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Composite graphic form business news pages of Frost's Meditations
Sunday 9th May 2010
Goldman to 'sue for peace' on Abacus charges   |  Tycoon’s wife gives secret files to taxman    |   Leaderless UK stokes crash fears   |   Europe's future in the balance as eurozone faces its toughest test   |   Funeral costs jump almost 50%   |   FSA's Margaret Cole wages war against criminals in the City   |   British taxpayers ordered to bail out euro   |   Car firms pin hopes on pay-as-you-drive as recession makes buying vehicles too expensive   |   BP Oil-Collection Chamber Clogs, Removed From Leaking Gulf Well   |   Thais lined up to buy Corus Redcar steel plant   |  

BP Oil-Collection Chamber Clogs, Removed From Leaking Gulf Well
David Wethe - BusinessWeek

BP Plc’s latest effort to prevent oil leaks from damaging wildlife and tourism on the U.S. coast are being stymied as cold and pressure a mile below the surface of the Gulf of Mexico formed ice that clogged a containment device.

The device, a 40-foot-tall steel chamber BP hoped would capture the gushing oil and funnel it to an overhead drillship, was blocked by ice crystals formed from gas hydrates at the well site, the company said. An estimated 5,000 barrels of crude are spilling each day from the well, threatening shrimping and fishing grounds that supply a quarter of the U.S. seafood.

“I wouldn’t say it’s failed yet,” Doug Suttles, BP’s chief operating officer for exploration and production, said yesterday. BP expects to break up the hydrates by sending warm water through an insulating layer, he said.

The Macondo well began spewing oil into the Gulf after an April 20 explosion on Transocean Ltd.’s Deepwater Horizon rig. The U.S. Fish and Wildlife Service yesterday stopped public access to Louisiana’s Chandeleur and Freemason islands, where BP and federal officials Thursday said oil from the spill first reached shore. Tarballs ranging in size from dimes to golf balls, were recovered yesterday on the shore of Dauphin Island, Alabama, about 90 miles northeast of Chandeleur.

Best Hope
The containment system, now set aside on the seabed about 200 meters (656 feet) from the biggest leak, was London-based BP’s best hope for slowing the spread of oil while it drills a relief well aimed at relieving pressure so the flow can be stopped altogether. BP has 20 experts studying the possibility of injecting pieces of rubber into the well to stop up the pipe.

“We continue to look to see if that’s going to be a viable option” and not make the leak worse, Suttles said yesterday at a press conference in Robert, Louisiana.

Meanwhile, BP will consider ways to prevent the containment dome from clogging, such as applying heat. Hydrate gases crystallize like ice in the cold waters and high pressure 5,000 feet beneath the ocean’s surface.

BP engineers thought the opening atop the dome was large enough that it wouldn’t clog with hydrates, Suttles said.

The company expected the containment system, a rectangular structure with a pyramid-shaped dome on top, to capture as much as 85 percent of the flow of oil. He said the relief well is “ahead of plan,” having reached a depth of 9,000 feet.

Methane Bubble
The explosion and fire aboard the rig, which BP leased from Geneva-based Transocean, killed 11 workers. A bubble of methane gas that shot up the drill column and burst through several seals and barriers caused the blast, the Associated Press reported on May 7, citing interviews with rig workers obtained by a California engineering professor.

Suttles declined to comment on the report. The U.S. Coast Guard and the U.S. Minerals Management Service will begin an investigation May 11 to identify the factors leading to the incident, according to a government statement issued yesterday.

The Minerals Management Service, overseer of offshore drilling, completed inspections of all deepwater drilling rigs operating in the Gulf without identifying hazards, regional director Lars Herbst said at a press conference May 7.

Blowout Preventer
Inspectors checked test records of blowout preventers, an assembly of valves atop wells on the seafloor. The blowout preventer on the BP well failed to stop a mixture of oil and gas from ejecting unexpectedly and igniting the rig, according to Suttles. Houston-based Cameron International Corp. supplied the blowout preventer for the Deepwater Horizon.

Besides possibly injecting rubber cuttings into the well, engineers are considering installing a second blowout preventer atop the first, Suttles said.

Similar containment boxes have been used to funnel crude from leaking wells in shallow water. This is the deepest deployment of such a system, according to a fact sheet provided by BP.

Coast Guard Rear Admiral Mary Landry said efforts to battle the spill are the biggest she’s ever seen. Suttles said more than 8,500 responders and 4,000 volunteers are involved.

Calm seas have enabled BP to burn as much as 9,000 barrels of oil from the surface, Suttles said May 7. Controlled burns weren’t planned yesterday because of high winds, Coast Guard Petty Officer Connie Terrell said in a telephone interview.

The Coast Guard and BP have been skimming oil from the Gulf. BP planned to do more skimming yesterday and to drop additional dispersant on the slick, company spokesman Mark Proegler said. Oil accounts for about 10 percent of the 45,000 barrels skimming boats recovered so far, Suttles said.

The National Oceanic and Atmospheric Administration widened a fisheries closure in the Gulf of Mexico on May 7, calling it necessary to reassure consumers that fish and shrimp caught in the region are safe to eat.

