthening balance sheets and to make bonus practices “normal.” Merkel said on Oct. 9 she was “determined to do whatever necessary to recapitalize the banks to ensure credit to the economy.” ‘No Credit Crunch' Bankers have said they haven't restricted lending and that demand for credit is slowing as growth slows. “All banks I talk to keep lending to small- and medium- size enterprises and households,” Christian Clausen, president of the European Banking Federation, an industry association, said on Dec. 9. “That part of the bank will keep rolling.” There is “no credit crunch,” Frederic Oudea, chief executive officer of Societe Generale SA, France's second- biggest lender, and chairman of the French Banking Federation, said last month. “The reality is that credit is available,” he said in an interview on BFM radio on Dec. 16. Even so, companies across Europe say credit is tightening. ‘Double Punch' In France, where credit to the private sector increased by 3.7 percent in November compared with a year earlier, the majority of the country's company treasurers said they encountered “very strong tensions” in negotiating bank loans, with more than 50 percent of respondents saying the process led to more expensive terms, according to a December survey by the French Association of Corporate Treasurers. The majority of those polled said obtaining bank financing was “as difficult as at the end of 2008,” after Lehman Brothers Holdings Inc. collapsed. U.K. banks expect to toughen their criteria on loans to companies and households in the first quarter because of strains in the wholesale funding market, the Bank of England said Jan. 5in its fourth-quarter Credit Conditions Survey. Belgian credit growth slowed to 3.1 percent in the 12 months to the end of October, from 3.6 percent at the end of September, the country's central bank said on Dec. 12. In Italy, some companies with annual sales of 30 million euros to 40 million euros are charged as much as 10 percent interest on loans, Emma Marcegaglia, chief of the country's Confindustria lobby group, said in an interview on Dec. 20. Lending to businesses and consumers grew at the weakest pace in a year, the Bank of Italy said today. Draghi's Priority With the ECB's injection, “deleveraging may happen in a more orderly way, but it doesn't mean it will be painless,” said Alberto Gallo, head of European credit strategy at RBS. Banks are faced with high long-term financing costs, a deteriorating economy and difficulties raising capital, he said. “It's what I call the double punch: A combination of negative growth and banks' deleveraging will affect lending activity.” Even the ECB's Draghi, who has made it one of his priorities is to keep credit flowing into the economy, said the central bank's loan offerings may fail to achieve that goal. “Monetary policy cannot do everything, but we're trying to do our best to avoid a credit crunch that might come from a lack of funding,” Draghi said Dec. 19 at the European Parliament in Brussels. “We have to be extremely careful here, because there may be other reasons that create a credit crunch.” Draghi may be wary of the U.S. experience with multiple rounds of bond purchases. That so-called quantitative easing hasn't stimulated lending, Natixis's Waechter said. ‘Kick the Can' “Lending really picked up when the economy got better,” he said. The ECB cut its forecast for euro-area economic growth in 2012 to 0.3 percent on Dec. 8 from a September prediction of 1.3 percent. The central bank expects the economy to expand 1.3 percent next year. In the U.S., almost all categories of bank lending fell in 2009 and 2010 and didn't start improving until last year, when the Federal Reserve stopped its second wave of quantitative easing, according to data by the U.S. institution. Banks increased their holdings of Treasury and agency securities in 2009 and 2010, showing they were using the Fed's cheap money to own safe government paper. Because quantitative easing tends to improve capital markets first, the healing will be even slower in Europe given its reliance on banks for borrowing, according to Gallo.

Trial begins in giant Spanish corruption scandal

2012-01-10T21:39:00.001Z

top Spanish former official went on trial Monday at the start of legal proceedings into a raft of corruption scandals in which King Juan Carlos' son-in-law is also accused. Jaume Matas, the ex-head of the regional government of the Balearic islands who had also served as environment minister, appeared at a court in Palma de Majorca alongside three other suspects. They have been charged with embezzlement, fraud, falsifying documents and influence peddling. Matas was charged in March 2010 and was released after paying a record bail of 3.0 million euros ($3.8 million). Prosecutors are demanding an eight and a half years jail term. Matas served as president of the government of the Balearic Islands between 1996-1999 and then between 2003-2007. He was environment minister between 2000-2003. The so-called "Palma Arena affair" as the Spanish press has dubbed the corruption scandal centres on the suspected embezzlement of public funds during the construction of a velodrome in Palma de Majorca between 2005-2007. An investigation concluded that the cycling track had an unjustified cost overrun of 41 million euros. That led authorities on the archipelago to uncover other cases of suspected embezzlement of public funds, including one allegedly involving royal son-in-law Inaki Urdangarin. The 43-year-old ex-Olympic handball player is scheduled to appear in court on February 25 as part of a probe into corruption at a non-profit organisation, Instituto Noos, which he headed between 2004 and 2006. The probe centres notably on a payment of 2.3 million euros to Instituto Noos for organising a tourism and sports conference in 2005 and 2006. Urdangarin, who has the title Duke of Palma and is married to the king's youngest daughter, Princess Cristina, has denied any wrongdoing. Last month the royal family suspended the the duke from official engagements and the palace's highest official, Rafael Spottorno, gave an unprecedented rebuke, telling Spanish media his behaviour "does not seem exemplary".

Shoe shop chain Barratts Priceless makes 1,600 staff redundant

2011-12-30T17:00:00.001Z

The high street gloom deepened on Friday as more than 1,600 workers at shoe chain Barratts Priceless were made redundant and 400 jobs were put at risk following the collapse of toy chain Hawkin's Bazaar. Barratts' administrators Deloitte said the 1,610 full- and part-time staff who manned its 371 concessions in stores such as Dorothy Perkins would be paid up until the end of Saturday. The Bradford-based shoe group collapsed this month when 170 of its 3,840 staff were laid off and 18 of its 191 stores closed. Deloitte partner Daniel Butters said it was hopeful that some retail jobs could be saved as the administrators were in "active discussions to rescue a significant part of the remaining business". The jobs blow came as restructuring specialist Zolfo Cooper was formally appointed at Hawkin's parent company Tobar, which also owns toys and children's accessories retailer Letterbox. The group, which also has a home shopping arm, employs 380 full-time staff at its 65 stores and head office in Beccles, Suffolk. The failure of Hawkin's, following the crucial Christmas trading period, is the second among retailers this week: fashion chain D2 Jeans has also folded. D2's administrator BDO immediately closed 19 of its 47 UK stores, making more than 200 employees redundant. No job losses have been announced at Hawkin's, with Zolfo Cooper saying the business would be run as a going concern. The 55 "pop-up" stores Hawkin's opened for Christmas, which employed 400 temporary staff, will close as planned. Zolfo Cooper's Peter Saville said: "Hawkin's has experienced exceptionally challenging trading conditions of late. At this stage we intend to continue to trade the component parts of the group whilst we seek a buyer for all or parts of its operations." Hawkin's was set up in 1973 and sells quirky toys, gifts, games and gadgets using the tagline "things you thought had gone forever, things you never even knew existed". Insiders suggested that a buyer would be found for at least part of the loss-making business, which at last count had debts of £42m.

Spain sets out 8.9bn euros of new austerity measures

2011-12-30T16:47:00.001Z

Spain's new conservative government has outlined 8.9bn euros ($11.5bn, £7.5bn) in new spending cuts and tax rises to lower the country's borrowing. The announcement is the first in a wave of austerity measures, with a total of 16.5bn euros to be cut in 2012. It also said Spain's 2011 deficit will be about 8% of its output - higher than the 6% seen by the previous government. The Popular Party last month ousted the Socialists from power at elections amid deep economic gloom. The government of new Prime Minister Mariano Rajoy has vowed to meet Spain's target of reducing the public deficit to 4.4% of gross domestic product in 2012, no matter what. On Friday, Deputy Prime Minister Soraya Saenz de Santamaria maintained a freeze on public sector wages for another year and ruled out practically all government hiring. "This is the beginning of the beginning," Ms Saenz de Santamaria said. "We are facing an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures." Taxes on the wealthiest Spaniards will also be raised for at least two years, raising 6bn euros, she said. Spain's borrowing costs have jumped in the last year - reaching as high as 6.7% for 10-year debts - as investors feared that Spain might join Greece, the Irish Republic and Portugal in needing a bailout. The country's economy has shrunk sharply since a housing bubble burst in 2008, and it has an unemployment rate of 21%, the highest in Europe. The austerity measures have sparked a number of large protests across the country.

High street lingerie chain La Senza has announced that it is planning to enter administration in the next 10 days due to "poor trading conditions"

2011-12-23T20:48:00.001Z

High street lingerie chain La Senza has announced that it is planning to enter administration in the next 10 days due to "poor trading conditions".

The retailer has 2,600 staff at 146 stores and 18 concessions across the UK.

A spokeswoman said: "Due to trading conditions in La Senza's high street locations andthe overall macro environment which are having an adverse effect on the company,the board of directors of La Senza has filed a notice of intention to appoint administrators.

"For the avoidance of doubt, the company is not currently in administration, and no administrator has been appointed."

The firm was sold to private equity group Lion Capital five years ago by Dragons' Den entrepreneur Theo Paphitis.

He tweeted: "Just heard sad news that @LaSenzaUK which was once my baby has filed for administration."

British bonds win 'safe haven' tag in eurozone debt storm

2011-11-20T11:00:00.001Z

British government bonds are attracting strong support, in sharp contrast to their troubled eurozone peers as investors seek a safehaven from a debt crisis now spreading to Italy, Spain and even France. British government bonds, or gilts as they are known, are in huge demand largely because the Bank of England is buying them up with newly-created money that it hopes can in turn be used to stimulate an anaemic economic recovery, analysts say. But investors are also reassured by the British coalition government's determined efforts to slash state debt and avoid the severe troubles that have snared the crisis-hit eurozone trio of Greece, Ireland and Portugal.

TWO MILLION EUROS CLAIMED AFTER CANCELLED STONES CONCERT

2011-11-20T10:55:00.001Z

The PP mayor of El Ejido in Almería, Francisco Góngora, has criticized the "negligence" of the former government team and announced that the city council are to begin legal proceedings against the promotions company who were to stage a concert by the Rolling Stones in 2006.

Following the findings of "many irregularities" in the case, the council are now seeking to claim a total of 2,251,000€, which they feel they are owed, in view of the cancellation.

The announcement was made at a press conference in which Francisco Góngora claimed that there was a “contractual obligation” by the promoter to ensure that the concert went ahead and that even if the company were insolvent, then they would seek recompense from the individuals responsible for the incomplete commitment made to the previous government team.

Information indicates that there was a contractual clause that stipulated that insurance must be provided that should the concert be cancelled, then the promoter would be able to repay any money owed, in full, through an insurance claim. It is believed that this insurance was never provided.

Although some money is said to have been returned, it was only about half of the 4.176 million euro that the city had paid for the organisation of the concert.

There also appears to be a lack of information as to where the money actually went and who might be accountable for the cash given to the company by the council. There have also been allegations made that this whole case could be part of a much wider campaign of both political and corporate corruption.

Now, reviewing the clauses of the original contract, it has been found that the rights to claim the money back would expire after 15 years.

Góngora, also stated that there were economic losses of 2.6 million euro recorded after the second concert by the Rolling Stones in El Ejido held in 2007, which were due to "mismanagement" whereas the projected ticket sales were calculated at 60,000 attendees, but only 20,000 tickets were actually sold.

Referring to the award of the second contract by the previous council, Góngora stated that "despite the failed previous contract they rehired the same company for four million euro of which they did not deduct anything owed," continuing that he considered the failings to be down to the complacency of the previous PSOE government.

The Ministry of Interior for Andalusia had already imposed a 60,150 euro fine on the organisers for breaching the rules on show cancellations in failing to return ticket money within the maximum four days which is set out by the governing body. In actual fact, it took several weeks for the organisers to return the money raised on the 50,500 tickets sold for the cancelled concert.

Four police officers stabbed in north London

2011-11-19T14:23:00.001Z

Four police officers were stabbed as they tried to detain a man after a disturbance in north London, Scotland Yard said on Saturday. Police said officers were called to an incident shortly before 9 a.m. on the main road in Kingsbury where they had tried to speak to a man before he ran into a butcher's shop and grabbed a knife. "Officers followed the man in an attempt to detain him and were subsequently assaulted," Chief Superintendent Dal Babu told reporters. "Four male police constables suffered stab injuries during the incident and have been taken by the London Ambulance Service to hospital." One was stabbed in the stomach, a second suffered head injuries and stab wound to his arm, the third was stabbed in the leg, and the last sustained stab wounds to a hand and also suffered a broken hand. Witnesses told media the suspect had been shouting at police beforehand and up to 10 officers had tried to calm him down. A 32-year-old man has been arrested on suspicion of attempted murder and is being quizzed at a police station in the area.

Saif al-Islam Gaddafi after his capture, his fingers wrapped in bandages and his legs covered with a blanket

2011-11-19T14:12:00.001Z

. Photograph: Reuters Tv/Reuters

Saif al-Islam Gaddafi, the fugitive son of Libya's deceased former dictator, has been arrested in southern Libya, according to officials from the country's new government.

Libyan state TV reported that Saif has arrived in captivity and unhurt at an army base in the town of Zintan, 90 miles south-west of Tripoli.

Muammar Gaddafi's second and highest-profile son was captured along with several bodyguards by fighters near the town of Obari in Libya's southern desert, said the interim justice minister and other officials.

Saif was said to be in good health, according to the justice minister Mohammed al-Alagi.

"We have arrested Saif al-Islam Gaddafi in [the] Obari area," the minister told Reuters.

Saif was captured near the southern city of Sabha with two aides trying to smuggle him out to neighbouring Niger, militia commander Bashir al-Tayeleb said.

Zintan, a base for forces in the Nafusa Mountains which played a key part in the storming of Tripoli in the summer, is reported to have crowds dancing in the streets and waving the Libyan flag.

There are reports that an angry mob tried to storm the plane on which Saif was taken to the western mountain town of Zintan, the home of one of the largest revolutionary brigades in Libya.

Gunfire is echoing across the capital, Tripoli, where large crowds have gathered in Martyrs' Square firing volleys of automatic fire in the air. "A great day, a great day," said Abdullah, a taxi driver, stuck in one of the traffic jams that built up around the square.

A Reuters reporter said a man who appeared to be Saif, but who refused to confirm his identity, was on a plane flown by militiamen to the town.

The man wore traditional robes with a scarf pulled over his face, but his features, visible despite a heavy black beard, as well as his rimless spectacles, conformed to pictures of the 39-year-old younger Gaddafi.

The man's thumb, index finger and another finger were heavily bandaged.

Libyan TV also showed him He is sitting by a bed and holding up three bandaged fingers as a guard looks on.

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis.

2011-11-19T00:26:00.001Z

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis. The Prime Minister returned from talks in Berlin with the German leader having made little progress in agreeing emergency action to stop the financial contagion spreading. Tensions were inflamed after a close ally of Ms Merkel predicted Britain would eventually adopt the euro. The German media joined the clamour, with the mass-circulation newspaper Bild questioning whether it might be better for Britain to leave the European Union altogether. Behind the leaders' smiles at a joint press conference yesterday, they acknowledged fundamental differences remained on three key issues: * New eurozone rules. Ms Merkel called for "limited" changes to European treaties to impose fiscal discipline on the single currency but stressed negotiations should only be for eurozone members. Mr Cameron wants Britain involved in the talks because of the potential impact of the decisions on the UK; * Whether the European Central Bank should intervene to support the eurozone. Ms Merkel – backed by the German public – is fiercely resisting the move, which she fears would fuel inflation. But Mr Cameron insisted that all the eurozone's institutions had to "do what is necessary to defend it"; * Taxing financial transactions within the EU. Ms Merkel supports the step but Mr Cameron fears it would disproportionately hit the City and said it would work only if applied globally. The Prime Minister said: "It is obvious we don't agree on every aspect of European policy, but I am clear we can address and accommodate and deal with those differences." He also stressed the two leaders were "very good friends" and "absolutely" in agreement on the importance of completing the single market, budget discipline and stopping EU spending from rising by more than inflation. But shortly before Ms Merkel also paid tribute to the "strong bonds of friendship" between the countries, her veteran Finance Minister used less diplomatic language in which he seemed to predict the end of sterling. Wolfgang Schäuble told the news agency DPA it was Britain's right to remain outside the eurozone "for the time being". But he said it was a matter of time before non-eurozone states became convinced of the euro's advantages. "One day the whole of Europe will have a single currency and perhaps it will happen more quickly than many people on the British island think," he said. Meanwhile, in an article headlined 'The Sick Empire', Der Spiegel magazine described Britain's plans to eradicate its budget deficit by 2015 as "utopian". It added: "The situation on the island is more dramatic than in parts of the continent. It's bad news nearly every day. "But the British government gets away with it by proclaiming carry-on-as-usual policies and by blaming its economic stagnation on the eurozone." The war of words between Berlin and London erupted on Tuesday after Volker Kauder, Ms Merkel's parliamentary party leader, lambasted Britain for being too self-centred on Europe. "Just looking for their own advantage and not being prepared to contribute – that cannot be the message we accept from the British," he told a congress of his ruling conservatives. The former Prime Minister, Sir John Major, weighed in behind Mr Cameron last night as he condemned the financial transaction tax as "a heat-seeking missile...aimed at the City of London". He also warned of an "undemocratic" move towards eurozone fiscal union. In an interview with Al Jazeera, he also predicted "one or two countries" would be forced to quit the euro.

Virgin buys Northern Rock for £747m

2011-11-17T16:17:00.001Z

Northern Rock has been sold to Virgin Money, for £747m, marking the first return to the private sector of a UK government-backed bank since the financial crisis. Virgin, the retail banking arm of Sir Richard Branson, will pay £747m in cash upfront – roughly half of the £1.4bn of government equity that was injected into Northern Rock following its collapse in 2007. The taxpayer could receive up to an additional £250m if the business is sold or floated in future. The sale of the “good” part of the bank marks a £400m loss for the government. The bulk of the funding for Virgin’s bid was provided by Wilbur Ross, the US billionaire investor, who owns a 20 per cent stake in the group. More ON THIS STORY Q&A How the deal affects you Lombard Branson risks Northern exposure Metro Bank has issued just 100 mortgages Good news for Lloyds as Co-op bids for branches On London UK domestic banks ON THIS TOPIC N Rock expects to make profit in 2012 Northern Rock to set off privatisation wave Hedge fund says Northern Rock call is wrong Virgin’s success follows an unsuccessful first attempt to acquire Northern Rock before its nationalisation almost four years ago. This time Virgin faced very little competition for the business, which includes 75 high-street branches, 1m customers and £14bn of mortgages. The sale signals the end for one of the most notorious brands in British high-street banking.

UK press in dock over phone-hacking, lawyer says

2011-11-17T00:10:00.001Z

Britain's entire press stands in the dock at an inquiry into media standards, said a lawyer representing victims of press intrusion and phone-hacking by Rupert Murdoch's News of the World. David Sherborne, who is representing 51 "core participants" at an inquiry set up as the hacking scandal engulfed News Corp's British arm, said Wednesday that "tawdry" tabloids were guilty of blackmail, bribery and vilification. He said his clients had endured lies, harassment and other "despicable" actions from the press and that phone-hacking might only be the tip of the iceberg. "It is the whole of the press, and in particular the tabloid section of it, which we say stands in the dock," he said. "It is time we had change and by that I mean real change." The Leveson inquiry, due to last a year, will make recommendations which could have a huge impact on the industry and lead to tighter regulation and, at the least, an overhaul of the current system of self-regulation. Lawyers for Britain's major newspaper groups have already pleaded for the essence of that system to remain and said that if anything, the press needed more freedoms. But in a scathing and detailed attack on newspapers, particularly the notoriously aggressive tabloid press, Sherborne said: "We are here not just because of the shameful revelations which have come out of the hacking scandal, but also because there has been a serious breakdown of trust in the important relationship between the press and the public." "The press is a powerful body. They have a common interest and a self-serving agenda," he told the inquiry. Sherborne said revelations that a private detective, jailed for phone-hacking in 2007 along with the News of the World's former royal reporter, had carried out more than 2,000 tasks for the paper suggested that there were about 10 stories in the tabloid every week from the illegal practice. He listed details of some of those who had been targeted, starting with the parents of Milly Dowler, a missing schoolgirl who was later found murdered. It was the revelation that her phone had been hacked while she was missing that changed attitudes to the issue. Within days, News Corp withdrew its bid to buy the 61 percent of broadcaster BSkyB it did not already own and its British newspaper arm News International closed down the 168-year-old News of the World. It also prompted Prime Minister David Cameron to order the inquiry.

UK economy forecast: Eurozone crisis dampens Bank’s growth estimate

2011-11-17T00:01:00.001Z

THE Bank of England warned today that the eurozone debt crisis is the “single biggest risk” to the UK recovery as it forecast a dramatically increased threat of a double-dip recession next year. Its quarterly inflation report revealed a greater chance of the economy contracting in the first three quarters of 2012, compared with its August forecasts, as eurozone and banking concerns and squeezed household budgets continue to weigh on growth. The Bank slashed its central - or most likely - growth estimate to no more than 1 per cent in both 2011 and 2012 from previous forecasts of around 1.5 per cent and 2.2 per cent respectively. The worsened prospects for the UK economy mean inflation is likely to fall far quicker than previously estimated, hitting the Government’s 2 per cent target in the second half of next year before falling to as low as around 1.3 per cent in 2013. Bank governor Sir Mervyn King warned the “journey to a more balanced world economy will be long and arduous”. He said UK economic activity will be broadly flat until the middle of next year and added that the country faces a “difficult economic environment”. Today’s report backs the City’s view that the Bank will keep interest rates on hold for the foreseeable future and add another £75 billion to its quantitative easing programme by February. Vicky Redwood, chief UK economist at Capital Economics, said: “Even the Bank’s downgraded growth forecasts still look optimistic to us - we expect zero growth next year.”

