Berlin bank data attack threatens Switzerland
Matthew Allen - SwissInfo
Germany has confirmed that it intends to defy protests from Bern by paying for stolen Swiss bank data to help track down domestic tax evaders.
The latest diplomatic spat with another country places Swiss banking secrecy under even greater pressure and has left observers wondering if Switzerland will flinch first under the latest assault.
Just when Switzerland thought they had seen the back of one troublesome German finance minister (Peer Steinbrück), his successor on Tuesday confirmed Chancellor Angela Merkel’s earlier comments that a price may be paid to obtain stolen Swiss bank data.
“In principle, the decision has already been taken,” Wolfgang Schäuble told the Augsburger Allgemeine newspaper.
The revelation comes as another blow to Switzerland, which appears to be fighting a one-sided battle, lined up against the might of the G20 group of the most powerful nations in the world and the Organisation for Co-operation and Development (OECD).
France is already in possession of data stolen from HSBC’s private banking arm in Geneva that they will use to track down tax evaders despite Swiss protests. And Germany has a track record of seeing its threats through to the end.
Shot in foot
Two years ago, Germany paid a substantial sum for illegally obtained information from a Liechtenstein bank. The move netted some high profile tax evaders and forced a concession from Liechtenstein to amend its ways in future.
But Switzerland should not back down quite so easily, according to Arturo Bris, a professor of finance, law and economics at Lausanne’s IMD international business school.
Bris believes that Germany has “shot itself in the foot” after arguing for so long that Switzerland’s banking system encouraged criminal activity. By conspiring with criminals itself, Germany has now lost the validity of its argument and could be successfully challenged by Switzerland in its own courts, according to Bris.
“Thanks to the comments by Chancellor Merkel [and now Schäuble], the situation looks brighter in Switzerland than it did two weeks ago,” he told swissinfo.ch. “ I do not see any advantage in this illegal act which will surely backfire on Germany.”
“Switzerland should remain strong and put more effort into explaining that the problem lies not with its secrecy laws, but with criminals in other countries. The failure lies with other countries failing to prosecute criminals inside their own borders,” he added.
Red-handed and red-faced
Putting the latest German incident into isolation, Bris may have a valid argument. But Switzerland is fighting attacks against its system of banking secrecy from all sides.
Last year, Switzerland was forced to renegotiate a host of double taxation treaties with other countries to remove itself from an OECD “grey list” of uncooperative tax havens.
The Swiss government then had to strike a deal with the United States to hand over information on thousands of UBS clients after the bank was caught red-handed in a tax evasion probe. A Swiss court ruling that at least part of the deal was illegal may leave a red-faced government having to go back to the US authorities asking to re-negotiate.
If Germany goes ahead with its threat to use the stolen Swiss data to hunt down its own tax evaders, it could create a lucrative market for other disaffected bank staff to follow suit in the hope of legal protection and a windfall pay day.
Swiss banks already operate very tight levels of security to protect client data, according to John Ederer, Deputy Head of Forensic - a unit that advises companies on white collar crime risks - at KPMG Switzerland.
Security strategy
“Undoubtedly the rules of the game have changed in the last few years and people are becoming more aggressive. Technology is constantly updating, but it is very often the most basic controls that prove the most effective,” he told swissinfo.ch.
For example, banks routinely segregate different aspects of client information into separate servers and carefully restrict access while monitoring staff activities. Staff are also restricted on what they can print and the use of USB memory sticks is routinely forbidden.
However, any security system is only as strong as its weakest link, according to Ederer.
“The principle weakness of any environment is the human element. If you have one rotten apple in a barrel full of perfect apples, that could compromise the whole system,” he said.