Tycoon’s wife gives taxman secret files
The latest twist in a bitter £400m divorce battle threatens to cause jitters among a wealth circle
David Leppard - Sunday Times

Michelle Young, 45, who is divorcing her husband Scot, is to give HM Revenue & Customs a computer disk containing hundreds of pages of emails and other documents outlining his dealings in property, shares and film companies over the past five years.The wife of the tycoon at the centre of a £400m divorce is to hand secret files on his dealings with the super-rich to the taxman.Michelle Young, 45, who is divorcing her husband Scot, is to give HM Revenue & Customs a computer disk containing hundreds of pages of emails and other documents outlining his dealings in property, shares and film companies over the past five years.

The files were held on the hard drive of a laptop computer used by the tycoon. He believed he had deleted them before handing the laptop to his estranged wife to help their children Scarlet, 17, and Sasha, 15, study for exams.

She hired private detectives, including the former head of Scotland Yard’s computer crime unit, to examine the laptop and they recovered a large amount of encrypted material.

This weekend Scot Young, 48, said he had already been subjected to one Revenue inquiry that ended with him declaring himself bankrupt and owing £2m to the taxman. “I have nothing to hide. A copy of the hard drive is with my former lawyers and I’m happy to give that to the Revenue.”

The latest twist in the high-profile divorce battle will unnerve some of Scot Young’s friends, who have already told him privately they are unhappy with the publicity surrounding the case. The couple split up four years ago.

A fixer to Russian oligarchs and British billionaires, Young, whose assets were once estimated at £400m, claims he is broke after losing his fortune in a series of disastrous financial deals. The court has given him a six-month suspended jail sentence for failing to disclose full details of where this money has gone.

He insists that properties he has been linked to in a £100m portfolio have all been repossessed or sold.

Last December Mrs Justice Black awarded Michelle Young £27,500 a month in maintenance on top of rent and school fees for her daughters, conceding the sums would be seen by some as “exceptionally generous”. She pointed out that the family had become used to a “luxurious lifestyle”, however.

Scot Young has declined to provide a penny of the maintenance award.

In the past, Michelle Young and her children have received more than £1m from some of her estranged husband’s friends and business associates. There were direct or indirect contributions from Sir Philip Green, the boss of Topshop, and Harold Tillman, the chairman of Jaeger, the fashion chain.

Sir Tom Hunter provided £124,000 in rent and school fees. Richard Caring, the restaurateur, has paid £50,000 towards Scot Young’s legal fees.

Scot Young sold Boris Berezovsky, the oligarch, a family home on the Wentworth estate in Surrey for £19m in 2001. The files show that in 2004 he sold Berezovsky a London property estimated to be worth £4m for just £350,000. Scot Young said last week the price paid was the market value because the property had only a five-year lease.

The computer disk and other documents contain details of transactions involving the sale of 15 properties, including half a dozen mansions in Belgravia, central London.

The files also contain references to film investments. Scot Young discussed funding Manolete, a film about a Spanish bullfighter released in March, starring Adrien Brody and Penelope Cruz. He confirmed he did invest in one film company because associates told him it would be “tax-efficient”.

Other files include references to a technology firm called EU Smart, in which Green’s wife Tina held some shares.

Michelle Young said she and her daughters faced penury because she was unable to pay school fees or rent due this week on their three-bedroom house in St John’s Wood, London. “I have been humiliated. He has stolen the last three years of our lives. We are just living one day at a time. He is eating in the finest restaurants with beautiful young models while my girls don’t know their futures,” she said last week.

She said she was now looking for “an angel investor” to help fund her case. The tycoon Vincent Tchenguiz has reportedly shown interest but has not yet committed any funds.

Sofia Moussaoui, Michelle Young’s solicitor, said the taxman had “a bottomless pit in terms of resources” to find out what had happened to her husband’s assets.

Young said he had only one girlfriend, Noelle Reno, the former fiancée of Matthew Mellon, heir to the banking fortune. He was “delighted” that the taxman or the trustee in bankruptcy would be “looking at this in a rational fashion, unlike my wife, who I believe is refusing to come to terms with the fact that we can no longer live a luxury lifestyle”.


Leaderless UK stokes crash fears
David Smith - Sunday Times

Fears of a market slump mounted this weekend after British politicians failed to form a government and senior bankers warned that the eurozone crisis might cause bank lending to seize up.

European finance ministers are today expected to agree a financial support mechanism for ailing economies such as Greece, Portugal and Spain. Traders fear the scheme, to be announced tonight, will not be enough to reassure markets and there will be a repeat of last week’s chaotic trading.

After sharp dips following the election, sterling stabilised on Friday in the expectation that a political deal would be struck over the weekend, with the Conservatives forming a government with the backing of the Liberal Democrats. Yesterday, however, Tory sources said no deal was likely before tomorrow, though progress was being made.

Traders said markets were already spooked by the chaos in America on Thursday, when prices plunged crazily before recovering most of their losses.

The Securities and Exchange Commission and other market regulators have launched investigations, with initial explanations of a “fat finger” trade (a mistaken one) now discounted.

“With the markets being highly nervous ... and in the mood to penalise any country that is perceived to be falling short on its deficit-reduction needs, it is of paramount importance that a credible commitment on how to tackle the dire UK public finances is in place sooner rather than later,” said Howard Archer, an economist at IHS Global Insight.

Michael Saunders, an economist at Citigroup, said: “The UK faces a difficult mix of political weakness and unsustainable fiscal trends. The electoral system — no fixed election date and first past the post — means minority governments tend to be inherently unstable. With the biggest budget deficit in the G7, Britain urgently needs to establish a credible path back to fiscal sustainability.”