Euro zone crisis is tough going -- for traders

2011-11-16T15:44:00.001Z

Life is not easy for the financial market traders who are making things so hard for euro zone policymakers. There are no pumped-up traders cheering from their screens as Italy's bond yields rise or as France gets sucked into a debt crisis which has already forced Greece, Ireland, and Portugal to seek international bailouts. The mood is weary and fraught. Bond traders see their own business throttled off by the same market forces that squeeze Italy's public finances and stir speculation about France's triple-A credit rating. "Things have felt almost as bad as it was back during the Lehman days in terms of liquidity - it is increasingly hard to get any business done and, to be honest, we think it is going to get worse," a London-based bond trader said. "Two-way markets have gone, the size of business you can get done at these bid/offer rates is minimal, bonuses and jobs are being cut. It's depressing and what is worse, there is no guarantee that anything is going to be better next year." Talk to fund managers and it is easy to see why a debt crisis which has mutated into an existential crisis for the euro is not translated into a bonanza for traders. "What if the currency union falls apart? Our premise is that it doesn't happen. (But) if you think that is going to happen, don't buy equities. Don't buy anything. Just go and hide," a London fund manager running money for institutional investors said. UNRELENTING STRESS As investors stampede to exit some euro zone bond markets, price swings have become bigger and the business of trading -- which relies on finding buyers or sellers before the market moves against you -- has become harder. "People are just exhausted because of the intensity of what is going on," said a bond salesman in London who has been working in the financial market for decades. "It is unbelievable stress and it is unrelenting. People are just hunkered down and working their socks off as everything is just more difficult -- hedging your risk, avoiding losses, everything." There is somewhat less gloom in equity markets, where investors are still trying to spot pockets of value. But the extent to which stock markets have been moving in lockstep with the price of Italian, Spanish, or French bonds in recent days means that trading behavior is far from normal even in equities. "Over the past few days there have very quiet periods punctuated by mad dealing frenzies," said Yusuf Heusen, sales trader at IG Index in London. "The quiet periods have been really very quiet as traders have not been taking on much risk other than to short the euro markets. The busy periods are absolutely manic as everybody wants to get on at the same time and generally same direction and sell offs are extreme as a consequence."

Bank governor Sir Mervyn King sent a stark message to political leaders as he flagged an unresolved eurozone debt crisis

2011-11-16T15:41:00.001Z

Bank governor Sir Mervyn King sent a stark message to political leaders as he flagged an unresolved eurozone debt crisis as the "single biggest risk" to the economy. But despite cutting forecasts, some experts accused the bank of being too optimistic and have predicted another multibillion-pound injection into the economy as early as next month. In its quarterly inflation report, the bank slashed its central, or most likely, growth estimate to around 1% in both 2011 and 2012 - but compared to previous forecasts the Bank's projections reveal a greater chance of the economy shrinking in the first three quarters in 2012. The forecasts assume the problems in the eurozone do not deepen, quantitative easing is maintained at current levels and interest rates stay at record lows. The worsened prospects for the UK economy mean inflation is likely to fall far quicker than previously estimated, hitting the Government's 2% target in the second half of next year before falling to as low as around 1.3% in 2013. Sir Mervyn, who was formally knighted at Buckingham Palace on Tuesday, said UK economic activity will be broadly flat until the middle of next year and added that the country faces a "difficult economic environment". The bank's report backs the City's view that interest rates will be kept on hold for the foreseeable future and another round of quantitative easing (QE) will be rolled out before February. But some economists were still not convinced. Vicky Redwood, chief UK economist at Capital Economics, said: "Even the bank's downgraded growth forecasts still look optimistic to us - we expect zero growth next year."

How a Financial Pro Lost His House

2011-11-13T14:16:00.001Z

ONE night a few years ago, when the value of our home had collapsed, our debt was out of control and my financial planning business was shaky, I went to take out the trash. He wrote a book based in part on lessons learned by losing his Las Vegas home in the housing crisis. There was this enormous window that looked right in on the kitchen table, and through it I could see my wife, Cori, and our four children eating dinner. It was dark outside, so they couldn’t see me, and I just stood there looking at them. After a while, I pulled up a bucket and I sat on it, just watching my children eat. I found myself wishing that I could get back there, connected to the simple ordinary stuff of my family’s life. And as I sat and watched, filled with longing and guilt, two questions kept arising: How did I get here? And how am I going to get out of this? There are many stories these days of people who lost their financial bearings during the housing boom and the crisis that followed, but my story is a bit different from most. I’m a financial adviser. I get paid to help people make smart financial choices, and I speak and write about personal finance issues for this publication and others. My first book comes out in January, “The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money” (Portfolio, a Penguin imprint). The thing that few people know, though, is that I learned a lot of this from experience. I made a bunch of mistakes, the very same ones that I now go around warning people to avoid. So this is the story of how I lost my home, the profound ethical questions that arose along the way, and what my wife and I learned from the mistakes that led us to that point. It made me better at what I do, but it wasn’t much fun getting there. Like most financial stories, this one is personal. It starts with me getting into the financial services industry more or less by accident. I answered an ad in 1995 that I thought was for a job related to “security” (as in security guard) but was in fact related to “securities.” That’s how little I knew about the stock market. A few months later I found myself working a phone at a Fidelity Investments call center. Things went well, and by 1999 I was a Merrill Lynch financial adviser and a certified financial planner. By then, we also owned a house in Salt Lake City. We’d bought it two years earlier, with a $25,000 down payment. A few years later, an opportunity arose to form a partnership with a successful Merrill adviser in Las Vegas. The place was on our top 10 list of never-move-to cities because we had always associated it with the Strip. But Cori and I were looking for an opportunity to have an experience somewhere else, and we met some great people when we visited the city. I took the job, and we moved down there. That was May 2003. Housing prices were already crazy, so we rented. But our neighborhood had zero character and lots of cookie-cutter houses. Within a few weeks, we were looking for a place to buy. I felt we could afford around $350,000. We called a real estate agent named Mitch, who had signs on all the bus stops: Talk to Mitch! He picked us up in a gold Jaguar, and suddenly we were looking at houses that listed at $500,000 or more. It felt a little crazy to be shopping for houses that cost half a million dollars, but my income was growing rapidly. Everywhere I looked, people were being rewarded for buying as much house as they could possibly afford, and then some. There was this excitement in the air, almost like static. I started to think that if I didn’t buy a house right then, I would never be able to afford one. At moments during our house hunt, I felt in my gut that something wasn’t right. We’d go to open houses for $400,000 homes and see lines of couples in their late 20s — younger than we were — waiting to get inside. I kept wondering where all the money was coming from. How did all these people make so much?

BOTTOM five most hated airports

2011-11-13T14:08:00.001Z

5. Ninoy Aquino International, Manila, Philippines

Wear a helmet -- the first collapsed ceiling in 2006 at Ninoy Aquino International Airport.

Beleaguered by ground crew strikes, unkempt conditions, soup kitchen-style lines that feed into more lines and an overall sense of futility, NAIA brings the term “Stuck in the 1970s” to a new level.

At Terminal 1 all non-Philippine Airlines remain crammed despite serious overcapacity issues and a new and underused Terminal 3 is occupied by a few minor carriers.

A rash of bad press this year (including a “Worst in the World” ribbon from Sleeping in Airports) was capped by a collapsed ceiling in T1, a paralyzing ground service strike at T2, and the usual charges of tampered luggage, filthy restrooms, seat shortages at gates, re-sealed water bottles sold in retail shops and an Amazing Race-style check-in routine spiked with bureaucracy, broken escalators, lengthy Dot Matrix passenger lists and creative airport departure fees.

Read more on CNNGo: World's busiest airports announced

4. Toncontín International, Tegucigalpa, Honduras

Over-priced corn chips will be the least of your worries.

When do the most common airport gripes about inefficiency, uncomfortable gate chairs, dirty floors and lousy dining options suddenly become irrelevant? When you’re preoccupied about whether your 757 will actually be able to stop before the runway does.

Nestled in a bowl-shaped valley at 957 meters above sea level, Toncontín’s notoriously stubby, mountain-cloaked landing strip was recently lengthened another 300 meters following a fatal TACA aircraft overshoot in 2008.

Not enough though to avoid being named the “second most dangerous airport in the world” by the History Channel.

Nepal’s hair-raising Tenzing-Hillary Airport in the Himalayas is the top seed, but receives fewer gripes from its thrill-seeking Everest-bound clientele.

3. London Heathrow, London, England

"You'll fly through departures -- at the speed of a penguin."

Depending on which of Heathrow’s five terminals one is funneled through, the average experience at the world’s third-busiest airport ranges from mildly tedious to "Fawlty Towers" ridiculous.

With its rash of -- as they were politely called -- “teething problems” in bright and airy T5 (remember that riotous grand opening with 34 canceled flights?) and nicely matured problems in Ts 1, 2 and 3, the issues passengers are beset with run the gamut.

Parking messes. Busted baggage carousels. Deadlocked security lines. Long walks (or, more commonly, runs) between gates to a frenzied soundtrack of “last call” announcements. Realizations that getting out of Heathrow took longer than actually flying here from Madrid.

In the airport “where the world changes planes,” it all boils down to a chronic inability to cope with this many people. Plans for a sixth terminal should help sever even more nerves.

2. Los Angeles International Airport, Los Angeles, United States

It's not even a good spot for celebrity sightings.

If the world’s seventh-busiest flight hub was an old ballpark resting on the stale reputation of its Dodger Dogs and that great 1959 series, LAX might have some endearment value.

But it’s an airport -- a dramatically undersized and moribund one with the architectural élan of a 1960s correctional facility and several publicized concerns about how its 1,700 takeoffs and landings a day can be sustained in a facility a fifth the size of healthier cousins like Dallas/Fort Worth.

The unsupportive donut-shaped design -- it’s been called “eight terminals connected by a traffic jam” -- makes dashing between airlines feel like a diesel-scented cardio test.

Plunked in the middle is the airport’s landmark Jetsons-style restaurant and only mentionable amenity, Encounter, but how does one actually get inside this place -- at least before being nailed for a petty traffic violation by some of the most ticket-hungry airport cops west of the Mississippi?

Read more on CNNGo: World's most terrifying airports

1. Paris-Charles de Gaulle, Paris, France

Don't expect to make friends during a storm closure.

“A great country worthy of the name,” President Charles de Gaulle once opined, “does not have any friends.”

True or not, it’s this sort of attitude that has helped CDG become the most maligned major airport on earth. What’s fueling it?

Grimy washrooms with missing toilet seats don’t help. Nor do broken scanning machines and an overall lack of signage, gate information screens and Paris-worthy bars, restaurants or cafés.

The baffling circular layout is worsened by warrens of tunnel-like structures, dismissive staff and seething travelers waiting forever in the wrong queue.

The worst part may be this airport’s aura of indifference to it all. “Waiting for a connection here,” notes one commuter, “is like being in custody.”

If you’re actually staying in Paris, you may be okay. If you have the gall to just be passing through between Malaga and Montreal, you can cut the spite of this place with a cheese knife.

Top five most hated Airports

2011-11-13T14:01:00.001Z

10. São Paulo-Guarulhos International, São Paulo, Brazil

Whether it's 9 a.m. or 9 p.m. this airport experiences round-the-clock rush hour.

Why is this place on our list after scoring third best airport in South America at the 2011 World Airport Awards?

Because, shockingly enough, it turns out that corporate medal ceremonies aren’t always in sync with what people are thinking when they're standing in two-hour immigration lines, suffering routinely unannounced gate changes and paying through the teeth for a stale Brazilian cheese roll and beer inside an understaffed and over-aged aviation facility.

In a country where flight delays (departing or arriving) are just part of the deal, some recent numbers would give pause to the most unflappable traveler at Brazil’s largest airport.

Just 41 percent of all flights leave on time. Only 59 percent of flights arrive on schedule, according to Forbes.

São Paulo-Guarulhos has announced plans to add runways and terminals -- what airport hasn’t? -- but with nearly 30 million passengers traipsing through every year (the figure has reportedly doubled in under a decade) the urgency is palpable and, sadly enough, unsolved by upping prices at musty duty-free shops.

But does this really constitute bronze medal status? When the best unofficial advice for surviving Brazil’s pin-up airport is to try and learn a little Portuguese and not lose your temper, something’s gotta give.

Read more on CNNGo: World's biggest airport planned

9. Perth Airport, Perth, Australia

Kick a dog while it's down: The Qantas strike didn't help PER's reputation.

If there’s one thing Australians love, it’s hating their airports.

But while the big guns in Sydney, Melbourne and also-rans in Darwin, Cairns and Hobart get routinely lambasted for various inefficiencies and rip-off tactics, passengers in Western Australia have a special place in their spleens for Perth.

“The only advantage over some other airports is the lack of nearby combat,” notes one of several miffed passengers on airportquality.com.

With a reviled pair of domestic terminals (home of two-hour taxi-line queues, atrocious check-in lines, overpopulated gates and meager lounges) and a slightly more palatable international terminal five kilometers away, Perth’s brittle facilities can be overwhelmed just by a trio of aircraft arriving within 20 minutes of each other.

Now that an ambitious “billion-dollar” redevelopment project has been significantly scaled back, who would ever want to leave Changi for this place?

Read more on CNNGo: Transit hotels: How to get to sleep during your stopover

8. Tribhuvan International, Kathmandu, Nepal

Don't look the officers -- or the dogs -- in the eye.

For a small airport in a pretty country, Tribhuvan has it all: the interminable weather delays of Boston Logan, the shoddy restroom maintenance of a Glasgow sports bar, the departure board sparsity of McMurdo Airfield and the chronic chaos of a kids' soccer match.

Some airport improvements have been underway for the Visit Nepal 2011 tourism campaign, including things most passengers don’t much care about (e.g., the new helicopter base).

The most serious beefs with Nepal’s only international airport revolve around its primitive yet officious check-in procedure, starring a roulette wheel of underpaid security agents.

“Departure is an endless game of body searches and silly questions,” notes one passenger.

“Those who didn’t have their e-tickets printed out had to argue their way in,” says another, who was checked seven times and scolded for not having a baggage tag on a carry-on before eventually boarding.

Never mind. The city’s markets and surrounding mountains are lovely.

7. John F. Kennedy International, New York, United States

Fans flooded the airport to welcome the 1964 British Invasion, but it seems they never left.

You’d think it would be one of the greatest humiliations any major airport would never allow itself to live down -- getting routinely abandoned by fed-up folks opting to fly out of Newark (Newark!) instead, where at least the ground staff cop less attitude and fewer people outside are pretending to be cab drivers.

But, nah, JFK really couldn’t really care less.

Every year, more than 21 million passengers stumble through worn, mid-century terminals that peaked when The Beatles arrived in the United States and rooftop parking was all the rage; JFK proudly remains the world’s busiest international air gateway.

So if you’re not into a dim, surly, unbearably congested airport reeking with attitude and unapologetically long immigration lines -- good riddance.

“JFK had a piece of my luggage sitting in a little detention room for bags -- for over a year,” notes one passenger. “No one noticed it was there, until finally an observant Air France employee wondered what the dusty little green bag in the corner was.”

6. Jomo Kenyatta International, Nairobi, Kenya

Can't be disappointed if you're not expecting much.

“As African airports go, it’s not that bad -- but as an international hub, it may be one of the worst out there.”

This is the common refrain among travelers through JKIA, who either don’t have the heart or the expectations to give this dated aviation facility the kind of pounding reserved for the JFKs and Charles de Gaulles of the world.

Saddled with a 1958 blueprint designed for 2.5 million passengers, JKIA receives close to twice that many. Hence the airport’s 2005, Three Phase, US$100 million expansion project which has seen long delays (something about the rain) and has been spinning its tires somewhere in Phase Two for the last few years.

For now, that means business as usual: cramped spaces; long lines; inadequate seating; frequent power outages; tiny washrooms hiding up several flights of stairs; shabby duty free shops; overpriced food outlets; and business class lounges worthy of a shelter in mid-city Los Angeles.

Sure, it’s a breeze compared to Lagos. But it could be so much better. The confusing result: grateful disappointment?

Fall of richest man in Ireland as Quinn is declared bankrupt

2011-11-13T13:52:00.001Z

TROUBLED tycoon Sean Quinn, once Ireland’s richest man, was declared bankrupt yesterday at the High Court in Belfast. The 64-year-old businessman was granted a voluntary adjudication over an alleged E2.8bn debt owed to Anglo Irish Bank. It is believed to be one of the biggest bankruptcy orders of its kind ever made in either the United Kingdom or Ireland. Mr Quinn said he brought the application north of the border because he was born, reared and worked all his life in Co Fermanagh. But by declaring himself bankrupt in Northern Ireland it also means he only has to wait a year before going back into business – rather than 12 years in the Republic. He claimed to have been left with no alternative but to take the “drastic decision” over problems which stemmed from “ill-fated investments in Anglo”. The former billionaire was stripped of control of his manufacturing and insurance business empire in April. He had been plunged into financial trouble by purchasing bank shares which then became worthless. As a consequence, receivers were installed and he and his family lost any role in the management of the Quinn Group. Mr Quinn accepts that he owes around E194m to Anglo for property loans which he cannot repay. But the rest of the alleged debt, which relates to Contracts for Difference (CFDs) used to buy bank shares, is disputed. The Quinn family are currently suing Anglo, claiming the CFDs were tainted with illegality. Mr Quinn applied for voluntary bankruptcy through his lawyer and licensed insolvency practitioner, John Gordon of Napier and Sons. The order was granted during a brief hearing before a Master at the High Court in Belfast. Mr Quinn said in a statement: “I have done absolutely everything in my power to avoid taking this drastic decision. The vast majority of debt that Anglo maintains is owed is strenuously disputed. I cannot, however, now pay those loans which are due.” He added: “Following Anglo taking control of the Quinn Group of companies, which I and a loyal team spent a lifetime building, I find myself left with no alternative.” The businessman said he had “worked tirelessly” to find a solution to the problems. He claimed: “Anglo, and more recently the Irish Government, are intent on making scapegoats of my family and I.” According to him, the bank has attempted to avoid acknowledging “a lack of corporate responsibility, self-interest and lack of regulation that prevailed at the time”. His allegations are now the subject of High Court proceedings. Mr Quinn accepted: “I am certainly not without blame. I am not in the business of pointing fingers or making excuses. “However, recent history has shown that I, like thousands of others in Ireland, incorrectly relied upon the persons who guided Anglo and who wrongfully sought to portray a ‘blue chip’ Irish banking stock.” He said that he and his team had developed one of the most successful businesses in Irish history, with the group generating more than 5,000 jobs and contributing in excess of E1bn in tax revenues. Mr Quinn rejected any suggestion that he had brought down the empire. He also claimed: “Anglo has supported and promoted an ill-conceived and highly damaging receivership programme which I believe, if it continues on its current road, is destined for certain and catastrophic failure.” The statement added: “My family and I have been subjected to relentless negative media coverage over the past three years. “I have been portrayed as a reckless gambler who bet on a bank. I have never sought publicity, nor have I courted the media. “Sadly this now seems to have worked very much to my disadvantage, especially when compared with the sophisticated and massively expensive publicity campaign operated for, and on behalf of Anglo.

Murdochs are not a mafia – but the family firm is in meltdown

2011-11-13T13:40:00.001Z

There are times to push fine detail and finely timed memory losses aside and ask: what makes sense? And thus the fall and fall of the House of Murdoch continues. Young James is so smart, so smooth, such a master of dead bats and – yes! – detail. He's a clever lad. Why, then, did he act so stupidly? And why did those who were supposed to protect him, in loco parentis, do such a lousy job? We're not talking corporate governance here: we're talking family. Tom Watson may have pushed his mafia metaphor a tad too far at the committee grilling last week, but the family and its faithful, well-remunerated retainers are what matter most. See everything that Rupert has done over the last 20 years as family first and it all begins to fall into place. Take Les Hinton, the head butler at Wapping Abbey at the time. Did he brief Rupert Murdoch as Clive Goodman went to prison? How could he not have? Murdoch senior is always on the phone. He'd be chatting to editor Andy Coulson just as he'd chatted to News of the World editors down the years. Would Rupert have left his de facto heir to sink or swim in this rancid pool without full briefings and full protection? Of course not. Take Rebekah Brooks, the tabloid queen waiting to climb the management ladder when young James arrived. She'd been editor of the News of the World; she was editor of the Sun, just a few corridor yards away; Andy Coulson was her former deputy, her pick for the top, her boy. Didn't she see the perils post-hacking? Surely she wouldn't let James fall into the mire. Or take Colin Myler, the last editor of the News of the World, the Mr Clean chosen to clear up the whole damned mess. Hugely experienced, a previous editor of the Sunday and daily Mirror; an honourable guy who took the fall when a high-profile trial was stopped because people on his staff made mistakes. How did Myler come to Wapping, then? Because, after almost seven years' exile on Murdoch's New York Post, he was the safe pair of hands Rupert chose personally to put things back on track. And today? Les Hinton is history, dumped from Dow Jones as the family scrabbles after a safe haven. Rebekah is history, too, left with an office, a chauffeur and £1.7m to keep her warm. While Myler is suddenly the enemy, the loyalist inexplicably contradicting James about what James was told and siding with Tom Crone, the paper's equally suddenly reviled lawyer. Does any of this make the remotest human sense? If some revered TV scriptwriter (say Peter Morgan) wrote a series about newspaper life in which nobody gossiped, nobody got drunk, nobody told anyone anything, he'd be laughed out of the studio. The entire farrago doesn't hold for a second. With Scotland Yard knee-deep in unread emails, there's nil chance of that unsteady state ending any decade soon. Proof – in any bewigged form – will probably only emerge much later: but proof, in a thumbs-up or -down way, is commodiously available already. An over-protected fool or a desperate man cornered? It's a sad, sad choice, but amounts to much the same thing either way. Protectors didn't protect. Instead, they were jettisoned one by one. And perhaps the saddest – nay, tragic – explanation of what went on is also the most benign. James wasn't interested in tabloid blunders, or even playing executive chairman to them. He loved digital, TV, the future. He was bored, bored, bored by lawyers and their letters. His father, the dad who must be obeyed, had made him serve his time; but his mind kept wandering away to the fields he loved. There's the tragedy for the son and the family, but worst of all for Rupert. Those who didn't quite believe it in the summer must surely acknowledge it now: James Murdoch can never sit at his father's desk. The whole succession scenario is bust. The Murdoch hegemony stops here. No sentient shareholder is going to let the family run things hands-on any longer. Just sit back and cash the dividends. There may be more rumours about a Sun on Sunday come the dawn of 2012, but forget them. We can't even be sure there'll be a Sun if James's readiness to shut it (should more hacking be discovered) is tested. There won't be any clear, calm, imminent moment when, all passion spent, the Bun seems wholesome again. Trinity Mirror, its profits bulwarked by the greatest ever stroke of luck, can carry on smiling. The murk of 2011 will just linger on (oozing into view every time Tom Watson mentions a new private eye). Those who like strong medicine and stronger penalties against malfeasance may care to count the payback thus far. For Murdoch: no heir, no News of the World, some $90m (£56m) gone, a reputation and an influence lost, a family at war. For James: no glowing future. For many of the rest of the gang: no jobs and possibly no freedom either. Retribution doesn't come crueller than this. Hacking can damage your health, wealth, your nearest and dearest. Hacking has sundered the biggest media empire in the globe: and many things, including Wapping and, less joyously, the papers that remain, can never be quite the same again. ■ The News of the World may be dead and buried, but a dogged Max Mosley is still trying to drive a stake through its heart. About 3,000 copies of the Nazi orgy story that incensed him circulated in France so, three years after the event, he went to Paris, launched another privacy case and (last week) won. Triumph? Only up to a point. The court awarded €32,000 in all (€10,000 as a state fine, €7,000 (£27,000) as Max's damages and the rest as costs). That doesn't sound much, sniffed Britain's finest media eagles, barely worth putting on a wig and gown for in the Strand. His French lawyer thought Max had done pretty well – but the tariff, by Strand standards, is low, low, low. Whether it's under French law or the European Convention on Human Rights, you can make a point over the Channel, if you must: but you won't make a mint.