“The strongest human element controls are a positive ethical environment, effective training, codes of conduct, good direction from senior management and leading by example.”
| Tax attacks | |
| Switzerland
has been under continuous attack in the past 12 months for
helping foreign tax evaders hide their assets. The global crusade
coincided with the devastation of the financial crisis leaving large
holes in the budgets of many countries. The OECD placed Switzerland on a grey list of uncooperative tax havens in April last year. The Swiss were removed in September after renegotiating several double taxation treaties, but they have refused to automatically transfer information to tax investigators without proof of crimes. Former German Finance Minister Peer Steinbrück referred last summer to the Swiss resembling Indians running away from the cavalry. Italian Finance Minister Giulio Tremonti said that he wanted to “bleed dry” the financial sector in the southern Swiss canton of Ticino. Several countries, including Italy, France, Britain and the United States launched tax amnesties last year in an effort to repatriate assets from tax cheats. These are forecast to damage the Swiss offshore banking industry. |
Switzerland was
particularly annoyed at the aggressive Italian amnesty
that saw surveillance and tailing of cross border suspects going into
Switzerland. The Swiss suspended talks on the new double taxation
treaty in protest. The most damaging tax evasion case involved the activities of UBS bank in the US. In February 2009, UBS was fined $780 million after admitting helping US citizens to dodge taxes. In September, the Swiss government was forced to hand over the details of 4,450 UBS clients to the US – in effect violating Swiss banking secrecy to prevent a ruinous court case for UBS. Canada and India have also issued warnings that they will not tolerate Swiss banks sheltering tax evaders’ assets. A former employee of HSBC private bank in Geneva ran away with sensitive client data that he handed over to the French authorities last year. |
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NASA's Outsourcing May Benefit Large Contractors
Andy Pasztor - Wall Street Journal
Despite the Obama administration's multibillion dollar bet that a scrappy band of entrepreneurs can revitalize the U.S. manned space program, its budget also offers sweeteners to some of the nation's largest aerospace contractors.
The National Aeronautics and Space Administration's proposed $19 billion spending plan for the fiscal year starting Oct. 1 includes early seed money for development of pioneering technologies to deliver cargo and astronauts to Earth orbit and beyond. But two of the five initial recipients hardly fit the mold of hungry start-ups: Boeing Co., one of NASA's premier suppliers, and United Launch Alliance, a Boeing-Lockheed Martin Corp rocket joint venture that currently has a virtual monopoly launching U.S. military and spy satellites.
On Tuesday, NASA Administrator Charles Bolden said the commercially oriented development projects are aimed at providing "game-changing" propulsion, in-orbit-refueling, inflatable structures and other systems intended to leapfrog current agency capabilities. Over five years, NASA envisions spending some $7.8 billion on various demonstration programs to "reduce the cost and expand the capabilities of future exploration activities." Initial contracts for NASA's Commercial Crew Development program total only about $50 million, but the choices were announced with much fanfare along with the budget.
In an interview Tuesday, Mr. Bolden said he and White House officials are counting on the fact that with such an array of firms, "We will have several successes." "There will be some failures," he sad, but "I doubt very seriously . . . that everyone will fail."
The rest of the companies recently picked by NASA to push ahead in this arena are closely held Paragon Space Development Corp., an Arizona-based hardware and engineering firm; Blue Origin, a space tourism company formed by Jeff Bezos, the founder of online retail giant Amazon.com; and Sierra Nevada Corp. a Colorado company that designs and manufactures spacecraft subsystems and components.
But there is an apparent disconnect between the rhetoric and the reality of how NASA hopes to proceed. In the interview, Mr. Bolden said lower-level NASA officials picked the winners in the last round on the grounds that "they are truly entrepreneurial" and "almost in incubator status."
The NASA chief, however, went on to add that while the shift to commercial-style development requires picking companies with "innovative ideas . . . the paradigm did not say they had to be start-ups."
Mr. Bolden said, "It would be unfair, to be quite honest, to limit it to truly entrepreneurial firms."
Boeing said it would work on perfecting technologies needed for relatively simple, low-cost capsules capable of reaching orbit. "It will be compatible with multiple launch vehicles and configurable to carry a mixture of crew and cargo on short-duration missions to and from the International Space Station," according to a company statement.
Mr. Bolden and other NASA officials have indicated it could take NASA months to detail a timetable for future exploration missions based on advanced technologies. "It's more than a couple of weeks but less than years, " the NASA chief told reporters at a press conference earlier Tuesday. Among the most likely eventual destinations are the Moon, Mars and certain asteroids.