Other City sources warned that bank liquidity — the willingness of banks to lend to each other — had dried up suddenly last week. “That is what caused the last crisis and is still the big worry,” said one senior banker.

The Bank of England postponed its regular monthly monetary policy committee meeting on Thursday to avoid a clash with the election. The meeting tomorrow is set to leave Bank rate on hold at 0.5% and not add to the £200 billion of quantitative easing.

Economists have warned that if political uncertainty sends the pound sharply lower, the Bank may be forced to put up rates sooner than is good for the economy.

Mervyn King, the governor, will present the Bank’s new inflation report on Wednesday. It is expected to point to higher inflation.

Today’s EU moves follow an aggressive market sell-off last week on worries about the Greek crisis spreading to Portugal, Spain and Italy. Alistair Darling will travel to Brussels today to attend the meeting.

The mechanism will include an arrangement to allow the European Commission to issue bonds with the implicit backing of the European Central Bank. Any default losses will be shared by all member states, including Britain. A European Monetary Fund will also be proposed, but is likely to be rejected by some member states, including Britain.

Some analysts fear events in the eurozone will tip the markets into a deep, enduring crisis. Others are more optimistic.

Brian Belski, chief strategist at Oppenheimer in New York, said fear was likely to continue causing havoc in the near term. “Everyone was bullish and now the world is coming to an end,” he said. Mistrust of the market was muddying investors’ vision, Belski said. “It’s a problem of optics. What is Greece? It’s 3% of the GDP of the eurozone.”


Europe's future in the balance as eurozone faces its toughest test
As the world waits to see whether Greece's debt crisis will spread to other European nations, eurozone experts give their views on how events will play out

Richard Wachman and Katie Allen - The Observer

A Euro coinThe eurozone faces the biggest test since its inception in 1999, amid fears that the Greek debt crisis could spread to other European countries and imperil the future of the euro.

Nervous stock markets have plunged around the world as worries intensify that banks will lose confidence at the ability of heavily indebted governments to repay their loans. A loss of confidence could lead to a second leg of the credit crunch if banks refuse to lend to each other because of concern about their exposure to nations that have borrowed to the hilt.

In particular, markets are fretting that weak European economies such as Portugal, Spain and Italy could follow Greece, and seek international and EU aid. When German chancellor Angela Merkel urged the German parliament to back the EU's emergency loan package for Greece, she said: "Quite simply Europe's future is at stake. Nothing more, nothing less."

On Friday, Merkel obtained parliamentary approval for the EU and IMF to start disbursing the €110bn Greek bailout. But the crisis is far from over, because there are doubts that Greece will be able to implement massive cuts in public spending in the face of widespread public opposition that last week led to riots and three deaths.

Now questions are being asked about whether Britain could face the same problems as Greece, despite the country being outside the eurozone. Below we speak to experts and leading figures to gauge their views on whether the euro can survive and about Britain's ability to weather the storm.

Richard Lambert
- Director general of the CBI

This is a very risky time for the eurozone, but I think the euro is more a political project than an economic one. The European political elite is very committed to the single currency. If the euro fell apart, it would be potentially disastrous for the member nations, ushering in a period of deflation, not to mention extreme political and economic uncertainty.

Turmoil in Europe is not in Britain's interest. But we are not, currently, in the same boat, as we have a flexible exchange rate. Nor is our indebtedness as serious. According to the IMF, we have a modest current account deficit of 1.7%, against 8.9% for Greece. And the average maturity of UK government debt is longer than for other European economies.

Of course we have to deal with our deficit. Failure to do so would mean that Britain too would be in trouble in a few years. But we have a credible record in managing our public finances; we are in a very different place to Greece.

Dylan Grice - Global markets strategist at French bank Société Générale

It is difficult to know whether this will lead to an unravelling of the euro, but it feels like a slow-motion train crash. One could argue that the euro will go the way of gold standard, which was abandoned by many countries in the 1930s because it underpinned a system that was too rigid.

One thing we do know is that crises like these move sequentially. Mr Market turns into one of those outsized monsters in the Hollywood movies, hunting its cowering victims down one by one, picking up cars or buses in which in which they might be hiding and violently shaking them until someone falls out.

We saw this during the crash of 2008 when the epicentre of the crisis moved from one weak financial institution to the next. We also saw it during the Asian crisis of 1997 when we were assured that Korea was not Thailand or Indonesia, but Mr Market decided otherwise. The world's indebted governments should be paying attention

Gerard Lyons
- Chief economist at Standard Chartered

In terms of the euro, all this should not be a surprise. All the arguments against the UK joining the euro have been vindicated. Not all the members who are currently in the euro should be in it.

The euro may have better protected some of its members compared with what may have happened if they had been outside during the crisis, and some countries, like Iceland, still want to join. Despite all this, the euro system is not sustainable in its present form.

At some stage, the euro area would have had to come to a fork in the decision-making road. This may be that fork. The euro area needs to decide whether it wants political union. The nations which accept a political union will have to go down one route – and those that don't will have to leave the euro.

History shows that monetary unions of large sovereign nations cannot survive unless they become a political union. Monetary union requires labour mobility and fiscal flexibility in the form of a single treasury. Rich regions need to bail out poor areas when needed. This is easier to implement if they are part of the same country and much harder to justify across a monetary union.