Man arrested over alleged police payments named as Sun journalist

2011-11-04T15:43:00.001Z

A Sun journalist has been arrested as part of Scotland Yard's investigation into alleged payments to police officers by newspapers. The reporter is believed to be Jamie Pyatt, district editor of the paper. The arrested journalist was taken to a South West London police station at 10.30am on Friday. Pyatt, 48, has been working at the Sun since 1987. He is the sixth person arrested by detectives working in Operation Elveden, which was set up in July following allegations that police officers had received up to £130,000 over several years from the News of the World for information, including contact details of the royal family. News International refused to comment on the arrest and saying it had "a very clear duty of care to employees and would not be making any comment on individuals". Scotland Yard also refused to confirm the identity of the person it arrested, but said in a statement earlier that it had arrested a 48-year-old man in connection with Operation Elveden. Its statement said: "He was arrested outside London on suspicion of corruption allegations in contravention of section 1 of the Prevention of Corruption Act 1906, and is being brought to a south-west London police station." Operation Elveden is one of three Met investigations relating to alleged illegal activities by newspapers. The others are Operation Weeting and Operation Tuleta, set up to examine phone hacking and computer hacking, respectively. On Thursday, Scotland Yard confirmed to the Guardian that the number of people whose phones may have been hacked had reached 5,800 – 2,000 more than previously stated. So far 16 people have been arrested and bailed on allegations of phone hacking.

Italy government hangs by thread as coalition crumbles

2011-11-04T15:29:00.001Z

Italian Prime Minister Silvio Berlusconi's fate hung by a thread Friday and desertions from his crumbling centre-right coalition may have already robbed him of the parliamentary numbers he needs to survive. Berlusconi, caught in the crossfire from European powers and a party revolt at home, agreed at a G20 summit in France to IMF monitoring of economic reforms which he has long promised but failed to implement. But this may soon be irrelevant for the Italian leader, who will return to Rome later Friday to face what looks increasingly like a deadly rebellion by his own supporters. With financial markets in turmoil over the situation in Greece and Italy viewed as the next domino to fall in the euro zone crisis, calls are mounting for a new government to carry through reforms convincing enough to regain international confidence. Berlusconi has consistently rejected calls to resign and says the only alternative to him is an early election next spring, rather than the technocrat or national unity government urged by many politicians and commentators. Yields on 10-year Italian bonds reached 6.36 percent by early afternoon, creeping closer to 7 percent, a level which could trigger a so-called "buyers' strike" where investors take fright and refuse to buy the paper. Two deputies from Berlusconi's PDL party this week defected to the centrist UDC, taking his support in the 630-seat lower house of parliament to 314 compared with the 316 he needed to win a confidence vote last month. But at least seven other former loyalists have called for a new government and could vote against the 75-year-old media magnate. "The (ruling) majority seems to be dissolving like a snowman in spring," said respected commentator Stefano Folli in the financial daily Il Sole 24 Ore. Other commentators spoke of an "inexorable" revolt against Berlusconi. Even Defence Ministry undersecretary Guido Crosetto, a Berlusconi loyalist, said on television: "I don't know how many days or weeks the government has left. Certainly a majority relying on a few votes cannot continue for long." PATRONAGE Berlusconi, one of Italy's richest men, still has significant powers of patronage and he and his closest aides are expected to spend the weekend trying to win back support for a parliamentary showdown Tuesday. Some rebels have already threatened to vote against Berlusconi in the vote to sign off on the 2010 budget. Berlusconi faced concerted calls to resign when he lost a previous vote on this routine measure, which was almost unprecedented. Although it is not a confidence motion, he would come under huge pressure if he suffered a second defeat. "Unpopular prescriptions are necessary and this challenge cannot be faced with a 51 percent government," said UDC leader Pier Ferdinando Casini, in a reference to Berlusconi's weakness and a widespread feeling that the reforms can only be passed with a broad consensus. The premier has promised European leaders that he will call a formal confidence motion within 15 days to pass amendments to a budget bill incorporating new measures to stimulate growth and cut Italy's huge debt. That will be in the Senate where he has a more solid majority but it could still bring him down. Berlusconi, beset by a string of sex scandals and court cases, has consistently resisted pressure from groups ranging from a powerful business lobby to the Catholic Church to stand down.

Wall Street markets are suffering huge falls this morning as fears grow that Europe's plan to save the euro will unravel

2011-11-01T15:21:00.001Z

Wall Street markets are suffering huge falls this morning as fears grow that Europe's plan to save the euro will unravel before it can even kick in.

Greek Premier George Papandreou said he will put Greece's bailout through a referendum, throwing the long-awaited deal into disarray.

Financial markets around the world have tumbled in reaction to the shock announcement today and U.S. stocks have also fallen at the open.

Wall Street: Financial markets around the world have tumbled in reaction to the shock announcement and U.S. stock futures are down on Tuesday

The Dow Jones opened down 258 points, or 2.2 per cent; the Nasdaq fell 78 points, or 2.9 per cent, and the S&P fell 33 points, or 2.7 per cent.

‘The market did not see this Greek referendum coming, which is potentially a killer,’ said Vermont investment strategist Paul Mendelsohn.

‘It could knock the wheels off the bus of the whole (Europe rescue) plan.’

Brussels is stifling City of London, Cameron claims

2011-10-29T14:53:00.001+01:00

David Cameron signalled new European battles ahead as he pledged to resist alleged attempts by Brussels to shackle the City of London in red tape. The Prime Minister echoed claims that the emergence of a two-tier Europe following the financial crisis could result in a wave of EU directives that would harm the Square Mile. The Government has said it is determined to prevent the 17 members of the eurozone acting as a bloc to thwart the interests of the 10 EU states, including Britain, that have retained their own currencies.

Knight Frank partners share £73m bonus pool

2011-10-24T23:41:00.001+01:00

PARTNERS in the upmarket estate agent Knight Frank have landed a £73m payout after profits rose by 10 per cent in the last financial year, buoyed by foreign investors flocking to London’s luxury property market. The firm, which advises on both residential and commercial property deals, saw pre-tax profits rise to £101.9m in the year to March – its highest level since the credit crisis – while turnover increased seven per cent to £308.4m. “Equity rich buyers” seeking property in London helped boost the firm’s residential arm, which has instructed on deals including the sale of St John’s Wood Barracks in northwest London. The bonus pool is more than double the amount awarded in 2009, although it is now shared by more people as Knight Frank has extended its partnership. Nick Thomlinson, senior partner and chairman of Knight Frank, conceded he remained cautious about the outlook for the year ahead but said the group had strengthened its balance sheet and was focusing on growth in key markets like Asia. The firm also opened new offices in Dubai, South Africa, Austria and Switzerland.

Coty Prestige and the house of Cavalli unleash new global beauty brand

2011-10-24T23:37:00.001+01:00

Italy Coty Prestige unveiled the new signature feminine fragrance from the house of Roberto Cavalli. The official reveal took place at the Cavalli private villa in Florence, at a press conference attended by Roberta and Eva Cavalli, Coty Prestige President Michele Scannavini, and fragrance face Elisa Sednaoui. The scent will be launched worldwide, both in domestic and travel retail markets, from February 2012. The brand has been earmarked as another global pillar for the Coty group. "We want to establish Cavalli as a global brand from the beginning; it’s not going to be niche. It’s going to be big, global, and well distributed in all continents. We want to make it a top 20 brand." Coty Prestige Senior Vice President Commercial Jean Mortier The Cavalli beauty licence was previously held by ICR-ITF. “This [introduction] is just the beginning of the rebirth of the house of Cavalli, and will be followed by other launches,” Coty Prestige Senior Vice President Commercial Jean Mortier told The Moodie Report, during an interview conducted at the event. “We want to establish Cavalli as a global brand from the beginning; it’s not going to be niche. It’s going to be big, global, and well distributed in all continents. We want to make it a top 20 brand.” The fragrance embodies all the codes of the Cavalli brand and, as expected, reflects the designer's well-known love of animal print. A tiger features in the TV ad campaign, and face Sednaoui wears a tiger print gown. "I am honestly so excited about this launch," declared Roberto Cavalli at the press conference. "Today I open my house to all of you, and show you my lifestyle, to help explain more clearly what Roberto Cavalli is all about. I am sure this new fragrance will be a big success." “This is so emotional for us,” noted Eva Cavalli, “and I want to thank Michele and the Coty team for everything they have done. It’s been hard work, but also a lot of fun…We are very proud of this fragrance.” Glamour and sensuality were recurring themes. Eva described Sednaoui as the perfect embodiment of the Cavalli woman. “She is beautiful, with a stunning body and hypnotic eyes,” she explained. “The Cavalli woman is strong, sensual and secure, knows exactly what she wants and can get it immediately. “There is something feline inside all of us; every woman wants to be a bit of a tiger, a little wild. That’s one of the reasons why Roberto loves animal print so much.” Roberto and Eva Cavalli showcase their fashion, lifestyle - and new signature fragrance - at their villa in Florence Coty’s Scannavini highlighted the close connection between the fashion and fragrance industry. “There are several similarities; they are getting closer and closer,” he noted. “It’s all about emotion. When you see a beautiful dress or a beautiful fragrance, the response is not really rational. And with this fragrance, we want to evoke the same emotion a woman would experience when she sees a [Cavalli] dress.” He added: “Fashion and fragrance continue to evolve. You always have your classics [dresses and fragrances], the ones you keep forever. But there is also room to experiment with new trends.” “I think they go in parallel,” noted Eva. “They complete each other – a fragrance needs fashion to complete the dream. But everyone can buy a fragrance, it’s [democratic], and allows women to feel special, in this case to be a part of the Cavalli universe. So we’re not just speaking about a fragrance, it’s a way to fulfil a dream.” Face Sednaoui declared herself “honoured and excited” to have been chosen by Cavalli to represent its new signature fragrance. The print campaign was shot by Steven Klein; the TV ad directed by Johan Renck. "I think the Cavalli woman is someone who dares to be herself, who has personality, style, opinions and self-confidence. All women should dare to be themselves, dare to go out there and have fun." Fragrance face Elisa Sednaoui “I think the Cavalli woman is someone who dares to be herself, who has personality, style, opinions and self-confidence,” she explained. “All women should dare to be themselves, dare to go out there and have fun.” Sednaoui had high praise for the Cavalli grown she wears in the ad campaign. “It was designed especially for me by Eva,” she explained. “The fabric is amazing, just like the quality of the design. I honestly felt like the tiger in me was coming out,” she laughed. “And every woman should dare to be a tiger sometimes, because then great things can happen.” The high quality of Cavalli couture is, according to Sednaoui, the key to the brand’s appeal. “The thing that comes to my mind is the quality of work that is behind every piece,” she explained. “The quality, the cut, the materials – Roberto has all this incredible knowledge [which allows him] to play with fashion and shape.” BOTTLING THE BRAND “A strong personality is the sexiest thing,” believes Roberto Cavalli, and his new signature fragrance aims to reflect that in all the right ways. Composed by Givaudan’s Louise Turner, the floral-amber juice features three key ingredients: orange blossom, Tonka bean and pink pepper. “It’s got lots of signature; it’s intense, it’s very Cavalli,” noted Turner at the launch event. “It’s very sensual, very feminine and has a good vibration. Like a Cavalli dress, you wear it to be noticed.” Turner was given a comprehensive brief for the fragrance, which included lots of background about the brand fundamentals, examples of Cavalli animal print, and various quotes from the designer. “It was clear to me that Roberto is someone who is very inspired by nature,” she explained. “We always tend to associate him with animal print, which he does love, but there’s an awful lot more to the house than that. It’s much more varied, very colourful, such a vibrant universe. Roberto uses nature in quite a figurative manner, which is quite evocative for me.” During the fragrance launch event, journalists were allowed unprecedented access to the Cavalli factory, atelier and archive Turner continued: “It is not difficult to have ideas about a house with such a strong identity. I think a strong brand image allows you to have a strong signature in your fragrance as well. I just needed to make sure that the fragrance tells the same story as a Cavalli dress.” Turner chose orange flower to anchor the heart of the juice. “For me, it’s very feminine and very colourful,” she explained. “It’s got lots of sensuality, it’s quite extravagant, and very Italian. It animates and adds dimension.” Tonka bean, which features in the base, was also selected for its sensual properties. It is complemented by vanilla absolute and benzoin to form an amber accord. A top note of pink peppercorn is said to deliver a touch of vibrancy and exuberance. Turner is known for her work with natural ingredients, and admits that she favours certain components over others. “I don’t really like animal notes,” she revealed, “and there are none in this fragrance. "It is not difficult to have ideas about a house with such a strong identity. I think a strong brand image allows you to have a strong signature in your fragrance as well." Fragrance nose Givaudan’s Louise Turner “I suppose every perfumer has a favourite palette of raw materials which they always draw on,” she continued. “But that palette does change. It’s like anything, you have your favourites, but they evolve. You can go off things too.” One element that doesn’t change, however, is the excitement Turner feels at the start of the creative process. “At the very beginning, when you first get the brief and are sifting through lots of ideas, that is very stimulating,” she confirmed. “It also feels good when you see your finished product in the bottle. “But best of all is when you smell your fragrance in the street, or watch someone buy it. What we create is very personal, and of course we want people to like it.” The fragrance is presented in a curved glass bottle, topped with a tiara-shaped cap formed by Roberto Cavalli’s golden seal. The neck is adorned with a tiger-print band. The outer carton is also gold, with the signature seal printed in relief on the front. The box sports a tiger-print base, beneath a turquoise “hip-belt” style ribbon. SETTING OUT THE STRATEGY Coty Prestige has made no secret of its ambitions for the Cavalli brand. “For this fragrance, we are looking at a big launch next February, both in local markets and in travel retail worldwide,” noted Mortier. “We have high hopes for it everywhere. “In geographic terms, we believe the brand will be very strong in Europe, especially in Italy, but also in Russia and the Middle East too – Cavalli even has a club in Dubai. The brand is known in North America, because Roberto is a real red carpet guy, and we also think South America could be very big, particularly Brazil and Mexico. In Asia, we are also confident that the animal print element and special DNA of this brand could help to capture the Chinese consumer, which of course is so important.” Mortier underlined the unique perspective the licence had brought to the Coty portfolio. “Robert Cavalli offers something different, something we didn’t already have within the group,” he explained. “That’s very important. There are so many me-too products nowadays, that if you introduce a new brand to the market, it has to be different, it has to stand out, and it needs to be very clear in terms of its DNA.” "There are so many me-too products nowadays, that if you introduce a new brand to the market, it has to be different, it has to stand out, and it needs to be very clear in terms of its DNA." Coty Prestige Senior Vice President Commercial Jean Mortier And while Coty has introduced a number of new products, and indeed new brands this year, Mortier is quick to point out the importance of supporting classic lines too. “Think back to what we have done this year, with ck one shock and Calvin Klein Forbidden Euphoria,” he instructed. “We always make sure that a certain amount of innovation is dedicated to reinforcing our big pillars. Innovation is necessary; it represents about 16% of our sales. But it’s a balancing act, and you have to look after everything else too.” The launch of Roberto Cavalli Eau de Parfum will be supported by extensive print and TV advertising. In travel retail there will be a number of HPPs, which are still being finalised. And digital media will also play a role. “Within Coty, we have had a team of people working on this for some time,” confirmed Mortier. “We have realigned our resources, in terms of digital media, behind all our brands. So we have new web-sites, but are also working on social media such as Facebook, which will be very important for this type of launch.” He added: “Basically, this sort of thing is critical today, you have to be there. But you also have to know how to play it. You have to monitor how much money you spend, and it has to be complementary to traditional media such as print, outdoor and TV.” Mortier confirmed that the signature feminine fragrance would be followed by other launches, including introductions under the Just Cavalli brand. “But first we want to install this fragrance at the right level and position, in terms of distribution, image and pricing. That’s the first priority.” Mortier did not rule out extending into other product categories, in due course. Colour would be the most obvious choice for diversification. “We have not had any discussions about this yet because we are so focused on the fragrance, but why not, I think it’s a possibility,” he acknowledged. “But it is very early days, and to enter the colour category you need to have a certain critical mass. So this would not be on the agenda for a few years, but yes, in theory colour, and within that, the nail sector, could be very interesting.” The fragrance launch concluded with a sumptuous dinner and late-night party, again at the Cavalli villa Skincare and make-up will play a much bigger role for Coty in the year ahead, although fragrance will remain core. The brand has just started rolling out its face and body brand philosophy. In 2012 the group will introduce a new make-up collection from Calvin Klein. And the acquisition of leading nail brand OPI (which will feature in travel retail) is set to open up another lucrative new sector. “We are in the middle of a big change, moving from a fragrance house to a beauty house,” confirmed Mortier. “It’s a big challenge, but very exciting. We aim to transform philosophy from a mainly US brand, to an international brand. That process has already started with the UK; next will be Australia, Canada, then Asia.” He continued: “We will enter the make-up category with Calvin Klein next February/March. And of course we also have OPI. Our goal is to double the nail business in travel retail. We think it is very under-developed, so there is big potential in the channel.” Looking back at the last fiscal year, which ended in June, Mortier seems satisfied with the group’s performance. “We had a very good year, with double-digit growth close to +20% in travel retail,” he reveals. “We really grew the business on all continents, but especially in Asia, thanks to Chloe and Marc Jacobs. I would say that the fiscal year starting from July has also begun very well, with all our early innovations performing strongly.” Mortier praised the efforts being made by certain travel retailers to drive footfall and penetration, and singled out World Duty Free Group and Aelia for their investment in the retail environment. “I see a lot money being spent on airport renovations, especially in Europe,” he confirmed, “although I still believe in some airports that fragrance is under-developed and needs more space.” Mortier also acknowledged the difficulties of trying to organise cross-category merchandising and events. “For example, we have tried with many of our licences to [capitalise on the synergies between the fashion and the fragrance],” he explains. “But it involves dealing with different buyers – and in some cases different concessions – so it’s very difficult. Which is a shame, because it works so well when we introduce fragrance into a domestic fashion boutique. After all, the consumer doesn’t differentiate, they see the brand as one.” Nonetheless, Mortier is determined to add some theatre to the travel retail environment with the launch of the new Cavalli fragrance. “I would love to bring a tiger to the airport,” he laughs, “but I don’t think that will be possible. But we will explore possibilities involving dresses and bags. And we might create some special accessories, a ring or necklace containing a solid perfume, for example. It represents another access point to the brand and we know from our experience with other designers that consumers love that sort of thing.” Such innovation is all part of the Coty mind-set. “I think we are seen by the business as very energetic, entrepreneurial and dynamic,” noted Mortier. “Our entire team is very reactive, and that’s good, because travel retail in particular is a very fast-moving business.” He concludes: “We are big, but not arrogant, I hope. We try to grow, to find solutions, to set new trends. We want to build brands, bring theatre to the store and create a real shopping experience for the consumer.” Roberto Cavalli is a brand that will allow them to do just that.

Failure to solve Europe's debt crisis will cost UK taxpayers billions

2011-10-24T11:56:00.001+01:00

Britain has already injected £1.88bn into the European Investment Bank (EIB) and pledged another £35.7bn, equivalent to close to 2pc of UK GDP, to be drawn down as required. Although the EIB, which is the world's largest non-government borrower, ranks above other unsecured creditors, thanks to its "privileged relationship" status under the EU treaty, it could face huge losses in the event of a euro break-up. If the UK's stake in the European Bank for Reconstruction and Development (EBRD) is included then the total capital commitment for the taxpayer could rise by a further several billion pounds. On top of this the country could also be called on to stump up some of the cost of the EU's emergency funding facility the European Financial Stability Mechanism. "What the public doesn't realise is the quite simply staggering amounts of taxpayer money that has already been committed if things get significantly worse. This may be a doomsday scenario, but recent history has proven that many events thought extremely unlikely have a funny habit of coming to pass," said one London-based credit analyst. The EIB's most recent accounts reveal huge sovereign credit risk exposures to the endangered periphery states. Some €14.2bn of loans were made to, or guaranteed by, the Greek government. Another €7.7bn is backed by the Portuguese sovereign.

The slain Libyan leader Moamer Kadhafi secretly spirited out of Libya and invested overseas more than $200 billion

2011-10-22T07:37:00.001+01:00

The slain Libyan leader Moamer Kadhafi secretly spirited out of Libya and invested overseas more than $200 billion -- double the amount that Western governments previously had suspected, The Los Angeles Times reported late Friday. Citing unnamed senior Libyan officials, the newspaper said US administration officials were stunned last spring when they found $37 billion in Libyan regime accounts and investments in the United States. They quickly froze the assets before Kadhafi or his aides could move them, the report said. Governments in France, Italy, England and Germany seized control of another $30 billion or so. Earlier, investigators estimated that Kadhafi had stashed perhaps another $30 billion elsewhere in the world, for a total of about $100 billion, the paper noted. But subsequent investigations by US, European and Libyan authorities determined that Kadhafi secretly sent tens of billions more abroad over the years and made sometimes lucrative investments in nearly every major country, including much of the Middle East and Southeast Asia, The Times said. Most of the money was under the name of government institutions such as the Central Bank of Libya, the Libyan Investment Authority, the Libyan Foreign Bank, the Libyan National Oil Corporation and the Libya African Investment Portfolio, the paper pointed out. But investigators said Kadhafi and his family members could access any of the money if they chose to, the report said. The new $200 billion figure is about double the prewar annual economic output of Libya, The Times noted. Kadhafi, who lorded over the oil-rich North African nation for 42 years, met a violent end on Thursday after a NATO air attack hit a convoy, in which he was trying to escape from his hometown of Sirte. He survived the air strike but was apparently captured and killed after a shootout between his supporters and new regime fighters.

¡Ole! Spain drives legality into mobile services with Sybase 365

2011-10-18T16:26:00.001+01:00

Spain was one of the first countries to start to lay down laws relating to old non-registered pay-as-you-go SIM cards for anti-terrorism reasons i.e. you MUST tell the authorities your name and address and get a new SIM if you had one of the old anonymous ones. Following on from this "mobile legality" theme, news this week bubbles of Sybase subsidiary company Sybase 365 working with Spanish mobile operator Yoigo. The two firms have joined forces to offer registered SMS, a new service allowing companies to send customers confirmation text messages with the same legal standing as registered mail. According to Sybase, "Officially certified by the Spanish Real Casa de la Moneda (The Royal Mint of Spain) the Sybase 365 and Yoigo service recognises an SMS confirmation as legal proof of delivery of important documents and information. These certificates can then be used as evidence in judicial proceedings in Spain for enterprises wishing to demonstrate correspondence with their customers. This will enable companies and their customers to resolve disputes in a timely manner, avoiding the cost of court proceedings." With registered SMS, financial institutions, utility companies and enterprises will be able to use SMS where previously they would have used registered mail. Developers working to build in legally approved services into mobile (or desktop for that matter) applications should perhaps take note of Sybase 365's suggestion that an SMS provides a number of advantages over registered mail including five times better response rate over traditional mail and is read 288 times faster than email. "No other communication medium has the ability to reach more people than SMS, said Howard Stevens, senior vice president, global telco and international operations, Sybase 365. "Consumer acceptance and enterprise adoption of the mobile channel is fuelling the growth in volume, availability and sophistication of mobile services and the registered SMS services we're launching confirms this trend."