After the space shuttle fleet is retired, likely before mid-2011, NASA expects a gap of at least five years before new commercial spacecraft and rockets go into service. Many inside and outside NASA predict it's likely to take years longer. In the interim, the U.S. will be dependent on Russia, and potentially space agencies in Japan and Europe, to send astronauts to the International Space Station.
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Radar probe stuck in political limbo
ThisDay
Investigations into the military radar scandal underway simultaneously in Tanzania and the UK now appear to have become caught up in a political web, with the investigating agencies in both countries further delaying the planned prosecutions of key suspects in the major corruption case.
In Britain, the director of the Serious Fraud Office (SFO), Richard Alderman, is trying to prove that the world's second-largest defence equipment provider, BAE Systems, paid bribes in Tanzania to secure the contract.
Similarly in Dar es Salaam, the Prevention and Combating of Corruption Bureau (PCCB) has been conducting its own investigation that has stalled for several years despite PCCB claims of being close to a prosecution.
The UK investigation has been described as a difficult test of the 57-year-old Alderman's ambitions to put the SFO on a par with the US department of justice as a world leader in fighting fraud and corruption.
Reports say the SFO chief wants to steer Britain away from a past in which long, expensive fraud investigations often languished on the road to criminal prosecution, and instead borrow from the US justice system by encouraging companies like BAE Systems to voluntarily report corruption problems and strike plea deals to resolve them rather than face drawn-out criminal prosecutions.
But a months-long effort to settle the BAE case recently hit a new impasse as the SFO failed to persuade the company to plead guilty to alleged criminal offences and pay hundreds of millions of pounds in fines.
Now Alderman says he plans to press criminal charges, if he can get the required approval of the UK attorney general Baroness Scotland.
Corruption cases, which typically are complex, involving payments in overseas jurisdictions, and often highly political, can be difficult to mount.
"BAE is clearly a very important case. It is very important that we get it right," Alderman was quoted as saying recently.
The SFO is mounting fresh efforts to bolster its case on the advice of Timothy Langdale QC, its outside legal counsel, who last month delivered his preliminary view on the agency's plan to charge BAE over alleged corruption in African and European nations.
Still, it is understood that even if all goes well and Langdale eventually signs off on the case, the dossier is unlikely to be sent to the UK attorney-general for some weeks.
Lawyers say that could mean the prosecution - announced by the SFO with much fanfare on October 1 last year - could remain mired until the UK's general election in May this year and a possible change of attorney-general.
Baroness Scotland took more than six months over a decision on a previous proposed SFO corruption prosecution.
BAE, which has always denied wrongdoing, has expressed surprise and dismay at both the SFO's settlement demands and what it sees as the agency's willingness to conduct negotiations through the media.
Three years ago the agency bowed to heavy political and diplomatic pressure to scrap a probe into BAE Saudi Arabian deals worth tens of billions of pounds.
SFO officials insist the early announcement of plans to charge BAE was an attempt to respond in good faith to public interest in the case, rather than a ploy to win positive media coverage.
In 2008/09, the office of the Director of Public Prosecutions (DPP) in Tanzania declined to give PCCB consent to prosecute the radar case, claiming insufficient evidence.
Officials close to the PCCB say the Bureau has since then been waiting for mutual legal assistance for key evidence from the SFO, in order to mount a watertight corruption case.
PCCB Director General Dr Edward Hoseah has publicly announced that the prosecutions of at least three major corruption cases are imminent, with the radar case believed to be one of them.
Due to its very nature, the radar case has also caused considerable waves in the local political arena, with highly-controversial comments attributed late last year to the Minister of State in the President's Office (Good Governance), Ms Sophia Simba - allegedly in defence of a prominent suspect in the case – fuelling much speculation of undue political influence in the PCCB investigation.
Investigations by THISDAY have since revealed that the third phase government of former president Benjamin Mkapa used national gold reserves from the Bank of Tanzania to secure a $40m loan from Barclays Bank for financing the radar purchase.
In order to secure the hefty loan, the Mkapa government went out of its way to minimize the financial risk carried by Barclays Bank in the transaction, including acceptance of a financing arrangement that allowed BoT money backed by the national gold reserves to be held in London as collateral.