The basic problem with the euro was that one interest rate does not suit all the countries. In economic jargon, the euro is not an "optimal currency area". In other terms, the economies are so different they need their own interest rates. One size does not fit all.

So, ahead of the recent financial crisis, the euro contributed to an even bigger boom in the smaller European economies. Hence they have seen a bigger bust.All this demonstrates the fragile underpinning of the euro area.

Anton Börner - President of BGA, the Federation of German Wholesale and Foreign Trade

We need the euro! The current developments show that it's no longer just about Greece but about the euro as a whole. We need the euro, so everything must be done to stop it going under.

Why? Because the euro is as beneficial to Germany as to other countries in Europe. In the past, volatile exchange rates made long-term planning very hard for export-dependent companies. Expensive currency hedges and exchange fees – such as those still common in US or Asian trade – are no longer something firms within Europe have to contend with. That saves billions of euros every year and safeguards jobs.

The fact other euro member states have benefited from low interest rates does not mean that Germany is worse off. In fact the opposite is true: we have benefited from having more stable and faster-growing trading partners. Germany has also gained by no longer having to grapple with devaluation in other countries.

Leaving aside Germans' historical sensitivities, a weak euro bluntly means less credibility for the eurozone. That means less investment, less wealth, less security for pensioners and savers and means drastically rising interest rates with the knock-on effect of more countries being at risk of bankruptcy. The long-term stability of Europe and basic order itself would be under threat.

Germany should get strongly involved in the framework of an IMF solution. Above all though, Germany must make sure that such a crisis is never repeated. The no-bailout clause in the Maastricht Treaty was introduced at the insistence of Germany and is indispensable. That's something we must insist on.

John FitzGerald - Economist at Economic Social Research Institute, Dublin

I don't think we will see the break-up of European monetary union. Each European country has the ability to deal with the economic problems that lie ahead.

Take Ireland as an example. No one suggested that we seek a bailout from the IMF or Europe. We got on with it ourselves and have come up with a very good fiscal package. Wages are expected to fall on average by up to 7% over the next three years, which will bring down the price of goods and services.

The underlying structural deficit before the government began taking action in 2009 was around 8%; we now think it is probably in the 3-4% range. The Irish government still needs to do more. A tough budget next year will probably complete the bulk of the adjustment, so when the economy recovers fully the country will no longer be in deficit.

Admittedly, the rescue package for Greece has raised expectations that other countries with problems can rely on outside help. But Spain's problems are not of the same order as Greece's. The Spanish government can deal with the situation, as long as it acts decisively and with resolve.

Lord Jay of Ewelme - Vice-chair of Business for New Europe
The eurozone has taken quite a battering over the past few weeks. There has been febrile speculation that it might break up, but this is wide off the mark.The greatest danger was the prospect of a Greek sovereign debt default.

This danger has been met, after much wrangling, with a €110bn support package from the EU and the IMF. This support was conditional on Greece passing reforms to cut its budget deficit from the current 13.6% to less than 3% in 2014.

That, however, is just the beginning. Spain and Portugal need to join Ireland and Greece in taking credible action to deal with their deficits. When this happens, the linked risk of a possible European banking crisis will recede.

This crisis was not caused by the markets – it was caused by governments spending beyond their means. They have been in denial about rising debt and the need for economic reform. Once the crisis passes, the euro should continue to help the EU to grow.


Funeral costs jump almost 50%
• Funeral costs rise by up to 48% in three years, survey finds
• Poor hit hardest as social fund payment does not cover costs
Rebecca Smithers - The Guardian

It is the one major expense we will all have to meet – hopefully later rather than sooner – although it will be down to somebody else to settle the bill.

But the average cost of even the most basic, "no frills" funeral has soared to a level which the most cash-strapped families would struggle to afford, according to a survey published this month by the UK's funeral directors. The survey found that charges by local authorities for cremation and burial have escalated by up to 48% since 2007, far outstripping the rate of inflation, and it is giving funeral directors a bad name.

The fees funeral directors charge for a typical funeral now average £1,515, up 3.25% since 2007 – while the "disbursements" – the essential third-party charges associated with cremation and burial which exclude the work carried out by the undertaker – have escalated enormously.

The survey, from the National Association of Funeral Directors (which represents firms that organise about 85% of UK funerals – 470,000 every year), also shows that the government's social fund grant, available to the poorest bereaved families who qualify, is inadequate for even the simplest ceremony.

The reality of death is, of course, that the content and scale of funerals are generally left to the next of kin or close friends to decide, organise and deliver within days. You may opt for a very simple ceremony or a theatrical "full works" – as in the case of the recent funeral of pop impresario Malcolm McLaren – with a customised coffin carried in a carriage drawn by a team of plumed black horses.

But there is rarely time to "shop around" for the best quote, and many decisions about detail are made in haste. The associated costs, from catering to hiring limousines and organising death notices, can soon add up. Financial talkboards reveal that, whatever funeral directors' boasts about keeping their costs down, many consumers complain that they "fleece the living" at a difficult and stressful time.

The survey claims that funeral directors' average hourly rate of £35 compares favourably with other professional service providers – plumbers at £30 per hour, car mechanics at just over £90.16 and electricians at £35-£45 an hour.

The marked rise in the cost of funerals over the past couple of years is due to increases in third-party disbursements over which the funeral director has no control.