Catholic Church Child Trafficking Network

2011-10-18T16:17:00.001+01:00

Spain is reeling from an avalanche of allegations of baby theft and baby trafficking. The trade began at the end of the Spanish civil war and continued for 50 years – hundreds of thousands of babies are thought to have been traded by nuns, priests and doctors up to the 1990s. This World reveals the impact of Spain’s stolen baby scandal through the eyes of the children and parents who were separated at birth, and who are now desperate to find their relatives. Exhumations of the supposed graves of babies and positive DNA tests are proof that baby theft has happened. Across Spain, people are queuing up to take a DNA test and thousands of Spaniards are asking ‘Who am I?’ Katya Adler has been meeting the heartbroken mothers who are searching for the children whom they were told died at birth, as well as the stolen and trafficked babies who are now grown up and searching for their biological relatives and their true identities.

Spain’s property bust is only getting worse.

2011-10-18T16:09:00.001+01:00

: AFP; Cranes erecting the Pelly tower under construction in Seville.

Spain’s property bust is only getting worse. The wonder is that the country’s economy and banks are still this resilient.

The Spanish government said Tuesday that housing prices remained in free-fall in the third quarter, dropping 5.5% from a year earlier, the biggest decline since 2009.

This makes Spain, in many senses, the worst case of a property bust in the developed world—the country is already deep in its third consecutive year of falling prices, with no rebounds.

Last year, the pace of decline slowed significantly, signalling some light at the end of the tunnel, but another metaphor is called for instead: that last year’s respite was nothing more than a dead cat’s bounce.

The good news should be the overall amount of the decline, since Spain’s government says prices are only down 18%, in nominal terms, since their peak in early 2008.

But that doesn’t include the effect of Spain’s persistent inflation, one of the highest in the euro zone, which makes the real drop closer to 30%—Spain’s government didn’t provide real price data in today’s release.

After earlier predictions of a short-term correction have been smashed, some analysts now say prices may keep falling for the next two years, eroding Spain’s household wealth and banking balance sheets.

Meanwhile, banks are struggling to keep up with the loss in value of the collateral against €400 billion worth of loans to construction and real estate firms, an amount that remains unchanged since 2008.

For Luis Garicano, a professor of economics and strategy at the London School of Economics, this number is perhaps the most dangerous of those related to the bust, since it indicates the banking sector exposure to such loans hasn’t diminished.

He estimates that a possible explanation is that banks have exchanged some non-performing loans for property that they now own, but not enough to offset the rising interest on the loans.

Many, if not most of these loans, are being rolled over to keep zombie developers in business, in the hope that the market will recover.

All the same, banks have also turned into property developers now.

Walk into any Spanish bank branch, looking for a mortgage, and you will see that is much easier to get it if you’ll just take one of the many, many houses the bank acquired from a bankrupt developer. But many will say why worry? The same house will be even cheaper next month.

Businessman David Stewardson jailed for £1m fraud

2011-10-16T21:37:00.001+01:00

Midlothian businessman who provided security for some of the UK's biggest music festivals has been jailed for three years and nine months for fraud. David Stewardson, 56, from Mayfield, admitted carrying out VAT and income tax fraud worth more than £1m between 23 December 2004 and 6 July 2009. He was also illegally claiming state benefits during the four-and-a-half years he was involved in the scam. His firm, Westcoast, provided security at T in the Park and Glastonbury. Stewardson was the operator of Westcoast Group Security which had a turnover sometimes in excess of £1m a year. However, his lawyer claimed his client had been asked to front the company by a person who could not do so because they were bankrupt and that he would receive £150 a week for doing so. Fiscal Depute Isabel Clark said the bank became concerned because of the high amounts being put through the account and because the money was always withdrawn in cash. Continue reading the main story “ Start Quote He lives in a council house, has never been on holiday abroad and has a motability car” David Blair-Wilson Stewardson's previous solicitor The matter came to light when Stewardson was unable to provide documentation to the authorities about National Insurance and VAT payments. She added that Stewardson did not have any assets that could be found, but The Crown would move to forfeit any that were. Stewardson's solicitor at the previous hearing, David Blair-Wilson, told Sheriff Frank Crowe: "He is not a criminal mastermind. "He lives in a council house, has never been on holiday abroad and has a motability car. "He is not a man with yachts, Bentley motor cars or thousands in the bank." He added that the company had been owned previously by persons "known to the courts" and there had been prosecutions and shootings in Glasgow connected to it. Lot of pressure Stewardson, he said, had been told he would come to a similar fate if he did not comply. When Stewardson appeared for sentencing he was represented by solicitor Massimo D'Alvito, who told Sheriff Crowe that his client had been under a lot of pressure at the time of the offence and was a first offender. Sentencing Stewardson, Sheriff Crowe told him: "It is clear you were specially and cynically selected for this task by criminals who have defrauded the public of a seven figure sum in taxes. "Your involvement was not a one-off incident or covering a short period of time. "You operated this deception for over four and a half years and siphoned a substantial amount of money into the black economy with the consequence that a significant amount of money was lost to the public in tax revenue. "I find it astonishing that the banks handling your accounts, namely the Bank of Scotland and Clydesdale Bank, did not bring to the attention of the authorities at a much earlier stage the unusual and deeply suspicious way in which you operated these accounts, withdrawing large sums of cash on a regular basis as soon as cheques had been cleared." The sheriff added that he had declared forfeit £1,600 which was the only money recovered by the police when they searched his home and closed down the operation in July 2009.

Spanish banks in €6bn merger talks

2011-10-08T01:19:00.001+01:00

Banco Popular, Spain’s fifth-biggest listed bank by assets, has offered to buy its smaller listed rival Banco Pastor in a merger that marks a new stage in the restructuring of the country’s financial sector. In filings published on Friday by the Comisión Nacional del Mercado de Valores (CNMV), the market regulator, the banks said they were proposing a friendly all-share deal in which Popular would offer to buy 100 per cent of Pastor. More ON THIS STORY Dismay at Spanish bank restructuring Spain nationalises three more savings banks In depth European banks Santander predicts return to big profits Global Insight Italy and Spain The CNMV had earlier suspended trading in shares of Popular, with a total market value of €4.99bn, and of Pastor, valued at €827m, apparently after news of the discussions leaked before the planned announcement on Monday. At Friday’s share prices, the Popular offer represented a one-third premium for Pastor and valued the target bank at 0.75 times book value, according to the Pastor camp, although Popular’s share price could fall once the suspensions are lifted. CaixaBank, the banking arm of the Barcelona-based La Caixa savings bank, was valued at 0.8 times book value at its flotation earlier this year, but Bankia, comprising Caja Madrid and six others, managed only 0.4 times when it was listed. Three savings banks seized by the official bank rescue fund last month were valued at between zero and 0.12 times book. Until now, the Bank of Spain and the Spanish government have focused on forcing unlisted savings banks to recapitalise themselves and merge with each other to reduce costs and improve efficiency after the collapse of the Spanish housing and construction bubble. Listed banks have been seen as potential buyers rather than takeover targets. “This is only the start,” said one person aware of the talks as the boards of the two companies held separate meetings. “There is going to be a huge shake-out in the banking sector.” Popular is a national Spanish bank that has focused on retail banking and lending to small and medium-sized businesses, while Pastor’s activities are concentrated in the north-western region of Galicia. Pastor – along with four Spanish cajas or savings banks – was one of the nine European banks that failed Europe-wide stress tests in July.

UBS CEO Gruebel resigns over rogue trading loss

2011-09-24T21:00:00.001+01:00

UBS chief executive Oswald Gruebel has resigned over a $2.3 billion loss caused by rogue trading at its investment division, which is to be restructured now to prevent similar incidents in future, the Swiss bank said Saturday. Gruebel, who had come under heavy pressure from shareholders over the scandal, said he hoped his resignation would allow the bank to restore its reputation in the eyes of clients and investors. Article Controls EMAIL REPRINT NEWSLETTER SHARE "As CEO, I bear full responsibility for what occurs at UBS ( UBS - news - people )," he said in a memo to staff. "From my first day on the job I placed the reputation of the bank above all else. That is why I want to and must act according to my convictions." UBS Europe chief Sergio P. Ermotti will take over immediately as interim chief executive until Gruebel's replacement is appointed. Gruebel's departure caps 10 days of speculation over his future following the bank's announcement that a single London-based trader had evaded internal control systems and gambled away $2.3 billion. The trader, 31-year-old Kweku Adoboli, was arrested Sept. 15 and charged with fraud and false accounting. A judge ordered him Thursday to be held in jail until a hearing next month.

Jeremy Johnson’s plane, cars, other assets set for Saturday auction

2011-09-24T02:40:00.001+01:00

Utah auctioneer expects lively bidding Saturday, when property owned by St. George businessman Jeremy Johnson, who faces a federal criminal mail fraud charge, goes on the auction block. A preview of the auction Friday gave potential bidders a peek at the office and patio furniture, seven televisions, computers, classic automobiles, a dune buggy, and snow plane powered by a rear wooden propeller with a roof of black and white cowhide. All told, 248 items are scheduled be sold, all of which are from Johnson’s defunct I Works company except the cars. The Federal Trade Commission sued Johnson and I Works in December in federal court in Las Vegas, accusing him of running a large-scale fraud that took in about $350 million. I Works is accused of making millions of dollars of unauthorized charges on consumers’ credit and debit cards after they purchased products online for a minimal charge. At the request of the FTC, a federal judge appointed a receiver, Robb Evans & Associates, to examine the finances and business records of Johnson and I Works and preserve assets. The receiver asked the judge to allow it to sell off property because the company was no longer functioning and it wanted to preserve as much value as possible. In another case, Johnson faces a federal criminal mail fraud charge in Salt Lake City connected to his I Works operation. He was released from a jail last week after posting a $2.8 million bail. On Friday, a steady stream of people circulated among the auction items at the warehouse of Statewide Auction Co. By mid-afternoon 130 bidders had registered. The auction begins at 10 a.m. at the warehouse at 5099 Wheeler Way in Hurricane. There is no minimum bid on any of the items. Tom Erkelens, a co-owner of Statewide Auction who will conduct the sale, said he anticipates a good crowd Saturday, and expects strong bidding on the five mint-condition classic cars, among them a 1972 Chevelle Super Sport, a 1957 Belaire and a 1953 Ford Customline with "Ford-O-Matic."

European banks head towards another meltdown

2011-09-23T00:25:00.001+01:00

Shares in some of Europe's largest banks fell by 10pc as the cost of insuring European lenders' senior bonds rose to record levels, according to credit default swap prices. The Markit iTraxx Financial Index of contracts on the senior debt of 25 banks and insurers climbed to an all-time high 315.5 basis points. The last banking crisis was regarded by most eurozone members as an Anglo-Saxon phenomenon caused by lax lending controls that resulted in major UK and US institutions either collapsing or having to take costly state-funded bail-outs. To offset the threat of another crisis spreading across the eurozone, European regulators ordered their banks to increase their liquidity buffers. Government bonds were generally viewed as the most liquid and least risky assets to hold. However, this policy has come back to haunt them, leaving many lenders across the region seriously exposed to the eurozone sovereign debt crisis. French banking giants BNP Paribas and Société Générale are among the hardest hit. Recent estimates suggest BNP has eurozone sovereign debt exposure of about €75bn (£65bn), amounting to roughly 6pc of total assets, including €14bn of Greek debt and €21bn of Italian government bonds. The other two major French banks, SocGen and Credit Agricole, each have exposures of a similar size. Between them, France's banks have about €56bn of Greek sovereign bonds alone, and have so far taken 20pc writedowns on this.

signs of an institutional run on French banks

2011-09-23T00:23:00.001+01:00

Christine Lagarde, the managing director of the International Monetary Fund, urged Europe's leaders to bail out their fragile banks, as the boss of the eurozone's biggest bank, BNP Paribas, rejected fears that the financial sector was "in peril". Addressing journalists in Washington at the opening of the IMF's annual meeting, Lagarde said that Europe must tackle "this twin problem of sovereign debt and the need to strengthen capital buffers". She said: "It is critical that to fuel growth, banks be in a position to finance the economy, to finance enterprises, to finance households, to finance local governments. To do that they need to have the balance sheet that will actually support credit to the economy." Despite the recent stress tests carried out by the European Banking Authority, which suggested that most of the banks were well-placed to cope with the sovereign debt crisis, the IMF estimates that banks have taken a €300bn (£260bn) hit in the past year as a result of the growing risk of default by Greece and other vulnerable eurozone countries. Lagarde's call came as Baudouin Prot, BNP's chief executive, emphatically denied reports that it was in talks with Middle Eastern investors about securing a capital injection. "I formally deny this," he said. "We have no particular contact because we don't need a capital increase." But French bank shares – which have lost 50% of their value in three months – continued to fall as markets endured one of their worst trading days since 2009. BNP was off more than 5% and close rival Société Générale fell almost 10%. In the UK, bailed-out Lloyds Banking Group was down more than 10%, bearing the brunt of anxiety about a slowdown in economic growth. The FTSE 100 closed down 4.7% with large falls from mining companies, which make up a large part of the index and whose fortunes are closely tied to global economic prospects. Out of the 100 stocks, only technology company Autonomy – supported by a bid from Hewlett-Packard – fell by less than 1%. A survey from the crucial manufacturing sector, which chancellor George Osborne had hoped would lead an economic recovery, exacerbated the nervous mood by suggesting industry had been hit hard by the collapse of confidence around the world. The CBI's monthly industrial trades survey showed declining orders, both at home and abroad, and a rising backlog of finished goods, in the latest evidence that the recovery has stalled. Minutes from the latest meeting of the Bank of England's monetary policy committee revealed on Wednesday policymakers were preparing a new round of quantitative easing to respond to the worsening outlook. The gloom was echoed in the eurozone, where the early, "flash estimates" from the closely watched purchasing managers surveys signalled a sharp downturn in both manufacturing and services growth, adding to fears that Europe could be heading for a new recession. The Greek government announced new austerity measures this week to persuade investors that it is committed to tackling its debts. But investors are still fretting about the potentially devastating impact of a default on the region's banks. BNP insisted on Thursday that it could maintain a core tier one ratio – an important measure of financial strength – of 9% by January 2013 even if it sustained losses through the eurozone crisis. But Mohamed El-Erian, boss of the world's biggest bond investor Pimco, warned in a blog on the FT's website that there were "signs of an institutional run on French banks".

S&P downgrades Italy as Greek austerity row forces global stock markets lower

2011-09-20T00:29:00.001+01:00

The news came after panic gripped global markets as a fresh showdown over Greece renewed fears that the eurozone will be plunged into crisis. The rating for Italy, which has Europe’s second-largest debt load, was lowered from A+ to A, S&P said in a statement. The agency said the country's net general government debt is the highest among A-rated sovereigns, and now expects it to peak later and at a higher level than it previously anticipated. “In our view, Italy’s economic growth prospects are weakening and we expect that Italy’s fragile governing coalition and policy differences within parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges,” S&P said in a statement. "The measures included in and the implementation timeline of Italy's National Reform Plan will likely do little to boost Italy's economic performance, particularly against the backdrop of tightening financial conditions and the government's fiscal austerity program." Earlier, as Greece and the bail-out "troika" of the International Monetary Fund (IMF), the European Union (EU) and the European Central Bank (ECB) thrashed out their differences, investors hit the sell button – hammering confidence and threatening the recovery. Greece warned that it is just weeks away from default unless the troika releases an €8bn (£7bn) instalment of its original €110bn rescue. Creditors, though, stressed that they need evidence the country is delivering on its promised spending cuts.

UBS raises rogue equity trade losses to $2.3 billion

2011-09-18T19:36:00.001+01:00

Swiss bank UBS on Sunday increased the amount it said it had lost on rogue equity trades to $2.3 billion and alleged a trader concealed his risky deals by creating fictitious hedging positions in internal systems. UBS stunned markets on Thursday when it announced unauthorised trades had lost it some $2 billion. London trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008. "The loss resulted from unauthorised speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months," UBS said in a brief statement. "The loss arising from this matter is $2.3 billion. As previously stated, no client positions were affected." Global stock markets have been extremely volatile in recent months, plunging on concerns over euro zone and U.S. debt crises and then rebounding on hopes for their resolution. The loss is a disaster for the reputation of Switzerland's biggest bank, which had just started to recover after it almost collapsed during the financial crisis and faced a damaging U.S. investigation into aiding wealthy Americans to dodge taxes. "Loss even more. Reads like they're making excuses," said Helvea analyst Peter Thorne of the UBS statement. The new scandal has prompted calls for its top managers to step down and for its investment bank to be split into a separate unit from its core wealth management business. Chief Executive Oswald Gruebel, who was brought out of retirement in 2009 to turn the bank around, was quoted in a newspaper on Sunday as saying he is not considering quitting over the crisis, but said it was up to the board to decide. In a memo to staff on Sunday, he said: "Ultimately, the buck stops with me. I and the rest of senior management are responsible for dealing with wrongdoing." Swiss newspapers quoted unnamed insiders as saying the UBS board and important shareholders such as the Singapore sovereign wealth fund were still backing Gruebel, with immediate changes at the top the last thing the bank needed. Gruebel is widely expected to present plans to drastically cut back the investment bank at an investor day in November. INDEPENDENT INVESTIGATION The bank, whose three keys logo symbolise "confidence, security, discretion," has pulled its "We will not rest" global advertising campaign for now, that was designed by advertising agency Publicis to try to rebuild its image. Meanwhile, UBS client advisers have been writing to customers to reassure them of the underlying financial strength of the bank despite the trading loss, a spokesman said. "That we now suffer this setback at this point in our efforts to improve our reputation is very disappointing. This incident also sets us back somewhat in our capital-building efforts," Gruebel said in his memo. "However, I wish to remind you that our fundamental strengths as a firm remain intact... we remain one of the best capitalized banks in the industry. UBS said its board of directors had set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and the bank's control systems. The bank said it had covered the risk resulting from the unauthorised trades, and its equities business was again operating normally within previously defined risk limits. It said the trader had allegedly concealed the fact his trades violated UBS risk limits by executing fake exchange-traded fund (ETFs) positions. "Following inquiries directed to him by UBS control functions that were reviewing his positions, the trader revealed his unauthorised activity," the bank said. "The positions taken were within the normal business flow of a large global equity trading house as part of a properly hedged portfolio," UBS said. "However, the true magnitude of the risk exposure was distorted because the positions had been offset in our systems with fictitious, forward-settling, cash ETF positions." The Sunday Times cited unnamed insiders saying the trader placed bets worth $10 billion before his losses were detected. ETFs are index funds listed on an exchange and can be traded just like regular stocks. They try to replicate index performances and offer lower costs than actively managed funds, but regulators have warned about risks from some complex ETFs. In the past three months, DAX futures have fallen 22 percent, Eurostoxx 50 futures have dropped 20 percent and S&P 500 futures have dipped 4 percent. The instruments involved in the UBS case are similar to those that Jerome Kerviel, the rogue trader at Societe Generale, traded when he racked up a $6.7 billion loss in unauthorised deals in 2008. Christoph Blocher, vice-president of the right-wing Swiss People's Party (SVP) -- the country's biggest -- renewed his calls for a splitting off of the investment bank. "One has to seriously examine a ban on investment banking for commercial banks," he told the SonntagsZeitung, adding his party might team up with the center-left Social Democrats to push for such a move.

'Rogue trader' Kweku Adoboli faces fraud charges dating back to 2008

2011-09-17T02:15:00.001+01:00

tearful Kweku Adoboli, the alleged rogue trader at the centre of a $2bn (£1.3bn) loss at Swiss bank UBS, appeared before magistrates on Friday to be charged with fraud and false accounting dating back to 2008. A clerk at City of London magistrates court handed the 31-year-old Ghanaian a tissue as the 15-minute proceedings began, after which the one-time star trader was led away to remain in custody until a bail hearing on 22 September. Adoboli's charge sheet appeared to allege that he had taken steps to cover loss-making trades as long ago as 2008. A committal hearing was set for 28 October. The timescale of the allegations will raise questions about risk management procedures at the bank, put intense pressure on the chief executive, Oswald Grübel, and fuel calls from some Swiss politicians for the bank to exit its investment banking business, putting thousands of jobs at risk in the City. Many UBS bankers already fear for their year-end bonuses. Smiling at times, Adoboli spoke only to confirm his name, address and date of birth, while the Swiss bank refused to add anything to the statement it issued on Thursday when it revealed it had called in City of London police at 1am to investigate Adoboli after uncovering "unauthorised trading". British-educated Adoboli – whose passport spells his name as Kwaku – joined UBS in 2006 and was a member of the so-called delta one trading desk, where, among other things, he traded exchange traded funds (ETFs). These complex financial instruments, on which the regulators issued warnings earlier this year, are structured to mimic market movements. His registration with the Financial Services Authority was switched to "inactive" on Friday at the request of the firm – indicating that he is no longer performing that role. Two charges claim that Adoboli falsified records of ETFs between October 2008 and December 2009 and then January 2010 and September 2011. A third charge alleges that he committed fraud between January 2011 and September 2011 while senior trader in global synthetic equities. His lawyers at Kingsley Napley – the law firm that advised Nick Leeson, the rogue trader who broke Barings – did not issue a statement or enter pleas to the charges. His father, John, told Reuters from Tema, Ghana: "I want the world to have an open mind. He should not be sentenced before the trial begins." The former United Nations worker is hoping to fly to the UK this week and is applying for a visa. The City of London police, who arrested Adoboli at his luxury home on the edge of the City at 3.30am on Thursday, said their investigation was continuing, in "close collaboration" with the Financial Services Authority, the Serious Fraud Office and the Crown Prosecution Service. Adoboli's trading activity, by its nature, required him to perform frequent numbers of small trades. One of the last postings on his Facebook page – "need a miracle" – came at around the time the Swiss National Bank intervened to reduce the value of the Swiss franc, which has prompted speculation that this helped expose his losses. The bank, which employs 6,000 staff in London, will now have to pay for a detailed investigation being launched by the FSA and the Swiss regulator, Finma, into the control systems at UBS, the failures that permitted the losses to occur, and details of the unauthorised trading activity. The "comprehensive, independent investigation" will be carried out by one of the big four accountancy firms, although no timescale has been given for when it might be completed. The discovery of the "unauthorised trading" has come at a sensitive time for the City, coinciding as it does with the third anniversary of the collapse of Lehman Brothers and coming after calls from politicians in the UK and Switzerland for the break-up of high street banks to separate "casino" investment banking arms. "It shows that investment banking is a high-risk field and it's important that we clearly separate systemically important functions from the rest of the banking business," said Caspar Baader, of the Swiss People's party. Switzerland's Social Democratic party called for "consequences" such as a ban on "proprietary trading" and replacing "egomaniacal, arrogant and irresponsible managers". Even a year after the banking crisis of 2008, during which Swiss taxpayers contributed to a $60bn bailout of UBS, the nation's banking assets totalled SFr3.47tr – nearly seven times the country's gross domestic product. New laws requiring UBS and Credit Suisse to rein in risk and hoard capital to a higher level than required elsewhere in Europe have already been passed in the first chamber of the Swiss parliament and were debated this week in the upper house, known as the national council. Moves to hive off riskier investment banking and private client operations from those banking functions vital to the smooth operation of the Swiss economy also form part of the legislation, but would not be implemented immediately. Banking analysts believe UBS may now have to scale back its investment banking business and axe even more jobs on top of the 3,500 group-wide cuts announced last month in a bid to save £1.5bn – a similar amount to the losses the bank now fears it faces from the alleged "unauthorised trading". "We are making further cuts in our 2012 profit estimates, as we believe that UBS is set to announce a more streamlined investment banking business strategy in November, with certain business units being closed and additional jobs being lost. This is part of the bank's efforts to address the long-term structural issues within the financial services industry," said Christopher Wheeler, an analyst at Mediobanca. Ratings agencies warned of a downgrade of the bank's credit rating. Standard & Poor's placed the bank on its Creditwatch list, citing factors including the "setback to UBS's efforts to rebuild its reputation and demonstrate strengthened risk-management following its weak performance in 2007-2009", when it almost collapsed during the credit crunch.