SFO investigations have so far identified key roles played by the then attorney general, Andrew Chenge, and the then Bank of Tanzania governor, Dr Idris Rashidi, in the radar deal. Both Chenge and Rashidi are now considered top suspects in the SFO's ongoing investigation of corruption indications related to the deal.
According to the SFO investigation, the legal opinion given by Chenge in support of the financing agreement for the purchase of the radar system had "put the economic interests of Tanzania at risk.”
Local business tycoons Tanil Somaiya of Shivacom Group and Shailesh Vithlani have also been identified as key suspects in the radar investigation.
Meanwhile, former BAE Systems agent Alfons Mensdorff-Pouilly is reported to have been formally charged with corruption relating to BAE contracts in eastern and central Europe.
SFO officials said late last week that between January 1, 2002 and December 31, 2008, Mensdorff-Pouilly conspired with others to give or agree to give corrupt payments to agents of certain eastern and central European governments.
Mensdorff-Pouilly paid off unknown officials of the Czech Republic, Hungary and Austria to secure, or as rewards for having secured, contracts for the supply of SAAB Gripen fighter jets, the SFO said.
Late last year, the SFO said it was prepared to prosecute BAE over allegations it used bribery and corruption in arms deals in South Africa, Tanzania, Romania and the Czech Republic dating back to the 1990s.
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Banks told to comply on bonuses or lose UK banking licences
in shock FSA ultimatum
Louise Armitstead and Helia Ebrahimi - Telegraph
Investment banks have been told that every bonus issued must comply with the regulatory guidelines – or they face having their licences to operate in Britain revoked.
In an extraordinary ultimatum that has shocked some of the City's biggest companies, the Financial Services Authority (FSA) told bank bosses that 60pc of all pay must be deferred, with no exceptions, even for those whose contracts conflicting with the edict.
Many of the global players have in recent weeks made representations to the City watchdog, in particular about pre-existing employment contracts that guarantee bonuses over a year or more. But their appeals have been met with the FSA's toughest yet response.
One pay executive in a major bank told The Daily Telegraph: "The message came back that while the FSA agreed that it does not have jurisdiction over contractual law, it does have jurisdiction over issuing bank licences in London, and that we should go away and unwind the contracts."
Bankers at Merrill Lynch are among the first affected. Those with pre-existing contracts were told about the FSA's tough stance on Friday when their bonuses were agreed.
One Merrill Lynch employee said: "We thought that contracts would be immune from changes but were told by bosses that their hands were tied and there was nothing they could do, the regulator had put its foot down."
Banks that have not yet told staff about the bonus payouts are now scrambling to ensure that they are comply with the FSA rules.
Senior directors are concerned that the stance could result in the banks facing a series of legal challenges from individuals with pre-existing contracts. Headhunters say that banks including Barclays Capital and Nomura have lured star performers by offering them large guaranteed bonuses.
One headhunter said: "Many of these contracts have guarantees that 50pc of the bonus will be paid in cash. These are tricky things to unpick. But cleverly, the FSA has put the onus on the banks to unwind the contracts, rather than itself getting embroiled in a complex legal row."
Banks' senior directors have complained that the FSA's position on bonuses has shifted radically throughout the year, particularly in recent months since the Government announced its tax on bonuses and President Barack Obama unveiled his radical proposals to restrict Wall Street.
One said: "They have clearly gained confidence and they've thrown down the gauntlet. It's been very confusing and disruptive."
The FSA's position is the culmination of nearly a year of debate over how to curb huge sums paid out in remuneration by banks. In March, the regulator wrote to the bosses of the major investment institutions explaining that it was preparing a code designed to limit excessive pay in the aftermath of the financial crisis.
The consultation was followed in August by the publication of guidelines that demanded pay had to be calculated in relation to overall over risks.
The FSA issued guidelines on best practice for remuneration committees as well as recommendations for deferrals, claw-backs and a lower proportion of cash payouts.
When it found that some companies still planned to award multi-year guarantees and cash bonuses in the face of mounting political and public controversy, the regulator began to take a harder line.
In October, Lord Turner, chairman of the FSA, said he had "a range of levers'' at his disposal to block "excessive bonus payments''. "We will be talking to banks about whether their bonus pools are appropriate and if they aren't we will have a full and frank discussion with them,'' he said. At the time Lord Turner declined to detail the measures available to him.