The survey found that the cost of hiring a church for a funeral service, including the organist's fees and heating/lighting, is now £220, up 13.1% since 2007; the average cost of a cremation has increased by 48.1% to £613 and the cost of interring cremated remains at a crematorium or cemetery has risen 67% to £167.

Increases in disbursements have had a major impact on burial – still chosen for around 30% of funerals nationally. Although there is no difference in the funeral director's charges for cremation or burial, the price of a standard-size grave has risen 42% to £612 since 2007. Other factors include whether the deceased was a resident in the area served by the cemetery, whether the plot is purchased or leased and whether an existing grave needs to be opened up.

The NAFD says the social fund grant has been capped since 2003, and does not cover the funeral director's costs for a "simple funeral service" – which averages £1,184 – leaving a shortfall of nearly £500.

NAFD chief executive officer Alan Slater says: "Funeral directors are retail businesses and what this latest survey highlights is that despite being affected by substantial rises in their fixed costs, they continue to deliver high standards of care and excellent value."

He added: "Increases in third-party disbursements during the past couple of years have far outweighed the rise in professional fees, but what really concerns us is the shortfall of almost £500 between the maximum payment available through the social fund and the price of the most basic funeral.

"We will be continuing to campaign for an overhaul of the social fund payments system for funerals and a significant increase in the £700 grant."


FSA's Margaret Cole wages war against criminals in the City
Tracy Corrigan - Sunday Telegraph

Margaret Cole does not seem very scary when I first meet her in the Financial Services Authority's Docklands office.

She apologises for the poky meeting room we have squeezed into and is flustered when the photographer starts snapping, admitting that she hates having her picture taken.
But I am aware of her formidable track record at the UK financial regulator and suspect she is steelier than she seems. The former commercial law firm partner who now heads the FSA's enforcement division has scored some notable victories against the City's insider dealers, market abusers and other financial fraudsters. Recent scalps include David Baker, the former deputy chief executive of Northern Rock, who was fined last month for making misleading statements to the market, and Malcolm Calvert, a former Cazenove stockbroker, who is now serving 21 months in prison for insider dealing.

This is all part of her plan to create a "credible deterrent" against market abuse in the City. "I want it to be socially unacceptable," she says. "That is why the first step on the journey was to show that it's a criminal offence. When you go down to Southwark [Crown Court] to be sentenced, you take your toothbrush with you." Just as I thought, steely.

Until Ms Cole's tenure, the UK authority's record of bringing insider traders to book – both before and after the creation of the FSA in 1997 – was lamentable. "These people felt they were almost immune," remembers Simon Morris, a financial services partner at law firm CMS Cameron McKenna.

Ms Cole joined the FSA five years ago and realised, a year into the job, that a change of direction was needed. "It was widely held that [insider dealing] cases were too complex to go before a jury and therefore only civil cases before a tribunal should be contemplated, on the grounds that there was then a lower burden of proof," she says.

It didn't quite work like that in practice. Even if fines were imposed, they were often paltry. "We were not finding the process to be less onerous because the tribunal was applying, effectively, the criminal standard [of proof] through a different process.

"We came to the conclusion, reasonably early on, that we needed to embark on criminal prosecutions of market abuse and that was going to be the answer to creating a credible deterrent. Actually seeing people going to prison and being locked up was going to be much more powerful, in the appropriate cases, than a fine. So we set about changing the way we did things."

Her plan flew in the face of the conventional wisdom and she was not expected to pull it off. The FSA had never successfully prosecuted a criminal insider-dealing case.

Ms Cole says she lost count of the number of people who told her: "We think you are making a big mistake."

She sounds unfazed but surely, at the time, this must have been rather discouraging? "I thought it was the right thing to do [to pursue criminal prosecutions]," she says simply. Under the Financial Services and Markets Act of 2000, the FSA has a statutory objective to maintain confidence in the UK markets and reduce financial crime.

"The job of a regulator," Mr Morris points out, "is to regulate and where it is not taken seriously it has to make sure that it is taken seriously".

Last year, the FSA won its first criminal case for insider trading against Christopher McQuoid, former general counsel at TTP Communications, and his father-in-law, James Melbourne. McQuoid was sentenced to eight months
in prison, a sentence upheld on appeal, when the judge backed the FSA's pursuit of criminal convictions.

"Insider trading is not a victimless crime – this is a crime which does undermine confidence in the integrity of the market and this is a confidence which is of great importance to the economic welfare of the community as a whole," the judge noted.

More cases have followed. "We don't go out looking for particular types of scalps but we wanted to have cases growing in magnitude and complexity because we wanted to have impact. That's the whole point," Ms Cole explains.

For that reason, the enforcement team is "moving from cases that you might perhaps describe as opportunistic to cases where it is a much more organised scheme".

There is no sense that the battle has been won. After the conviction of Malcolm Calvert, Hector Sants, the FSA's outgoing chief executive, told The Sunday Telegraph: "There is an unacceptably high level of market abuse in the UK."

Nor is the greater focus on enforcement a post-financial crisis clamp-down akin to the Securities and Exchange Commission's fraud charges against Goldman Sachs in the US (though the FSA is now conducting its own investigation into that case).

"The cases in the courts now can't be politically motivated," Ms Cole points out, with a forbearance that suggests this is not the first time she has corrected such an assumption. It takes at least two years for cases to work through the pipeline,
as there is a long process of gathering evidence, trawling publicly available data and finding expert witnesses.