UBS hit by $2bn rogue trade

2011-09-15T12:42:00.001+01:00

Matthew Czepliewicz, an analyst at Collins Stewart, said the unauthorised loss cuts his 2011 earnings-per-share estimate for UBS by about 30pc - "a huge hit". He continued: "A loss of this magnitude will very likely have occurred in the FICC (Fixed Incomes, Currencies and Commodities) division, the very division UBS has been systematically rebuilding after shrinking it by 40pc during the credit crisis. That an unauthorised position of this size could have escaped oversight will renew pressure on management to radically scale back the FICC business, a volatile and capital-intensive business overall." He said that his upgrade of UBS to "buy" from "hold" on September 6 "now looks memorable, to say the least", but added: "As large and embarrassing as the loss is, it may in fact drive a positive strategic overhaul of the company. In the meantime, we await further detail on what went wrong and how management will respond." Andrew Lim, analyst at Espirito Santo, said the loss was manageable at group level at UBS. He added: "The $2 billion loss compares to our current estimate for the (third-quarter) group net earnings of 1.1 billion Swiss francs and (full-year estimated) net earnings of 5.1 billion Swiss francs. "The loss is therefore manageable at the group level, but is obviously not helpful for sentiment and confidence in the bank's risk management following the near-death experience of 2008/9." Fiona Swaffield, analyst at RBC, put the loss in context: "Assuming the loss is not revised at CHF1.7bn this is 3.4% of tangible book value end Q2 2011 and CHF0.35ps. Relative to target Basel III risk weighted assets of CHF300bn this is some 44bp. UBS on the most conservative measure has core T1 of 10% forecast end 2012 Basel III pre this and 13% with phased=in deductions. This would fall to 9.8% and 12.4%, respectively, so still respectable and above CS (8.8% on look through Basel III end 2012) but obviously hardly a positive as its strong capital base relative was an attraction." But she added the real issue over and above the financial impact is the reflection on risk management at UBS: "UBS was seen to have recovered significantly from the credit crisis and to have improved its risk management in the investment bank in spite of its struggle to improve returns. This obviously brings this very much into question." Goldman Sachs analysts Jernei Omahen and Peter Skoog wrote in a note: "This loss has the scope to have a material impact on the perception of UBS' private bank, impacting its future operating trends. "Today's announcement therefore adds to the long list of arguments (and pressure) for a substantially smaller investment bank." Louise Cooper, markets analyst at BGC Partners, said: "According to Bloomberg analysts were forecasting about a SFR 7bn or approx £5bn pre tax profit for UBS for the 2011, therefore a £1.3bn trading loss hits full year earnings by about a third." She added: "The jewel in the crown of UBS is its private banking business, producing consistent, quality earnings. An unexpected trading loss could do significant reputational damage to the bank especially given its track record during the crisis (massive recapitalisation and regulatory fines). Rich people tend not to want to do business with a bank where there are questions over risk control. UBS needs to do a good job in explaining what went wrong and assuring its clients that it will not affect them." Joshua Raymond, chief market strategist at City Index, commented: "Whilst the incredible volatility seen recently in the markets would have likely seen some traders lose and win big, the news that a rogue trader was allowed to stack up losses of $2bn will inevitably send nervous shockwaves through to those investors who have only just returned to the bank after a severe loss of confidence. "The Swiss firm has fought hard in the last few years to restore its credibility from having to be bailed out by the Swiss authorities, suffering a large fine for tax evasion and after it agreed to disclose the accounts of thousands of its clients to US tax authorities."

Down on the Borders

2011-09-11T00:41:00.001+01:00

The bookshelves are wooden skeletons now, and even those were carried out the door. Books too, of course, with hard and soft covers, remember those? DVDs, calendars, and the twilight end to everything else that used to fill the Borders off U.S. 95 was picked through and sold at a fraction of their outdated prices Friday as the bankrupt big box retailer prepares to close the Coeur d'Alene store for good this weekend. "Everything selling," General Manager Sean Thornton said watching customers sift through the remaining inventory. "Almost down to the carpet." Deals? You bet. What's left is marked up to 80 or 90 percent off. But there was little glee for those treasure hunting. Borders, which operated 1,249 Borders and Waldenbooks stores at its peak in 2003, is a casualty of the Internet industry - a fast-paced, versatile vehicle that gives consumers so many options, so quickly, book stores and printed media are all but obsolete. Customers didn't know what's in store for the future, they said, but they were sure Borders' closing is likely only one domino to fall in the digital future. "You may have to go to Oxford or the Smithsonian if you want to find books in the future," said Tim Tucker, a 15-year Borders customer, filling his arms full of old-fashioned reading material Friday. "They didn't change fast enough," he said. "And it's change or die." Death to a bookstore looks like walls full of empty bookshelves roped off in Coeur d'Alene's store, with the remaining inventory centered in the middle, where dozens of people stand close together to see what's left. At the front of the store, shelves were disassembled, and people, some with other businesses, carried those out for their own use. Janette Moote, retired and mother of at least one daughter who uses an iPad to read, remembers when her town in California got its first Borders years ago. "It was fantastic," she said. "We use to have a room in our house called a library." Now, seeing the remains of her once favorite store, "is like losing a member of the family," she said. Kindle, iPad, e-books, blogs; those are the terms of the reading future. It's true. The city of Coeur d'Alene, for example, allocated money for its library for e-books in 2012 budget. You didn't see that five years ago. Still, there are people who prefer the feel of turning the paper page in their hand. Count Erika Bliss, 22, and Shay Ward, 33, as two of those. They said the old-fashioned feeling, whether at home or in a book store, is comfortable, akin to relaxing in a nice coffee shop. "It's sad," Bliss, a science fiction fan, said in the nearly empty aisles. "I'd never thought they'd go out." But take one look at Nick Wages, comic book collector and all-around reader a few aisles away from Bliss and Ward, and you can see how it happened. On Wages' cell phone is an app that allows him to scan a book's bar-code right in the store, and instantly the cheapest price for that product is found online and around town. He demonstrates with a book originally priced at $17. The Internet shows him that copy for $2.69 after a two-second search. "That's kind of what killed it right there," he said. For Thornton, manager at the local Borders store which opened in 2003, watching the end, and knowing that his 24 employees have to move on, is crushing. "It's been emotionally crippling," he said. But he said he loved the run. If every Borders had been half as successful as his local branch, the company wouldn't have had to file for bankruptcy in February, he said. And the landlord has had possible tenants interested in moving into the new location, so the big footprint of what used to be a book store shouldn't stand empty forever. But he's sad. And his customer are too. "They've been crushed by it," he said of his repeat buyers. "I find we're consoling them more than they're consoling us." Borders will be open from 8 a.m. to 8 p.m. Saturday and from 8 a.m. to 3 p.m. Sunday before it closes for good. Everything, just about down to the carpet, must go.

FBI raids bankrupt solar venture Solyndra

2011-09-11T00:39:00.001+01:00

FBI agents, acting with inspectors from the Department of Energy, raided the offices of solar panel maker Solyndra on Thursday, just days after the DOE-backed company filed for bankruptcy. A spokeswoman for the FBI in San Francisco confirmed the raid, but declined to offer further details. The DOE inspector general's office typically investigates allegations of fraud or wrongdoing at the agency and within entities the agency does business with. Solyndra filed for bankruptcy last week, closing its Fremont, Calif., factory and laying off 1,100 workers. The falling price of traditional silicon-based solar panels was cited as the main reason for the closure. Solyndra made a more advanced panel that relied on less silicon. When its rivals' technology got cheaper, Solyndra's became less appealing. The company's factory was built with a $535 million loan backed by the Department of Energy. It was touted by President Obama as one of the ways his administration is nurturing a new, jobs-creating clean energy economy. The bankruptcy has drawn an outcry from lawmakers and others skeptical of Obama's green jobs push. "The FBI raid further underscores that Solyndra was a bad bet from the beginning and put taxpayers at unnecessary risk," House Energy Chairman Fred Upton told the National Journal on Thursday. "President Obama's signature green jobs program went from a darling of the administration to bankruptcy to now the subject of an FBI raid in a matter of days." What went wrong at Solyndra Congressional hearings have been scheduled on the matter. Solyndra did not immediately respond to a request for comment. A DOE spokesman said that, while regrettable, the Solyndra bankruptcy will not affect the agency's overall loan guarantee program, which has backed nearly $40 billion in projects to date. They include everything from solar and wind to advanced biofuels and nuclear power. "That is the nature of supporting emerging, innovative companies," said the agency spokesman, Damien LaVera. "In the long run we will have more successes than failures, and those companies will help lead America to a new era of productivity and global competitiveness." It's unclear just how much taxpayers will ultimately lose in Solyndra's bankruptcy process, if anything. It's possible the company could emerge restructured and ready to compete. But it's also possible it could be broken up and sold off. LaVera said that in a worse-case, liquidation scenario, the DOE is high on the list to get back at least some of the $527 million Solyndra drew from the loan. There has been talk from critics that Solyndra received the money in part because one of the company's main financial backers, billionaire George Kaiser, is also a big Democratic campaign donor. "That is absolutely untrue," LaVera said, noting that the loan application was submitted under the Bush administration and mostly complete by the time Obama took office. "Sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment," he said.

Harry Winston Diamond Corp. saw its luxury retail sales nearly double along with a modest increase in rough diamond sales

2011-09-08T20:08:00.001+01:00

Harry Winston Diamond Corp. saw its luxury retail sales nearly double along with a modest increase in rough diamond sales, but it wasn’t enough to lift profits for the Toronto-based company.

The company said Wednesday that second quarter consolidated sales increased 44.7 percent percent to 222.4 million year-over year, resulting in a 6 percent increase in gross margin to $72.2 million and an operating profit of $23.1 million, compared to an operating profit of $29.9 million in the comparable quarter of the prior year. Consolidated EBITDA was $43.8 million compared to $49.4 million in the comparable quarter of the prior year.

Despite the sales increase, net profits in second quarter fell 23 percent to $10 million.

Harry Winston consists of two businesses. The first supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company, however, is internationally known for its second business as a premier diamond jeweler and luxury timepiece retailer with salons in key locations throughout the world, including New York, Paris, London, Beijing, Tokyo, Hong Kong and Beverly Hills.

The luxury brand segment reported a 98 percent increase in sales to $132.8 million for the period, year-over-year. At constant exchange rates, the increase was 81 percent. Included in the second quarter was $55.6 million of high-value transactions, which generally carry lower-than-average gross margins. Operating profit was $6.8 million for the quarter compared to $2.3 million in the same quarter of the prior year. EBITDA for the luxury brand segment was $10.1 million compared to $5.5 million in the comparable quarter of the prior year.

“Global retail demand, especially in the emerging economies such as China and India, has delivered both strong retail sales growth and strong rough diamond prices. Seeing through the effect of a small number of high-value, lower margin sales, our own jewelry and timepiece business shows solid growth in both sales and margin in the core bridal, timepiece and designed jewelry segments,” said Robert Gannicott, Harry Winston chairman and CEO.

Meanwhile, sales from its mining segment increased 3 percent to $89.6 million for the second quarter, year-over-year, resulting primarily from a 41 percent increase achieved in rough diamond prices, offset by a 27 percent decrease in volume of carats sold. The mining segment recorded operating profit of $16.3 million compared to $27.6 million in the comparable quarter of the prior year. EBITDA for the mining segment was $33.7 million compared to $44 million in the comparable quarter of the prior year.

“The market price increase in rough diamonds has more than compensated for two complete sales versus three in the comparable prior year quarter as well as the lower quality diamonds mined from the upper part of the current open pit,” Gannicott said

“Looking forward we continue to see strong global jewelry and timepiece demand from China while Japan and the Middle East improve and the U.S. remains subdued. On this basis we expect to continue to grow our own jewelry and timepiece business despite challenging economic conditions in the U.S. and Europe. Although we do not predict further near-term rough diamond market price increases we do see our own rough diamond sales price already improving.”

Luxury Home Foreclosures a Deal for Well-Heeled

2011-09-08T20:04:00.001+01:00

Luxurious real estate doesn’t look — or cost — what it used to. “There are $4 million estates in Lutz and the Riverview area that are now less than $1 million,” said Keller Williams real estate agent Rande Friedman. “There’s a condo in Channelside that was $1.5 million, and now it’s $700,000.” Most homeowners have seen values drop, but these prices are so low because the homes are owned by a bank. And the bank wants to get rid of them. There are so many foreclosed luxury homes that Friedman created a website to list them. In three weeks, PoshForeclosures.com already has about 400 local listings. The Tampa Bay area and Florida are among the hardest-hit by foreclosures in the country. Friedman has a theory on why the foreclosure crisis finally caught up to the rich. “A lot of the people who got into the luxury market in 2005, 2006 were making their money from real estate,” he said. When the market crashed, so did their incomes. Plus, just like the rest of the population, many luxury buyers took out adjustable-rate mortgages. Many of them have come due recently. That, combined with job loss and sinking home prices, led to an uptick in foreclosures of luxury homes. That means hundreds of high-end homes sit abandoned. But that could be good news for those ready to buy. Homes and condos along the beaches and downtown condos are among the most-popular luxury foreclosures, Friedman said. Potential buyers of luxury foreclosures also don’t have to worry about trashed homes as much as buyers of lower-end houses. That’s because banks usually take better care of them, Friedman said. “People are still living in them, maintaining them, so they’re not the deserted, desolate foreclosure feeling,” Friedman said. “They really are truly nice properties.” That’s true, said Daren Blomquist, spokesman for RealtyTrac, which tracks foreclosure activity nationwide. “It’s in the bank’s best interest to fix up the home and get in the best shape possible before trying to sell it,” Blomquist said. “That way, they may get a better price.”

Swedish carmaker Saab denied bankruptcy protection

2011-09-08T16:09:00.001+01:00

A court on Thursday rejected Swedish carmaker Saab's request for protection from its creditors, it said, pushing the company one step closer to bankruptcy. "The Vaenersborgs district court has today decided to reject Saab's ... request for a voluntary reorganisation process," the court said in a statement. "The court has concluded that there is not enough reason to believe that a company reorganisation would be successful. The company's request is therefore rejected," it said. Saab has until September 29 to appeal against the ruling. Saab's biggest union, IF Metall, said it "lamented" the decision, after having said on Wednesday that bankruptcy protection "could be a good solution." The company is now at the mercy of its creditors. "If the company doesn't find another solution, or if it doesn't declare bankruptcy itself, we may have to do it ourselves in the coming days," IF Metall chairman Stefan Loefven said in a statement. In early 2010, Saab was saved from bankruptcy by Dutch group Swedish Automobile, then called Spyker which bought the brand from US car giant General Motors. With no cash and stagnant sales, Saab, which 3,700 people, has stopped paying its suppliers and they have in turn halted deliveries since April. The company owes about 150 million euros ($210 million) to its suppliers, according to Swedish Automobile chief executive Victor Muller.

Bosses of banks saved by taxpayer earn more now than before crisis

2011-09-05T23:49:00.001+01:00

The bosses of Britain’s bailed-out banks are paid more than they were before the credit crunch struck, a damning report reveals today. The chief executives of the country’s basket-case lenders earned an average basic salary of more than £1.1million last year before bonuses or other benefits. Shockingly, this figure is an increase on the £1million average from 2007 – the year that the financial crisis struck, crippling Britain and plunging the country into recession. Despite the fact that they have the job of salvaging the banks propped up with more than £65billion of taxpayers’ money, they are among the best-paid executives in this country. Their average wage is almost more than 40 times that of the country’s average of £26,000 and it dwarfs the £142,500-a-year salary earned by our Prime Minister. When bonuses and other perks are included bank chiefs enjoyed average total earnings of £3.7million last year – The damning findings by the country’s leading pay experts are likely to anger British taxpayers, who are sitting on losses of £34billion in RBS and Lloyds – or £1,300 per household.

Share slump hammers Euro banks

2011-09-05T23:47:00.001+01:00

Stocks in Europe and Italian fixed-income securities were pummelled on concern about the euro zone's debt crisis. The benchmark Stoxx Europe 600 Index ended the day with a 4.1 per cent drop. US and Canadian financial markets were closed for the Labor Day holiday. Financial stocks led the decline in Europe as Deutsche Bank chief Josef Ackermann said profit in the banking sector would be curtailed for years because of the sovereign debt crisis and some banks would likely fail. "Prospects for the financial sector overall ... are rather limited," the CEO of Germany's top bank said on Monday. "The outlook for the future growth of revenues is limited by both the current situation and structurally." Deutsche Bank, Credit Suisse Group, Barclays, Societe Generale and Royal Bank of Scotland all shed more than 6.5 per cent, according to Bloomberg News. "Not a great start to the week. There is a lot going on for banks, especially in the light of a low-growth environment and the backdrop in the euro zone not improving," Mike Lenhoff, chief strategist at Brewin Dolphin, told Reuters. Investors also sold euros, buying gold and US dollars instead. The euro dropped 0.7 per cent against the greenback after German Chancellor Angela Merkel's Christian Democratic Union was defeated in an election in her home state, yet another indication voters are unhappy about her efforts to deal with the European debt crisis and reject plans to use more taxpayer money to help solve the problems of countries including Greece and Ireland. "Merkel's problem is that she fails to generate confidence in her policies and those of her coalition partner," Gero Neugebauer, a political science professor at the Free University in Berlin, told Bloomberg. "It's about the consistency of her statements" on bailouts for indebted euro countries. The US currency strengthened 0.66 per cent against a basket of its major counterparts. Investors are eyeing a German constitutional court ruling on Wednesday on claims that Berlin is breaking German law and European treaties by contributing to bailouts for Greece, Ireland and Portugal, according to Reuters. The court is not expected to rule against the contributions, but may add stipulations for dealing with future requests that will complicate the region's bailout plans. "People are pricing in the risk of European meltdown, rather than the likely outcome," Ian King, head of international equities at Legal & General, told Reuters. Against this backdrop, Group of Seven financial leaders are likely to agree later this week to keep monetary policy loose. The G7's finance ministers and central bankers meet on Friday in Marseilles, France to discuss potential to bolster the slowing global economy. Before then however, central bankers are meeting in Australia, Canada, the UK and Europe and may offer investors more perspective on the global outlook.

Swiss bankers demand respect for law from US tax evasion investigators

2011-09-05T23:44:00.001+01:00

Swiss bankers have rejected another UBS-style tax evasion deal following an ultimatum from the United States last week to turn over the names of more tax cheats. The US has turned up the heat on Switzerland after finding evidence that Credit Suisse and other banks allegedly helped its citizens to break the law by hiding their wealth from the tax authorities. The successful prosecution of UBS two years ago led to a Swiss-US treaty that severely dented Swiss banking secrecy laws by providing the names of nearly 5,000 bank clients. But rather than burying the problem, the success of the deal has encouraged the US to pursue yet more banks – some of whom are rumoured to have illegally given UBS clients safe haven after Switzerland’s largest bank was caught out. The Swiss Bankers Association (SBA) is desperate to avoid other banks facing a UBS situation and called on negotiators to find a solution this time that keeps secrecy intact. Law abiding SBA chairman Patrick Odier demanded a universal treaty binding on all countries rather than a raft of ad-hoc agreements between Switzerland and other states. “The solution must be globally applicable, definitive and in line with current Swiss laws,” Odier said at the SBA’s annual conference in Zurich on Monday. While accepting that Swiss banks must pay a penalty if they had broken foreign laws, Odier nevertheless denounced the latest demands from US deputy attorney-general James Cole as “too tough”. “The US must recognise that legal certainty [of banking secrecy] is something that Switzerland must guarantee,” he said. “We cannot have one country refusing to respect the laws of another.” The SBA pointed to the recent deals with Britain and Germany as a possible template. Under the terms of these treaties – yet to be rubber stamped – Swiss banks would pay withholding taxes on past and future earnings of foreign account holders. Switzerland has also negotiated a new double taxation agreement with the US that is awaiting approval by the US authorities. UBS deal stands alone “I am very confident that we can find a common solution that would be in the interests of Swiss banks and the US,” SBA chief executive Claude-Alain Margelisch told swissinfo.ch. “We solved the UBS case and I hope we find a definitive global solution for all Swiss banks. We must make sure that we do not have the same problem for a third time.” Margelisch also dismissed the option of another UBS-style treaty despite that deal containing a paragraph that could force other Swiss banks to hand over client data if they were found to have broken US laws in the same way. “The UBS case was special because it involved only one bank in a context that is not comparable with other Swiss banks,” Margelisch told swissinfo.ch. “I could not imagine that the Swiss parliament would be ready to pass another such treaty for the rest of the banking community during election year.” But the latest signs coming from the US do not indicate that the Department of Justice (DoJ) is willing to compromise. Investigations have widened to around ten Swiss banks and Credit Suisse was recently served with official notice that it was being probed. Not bluffing Stories are also appearing in the media that the US negotiators are losing patience with their Swiss counterparts. The fact that the second-highest ranking DoJ official, James Cole, has become publicly involved suggests to US tax lawyer Scott Michel that the US is not likely to withdraw its demands for new bank client data. “It is a mistake to assume that when the DoJ makes a demand that they are bluffing,” Michel told swissinfo.ch. “There appears to be pent-up frustration that two years after the UBS case there is still evidence that other Swiss banks are helping US citizens hide their money away.” He added: “The DoJ is not even asking for an exchange of information – a lengthy process involving case-by-case examination. They want a large batch of Swiss banking client information and they want it now.” According to Michel, the US authorities appear to be building a legal basis to impose “draconian financial penalties” on Swiss banks that could dwarf UBS’s $780 million ($990 million) fine. Swiss media are also reporting that the US would be prepared to start criminal legal proceedings against banks if they do not comply with their demands.