The FSA said it would conduct spot checks to examine contracts and also threatened to force those breaching the rules to hold higher amounts of capital to compensate for the perceived extra risk. But privately bankers argued that the FSA would never be able to sweep away the rule of law.
One executive faced with dealing with the new ultimatum said: "It was pretty amazing but we actually chuckled because it's the sort of hard ball we would have played if we'd been in the FSA's shoes."
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Multimillion-pound payments at Credit Suisse will escape bonus tax
Katherine Griffiths, Miles Costello - The Times
A group of senior executives at Credit Suisse in London will receive multimillion-pound payouts next month in a move that will lessen the blow of the UK bonus tax.
The group is understood to include James Leigh-Pemberton, head of Credit Suisse in the UK and one of the Government’s key advisers on the banking bailout, as well as other senior figures. The payments are part of a five-year incentive programme that Credit Suisse put in place to retain senior staff when it was struggling in 2004 and 2005. In total, Credit Suisse may hand out stock worth about £1 billion, divided between 300 bankers around the world. The average payment may be about £3 million but the sums will vary wildly. Brady Dougan, Credit Suisse’s chief executive, could receive about £25 million.
The final sum will be determined by Credit Suisse’s share price performance over the next few weeks. Credit Suisse surprised the City two weeks ago by saying that its 400 UK managing directors would bear the brunt of the Chancellor’s 50 per cent bonus tax. Their bonuses have been reduced by 30 per cent from what they were expected to be.
Only a small number of the 400 London managing directors will receive windfalls under the performance incentive plan, known as PIP, when it vests late next month. For those who do, the PIPs will be particularly valuable because they will not be subject either to the bonus tax or the new 50 per cent income tax, which comes into effect in April.
Credit Suisse won praise from investors when it created PIPs, at a time of turnaround at the bank, as the scheme was seen as a novel way to link pay with long-term performance. Bankers who were granted PIPS in two tranches in 2005 and 2006 were not allowed to cash them in for five years.
Having weathered the financial crisis better than rivals, Credit Suisse now faces the danger that a wave of its top talent who have finally received their PIPs could leave the bank. Credit Suisse would not comment.
Meanwhile Lord Myners, the City Minister, is putting large investors on the spot over their policies on bankers’ pay. In a letter to the heads of investment at large fund managers in the UK last week, Lord Myners asked what they had done to engage with banks over their bonus decisions and what criteria they would use in deciding how to vote on banks’ remuneration reports.
One fund manager said that Lord Myners had a point in highlighting the industry’s previous shortcomings in reining in pay but added that banks had traditionally been extremely unwilling to discuss remuneration of traders and other highly paid individuals below board level.
Royal Bank of Scotland (RBS), which is 84 per cent taxpayer-owned, is close to securing agreement from its shareholders for a new long-term incentive scheme for its top management that could lead to a £10 million-plus payday for Stephen Hester, the chief executive.
The bank has written to investors with details of the new scheme, which replaces a plan that could have handed Mr Hester £9.6 million if he had lifted the share price to 70p.
RBS shareholders said yesterday that they had asked the bank to replace Mr Hester’s previous bonus deal with a scheme linked to more conventional measures such as profits, earnings per share and total shareholder return. They said that the maximum payout available to Mr Hester would not be substantially higher. It is likely to have a substantial shares component.
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Imperial Tobacco reports first rise in British cigarette market
in four decades
Catherine Boyle - The Times
The recession has taken a heavy toll of airlines and holiday companies, but as Britons battened down the economic hatches and stayed close to home, the downturn has produced an unlikely winner.
Imperial Tobacco said yesterday that the annual duty-paid cigarette market in the UK had increased by 1 per cent to 45.5 billion cigarettes in 2009, while the fine cut tobacco market grew by 21 per cent to 4,650 tonnes. It is the first time that the number of cigarettes sold in the UK has risen in almost four decades.
Alison Cooper, who will replace Gareth Davis as chief executive of Imperial in May, said: “In the UK, people are travelling a bit less and buying fewer cigarettes through travel retail. It’s that dynamic more than anything. The strength of the euro has also made it less cheap.”