The McQuoid case, for example, came to court just over a year ago but the charges were brought in January 2008 and preparation started a year before that. It is, Ms Cole notes mildly, "a fairly complex thing to do". Nonetheless,
the timing of the recent spike in cases is fortuitous, even though no prosecutions have come out of the controversial short-selling of bank stocks during the financial crisis. ("We never saw any evidence that there was manipulative short-selling," according to Ms Cole.)

The increased flow of cases coincides, happily, with the public's desire for tougher policing of the City – and the Conservative party's plan to give the FSA's bank-supervisory powers to the Bank of England and set up a financial crime unit. "It could well be that the FSA, under threat of death, is making a very good plea for clemency," Mr Morris says.

More aggressive tactics such as dawn raids have led to comparisons with the SEC, the US regulator, which, despite its failure to spot the Bernie Madoff scam, is generally seen as tough on market abuse.

"We did go to talk to them about their tools and powers but we decided to develop our own version," says Ms Cole.

Lawyers in the industry, however, say there are some obvious borrowings. "There is a whole series of new regulatory approaches that they've taken, in particular in relation to insider dealing, that are pretty clearly out of the SEC book," says Nathan Willmott, an FSA investigations specialist at Berwin Leighton Paisner, who cites unannounced telephone interviews of suspects, witness immunity, as well as dawn raids and arrests of suspects.

Sometimes, he feels, it goes too far. "It is right that criminal conduct be pursued through criminal prosecutions, but there has been a blurring of the FSA's approach in relation to deliberate criminal conduct and regulatory breaches by firms or individuals based on negligence or oversight," argues Mr Willmott.

He claims the FSA is increasingly "fining huge amounts and issuing prohibition orders over lesser charges in the hope that this will be the best way of raising standards in the industry".

Others regard such actions as a necessary shift for the FSA, which has to keep an eye on what people don't do, as well as what they do. Certainly, this is the FSA's perspective, following its own report and external criticism of its shoddy supervision of Northern Rock in the run-up to the crisis.

"We are not interested in process matters for their own sake but because supporting supervisory work and making sure firms have the right systems and controls is the front line of defence in protecting against more serious wrongdoing," Ms Cole says.

"Transaction reporting, for example, is crucial to the fight against market abuse and firms have to take it very seriously. That is why we are determined that our penalties should have real impact across this and the other work we do to support intensive supervision."

In March the FSA turned up the volume again with a series of dawn raids on City institutions, including Deutsche Bank, Exane BNP and Moore Capital. It is set to be the biggest insider dealing case to date.

Is Ms Cole biting off more than she can chew? Defence barrister Ian Burton thinks so. "That is a case that has been publicised beyond what it actually is. It is a deliberate PR campaign to show that they are strong, powerful and policing the City. It has generated huge publicity but I'm really not sure that there is that much substance to the case," he told The Sunday Telegraph recently.

It seems unlikely, however, based on her record to date, that Ms Cole is unaware of what she is taking on. For example, after her initial decision to pursue criminal convictions, she spent a year rebuilding her team. When she describes the process, she talks of the need to "upskill" and "instill a more commercial ethos".

This, of course, is management-speak for getting rid of staff who weren't up to the job and hiring new ones. There was a "change programme". (When Ms Cole uses such euphemistic jargon, which she is rather fond of, it sounds like a polite way of expressing harsh necessities, rather than deliberate obfuscation.)

Still, the reality was brutal enough. A third of the staff in the enforcement division left, allowing her to hire the criminal specialists needed to pursue her plan – after all, defendants on charges of insider trading can often command "an army" of top-flight lawyers. In doing so, she confounded yet another piece of received wisdom – that regulators can never recruit staff of sufficiently high calibre to take on the City.

It must all have been pretty miserable, I suggest. She concedes that "2007 was not a comfortable year" but she got through it because she had "a vision of the future".

Margaret Cole still has a lot on her plate, and she knows it, but she is not baulking at the latest challenges she has created for her team. "We have set a strong pace," she agrees calmly. "And we are going to keep it up."


British taxpayers ordered to bail out euro
Britain faces paying out billions of pounds under a European Union deal intended to prevent another financial crisis like the one in Greece.

Bruno Waterfield and Melissa Kite - Daily Telegraph

All 27 EU finance ministers have been summoned to Brussels on Sunday to sign up to a “European stabilisation mechanism. Britain will be unable to veto this as it will be put through under the “qualified majority voting” system.

The deal, effectively to shore up the euro, was denounced as a “stitch-up” last night after it emerged Nicolas Sarkozy, the French President and Angela Merkel, the German Chancellor, had devised it behind closed doors and were attempting to push it through at a time when there is no clear government in Britain.

It was declared a "done deal” by the 16 euro zone leaders who met in the early hours of Saturday morning.

The decision was taken as David Cameron was locked in talks with the Liberal Democrats to try to form a government.

Alistair Darling, the Chancellor, will fly to Brussels for the meeting after promising to keep George Osborne and Vince Cable, his Tory and Lib Dem counterparts, informed. EU finance ministers have been given the deadline of midnight tonight to agree the highly sensitive but rushed proposals to protect the single currency from financial turbulence from the Greek debt crisis.

“When the markets reopen Monday we will have in place a mechanism to defend the euro,” said President Sarkozy yesterday. “This is a full-scale mobilisation.”