Bogus pensions adviser jailed over £1.9m transfer fraud

2011-09-05T12:23:00.001+01:00

bogus financial adviser who fraudulently manipulated his “clients’” pension funds to avoid paying tax of over £1.9m has been jailed at Hull Crown Court for three years. Colin Pearson (pictured), who previously worked for the Food Standards Agency and held a McDonalds franchise, claimed to be a financial adviser and persuaded his "clients" to release over ₤3.4m from their pension funds. Pearson completed UK pension transfer forms on behalf of his clients to falsely claim funds were going abroad to avoid paying tax due on the pension withdrawals, said HMRC. His fraudulent actions netted him commission payments of over £377,000. He provided fake documentation to register two overseas pension schemes before submitting the fake documents to ensure the funds were released without suspicion or delay to bank accounts he controlled. On occasions he even made telephone calls to the UK pension companies posing as the policy holder. On one call he disguised his voice with a Cypriot accent giving the impression he was calling from overseas. To add further legitimacy to the scam, he used articles from the internet to create a PowerPoint presentation to sell the scheme to unsuspecting UK clients, HMRC added. He then took a cut of the funds before passing the balance onto the pensioners. In total, Pearson persuaded over thirty UK pension holders to make unauthorised transfers of £3.4m to avoid paying tax of £1.9m. The value of the funds released was estimated as £3,440,143, of which £2,997,018 was returned to "clients". He also released his own pensions, valued at £74,619.08. In total approximately £377,608 was taken as commission. He used the proceeds of his scam to maintain a lavish lifestyle, driving expensive cars and owning luxury homes both in the UK and Cyprus. Bob Gaiger from HM Revenue & Customs said: "Whilst Pearson was living a life most people could only dream of, he left the individuals he conned out of pocket and without the pension funds they expected. "HMRC will not tolerate this type of blatant fraud and will investigate and prosecute those found to be involved in stealing from the public purse. If you have any information about tax fraud please contact our 24 hour hotline on 0800 50 5000". On sentencing Pearson, His Honour Judge Richardson QC, said: "You are branded a criminal, your life is utterly destroyed, and you are totally dishonest in your deceitful actions."

SFO probes banks over asset-backed security sales

2011-09-05T12:20:00.001+01:00

The Serious Fraud Office is conducting an examination into banks and their offering of asset backed securities, as part of a ‘scoping exercise’ to see if products have been misrepresented to UK clients. The watchdog said it is consulting with relevant ‘people in the city’ as part of its broad-sweeping investigation into any potentially fraudulent sales of asset backed securities. A spokesperson for the SFO said: ‘We are conducting a scoping exercise into UK banks about all asset backed securities.’ Although the watchdog said this examination has been going on for ‘some time’, it would not clarify whether it was targeting any particular types of asset backed securities. After 2008, asset backed products such as collateralised debt obligations and mortgage backed securities came under fire for arguably sparking the financial crisis. As part of the exercise, the SFO is making inquiries into Goldman Sachs, including the ‘Timberwolf’ deal, a mortgage security underwritten by the bank in 2007, which has been scrutinised by lawyers in the US, according to the Financial Times. Earlier in the year, the SFO said it was looking into exchange-traded funds, as a 'potential threat' to market stability and as a form of asset-backed security which could follow the path of CDOs.

Solyndra, a manufacturer of solar panels, is bankrupt,

2011-09-01T17:50:00.001+01:00

Solyndra, a manufacturer of solar panels, is bankrupt, which is inconvenient for the Obama administration, which extended half a billion dollars’ worth of loan guarantees to the firm as part of the president’s stimulus effort. The inconvenience extends to the 1,100 Solyndra employees who have just lost their jobs and to the U.S. taxpayers who may be on the hook for the bankrupt firm’s loans. The project was indeed “shovel ready,” as the president likes to put it; unhappily, in this case, the shovel belongs to the gravedigger. Perhaps the gravestone could read: “Another project funded by the American Recovery and Reinvestment Act.”

Anglo in bankruptcy action on Drumm

2011-09-01T17:49:00.001+01:00

Rogue lender Anglo Irish Bank has asked a court in the US to deny its former chief executive discharge under bankruptcy laws.
David Drumm could walk away owing more than 10m euro in debts to his former employer if declared bankrupt, which he filed for last year.

Anglo has confirmed it filed papers in the US objecting to his bankruptcy and urging the courts not to protect him.

If granted, it means Mr Drumm, who lives in the Boston suburb of Wellesley, Massachusetts, will still be liable for his debts.

It is understood Anglo claims its former chief committed fraud in connection with a loans for shares scandal involving 10 of its biggest clients.

A judge hearing the high-profile trial will have to decide if Mr Drumm will have to account for the alleged fraud. Mr Drumm moved to the US in December 2008, shortly before Anglo was nationalised.

In a statement, Anglo said it had filed a Complaint for Denial of Discharge under section 727 of the US Bankruptcy Code, which is an application to bar Mr Drumm's discharge from US bankruptcy generally.

"The bank has further filed a Complaint to Determine Dischargeability pursuant to section 523 of the US Bankruptcy Code, which is a separate application to bar Mr Drumm's discharge from debts owed to the Bank specifically," it added.

"We understand that the US Bankruptcy Trustee is also filing a section 727 Complaint for Denial of Discharge."

Formerly bankrupt companies become M&A targets

2011-09-01T17:43:00.001+01:00

Hundreds of businesses crawling out of bankruptcy in the hands of hedge funds and other financial owners are hanging the "for sale" sign on their doors.

Distressed debt investors such as Paulson & Co, Avenue Capital and Silver Point Capital that took control of bankrupt companies during the financial crisis are looking to cash in on their investments as the economy recovers.

As a result, once-bankrupt companies in sectors such as auto parts, media, chemicals and technology that ended up in the hands of hedge funds and buyout shops are expected to come to the market soon, bankers said.

"There are some great brand names that are being rehabilitated and re-purposed into healthier companies," said one investment banker, who declined to be named because he was not authorized to speak to the media. "There will be demand for them when they come off the shelf."

Some already are. Auto parts supplier Cooper Standard (COSH.OB), which came out of bankruptcy in May 2010 under the control of hedge funds including Silver Point and Oak Hill Advisors, is shopping itself.

Delphi Corp, with Silver Point and Elliot Management among its owners, is planning an initial public offering.

Others such as Dura Automotive, in which Patriarch Partners has a majority stake, and Lear Corp (LEA.N), owned partly by Goldman Sachs (GS.N), could hit the market in the next year or two, bankers said.

Paulson and Avenue declined to comment. Silver Point and the auto suppliers could not be reached for comment.

MEDIA, TECH COMPANIES

Media companies in a similar situation are likely to consolidate, and direct marketing companies in particular could be next, restructuring bankers said.

That includes Vertis Holdings, brought out of bankruptcy by GE Capital (GE.N) and Avenue, and Source Interlink, which emerged with JPMorgan Chase's (JPM.N) help.

Other media companies that came into financial ownership through bankruptcy include Charter Communications (CHTR.O), partly owned by Apollo Management (APO.N); RHI Entertainment, the Journal Register, Young Broadcasting, and ION Media Networks.

"Some of the now-bankrupt media companies still have broad customer bases and strong franchises," one of the bankers said. "Once that gets fixed and repackaged, these can be viable companies again."

Technology companies such as Satelites Mexicanos and MagnaChip Semiconductor Corp (MX.N) have also emerged from bankruptcy in hedge fund and investor hands in the past two years.

In the chemicals sector, companies such as Tronox Inc (TROX.PK) find themselves in a similar situation.

The companies could not be reached for comment.

WAITING FOR EXIT

Bankruptcy tends to be more of a playground for hedge funds than strategic buyers scouring for targets.

Most corporations interested in acquiring troubled companies prefer to wait until a bankruptcy is complete, said Barry Ridings, vice chairman of U.S. investment banking and co-head of restructuring at Lazard Ltd (LAZ.N).

Bankruptcy reorganizations might include closing unprofitable or nonstrategic divisions, shutting down plants and solving issues with unions or other workers, Ridings said.

Hedge fund owners can keep bankruptcy costs down as they push for quick changes and an exit, said David Resnick, chairman of the Global Financing Advisory group at Rothschild.

"They're measured by their return on their investment, so they are very sensitive to getting something done sooner rather than later," Resnick said.

It is not that strategics never buy these ugly ducklings. Investor Charles Ergen purchased three bankrupt companies for his Dish and Echostar Corp (SATS.O) businesses in 2011.

"There's value received if you are willing to enter a complex, contentious situation," Resnick said. "Some people say that the value they'd be getting just isn't worth it."

British banks ordered to disclose debt exposure amid contagion fears

2011-08-12T01:12:00.001+01:00

Financial Services Authority (FSA) has stepped up scrutiny of UK banks' exposures to foreign government debt as fears of European sovereign debt contagion sent markets into a renewed frenzy yesterday.

The City watchdog is in talks with Britain's banks and their auditors to ensure consistent disclosure of their sovereign holdings according to the standards of the recent European stress tests in their year-end results.

As fears over which banks could be hit by downgrades of sovereign bonds continue to rattle markets, the FSA has also upped its day-to-day monitoring of UK lenders' exposures.

An FSA spokeswoman said: "We have been holding discussions with the banks and their auditors in relation to their sovereign exposures. What we are looking for is greater consistency and disclosures across firms to give the market clear information."

Yesterday marked another round of turmoil for Europe's banks as fears about exposures to debt-stretched economies made investors question their ability to fund in the market.

Shares in Société Générale gyrated as the French lender sought to stamp out doubts about its financial strength. The bank was the focal point of Wednesday's rout of bank shares.

SocGen's chief executive, Frederic Oudea, staged a fightback overnight, dismissing negative speculation as "absolute rubbish". He called for the French market regulator to investigate the source of market rumours.

"People are scared so the tiniest information touches off irrational fears," he said. "[Our clients] should not listen to this stuff, which is totally baseless."

His comments rallied the shares but they then fell more than 9 per cent in a day of frenzied trading before closing up 3.7 per cent. Speculation about a European ban on short selling helped boost shares. BNP Paribas, France's biggest bank, closed up slightly after falling up to 7.5 per cent earlier.

However, average short interest across the Euro Stoxx banks sector was 2.85 per cent, only marginally above the average for European companies in general, according to Data Explorers figures. Short interest in SocGen was 1.23 per cent and was 1.95 per cent for BNP Paribas.

The figures suggest short selling was not a major factor in the banks' declines, though rumours planted by a few short sellers can wreak havoc.

The cost of insuring SocGen's senior bonds hit a fresh record, according to data provider CMA. Speculation about a downgrade of France's sovereign debt, a bigger bailout for Greece and the bank's ability to raise funds put SocGen shares under pressure.

Banks' overnight borrowing from the European Central Bank hit a three-month high as prices for inter-bank lending showed Europe's banks increasingly unwilling to lend for longer than overnight.

Analysts at Royal Bank of Scotland said SocGen was among European banks that rely most heavily on short-term wholesale funding.

"The mix of euro doubts and rating fears in recent days and weeks may have dented the confidence of funding counterparties, which has then fed back into equity markets," they said.

Markets rebounded after heavy falls the day before but sentiment was highly volatile. The FTSE 100 dropped as much as 1.3 per cent but rounded off the day up 3.1 per cent at 5162.83. The rally was led by Barclays which jumped 8.6 per cent and recovered almost all Wednesday's losses.

European shares registered their biggest surge for 15 months as the Stoxx 600 index jumped 3.2 per cent. However, the index has fallen 21 per cent since it hit a high for the year on 17

US is stripped of its AAA credit rating for the first time

2011-08-06T08:31:00.001+01:00

The move is a major political embarrassment coming less than a week after high-stakes wrangling among Republicans, Democrats and The White House pushed the US to the brink of default.
S&P had threatened the move in July if Washington failed to deliver what it judged to be a serious plan to tackle the country's deficit and last night, after several discussions with administration officials, the agency followed through. The US government's rating was cut to AA+ and the outlook for the debt was kept on negative in a move designed to keep pressure on Capitol Hill to go further than it has in addressing its $14trillion of debt.
"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed falls short of what, in our view, would be necessary to stabilise the government's medium-term debt dynamics," S&P said.
In its statement, S&P said that it had changed its view "of the difficulties of bridging the gulf between the political parties" over a credible deficit reduction plan.
S&P said it was now "pessimistic" about the capacity of Congress and the White House to stabilise the government's debt.

14 alleged members of the mortgage fraud ring include real estate attorneys, title closers, appraisers and straw buyers

2011-08-05T21:58:00.001+01:00

14 alleged members of the mortgage fraud ring include real estate attorneys, title closers, appraisers and straw buyers. They were charged with conspiracy to commit bank fraud and wire fraud charges. The scheme involved more than 100 properties in New York and Florida, many of which are now in default or foreclosure.

The FBI has 10 of the suspects in custody, and is negotiating the surrender of others. Thirteen of those charged live in the New York area, and 12 of the suspects are expected to appear Thursday afternoon before a judge in the Southern District federal court in New York.

The other alleged member of the mortgage fraud ring was arrested in Texas Thursday morning.

The alleged leader of the ring, according to the indictment, is Gerard Canino, who created numerous mortgage brokerages, including First Class Equities of Long Island, and TAT Mutual Capital. Through these brokerages, the subject allegedly facilitated fraudulent real estate loan transactions throughout the New York metropolitan area.

Five loan officers, four attorneys and one disbarred attorney also were charged in connection to the alleged mortgage fraud.

From 2004 to 2009, Canino and his co-conspirators allegedly arranged home sales between "straw buyers" -- persons who posed as home buyers, but who had no intention of living in, or paying for, the mortgaged properties -- and homeowners, often people in financial distress, who were willing to sell their homes.

These straw buyers were allegedly paid hefty sums to obtain fraudulent mortgages, which were obtained by submitting fraudulent applications and documents, including fake W-2s and tax stubs, according to the indictment.

Wachovia Gets Dreier-Related Suit Tossed, While Rothstein Suits Settle

2011-08-05T21:56:00.001+01:00

The trustee in charge of liquidating the estate of the law firm of convicted Ponzi-schemer Marc Dreier has lost a bid to recover money from Wachovia Bank, which loaned millions of dollars to Dreier prior to his conviction and his firm's collapse.
Am Law Daily sibling the New York Law Journal reports that Manhattan federal bankruptcy judge Stuart Bernstein dismissed the lawsuit Wednesday. Trustee Sheila Gowan had alleged that Wachovia loaned millions of dollars to Dreier after the bank should have become suspicious that the lawyer was acting illegally, the NYLJ reports.
Jordan Siev, Wachovia's lawyer and the New York managing partner for Reed Smith, declined to comment to the NYLJ. Gowan and Howard Ressler, who represented the trustee, also declined to comment. Both are partners at Houston-based Diamond McCarthy.
Dreier was arrested in December 2008 for orchestrating a $700 million Ponzi scheme and selling fraudulent promissory notes. According to Wednesday's decision, Gowan alleged that Wachovia had “inklings” that something was wrong in October 2007 when Dreier bought a $17 million yacht using funds from Dreier LLP accounts at Wachovia and soon afterward asked for an $8 million personal loan secured by a mortgage on the yacht.
Judge Bernstein ruled that Wachovia's suspicions did not amount to knowledge of the scheme and dismissed the case. Dreier is currently serving a 20-year prison sentence.
In another high-profile Ponzi case, Am Law Daily sibling publication the Daily Business Review reports that two clawback cases have been settled connected to the bankruptcy case of Scott Rothstein's defunct law firm, Rothstein Rosenfeldt Adler.
Fort Lauderdale federal bankruptcy judge Raymond Ray approved a settlement under which Chris Salamone, whom the DBR describes as a "former Rothstein friend and investor," will repay the bankrupt estate $500,000. The judge also approved a separate settlement under which Rothstein's former law partner Carl Linder will repay $75,000.
Rothstein pleaded guilty in January 2010 to running a $1.2 billion Ponzi scheme through his now-defunct firm. In June of that year, he received a 50-year prison sentence. Rothstein’s attorney is Marc Nurik, who operates his own practice in Fort Lauderdale.
According to the complaint filed by Rothstein Rosenfeldt Adler bankruptcy trustee Herbert Stettin, Salamone invested $1.8 million with Rothstein during an 11-month period beginning in 2007 and received $2.4 million in return, the DBR reports.

Bankrupt Tour Firm Hurting Local Turkish Hotels

2011-08-05T21:54:00.001+01:00

The bankruptcy of Britain-based Holidays 4 UK is victimizing Turkish hoteliers, according to the Turkish Culture & Tourism Ministry’s office in the western province of Muğla.

Tourists who have been spending their vacation in Turkey’s Aegean province of Muğla and its towns under tours operated by the British company are still enjoying their holiday in Turkey, thanks to efforts by the office and the South Aegean Touristic Hoteliers Association, or GETOB.

Those who have completed their vacation are being sent to their countries from Dalaman and Bodrum’s Milas airports.

“Tourists are not the victims of this bankruptcy,” Muğla Culture & Tourism Director Kamil Özer told the Anatolia news agency.

GETOB Chairman İlhan Açıkgöz said the company had brought 43,000 tourists to Turkey so far, and it had booked for 40,000 people at Turkish hotels.

“Air Transportation Organizers’ Licensing [ATOL] will meet some of the losses due to the company’s bankruptcy, however ATOL will not pay outdated receivables,” he said.

Açıkgöz also said Turkish hoteliers would have a financial loss between 50 million and 100 million British pounds due to the bankruptcy.

“The only victims of this bankruptcy are Turkish hoteliers,” he said.

Some 6,000 customers of the British tour operator are spending their vacation in Mugla’s Marmaris town, an international tourism destination.

After Brighton-based Holidays 4 UK company’s bankruptcy, travel company Abta announced that the British tour operator actually had 12,800 customers in Turkey.

Speaking to the BBC, British Civil Aviation Authority’s executive David Clover said there was nothing to be concerned about, and every one would come back as planned.

Clover said customers who had paid the company but had not yet gone on their holiday would be refunded.

Holidays 4 UK had 18 employees and annual turnover around 35 million British pounds. It was carrying 100,000 passengers a year.

Bankrupt Rhode Island city may default

2011-08-05T21:52:00.001+01:00

Even an anti-default state law might not prevent Central Falls, the tiny Rhode Island city forced into bankruptcy by ballooning pension costs, from defaulting on some debt, credit agency Standard & Poor's warned Friday.

Rhode Island enacted the law to safeguard other cash-strapped cities and towns in the state to reassure potential investors who might be alarmed by the possibility that more bankruptcies lie ahead.

Bankruptcies are rare events in the municipal bond market, but the economies and fiscal health of many states, counties, cities and towns are under stress because of the shallowness of the country's recovery from the recession.

This intensifies concerns that there will be more bankruptcies, a step being considered by Alabama's Jefferson County.

A Jefferson County bankruptcy would be the biggest in U.S. history. As demonstrated by California's Vallejo, which filed for bankruptcy three years ago, this strategy can be lengthy and expensive.

Standard & Poor's, referring to the recent Rhode Island law's technical name in its statement, said:

"Given the Chapter 9 bankruptcy filing, the prospect of full and timely payments on the General Obligation debt is uncertain, notwithstanding that, pursuant to the recently amended Rhode Island General Laws in Chapter 45-12-1, a first lien on ad valorem taxes and general fund revenues secures the bonds."

S&P said the outlook for Central Falls, which only has 19,000 residents, was "developing." In May, the credit agency cut the city's credit rating to C from BBB-minus.

Central Falls is current on all its debt payments, S&P said. "City officials have expressed to Standard & Poor's that Central Falls intends to continue to make full debt service payments and prioritize debt," it said.

Now under the control of a receiver, Central Falls has an $80 million shortfall in its pension fund and its bill for retiree healthcare is more than four times its annual $17 million budget.

City officials have asked the bankruptcy court to reject its collective bargaining agreements with the police, fire, and municipal employees unions, S&P said.

That is not the only harsh medicine expected: Central Falls officials also plan to wring most cost savings out of city workers. S&P said the methods include "increased copayments, deductibles, and coshares of premiums on active employee and retiree health plans and a reduction in pension plan cost-of-living adjustments."

George Osborne interrupts holiday to make debt crisis calls

2011-08-05T20:40:00.001+01:00

Chancellor George Osborne held a round of urgent calls on the financial crisis from his Californian holiday home, including one to Mervyn King, the governor of the Bank of England, in which the two men agreed that the eurozone countries needed to move more quickly to set up the new euro-support structure agreed at their summit a fortnight ago.

Osborne also urged Italy and Spain to show that they will force through credible deficit reduction plans. In an attempt to dispel the suggestion that key ministers were complacently underplaying the crisis by staying on holiday, the Treasury gave a briefing on a round of calls made by Osborne, including one with the prime minister, on holiday in Italy.

David Cameron also spoke to German chancellor Angela Merkel by phone to gauge the German reaction to the crisis.

The Germans expressed anger that European Commission president José Manuel Barroso had suggested that fresh steps were needed beyond those agreed at the crisis summit on July 21.

The British focus is on seeing existing plans implemented, including empowering the European financial stability facility to buy bonds in the secondary market, offer precautionary credit lines and lend to recapitalise banks. The treasury minister, Justine Greening, admitted the developing crisis may make it harder for the government to meet its deficit reduction targets. She said: "Clearly the challenge we've got of getting our public finances back into order, rebalancing the economy and getting it back on track and creating jobs is now set against a very difficult global economic backdrop."

The most senior cabinet minister on duty, foreign secretary William Hague, insisted Britain was "not in the firing line", but convened an unscheduled stocktake with officials to assess the damage being done to Britain's banks.

The business secretary, Vince Cable, insisted the crisis would not damage the public finances, adding Britain is seen as a safe haven. He said: "Our banks have been made safer, there's a much stronger regulatory system in place and there's absolutely no reason why anybody should panic."