Britain’s biggest cigarette supplier’s share of the market was flat, at 45.2 per cent, last year. Imperial has raised cigarette prices in Britain, Spain and France since last September, despite the recession, and has benefited from smokers trading down to its cheaper brands, including JPS Silver and Mayfair.
The trend towards rolling cigarettes to save money has also helped Imperial, which sells more than half the fine cut tobacco that is sold in the UK.
This shift was even more pronounced in Spain, one of the European countries worst hit by the recession. Cigarette market volumes declined by an estimated 10 per cent to 80.7 billion in 2009, while fine cut tobacco market volumes grew 30 per cent to 5,150 tonnes.
Ms Cooper said that Imperial was in the final stages of integrating Altadis, the maker of Gauloises and Gitanes that it bought for €12.6 billion in 2008, and would be back on the acquisition trail soon.
Analysts have speculated that Société Nationale des Tabacs & Allumettes, the Algerian state-backed tobacco company, was a likely target.
Ms Cooper said: “I’d like to expand our footprint in Africa. The Algerian privatisation would be interesting but they have not been too fast about putting it on the market.”
Imperial could expect to come up against stiff competition in any bid battle, with British American Tobacco (BAT) also likely to enter the fray. A spokesman for BAT said: “We will examine any opportunities that come to the market and any possibilities that come up.”
Imperial and BAT have criticised government proposals to introduce plain packaging of cigarettes. Andy Burnham, the Health Secretary, said on Monday that this was one of several measures under consideration as part of efforts to halve the number of smokers in England and Wales from 21 per cent of the population to one in ten in the next ten years.
The Department of Health has emphasised that plans are at an early stage.
Asked about the scheme’s chances of success, Ms Cooper said: “If we have anything to do with it, this is highly unlikely.
“This is something that will do nothing to limit consumption, but do a lot to push consumption into illegal hands.
“It will be much easier to counterfeit a plain package. It’s an own goal and will only help illicit trade.”
She added: “Regulation is making less and less of an impact on consumption.”
Shares in Imperial rose 2 per cent to £20.38 yesterday.
News Corp posts $254m profit on the strength of film and TV business
Rupert Murdoch says he is moving closer to charging for all News Corp's newspaper websites
Andrew Clark - The Guardian
Sophisticated tablet computers, ereaders and smartphones would be unloved "empty vessels" without quality creative content, Rupert Murdoch said yesterday as his News Corporation empire opened a new front in its battle to get consumers to pay for journalism and entertainment.
Enjoying a boost from Hollywood film-making success and from the popularity of its Fox television network, News Corp returned to financial health with profits of $254m for the three months to December, compared with a $6.4bn loss a year ago after huge asset write-downs.
Murdoch said he was moving closer to imposing charges for access to all News Corp's newspaper websites, including the Times, the Sun and the News of the World, and he revealed the company was in "advanced discussions" with handheld device manufacturers about a subscription model allowing consumers to access media content "whenever and wherever they want it".
"Content is not just king, it is the emperor of all things digital," said Murdoch. "We're on the cusp of a digital revolution from which our shareholders will profit handsomely." In a reference to hyped technology such as Apple's iPad and Amazon's Kindle, Murdoch said such "ingenious and fabulous devices" would be "unloved and unsold" without creativity from companies such as his own, adding that they were powered by content – not by batteries.
"Instead of the existential debate about value, now we're merely arguing about valuation," he said. "Consumers want content delivered immediately and on a variety of devices. They're willing to be paid to be entertained and informed."
Asked about a recent speech in which the Guardian's editor, Alan Rusbridger, argued that papers were "sleep-walking into oblivion" if they try to resist a trend towards free access, Murdoch said: "I think that sounds like BS to me."
News Corp's profits were hit by a $500m one-off charge to settle litigation brought by a US firm, Valassis Communications, which accused Murdoch's empire of anti-competitive behaviour in its aggressive use of discount coupons for marketing.
But the company's Twentieth Century Fox film studio, which made James Cameron's blockbuster hit Avatar, saw its profits surge from $112m to $324m, aided by DVD releases of movies such as Ice Age: Dawn of the Dinosaurs and Night at the Museum.