Euro-zone leaders are attempting to get round objections from countries such as Britain by invoking Article 122 of the Lisbon Treaty, intended to enable a collective response to natural disasters. This does not need unanimous agreement.

By doing so, Mr Sarkozy has ensured a speedy confrontation with a new British prime minister and other leaders of non-euro currency countries. All 27 EU finance ministers must be present, but because decision will be taken by qualified majority vote, the 16 euro zone leaders can ensure its passage.

British exposure to liabilities created by a bail-out under the scheme would amount to around 10 per cent of the total loan. If a country failed to repay, the cost to Britain would be ¤10?billion (£8.6 billion) for every ¤100?billion on which it defaulted.

The scheme will present an immediate dilemma for an incoming Conservative government. A bail-out would increase British liabilities and debt at a time when Mr Cameron would be seeking to restrain spending.

Refusal to lend the money would plunge a Tory prime minister, overseeing a coalition or minority government, into a damaging conflict with the EU.

Euro-zone leaders took the decision as a two-hour dinner on Friday stretched into nine hours of tense negotiations.

Action is being called for because Spain and Portugal are showing the same early symptoms of crisis that Greece showed three months ago. Borrowing costs for indebted euro-zone countries have soared amid signs that market fears could spread across all EU countries, including Britain.

José Manuel Barroso, the European Commission President said: “We will defend the euro, whatever it takes.”

British officials are concerned that the EU is preparing to use the sweeping Lisbon Treaty clause as the legal basis for a European bailout scheme.

Under the clause, an EU member state hit by “natural disasters or exceptional occurrences beyond its control” can receive “financial assistance” after a qualified majority vote by European leaders.

Supporters of the plan argue that “exceptional circumstances” includes market “attacks” on the euro.

”The euro’s 16 countries have already agreed it - that’s a majority," said a diplomat. "It’s a fait accompli. Those not in the euro - Britain, Poland, Sweden and other new EU members - can’t stop this."

Officials and diplomats have confirmed that Gordon Brown, the Prime Minister, was the last non-eurozone leader to be telephoned on Friday night by José Luis Rodríguez Zapatero, his Spanish oppositer number, to be warned about the EU plan.

Europe’s failure to contain Greece’s fiscal crisis last week triggered a 4.3 per cent drop in the euro and threatened to spark a global debt crisis.

Mats Persson, the director of Open Europe, said that while euro zone stability was in Britain’s interests, the bailout deal was not.

”This latest move could make British taxpayers liable for the debts of governments over which they have no democratic control - to the tune of billions of pounds,” he said.

”A British government, of whatever persuasion, must really consider whether it should take part in centralised EU borrowing on this scale, not least since such facilities were always considered illegal under the EU treaties and wholly undemocratic.”

Goldman to 'sue for peace' on Abacus charges
Goldman Sachs is to "sue for peace" in the fraud trial bought by the Securities Exchange Commission and offer to admit to a lesser charge of negligence if the main charges are dropped.

Kamal Ahmed and James Quinn

The Sunday Telegraph can reveal that the US investment bank has already opened an informal negotiating channel with the SEC over the charges which focus on a sub-prime mortgage financial vehicle called Abacus.

As part of the move on negligence, Goldman will insist that there will be no admission of wrong-doing but that it will be willing to pay a financial penalty for poor processes, for example.
The SEC claims that Fabrice Tourre, a Goldman banker, mislead investors in the Abacus vehicle. He is accused of not telling long investors in the deal, ACA Management and the German bank IKB, that Paulson, the hedge fund run by John Paulson, had taken a short position, betting that house prices would fall.

Goldman has denied the charges, saying they are wrong both in fact and law.

A senior figure close to the bank said that Goldman would never "win a battle" against the regulator and so the bank had to find a resolution. The source also revealed that Tim Geithner, the Treasury Secretary, and the Federal Reserve also wanted to see a solution to the dispute. The bank has seen millions of dollars wiped off its value following the charges after investors became concerned about the impact of a drawn out criminal process.

In the next fortnight Goldman will file its defence documents with the SEC which the insider said would build a robust case against the main charges. The documents will make no mention of the negligence issue.

Once that document is filed, Goldman's lawyers will then have an opportunity to see the SEC's case against them through the process of discovery. It is hoped that during that process a deal can be done.

The move is part of Goldman's detoxification strategy as it attempts to head off aggressive attacks on the banks from politicians and pressure groups.

The bank is now also considering appointing a handful of outsiders to its new high-profile ethics and standards committee, which will be charged with cleansing the bank's reputation.

The investment bank is contemplating drawing up a short-list of well-known company directors from outside the world of banking plus public figures who might be an asset to its newly announced "business standards committee". The appointees would be advisers to the bank, but would not join its board.

The purpose of the committee, which Lloyd Blankfein, the chairman and ceo of Goldman, announced on Friday at Goldman's annual meeting, is to rigorously examine what the bank should and should not be doing in its day-to-day business, taking into account its existing business principles. Part of its remit will be to question and assess what the public might make of certain practices, after Mr Blankfein admitted on Friday "that there is a disconnect between how we as a firm view ourselves and how the broader public perceives our role and activities in the market". Mr Blankfein hopes that the committment to change will help to clean Goldman's image.

Although a final decision has yet to be made on the exact make-up of the panel, senior Goldman sources said that Mr Blankfein, the bank’s chairman, wants the committee to be up and running within weeks rather than months.