The shadow chancellor, Ed Balls, intervened, writing on the Guardian's Comment is Free site: "The idea that Britain – which has not grown for the last nine months and whose markets have fallen in the last 48 hours – is a safe haven or 'out of the firing line', as the foreign secretary William Hague claimed today, is not only complacent but patently absurd.

"The government needs to recognise that what we need in Britain, and across Europe, is a plan for growth. Without growth it will not be possible to get deficits down in a sustainable way. That is why the IMF and the government's own watchdog, the Office for Budget Responsibility, have issued warnings in recent days."

In one of the biggest banks in the centre of Athens a clerk is explaining how his savers have been thronging to pull out their cash.

2011-08-05T20:38:00.001+01:00

Wary of giving his name, he glances around the marble-floored, wood-panelled foyer before pulling out a slim A4-sized folder. It is about the size of a small safety-deposit box – and those, ever since the financial crisis hit Greece 18 months ago, have become the most sought-after financial products in the country. Worried about whether the banks will stay in business, Greeks have been taking their life savings out of accounts and sticking them in metal slits in basement vaults.

The boxes are so popular that the bank has doubled the rent on them in the past year – and still every day between five and 10 customers request one. This bank ran out of spares months ago. The clerk leans over: "I've been working in a bank for 31 years, and I've never seen a panic like this."

Official figures back him up. In May alone, almost €5bn (£4.4bn) was pulled out of Greek deposits, as part of what analysts describe as a "silent bank run". This version is also disorderly and jittery, just not as obvious. Customers do not form long queues outside branches, they simply squirrel out as much as they can. Some of that money will have been used to pay debts or supplement incomes, of course, but bankers put the sheer volume of withdrawals down to a general fear about the outlook for Greece, one that runs all the way from the humble rainy-day saver to the really big money.

'Clueless' government

"Every time the markets move, I get phone calls," says an Athens-based fund manager. "They're from investors asking: 'How can I get my money out of the country?' "

One senior investment banker is more blunt: "People are scared that the government doesn't know what the fuck it's doing." He tells a story about an acquaintance who took out €30,000, wrapped it in a bag and stashed it in his garage. "The bag had previously had some food inside," he says. "So it attracted rats, who ate the notes."

Bags of money in garages, frightened savers fleeing banks and even the country: these aren't the sort of stories you associate with a comparatively-prosperous European country, but with a developing one facing a life-or-death economic crash. The fact that they are now emerging from Greece not only indicates the scale of financial distress, it suggests something else: Greece today looks like parts of Latin America in the worst moments of its financial crisis.

In an echo of the days of Jim Callaghan, the International Monetary Fund is back in Europe, doing what it is more accustomed to doing in Buenos Aires or Brasilia: making emergency loans and telling the government how to run its economy. What is more, the scale of the changes an overborrowed Athens is now making are so vast and so rapid that they will leave Greece looking like a different country.

The government itself describes its plan to slash public spending and jack up taxes as one of the most ambitious deficit-reduction programmes in the world. But what often goes missing from this discussion of a fiscal crash-landing is the impact on the lives of citizens who have precious little time to adjust. When salaries of civil servants are slashed by up to 30% within a few months, as happened last year, and over 20% of public-sector workers face unemployment within the next four years – plus whole swathes of national assets are to be privatised before Christmas, with more job losses doubtless to follow – then you are talking about a wholesale transformation of a workforce.

Greece is already one of the poorest and most unequal societies in Europe, reckons Christos Papatheodorou at the Democritus University of Thrace. Among the few countries that look worse are Romania, Bulgaria and Latvia. So what will Greek society look like after the government's austerity measures take effect? He pauses, then says: "It will probably look like a developing country."

That message has not been lost on workers either: one of the new nouns used by trade union members and others who oppose the cuts is kinezopeisi, or China-isation. The claim is that such large drops in wages will lead to a workforce paid barely more than their counterparts in Shenzhen.

The oddest thing of all is that some of the leading lights in the government appear to see nothing wrong in a wholesale transformation of Greek society, albeit not into one that resembles an enterprise zone in eastern China. Elena Panaritis is widely tipped as one of the up and comers in Greece's government, and it is not hard to see why: smart, formidably well-trained in economics after a career with the World Bank, funny and fluent in English, she is exactly the sort of person any prime minister would choose to give a keynote address to fretful institutional investors.

And for a Greek politician involved in pushing through some of the most abruptly painful economic measures in the country's history, she does not seem especially Greek. When I observe how many Apple computers are in her office, she replies: "That's because I'm not Greek, I'm American." Her speech is American-accented and peppered with "darn" and "have a nice day". [See footnote] When asked to describe how Greece needs to change its economy, her answer revolves around changing its institutions and its structures – in other words, making Greece less Greek. Castigating the bureaucracy, she says: "It's not a kibbutz, it's a big country!"

This is a line that you hear often enough from those who want Greece to change. By European standards, Greece has an average-sized public sector, but a very leaky tax collection system. What the public sector is, however, is under-resourced and inefficient. On my last day in the country, I wangle my way inside a public pensions office for those working in the tourism industry: there are just two Dell computers in one large room, and lever-arch files dating back 30 years. No one ever paid for the data to be computerised, I am told, and the result is that one day's work takes three.

Private sector woes

The other big problem is in the private sector, with few industries that are able to pay their way in the world. Jason Manolopolous, who is author of a new book called Greece's 'Odious' Debt, says that for years Greece was buying more from the rest of the world than it was selling. "We were buying BMWs from the Germans and selling them tomatoes."

For now, those days are well and truly over. In Athens' upmarket shopping district of Kolonaki, boutiques that used to have waiting lists for designer handbags have shut. One sign says the owners have relocated – to Rome. In one clothes shop, with racks of discounted Calvin Klein and DKNY, the manager, Sav, explains what's happened: "In this crisis, the middle classes have been hollowed out." That is just what happened in Buenos Aires during its crash last decade.

The result is that people who thought themselves used to one way of life, and in one social class, are getting used to a sharp downgrade.

In one factory, where a staff of 200 is now down to 30, the manager points to empty floors and idle machines. They're now all on unemployment benefit, he says. "Mind you, our pay has been cut too, so we're not that far off."

Outside the soup kitchen of the Aghia Triada church in Piraeus, near Athens, more of Greece's new poor are waiting for a handout. Anna and her two daughters have walked in the midday sun to get here and are now queueing up with the long-term homeless.

That is not Anna's situation though; she lost her job three years ago but has still hung on to her house. That said, she no longer has the income or the benefits to pay bills and the electricity was cut off last month.

Inside, Pater Daniel, the head priest, says that he's noticed a lot more "well-dressed, clean" people taking free meals from the church. He reels off stories of a 23-year-old man who left last week for Australia, and a 40-year-old woman who lost her job on Friday.

Because the Greek Orthodox church is partly on the state payroll, the clergyman's salary has fallen by almost 10% to €15,000 a year.

Is he saying that the Orthodox church is also subject to public spending cuts? Pater Daniel laughs, then holds up five fingers: there are five priests in Piraeus, and soon there will only be one. He's pondering taking a second job.

"There is too much pain, and people are looking for someone to listen and squeeze their hand." He sighs. "Everyday I leave this church with a headache."

Insolvency firm Jirsch Sutherland has begun clawing back money former Astarra Asset Management (AAM) director Shawn Richard paid out of his overseas bank account

2011-08-01T02:10:00.001+01:00

Insolvency firm Jirsch Sutherland has begun clawing back money former Astarra Asset Management (AAM) director Shawn Richard paid out of his overseas bank account before becoming bankrupt.

Richard made numerous transactions from his Liechtenstein-based LGT Bank account prior to declaring bankruptcy, including a US$160,000 ($146,000) transfer to his parents in Canada, a representative of Jirsch Sutherland, Richard's bankruptcy trustee, said.

"The trustee demanded repayment of the US$160,000 from his parents," Jirsch Sutherland senior manager Michael Chan told InvestorDaily.

"Negotiations were conducted after and a settlement has been agreed on between the parties for a lesser amount."

Richard voluntarily entered bankruptcy in late January over the Trio Capita/AAM fraud and owed unsecured creditors about $3.22 million, a Jirsch Sutherland letter to the New South Wales Supreme Court said.

Most of the money is owed to National Australia Bank (NAB) and the debt was in relation to a "personal guarantee pertaining to loan accounts held by AAM" and Astarra Funds Management, it said.

Chan said NAB had made a formal claim of about $3.2 million against Richard.

NAB was unable to comment due to client confidentiality, a NAB spokesperson said.

The letter said that in terms of assets, Richard held nearly $40,000 in his Westpac bank accounts and also an undisclosed amount in the LGT Bank account.

The LGT account had nothing in it when Richard entered bankruptcy, Chan said.

"The funds in the LGT account was dispersed well before the bankruptcy occurred. It was dispersed over a period of time before the bankruptcy," he said.

However, Richard had provided limited assistance to Jirsch Sutherland in obtaining the LGT Bank statements and providing details of transactions in the account, he said.

"By him assisting us in getting the LGT Bank statements we are now able to determine where the money has been paid to as per the details on the bank statements from the LGT account," he said.

Jirsch Sutherland would be looking to claw back other transactions where possible, he said.

"There is definitely a significant amount that needs further investigation. The crux of the investigation is the LGT account," he said.

Richard was jailed on 22 July after a NSW Supreme Court judge convicted him of dishonest conduct while running a financial services business.

Last year, he pleaded guilty to two charges of dishonest conduct while running AAM and admitted to a third charge of making false statements in relation to financial products following an ASIC investigation.

The charges each carry a maximum penalty of five years' imprisonment or a $220,000 fine, or both.

Richard's sentencing is scheduled for 12 August.

"Mr Richard, in respect of the two counts of the indictment to which you pleaded guilty, I convict you on both," Justice Peter Garling said during the hearing.

"However, it is proper that I indicate to you that I will be imposing a sentencing of imprisonment.

"I wish, however, to proceed carefully given the evidence that is presented before me and the submissions on behalf of the crown and on your behalf."

It is alleged Richard dishonestly received undisclosed payments in his role as investment manager of the Astarra Strategic Fund (ASF) and Astarra Superannuation Plan (ASP).

ASIC alleged Richard and AAM received in excess of $6.4 million in undisclosed payments.

Court dismisses case against Anglo

2011-07-27T23:41:00.001+01:00

The High Court has dismissed the "pathfinder" action by Century Homes co-founder Gerard McCaughey over expected losses from a high-risk Anglo Irish Bank backed investment in two New York hotels.

About 50 "high net worth" Irish individuals had invested an average $1m in the hotels fund in 2006 and the court's decision has adverse implications for 23 similar actions by other investors.

Mr Justice George Birmingham today found there was no evidence of fraud by Anglo in relation to how the investment was promoted and managed and also dismissed all other claims by Mr McCaughey concerning the investment.

The judge said Mr McCaughey clearly "now regrets his investment decision but investor remorse does not provide a basis for a successful legal action".

"Had the hotels been disposed of at a time when they had increased in value very substantially and had a profit been recorded, his attitude might well have been different," the judge added. "Unfortunately that didn't happen and it appears that the plaintiff is now facing a loss on his investment."

"However, that is sometimes the lot of those who participate in high risk investments," he said.

Just because an investment fails to deliver hoped for returns, that did not mean another party was culpable, Mr Justice Birmingham said. "Still less does it provide a basis for concluding there had been fraud on anyone's part".

Having delivered his 95-page judgment, the judge adjourned the case to October when he will deal with costs and other issues. The case ran for several weeks with legal costs expected to amount to several million euro.

Mr McCaughey had sued Anglo Irish Bank and the Anglo-owned Delaware-based Mainland Ventures Corporation (MVC) over the Anglo Irish New York Hotel Fund, a private equity investment.

The action by Mr McCaughey, with addresses at Sandymount, Dublin and Manhattan Beach, California, was regarded as a test or "pathfinder" action for cases by 23 other investors.

Both defendants were sued for $23 million dollars over alleged fraudulent and/or reckless concealment and/or misrepresentation concerning the fund, set up to purchase and renovate the Beekman Tower Hotel and Eastgate Tower Hotel in Manhattan. The defendants had denied the claims.

The investors had claimed a "Black Brochure" given to them in September 2006 aimed at encouraging them to invest in the hotels fund failed to disclose key risks involved and amounted to "conscious and deliberate dishonesty". The judge rejected those claims.

The court heard none of the investors had ever seen the hotels and did not know the persons in the US who brought the project to Anglo in New York. The project involved the purchase of the two hotels with the intention of renovating them.

RECEIVERS ARE to take control of housebuilder McInerney on behalf of three banks owed €113 million

2011-07-23T01:17:00.001+01:00

RECEIVERS ARE to take control of housebuilder McInerney on behalf of three banks owed €113 million after the Supreme Court yesterday ruled against a rescue plan for the business backed by US private equity fund Oaktree Capital.

The ruling ends the process that began last August when the High Court appointed Bill O’Riordan of PricewaterhouseCoopers as examiner to five of the group’s Irish firms, and lifts the protection from creditors given to the business at that point.

As a result, three banks – Anglo Irish, Bank of Ireland and KBC – are to appoint receivers, said to be accountancy firm KPMG, to the firms. The banks had proposed to regain their debt through a 10-year receivership, during which the companies’ sites would be developed and the houses sold.

Meanwhile, the board of their parent, McInerney Holdings plc, will go ahead with an extraordinary general meeting next Friday, where it will ask shareholders to place that entity in liquidation. Its British and Spanish operations have been sold and the proceeds used to pay other bank debts.

The rescue plan involved an offer of €25 million from Oaktree to the banks in final settlement of the debt. The US fund was prepared to invest up to €54 million, including the bank settlement, in the Irish business, which it believed had a long-term future.

The High Court refused to approve the proposal earlier this year as it unfairly prejudiced the interests of Belgian lender KBC.

Yesterday Mr Justice Donal O’Donnell, Mr Justice Joseph Finnegan and Mr Justice Liam McKechnie comprised the majority dismissing the McInerney appeal, while Mr Justice Nial Fennelly and Ms Justice Fidelma Macken were the dissenting judges.

The court also dismissed the banks’ cross-appeal against the decision of Mr Justice Frank Clarke to allow the High Court case to be reopened after he had decided all three banks would be prejudiced by the rescue plan.

Mr Justice Clarke revisited his decision after being told there was a likelihood the National Asset Management Agency would take over the loans to McInerney from the two Irish banks. In his final decision, he ruled, the plan would be unfairly prejudicial to KBC but, even where a rescue plan was unfairly prejudicial to only one party, it remained unfairly prejudicial.

In his 74-page judgment, Mr Justice O’Donnell said McInerney had failed to show the receivership model would not have the prospect of a return of significantly more than €25 million and also failed to show the proposals were not unfairly prejudicial to the secured creditors. The High Court was correct in concluding it could not approve the proposals, he said.

There was something fundamentally implausible in the companies’ vehement claims the receivership-controlled work out would generate a return of only €18 million – or might incur losses of €11 million, he added.

Mr Justice O’Donnell said he believed acquisition by Nama of some of the McInerney loans would involve payment to the banks of something more than present-day market value of the properties involved. The companies also failed to show KBC would not do better under that than under the rescue scheme.

McInerney’s directors said afterwards they were disappointed at the ruling. They pointed out it meant a €54 million investment that would have saved 100 jobs and resulted in a €2 million payment to trade creditors, could not now go ahead.

It was “highly regrettable that the banks were unwilling to reach an accommodation with the investor and that a company such as McInerney, capable of attracting such a substantial foreign investment in this manner, should be allowed fail,” they said.

Holidaymakers hit by tour operator collapse

2011-07-21T00:44:00.001+01:00

Around 1,800 Briton have had their holidays cancelled as a result of the failure, while a further 525 customers are currently overseas.
The Civil Aviation Authority (CAA) confirmed that any travellers who have lost their booking are covered by the ATOL protection scheme, and will be able to claim a refund. Those holidaymakers still abroad will be able to complete their holiday and return to Britain as planned, although they may be forced to pay for their accommodation again and then claim a refund with the CAA when they return home.
Earlier this month Telegraph Travel reported that strikes and civil unrest in Greece had led to a sharp fall in holiday sales.
Analysis of more than 130,000 holidays conducted by The Co-operative Travel, the largest independent travel agent in Britain, revealed a 15 per cent decline in bookings to Greece during the last week of June, compared with the same period in 2010.

Barclays has lent £94billion to governments, businesses and households in Portugal, Ireland, Italy, Greece and Spain. HSBC has £23.5billion of exposure while Lloyds claimed it has only £86million of loans to Spain and Italy.

2011-07-16T09:58:00.001+01:00

British banks have more than £200billion tied up in some of the Eurozone’s weakest economies, a major report revealed last night.

Lenders including Barclays and taxpayer-controlled Royal Bank of Scotland have ploughed billions into the so-called PIIGS – Portugal, Ireland, Italy, Greece and Spain.

The study showed how much British banks stand to lose if European countries cannot repay their debts. Eurozone leaders will meet in Brussels on July 21 to discuss a second bailout package for Greece, European Council President Herman Van Rompuy said yesterday.

Big lenders: A report has revealed that British banks have more than £200 billion tied up in some of the Eurozone's weakest economies

Eight banks failed the stress tests by the European Banking Authority. A ninth refused to take part to avoid public humiliation and a further 16 scraped through but remain in the danger zone.

More...
DAILY MAIL COMMENT: Economic crisis shows no sign of letting up with yet more grim news
IAIN MARTIN: Sorry to depress you but there will have to be even harsher spending cuts
The eight banks that failed – five in Spain, two in Greece and one in Austria – must now raise an extra £2.2billion to protect themselves from future losses. All four British banks tested – HSBC, Barclays, Royal Bank of Scotland and Lloyds Banking Group – were given the all clear.

But the report revealed they have a total of £214billion tied up in Europe’s five weakest economies.

The high pass rate in the stress tests stoked fears that they were not robust enough and that the European banking system is still in grave danger.

BRUSSELS THREATENS VAT GRAB
British households could be crippled with yet another VAT rise thanks to a tax grab being plotted by EU chiefs.

Brussels wants to raise the amount which goes from the tax towards EU funding from 0.3 per cent to 1.3 per cent – arguing the cash is needed to balance the EU’s Budget.

Such a move could force up VAT from 20 per cent to 21 per cent. The rise could either be levied directly or be absorbed by the Treasury. A Commission spokesman said: ‘Our proposal is solid, responsible and is designed to make a difference for Europeans in the years to come after the crisis.’

The Treasury said the move would amount to an extra £1.4 billion a year on Britain’s net contribution. A spokesman called the plan ‘unrealistic’ and ‘unacceptable’ and signalled the UK would use its right to veto any hikes.

Stephen Booth, of the Open Europe think-tank, said: ‘There is no justification for an increase, especially when so much of Brussels’ budget is poorly and wastefully spent.’

Critics said the health checks were not credible because they did not take into account what would happen in the event of a country such as Greece defaulting on its debts. Jason Karaian, of The Economic Intelligence Unit, said: ‘It was not politically palatable for the tests to consider an inevitable Greek default

‘After so much dithering to date, there is no elegant solution to the euro area’s debt crisis. The pressure brought to bear by the markets next week should sharpen the minds of policy-makers. Harsh medicine is needed. The sooner that officials swallow hard and take decisive, painful measures to draw a line under the crisis, the quicker that Europe’s sickly financial system can begin to nurse itself back to health.’

RBS, which is 84 per cent owned by the taxpayer, has lent £96billion to the PIIGS.

That includes £1billion to the Greek government and £6billion to the Italian government – which is desperately fighting to stop the crisis reaching Rome. RBS has also lent £55billion in Ireland – with billions tied up in the fragile property market.

Barclays has lent £94billion to governments, businesses and households in Portugal, Ireland, Italy, Greece and Spain. HSBC has £23.5billion of exposure while Lloyds claimed it has only £86million of loans to Spain and Italy.

A previous round of stress tests last year passed all but seven of Europe’s banks. Ireland’s banking system was given a clean bill of health – but collapsed just months later.

Citigroup Estimates It Has $22 Billion at Risk in Five European Countries

2011-07-16T01:06:00.001+01:00

Citigroup Inc. (C), the third-biggest U.S. bank, estimated it has at least $22 billion in loans, trading assets and other “exposures” to Greece, Italy, Portugal, Spain and Ireland.
The net figure includes $13 billion in so-called funded exposure as of June 30, mostly in the form of credit to financial institutions and companies, according to an earnings presentation today on the New York-based firm’s website. Sovereign entities account for “a little more than” $1 billion of that amount, it said.
The remaining $9 billion is unfunded exposure, mainly to international companies based in the five countries, where Citigroup provides settlement and clearing services, according to the presentation. Estimates were based on the firm’s internal risk measures, it said.
“Our exposure to the businesses and the sovereigns in those countries certainly is appropriate given our size, our stature and our business model,” Chief Financial Officer John Gerspach, 57, told reporters today on a conference call.
Citigroup, led by Chief Executive Officer Vikram Pandit, tumbled 5.3 percent in New York Stock Exchange trading on July 11 as concern mounted that Europe’s debt crisis may engulf Italy, which has the region’s second-highest borrowings.
The bank previously disclosed $12.3 billion in loans to Italian customers at the end of 2010, including banks and public entities, and a further $18.4 billion in legally binding “commitments.” This figure doesn’t include so-called hedges, when an investor makes a bet to protect against potential loss on an existing position. The company hadn’t made detailed disclosures on the five countries since then.

Southern Cross Healthcare's demise now moves from the financial markets to its care homes.

2011-07-12T08:41:00.001+01:00

So far, the collapse of the largest care home operator in Britain has been played through a crashing share price and meetings in London hotels, where creditors have battled over its future.
But now, its 31,000 residents will also witness significant changes.
Southern Cross is set to disappear as a name and entity after all of the company's 80 landlords decided to leave. New operators will take over the 752 homes. At best, the rubble of Southern Cross will survive as an outsourcer of back-office services, such as payroll, to a small collection of landlords.
It is not the finale Southern Cross management envisaged.
Chief executive Jamie Buchan was planning for Southern Cross to lose up to 200 homes – through closures and landlords reclaiming properties – and emerge as a leaner operator focused on specialist care such as dementia.