News Corp is set to scoop a windfall in ticket receipts this year from Avatar, which recently passed Titanic to become the cinema box office draw of all time, and Murdoch said there had already been "very early talks" with Cameron about a sequel, although he added: "This being Jim Cameron, I certainly wouldn't hold your breath on the timing."
News Corp's newspapers delivered a 29% increase in profits to $259m, aided by cost cuts at British titles and by a robust performance from the Wall Street Journal. Despite ongoing financial woes on much of Fleet Street, Murdoch singled out the Sun for praise, saying it had achieved record weeks of advertising revenue recently and that it had "left other papers far, far behind in the contest for readers".
The group's television stations also turned in higher earnings and are the subject of an initiative by News Corp to get cable networks to pay more to transmit Fox programming. But News Corp's MySpace continues to struggle after losing a battle for dominance to Facebook. Murdoch admitted MySpace's is "still not where we want it" despite job cuts and a refocusing on entertainment.
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No charges against Madoff's UK operation
Stephen Foley - The Independent
No one from the UK arm of Bernard Madoff's fraudulent investment business will face prosecution, the Serious Fraud Office has decided.
In June last year Madoff was convicted of masterminding the world's biggest investment scam, but the SFO decided yesterday there was no evidence that anyone at Madoff Securities International – the London offshoot of Madoff's New York operations – had committed any crimes.
"Following a thorough review of all the available evidence, the SFO has decided to take no action against either the company or its directors, there being insufficient evidence to provide a realistic prospect of conviction," it said in a statement.
Madoff was one of the most powerful men on Wall Street until being unmasked in December 2008 as a fraud. For more than two decades, his firm, Madoff Investment Securities, pretended to invest money from thousands of clients, generating steady returns of about 12 per cent a year. In fact, he was simply using money from new investors to pay clients who cashed out. The $65bn (£41bn) they thought they had in their accounts simply did not exist, and many were ruined.
Madoff is serving a 150-year sentence in a North Carolina jail. Two computer programmers have been charged with assisting him, and his auditor has pleaded guilty to fraud, too. Frank DiPascali, Madoff's right-hand man for decades, is also in jail after pleading guilty to fraud and promising to help investigators prove other people were also in on the scam.
Funds from the New York operation would flow back and forth through the London subsidiary, where staff believed they were investing personal Madoff family money. A lawyer for Stephen Raven, former head of the subsidiary, said that he was "pleased with the outcome of the SFO investigation and that he and his directors have been fully exonerated".
The SFO said it continues to assist the FBI's investigation into the extent of the fraud, and who knew about it. The SFO is also examining whether any UK investment advisers committed crimes when they funnelled money to Madoff.
'Superwoman' stung by hedge fund guru's '$50bn trading scam'
Madoff clients listed
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Risky banking activity is like pornography Volcker tells Senate
Barack Obama's financial guru, Paul Volcker, rejects Republican criticism of regulatory crackdown on banks
Andrew Clark - The Guardian
Banning commercial banks from high-risk trading would cut down on "too-big-to-fail" institutions and help protect the economy from further financial crises according to Barack Obama's economic guru, Paul Volcker, who today rejected opposition from Wall Street over a wholesale regulatory crackdown.
Battling criticism from Republican lawmakers, Volcker told the Senate's banking committee it was entirely possible to define banks' "proprietary trading", quipping that risky financial activity was "like pornography: you know it when you see it".
Volcker told the committee: "Every banker I speak with knows very well what proprietary trading means and implies.
"My understanding is that only a handful of large commercial banks – maybe four or five in the US and perhaps a couple of dozen worldwide – are now engaged in this activity in volume."
Under plans set out earlier this month by Obama, the US government wants to stop any bank with a licence to take customers' deposits from operating hedge funds, private equity funds or from speculative trading with their own funds, rather than clients' funds.
"What I want to get out of the system is taxpayer support for speculative activity," said Volcker. "If you don't bar that, it's going to become bigger and bigger."
The proposal to limit banks' activities has been dubbed the 'Volcker rule' by Obama, named after the 82-year-old former Federal Reserve chairman who made his name as an inflation fighter in the 1980s.