Meanwhile, details of how the committee will actually operate continue to emerge.

The Sunday Telegraph understands that the committee will be at board level – slightly similar in structure to its three existing board committees, which focus on pay, appointments and auditing – and will be chaired by one of Goldman’s non-executive directors.

Possible contenders for the chairmanship are understood to include Lee Scott, the former chief executive of Wal-Mart, and Lakshmi Mittal, head of ArcelorMittal, both of whom are existing Goldman non-executives.

None of the bank’s senior management will sit on the committee. One of the business standards committees’ main roles will be to scrutinise the work of the existing business practices committee, which is chaired by Michael Sherwood, the Goldman vice-chairman who co-runs its operations in Europe, and meets every 10 days.

The business practice committee is made up of 20 senior bankers from across the business, and is meant to assess every element of Goldman’s day-to-day operations.

But the new committee will go one step farther – and make recommendations to the full board as to whether the bank should be involved in certain products.

“The idea is to make sure that what we’re doing is legal and honest and understandable,” said a Goldman source with knowledge of Mr Blankfein’s intentions.

A spokesman declined to comment on the committee’s likely make-up

Car firms pin hopes on pay-as-you-drive as recession
makes buying vehicles too expensive

Ray Massey - Mail on Sunday

Until now it has been a niche market. But with the recession making car-buying too expensive for many people, pay-as-you-drive could become as widespread as renting a DVD.

Major motor manufacturers are all planning to launch their own schemes. The first to be rolled out will be by Peugeot, starting in London next month before extending across the country.

It aims to make swapping between cars as simple as a rental from a video store - with a payment scheme more like that used for pay-as-you-go phones.

In return for a £10 membership fee, members have access to a range of vehicles - from small urban cars to people movers and even scooters and bicycles - which they can use by the day, weekend, week, or 10-day period.

They can be swapped around to suit need or mood.

Drivers will be given a pre-pay card on which credits can be topped up online - either by direct payments or with loyalty points - in the way that people now routinely top up the credits on their phones.

Peugeot will launch its first UK scheme at a South London dealership next month.

The next areas are likely to be Bath and Bristol and the Midlands. Similar schemes are already running in France, in Paris, Brest, Lyon, Rennes and Nantes.

Peugeot is still working out the pricing for its UK scheme, but, based on the French experience, the cost of hiring a small 207 supermini could be £56 a day, £100 for a weekend, £300 for a week, or £380 for ten days.

An open-topped cabriolet could range from £90 to £600.

Although companies such as StreetCar already offer carsharing schemes, this is the first time manufacturers have entered the market.

Daimler is trialling a payasyou go system called Car2Go in Germany and Texas and it could come to Britain.

The schemes are an acceptance by car firms that younger people and the cash-strapped want personal wheels to get around, but without the hassle of ownership.

The economic downturn has seen millions of families trying to trim their budgets.


Thais lined up to buy Corus Redcar plant
Dominic O’Connell - The Times

Corus has hired Citigroup, the American investment bank, to sell its mothballed steel mill on Teesside, raising hopes that more than 2,000 jobs can be saved.

The steelmaker, which is owned by Tata of India and includes what was British Steel, is understood to be in negotiations with SSI, a Thai steel group. However, sources close to the talks cautioned that they were still at an early stage, and that there was no certainty that a deal would be reached.

The sticking point is likely to be the difficulty of integrating the plant at Redcar with SSI’s other operations.

It is thought some government assistance will be sought, probably in the form of grants to aid the Thai firm’s inward investment in Britain. Corus and its predecessor companies including British Steel have made steel on the site for 160 years.

A deal would be a boon for Corus, which has come under political pressure since parts of the Teesside plant were shut down in February.

About 1,700 workers were made redundant, with more expected to go this year. The mill is one of the largest private-sector employers in the area. Unions and MPs have accused Corus management, led by chief executive Kirby Adams, of not trying hard enough to find a new buyer or secure customers for the mill’s products.

The Redcar site has been under threat of closure for several years and came close to being axed in 2001 when Corus, then a quoted company, suffered a cash crisis and a boardroom split.

It was kept open after Corus struck a deal with a consortium of four international steel firms to buy the plant’s output.

Last year the consortium pulled out of the deal, leaving Teesside facing an uncertain future.

Tata, which had in the meantime bought Corus, said it would have to start mothballing the plant if a buyer could not be found. It is also pursuing compensation from the consortium for allegedly breaking its contract.

SSI — Sahaviriya Steel Industries — was set up 20 years ago as Thailand’s first maker of hot-rolled coil steel, which is crucial in the making of consumer goods. It is now Thailand’s largest steel producer.

If SSI succeeds in buying the Teesside plant, it will be the second Asian steelmaker to purchase former British Steel assets. Tata Steel bought Corus in 2007, paying £6.7 billion at the height of a boom in steel prices.

The firm hit hard times when steel prices slumped during the recession, but has since staged something of a recovery.

During the first nine months of last year Corus lost about $1 billion (£675m), but has been in profit since. It has cut 5,000 jobs since the start of last year.

Tata is now one of the largest industrial investors in Britain. After acquiring Corus it bought Jaguar Land Rover, the Midlands carmaker, which employs about 14,000 people. That company, too, suffered in the recession but is now enjoying a mini sales boom.

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