He had proposed a 30pc cut in rents over summer so Southern Cross could rebuild is finances and prepare for the new era.
But landlords have turned their back on Mr Buchan.
In many ways, this is a gamble. High-profile tycoons such as the Livingstone brothers and Nick Leslau must now take responsibility for finding new operators. Backers of the landlords also include a state-backed bank, because Royal Bank of Scotland owns 40pc of Four Seasons.
If the transition of care goes wrong, their heads are on the block. According to Southern Cross, only 250 of the 752 homes have firm plans for new operators in place.
The GMB union has already issued a rebuke to the landlords and their alleged offshore tax bases.
"Southern Cross may be on its last legs but for Southern Cross's 31,000 residents and 43,000 staff this looks like a case of "out of the frying pan, into the fire"," it said. "All this spells months more uncertainty and worry for residents and staff."
However, Daniel Smith, chairman of the Southern Cross landlords' committee, told The Daily Telegraph he is "very confident" the "challenging" transition will be a success.
"It is a complex process and it will unfold over the coming weeks," he said, before offering reassurances about the quality of new care home operators.
"Unless you are an operator, the landlords are not getting involved in care delivery. Southern Cross are the current operators and the landlords will find new operators.
"It is a highly regulated industry. So you cannot have an operator that does not pass a Care Quality Commission test."
Mr Smith said property owners thought carefully about splitting up the business. The key factors in the final decision, he explained, were doubts about damage to the Southern Cross brand and the benefits of the company's size.
"I think economies of scale have produced largely illusive in the industry," he said. "If you are a landlord and have a portfolio of 100 homes out of 750 homes, wouldn't you rather be 100 out of 100? You would have an operator focused on driving performance in your homes."
Some of the landlords have been openly critical about the management of Southern Cross – blaming a drop in occupancy rates rather than a £250m rental bill as the reason for the company's problems – and have already said they will take control of their homes,
Bondcare and Four Seasons, which each own more than 40 homes, will operate their care homes and scrap closure plans by Southern Cross. Bondcare is also thought to be one of three parties, including Healthcare Homes, in talks about operating London & Regional's 90 homes.
Meanwhile, NHP, the biggest landlord with 250 homes, has brought in the former Priory chief executive Chai Patel as an adviser. Sources say his business Court Cavendish will operate NHP's homes when Southern Cross is closed and could also take over homes owned by Loyds, another leading landlord.
However, there are 80 landlords in total, many of which own just one home and have no deal with a new operator. Therefore, significant questions remain unanswered. Will all 44,000 Southern Cross jobs be saved and will any homes have to close because new operators cannot be found? Southern Cross believed more than 30 were not financially "viable".
The company says it will support the transition process "professionally" and Mr Buchan expects it to be completed by the end of October. But the transfer of 31,000 customers and 44,000 staff is rare in any sector, nevermind an industry where the customers require round-the-clock attention. "This will be a major and important project to manage and a lot of people need to help," Mr Buchan said.
Yesterday was the beginning of the end for Southern Cross. But residents and staff must find a way to live on.

Postal Paddy in Two Million Euro Fraud to Fund Gambling Habit

2011-07-11T08:14:00.001+01:00

One of the Sunday newspapers in Ireland reported over the weekend how a postal service manager had disappeared after it had been discovered that nearly two million Euros was unaccounted for at the Gorey Post Office and it is believed he had been wagering 20,000 Euros a day on Paddy Power.

Tony O’Reilly, 36, left home last Wednesday after the internal auditors discovered the discrepancies of Euor 1.76 million at the branch where he worked. The father of one made contact with a member of his family from an internet connection in Northern Ireland and was detained on Saturday after raising suspicion with a further 40,000 Euro bet.

The postal service manager left his home last Wednesday at 6:30am to drive to his post office job. O’Reilly later sent a text message to his wife and the company internal auditors claiming to have been in a car crash. Police investigated all the CCTV footage of the roads between his home and work and failed to find any evidence of the vehicle he used.

He was located in Belfast after he placed a bet of 40,000 Euros on an odds-on shot to win an additional 27,000 Euros at a bookie in the city. Both the Police and postal service are now investigating the major fraud and have interviewed employees to identify whether anyone else had any knowledge of the “black hole” in the post office finances.

A Paddy Power spokesman refused to comment on the incident: "Our relationship with our customers is private and we do not discuss individual customers. Should any of our customers have an issue with gambling, we have many measures in place to assist them"

According to the Guardian newspaper Tony O’Reilly was receiving medical help on Monday night. He is expected to be questioned over the missing money and other discrepancies at the branch.

There are regular stories in the media relating to online gambling, whether this is online bingo, poker or casino games. It seems that it is so easy to lose large amounts of money in such small periods of time online that is a real concern and clearly the current systems and regulation needs reviewing urgently.

Going forwards if legislation was passed whereby when crimes were committed to fund gambling habits the gambling operators were made liable then the online operators would take problem gambling a lot more seriously.

Care home operator Southern Cross confirmed today that it is to close down after the landlords of its properties abandoned the company.

2011-07-11T08:05:00.001+01:00

The group, which has 752 homes and 31,000 residents, has been locked in negotiations over a restructuring of the group's property arrangements, but following the landlords' decision it is now working on a plan to facilitate the transition of homes to new landlords and their new operators.

Southern Cross said that, to ensure continuity of care to residents, all payments to trade creditors are to be maintained and all home-based staff transferred on their current terms.

It added that it is expected the existing group will cease to be an operator of homes at the end of the restructuring period. The company's shares have been suspended with immediate effect.

DRIVERS bought one billion fewer litres of fuel at the start of this year compared to the same period in pre-recession 2008

2011-07-08T20:58:00.001+01:00

DRIVERS bought one billion fewer litres of fuel at the start of this year compared to the same period in pre-recession 2008, Britain's biggest motoring group says today.
The Automobile Association (AA) blames the 15.2 per cent fall in petrol sales and 6 per cent reduction in sales of diesel on high pump prices prompting motorists to drive less.

Petrol sales also fell by nearly 4 per cent in January to March compared to the same period last year, although diesel sales increased slightly, UK government figures show.

Consumer watchdogs warn the decline will put further pressure on the viability of remaining rural filling stations. The AA says the sales cut in the first three months of this year has also deprived the Treasury of almost £640 million in tax - nearly as much as the annual loss it predicted.

Petrol has increased by nearly 8p a litre and diesel by more than 10.5p in the first three months of this year. It reached 136.07p and 139.77p respectively in the AA's latest monthly fuel price report.

President Edmund King says: "The full impact of higher VAT, unbridled stock market speculation and a weaker pound on fuel prices has been laid bare. The first three months of the year saw the equivalent of 13.5 days of petrol sales wiped out - good for the environment but appalling for families, business, rural communities and the Treasury."

The AA, which has 15 million members, attributes the 0.5 per cent increase in diesel sales to firms closing their own fuel depots to save money and switching to forecourts instead.

Consumer Focus Scotland deputy director Trish McAuley said of the figures, released today: "High petrol and diesel prices in Scotland have made life difficult for people in rural areas who rarely have access to the public transport that people in cities enjoy.

"These statistics are particularly worrying for people who rely on rural filling stations. As their revenues drop, the viability of these businesses, which is often borderline at best, suffers. Without easy access to a filling station in their community, people in remote rural areas have to travel further - and use up more fuel - to fill their tanks."

Neil Greig, policy and research director of the Institute of Advanced Motorists, said: "This is just the latest in a set of indicators all showing downward trends in traffic, new car sales, speeding and now fuel sales.

"The impact of the recession is really starting to show. There have been substantial road safety benefits from these trends, but the impact of running older cars and cutting maintenance may lead to more pollution.

"The future for smaller petrol stations in Scotland also looks bleak, as drivers are clearly willing to go out of their way for cheaper fuel and ignore the service on their doorstep."

Environmental campaigners said ministers must take more of a lead to reduce transport's oil dependence.

UK retailers have closed 20 stores a day on average in 2011, as high street shops are hit by a downturn.

2011-07-08T20:56:00.001+01:00

According to the research of multiple retailers, in 300 town centres – conducted of behalf of PwC – clothes, shoe shops and jewellers have been among the hardest hit in 2011. But supermarkets, convenience stores and cafes have bucked the trend, showing growth in the first half of the year.

The research finds that there were 375 retail insolvencies this quarter, which is nine per cent more than the same time last year. The Local Data Company’s research found that of the eight high profile, failed or struggling, high street retailers that were examined, on average they looked to close over half (51%) of their stores.

Mike Jervis, insolvency partner and retail specialist, PwC, comments: “Retailers will continue to struggle for the next six months and we will see high levels of financial distress among certain types of retailers such as clothes shops.

“The combination of rising inflation and dented consumer confidence has led to people increasingly trying to find the best deal online. This has made life difficult for store-dependent high street retailers who have seen a drop in sales and reduced footfall.”

TJ Hughes forced to launch fire sale of stock

2011-07-08T20:55:00.001+01:00

The turmoil on the high street was brought into sharp relief yesterday after the administrators of the Liverpool-based TJ Hughes announced a fire sale to run down stock levels at the discount department store chain.

Alongside the sale, Tom Jack and Simon Allport, the joint administrators from Ernst & Young, said they were still trying to find a buyer for the beleaguered firm, which employs more than 4,000 people across the UK.

"We are already in discussions with over 30 interested parties and we are encouraged by the strong level of interest in the business and its portfolio of 57 stores," Mr Jack said.

"However, there are significant stock levels and we therefore must ensure we are also pursuing a strategy to trade this stock through the business, in case we cannot find buyers for all of the company's stores and employees. Promotional activity will therefore commence immediately in all TJ Hughes stores."

The move follows a spate of retail closures or restructurings over the last couple of months, with trouble at well-known names such as Focus DIY and Homeform, the owner of Moben Kitchens and Dolphin Bathrooms.

Although some retailers have collapsed, others, including Thorntons and the carpet retailer Carpetright, are closing stores as the sector battles against a backdrop of rising inflation, declining consumer confidence and sluggish economic growth.

TJ Hughes was bought in March by the private equity group Endless, in partnership with the retail entrepreneur Anthony Solomon. But the recent deterioration in the retail environment ultimately led to the discount chain entering administration at the end of last month. It lost more than £10m last year.

Yesterday, the Ernst & Young administrators said the fire sale would commence with advice and assistance from retail consultants GA Europe, a wholly owned subsidiary of the Great American Group.

TJ Hughes was founded in Liverpool in 1912 by Thomas Hughes.

Llangollen Hotels Limited and parent company Global Investments Group. 100 job losses are being made at a business run by hotelier Stephanie Booth which is in administration.

2011-07-08T18:07:00.001+01:00

The redundancies are at some of her hotels, a bar and children's play barns in north east Wales, Cheshire, and Shropshire run by Llangollen Hotels.

KPMG made the announcement as administrators for Llangollen Hotels Limited and parent company Global Investments Group.

Some hotels will continue to trade with bookings honoured until they are sold.

Llangollen Hotels comprises seven hotels in Wrexham, Denbighshire and Chester. The business employs 177 people.

Four freehold hotels will not be affected with no staff redundancies at Bodidris Hall in Llandegla, Wrexham; The Wild Pheasant, The Chainbridge and The Bryn Howel, in Llangollen, Denbighshire.

Any bookings and deposits "intend to be honoured until the hotels are sold", said joint administrators David Costley-Wood and Brian Green in a statement issued on Friday.

JOB LOSSES

The Anchor Hotel, Ruthin - 14
The Chester Bridge, Chester - 15
The Wynnstay, Wrexham - 36
Fun House, Mold - 15
Fun House, Wrexham - 9
Fun House, Oswestry - 5
McLarens, Oswestry - 11
Source: KPMG
The remaining hotels which are leased have been closed.

They are The Anchor Hotel in Ruthin, Denbighshire; The Wynnstay Arms Hotel, Wrexham; and The Chester Bridge Hotel, Chester.

The statement said the directors shut the Wynnstay Arms Hotel prior to the appointment of administrators.

'Substantial debt'

The Wynnstay Arms is a local landmark in Wrexham
The Anchor Hotel and The Chester Bridge Hotel closed on Friday.

Global Investments Group operates three children's soft play centres, Fantastic Fun Houses, in Mold, Flintshire; Wrexham; and Oswestry, Shropshire; as well as McLarens, a wine bar in Oswestry.

These are all leasehold properties and were closed by the directors prior to appointment of the administrators, they said.

Mr Costley-Wood, a joint administrator and restructuring partner at KPMG, said: "The Global Investment Group expanded rapidly into a range of leisure businesses and built up substantial debt in the process.

The four freehold hotels are trading well and we are confident of finding a buyer”

David Costley-Wood
Administrator
"The business is now no longer able to make payments as they fall due, necessitating the appointment of administrators.

"The four freehold hotels are trading well and we are confident of finding a buyer."

In 2009, Ms Booth appeared in BBC Wales fly-on-the-wall documentary series Hotel Stephanie showing her cope with the day-to-day problems of managing six hotels in north east Wales during the recession.

In recent months she has been linked with a takeover of Wrexham football club, before withdrawing from the process in May.

She took over the Wynnstay Arms, which is a well-known Wrexham landmark, in April 2010. The new proprietor "guaranteed" the workforce their jobs would be safe.

A spokesman for Ms Booth said on Thursday that she had been using her own money to ensure all staff were paid prior to the administrators being appointed.

Greece is bankrupt

2011-07-04T11:35:00.001+01:00

A rose by any other name would smell as sweet. In the case of Greece, default by any other name just stinks! The plain truth: Greece is bankrupt. Greece's sovereign debt crisis deepens daily as the gap in reality widens between politically driven “in denial” views of European Union (EU) leadership and market-place views as reflected in 5-year Greek bonds trading at a yield close to 20%; Standard & Poor cutting Greece's rating to triple-C (the lowest credit rating ever); and highest premiums payable on CDS (credit default swaps, used as insurance to protect investors against defaults) on Greek debt. Probability of default by Greece over the next 5 years has jumped to 86%.

Today, a CDS will cost US$2mil annually to insure US$10mil debt over 5 years. Markets have indicated for some time Greece suffers from a condition of bankruptcy rather than a crisis of liquidity (i.e. cash-short).

This simply means Greece cannot survive without significant debt relief and restructuring, combined with an overhaul of the ways its government collects revenue and expends. In essence, Greece has 2 major problems: it has too much debt and it cannot grow. I am afraid more and more of EU will get contaminated.

The Greek illusion

Greece should not have been into the euro in the first place. It failed to join in 1999 because it did not meet fiscal criteria. When it did so in 2001, it was through phony budget numbers. As Twitter R. Cohen wrote: “Europe's bold monetary union required an Athenian imprimatur to be fully European. So everyone turned a blind eye.” But Greece has had an awful history. The 1912-13 war wrested northern Greece from Ottoman control. Then came the massive exchange of 1923 where 400,000 Muslims were forced from Greece to Turkey and 1.2 million Greek Orthodox Christians, from Turkey to Greece.

A military dictatorship followed in the 1930s; brutal German occupation in 1941-44; and a civil war in late 1940s. There was the rightist dictatorship of 1967-74, not to mention the on-going conflict with Turkey over Cyprus. In “Twice a Stranger”, B. Clark wrote of Greece as a society “where blood ties are far more important than loyalty to the state or to business partners.”

It would appear EU membership provided some balm to Greek wounds. It detoxifies history. So Greece took to the EU as a passport to live on the never-never. The bottom line: a monetary union among divergent economies without fiscal or political union support has no convincing historical precedent. For a while, the easy-money, easy-lifestyle allowed everyone to overlook peripheraleconomies like Greece from becoming uncompetitive with the euro (with no drachma to devalue) and not showing any signs of “converging” (closing the gulf between strong and weak nations within EU), but amassing unsustainable deficits and debt. Greece remains a nation suspicious of outsiders and a place where state structures command scant loyalty.

This does not abode well. We now see a Greece resentful of deep spending cuts, and of the sale of state assets meted out by technocrats from outside. They feel the poor and unemployed are paying for the errors of politicians, and a globalised system that punishes those left behind. Strikes and violence are a measure of a EU that now leaves most Greeks unmoved by the achievements of European integration.

Greece is insolvent

It is true a sovereign state, unlike a firm, has the power to tax. In theory, it can tax itself out of trouble. But there is a limit on how far it can tax before it becomes politically and socially unsustainable. Already, Greece has a debt/GDP ratio of 143% in 2010, rising to 150% this year. It is too high to convince creditors to continue lending.

In practice, the market expects Greece to reduce its debt ratio considerably before it can borrow again. This means it has to create a primary budget surplus (revenue less non-interest expenditure) in excess of 8% of GDP to be credit worthy again. Among advanced nations, none (except oil-rich Norway) has managed to attain a durable primary surplus exceeding 6% of GDP. Greece is insolvent.

This is a dire situation. Government bonds serve as a reference asset by setting the “riskless” rate of interest. So any doubts about its value can cause turmoil. Indeed, solvency of the Greek financial system is at risk. So are other European financial institutions. Equally vital is contagion with its sights set firmly on other debt-distressed nations notably Ireland, Portugal, Spain and Italy.

But it doesn't stop there. Top Europeans have warned contagion to EU members could spark off a crisis bigger than the Lehman Brothers collapse in Sept 2008. So, it is not difficult to understand the hard line taken by the European Central Bank (ECB) aimed primarily to protect European banks which need time to strengthen their capital base. For obvious reasons, it has rejected any sort of restructuring of debt raising the spectre of a chain reaction, and threatening to punish any restructuring (re-negotiation of the terms of maturing debt) by cutting banks' access to liquidity.

Moreover, credit rating agencies would deem any such action as a default (i.e. non-payment of due debt). With Greece insolvent, the EU has taken the narrow road of beefing up the financing for Greece (which can't refinance itself in the market), while using moral suasion to persuade private creditors to roll-over their bonds. It is buying breathing space.

More denial doesn't work just prolongs the agony. What's happening to Greece is distressful. Over the past 12 months: the number of unemployed rose by close to 40%; unemployment is above 16% among youths, it's a devastating 42%. IMF estimates showed its GDP contracted by 2% in 2009 and 4.5% in 2010 and will shrink by 3-4% this year.

Despite severe fiscal austerity, its budget deficit will improve only slowly: from -15.4% of GDP in 2009 to -9% in 2010 and -7% this year (and estimated at -6.2% in 2012). That's a long way to surplus! Greece has become so uncompetitive its current balance of payments deficit was -11% of GDP in 2009, -10% in 2010 and optimistically estimated at -8.2% this year (and at -7.2% in 2012). Truly, Greece is in “intensive-care” a solvency crisis, not just caught in a short-term cash crunch (yes, it also does not have cash to meet its next debt payment before July 15).

Even at today's low interest rates, Greece's government interest payments alone amounted to 6.7% of GDP, against 4.8% for Italy and considerably higher than all other major European nations and the United States (2.9%). Even Portugal's ratio is lower at 4.2%.

Political solution: slash and burn won't work

What Greece needs is deep economic reforms or fiscal transfers from the EU which help address deepening market concerns about sustainability of its huge debts. Without these, the crisis will simply be deferred.

The message is clear: Greece's debt load at Eureo 350 billion or 150% of its expected economic output this year, is simply too large for the EU troika's (plus ECB and IMF) strategy to succeed. Athens had accepted a package of Euro 110 billion of EU/IMF loans in May 2010. But it now needs a 2nd bailout of a similar size to meet financial obligations until end 2014 when it hopes to move seamlessly into the new ESM (European Stability Mechanism) bailout fund (which takes effect in 2013) to prop up fiscal miscreants.

Latest draw-down involves release of a vital Euro 12 billion very soon but carries a proviso that parliament passes on June 29 (which it did with a slim majority) Euro 28.6 billion in spending cuts and tax increases as well as Euro 50 billion from privatisation of state assets, in addition to continuing existing austerity policies.

That's not all. The new plan calls for private creditor's participation on a voluntary basis (meeting ECB's insistence to avoid even a hint of default) or “Vienna Plus”, a reference to the 2009 Vienna initiative where banks agreed to maintain their exposure to Eastern Europe.

For Greece, the brutal austerity plans call for enormous sacrifices; indeed, no end to their agonies. Today, the situation at Syntagma Square and in front of parliament is getting more strained, angry and confused, surrounded by riot police and clouds of teargas. The people are becoming frustrated at being always at the receiving end.

On the German side, however, voters are aghast at the prospect of a 2nd bail-out, which they regard as pouring good money after bad. Germans consider the Greek government as corrupt; its tax system operates on voluntarism; state railroad's payroll is 4 times larger than its ticket sales; many workers retire with full state pension at age 45; etc.

Be that as it may, the IMF in particular needs to learn from lessons of the Asian currency crisis, where it has since acknowledged its prescriptions at the time made matters worse in Indonesia, Thailand and the Philippines, in the name of unleashing market forces to force adjustment and ignoring the adverse social and political impact of their policies.

I see them repeating the same mistakes again in Greece, paying too little heed to human suffering and adverse social impact to protect private sector creditors and pushing the end-game at breakneck pace. Germany's insistence to get private creditors share in the burden is a good soft step forward. Even so, the IMF seems too harsh.

Few options left

The fact remains Greece was outstandingly egregious in its fiscal profligacy and its lack of prudent economic governance. But Greece was not the only European economy that was living beyond its means and being pumped withill-conceived loans mainly from German and French banks. Greece is today insolvent. The EU's solution addresses only immediate funding needs, without offering a credible long-term resolution. It's just a stopgap. Frankly, Greece'spolicy options are limited: either a default, partial haircut (creditors taking losses on their investments), or a guarantee on Greek debt. Bear in mind Germany remains the biggest beneficiary of the euro-zone experiment. In 2010,

Germany recorded a US$185bil balance of payments surplus or 5.6% of GDP. No doubt, the EU has since pledged to stabilise the euro-zone economy, vowing to starve off a Greek default, and the ECB has categorically ruled out debt restructuring. That leaves Greece with only deflation, a lot of it.

As I see it, this will not work. First, in a democratic Greece, people are clearly not in the mood for deeper spending cuts and more austerity. Policies can be adopted but they can fail. Second, deflation had already made Greece's debt problem worse the debt is too large and the economy won't grow with continuing deflation. It can't just deflate its way to solvency.

The better option left is debt guarantee. Issuing guarantees (preferably partially backed by Greek assets) could help persuade creditors to exchange debt for new debt with longer maturities, effectively giving Athens more time to repay. As of now, only 27% of Greek debt is held by banks, 30% by ECB/EU/IMF, and 43% by other privates. Banks are already quietly resisting voluntary rolling-over unless offered incentives. EU has preferred to use moral suasion.

EU has also resisted haircuts. Mr Axel Weber, former Bundesbank governor, has since weighed in: “At some point you've got to cut your losses and restart the system,” drawing parallels between guarantee for Greek debt and steps taken by Germany and others during the financial crisis to backstop troubled banks.

The Greek problem “is a deep-rooted fiscal and structural problem that probably needs more than a 30-year time horizon to solve. The measures Europe need to adopt are much more profound than just short-term liquidity funds.” That, of course, raises the issue of “moral hazard”. EU has since pledged to stabilise the euro-zone, and starve off a Greek default in exchange for continuing Greek deflation and voluntary creditors' roll-over. Getting banks to share in the burden remains problematic. But, a narrow policy option is taken. It's another muddle-through created in response to politics. It offers no long-term way for Greece to resume growth.

I am told the political mood in Greece improves automatically in July and August as the urbans head en masse for family villages in the islands and mountains. Surely, for a little while, human woes will be eased by exposure to the beauty of the Agean.