One Republican, Mike Johanns, argued the rule would not have averted the collapse of Bear Stearns or the demise of the insurer AIG, neither of which operated high street banks. He accused the White House of using the credit crunch as an excuse to bash banks, by adopting an attitude of "never let a good crisis go to waste".
The top Republican on the committee, Richard Shelby, said he was "quite disturbed" by the way the radical new regulation had been "air dropped" into a debate on banking reform at short notice, although he added that he was open to any plan intended to prevent further "calamity".
Banks have argued that proprietary trading is almost impossible to clearly define, as most of their trading activity has some connection to customers: for example, they sometimes make investments with their own money in partnership with clients' capital.
The separation would reintroduce part of the formal division between commercial and investment banks, established under the Glass-Steagall act of the 1930s but repealed in the 1990s. Administration officials say they would seek to apply the rules to foreign banks operating in the US, potentially affecting British banks with major Wall Street arms such as Barclays.
Invoking his status as an economic grandee, Volcker warned the committee that unless Congress consented to curbs on risk, further financial disasters would result. "I might not live long enough to see the crisis but my soul is going to come back and haunt you," he said.
Outsmarted: High finance vs. human nature
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UK will break Darling's debt promise, warns think-tank
UK Chancellor will not halve debt by 2013-14, economics institute experts forecast
David Prosser - The Independent
Government tax and spending plans will not be sufficient for it to keep the promises it has made to cut the national debt, one of the UK's most influential think-tanks warned today.
The National Institute of Economic and Social Research (Niesr) said the plans announced so far by Alistair Darling would see the Chancellor fall short of his aim of halving the budget deficit as a proportion of national income by the 2013-14 financial year, despite the Government having pledged to enshrine that commitment in law.
Niesr predicted that even with further tax rises or spending cuts – inevitable in the think-tank's view – net borrowing would still be 6.8 per cent of GDP in 2013-14 – well above the 5.5 per cent to which the Government must get in order to keep its promise.
The widely respected think-tank also warned that Mr Darling's existing plans would see total public debt as a proportion of GDP continue rising, rather than beginning to fall from the middle of this decade onwards, as the Treasury's projections show. Simon Kirby, of Niesr, warned: "Public borrowing in 2013-14 will be 1.3 percentage points higher than the Treasury is forecasting, and net debt as a share of GDP will not start to fall in 2015-16."
The warning will be a major blow to Mr Darling, who is under huge pressure to spell out how he would get on top of borrowing following the general election. His political opponents, led by George Osborne, who has accused him of being too slow to act on the deficit, will seize upon the report.
The forecasts will also undermine the Chancellor's insistence that Britain's prized AAA credit rating is not under threat. The Treasury says Britain's debt as a proportion of GDP will rise to 77.7 per cent in 2015-16, before starting to fall; Niesr's claim that this is unrealistic makes it more likely that Britain's credit rating could be lowered.
Niesr also said today that the pace of Britain's economic recovery would pick up following the 0.1 per cent rise in GDP initially estimated for the fourth quarter of 2009, though it expects total growth of only 1.1 per cent to 2.0 per cent over the next two calendar years.
That modest forecast is in line with the latest economic data, which paints a patchy picture of the recovery. A survey, published yesterday, of purchasing managers in the construction sector suggests the industry's activity contracted for the 23rd month running during January, albeit at a slower pace. By contrast, the manufacturing sector, which reported on Monday, seems now to have moved into recovery mode.
In the dominant consumer sector, Nationwide Building Society said today that its latest survey of confidence revealed an improvement last month, while hopes for the employment market were boosted by research from KPMG showing that recruitment consultancies are continuing to see a pick-up in demand for staff from clients.
Against this backdrop, the Bank of England's Monetary Policy Committee begins its latest monthly meeting this morning, and will announce tomorrow its decisions on any changes to interest rates or quantitative easing.
The MPC had been expected to say that with the £200bn QE budget now exhausted and the economy in recovery, the policy would be suspended. However, the unexpectedly weak GDP figures for the fourth quarter of 2009 have led some analysts to speculate that the MPC might now extend QE, with the Bank's Governor, Mervyn King, requesting permission for another expansion of the programme.
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