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FREEISSUE 1,765 WEDNESDAY 21 NOVEMBER 2012

GUILTY

BY CATHY ADAMS

Sir John Bond steps down as Glenstrata giant is born

MORE: Page 2

CITY grandee Sir John Bondstepped down yesterday aschairman of Xstrata, asshareholders backed the56bn mega-merger withGlencore but snubbedcontroversial remunerationplans for senior executives.

The retention bonus snubprompted Bond who was setto become chairman of theenlarged group and backedthe pay proposals asfundamental to its futuresuccess to announce he

would depart Xstrata once asuitable replacement wasfound.

Seventy-one-year-old Bond,who has enjoyed a 50-yearcareer spanning the UK and

Asia, has been chairman ofthe miner since March 2011.

Bond is a former chairmanand chief executive of HSBCHoldings, and spent 45 yearsat the bank.

The departing Xstrata

chairman also served aschairman and non-executivedirector of telecoms giant

Vodafone until hisappointment to the Xstrata

board.Advisory roles that Bond

holds include with NorthernTrust and KKR Asia.

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FORMER bosses at British software giantAutonomy were yesterday accused ofserious accounting improprieties, dis-closure failures and outright misrepre-sentation by the chief executive ofHewlett-Packard (HP), after the US firmwrote off $8.8bn (5.5bn) over last yearspurchase of Autonomy.

Meg Whitman, who took the reins atHP shortly before the $11bn deal wascompleted in October last year, accusedAutonomys management most ofwhom have left since the deal was com-pleted of a willful effort on behalf ofcertain former employees to inflate theunderlying financial metrics...in order tomislead investors and potential buyers.

She said the matter had been referredto the Serious Fraud Office and the USSecurities and Exchange CommissionsEnforcement Division for civil and crimi-nal investigations, and that HP wouldaggressively pursue various parties torecoup as much of the money as possiblefor shareholders.

Mike Lynch, the former chief executiveof Autonomy, denied the claims, sayinghe was shocked to see this statement,and flatly rejects these allegations,which are false. He said he had not

heard the claims until HPs statement, orbeen contacted by anyone at HP.Lynch, who founded Autonomy in 1996

and pocketed around 500m from itssale, was forced out of the software firmin May. After his departure, an internal

whistleblower flagged up the allegedaccounting irregularities to HP manage-ment, who then investigatedAutonomys accounts in tandem withaccountancy firm PwC.The investigation led HP to believe that

Autonomy was substantially overval-ued, that hardware sales were reportedas higher-margin software sales, the costof that hardware was booked as a mar-keting expense, and that long-term dealswere recorded as short-term ones. Thesesupposed irregularities were responsiblefor more than $5bn of the writedown.HP said Autonomys accounts exaggerat-ed revenues by 10 to 15 per cent.Whitman yesterday denied that HP had

been careless in conducting due dili-gence on Autonomys books, which hadbeen audited by Deloitte.

If the financials are fraudulent and itis not caught by a company likeDeloitte... Deloitte is not exactly BrandX accounting firm, it is a big account-ing firm with worldwide operations. Itsa little challenging to go in and assume:Hey weve got to double-checkDeloitte, she said.

Deloitte said in a statement yesterday:We cannot comment further on thismatter due to client confidentiality. We

will cooperate with the relevant authori-ties with any investigations into theseallegations.The news pushed HP shares down 12

per cent to their lowest price in a decade.

BY JAMES TITCOMB

HP chief Meg Whitman alleged misrepresentation

Autonomy founder Mike Lynch denied the allegations

ROGUE TRADER

KWEKU ADOBOLI

HANDED

SEVEN

YEARS

FOR

FRAUDSee Pages4-5

HP ACCUSES

AUTONOMYOF $9BN LIE

MORE: Pages 2, 3, 8

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[email protected]

Follow me on Twitter: @allisterheath

CRUNCH talks between Eurozonefinance ministers dragged into theearly hours of this morning as theEurogroup strives to find a face-saving agreement over the nexttranche of Greeces bailout cash.

Ministers were consideringallowing Athens to buy back up to40bn of its own bonds at a discountas one of a number of measures tocut Greek debt to 120 per cent ofGDP within the next eight years.

Going into the second ministerialmeeting in successive weeks, Jean-Claude Juncker, the chairman of theEurogroup, was cautiouslyoptimistic of a deal being struck.

We must still reach anunderstanding on several details andI would expect that the chances aregood that we will come to a f inaland joint solution, he said prior tolast nights talk. But Im not entirelycertain [of reaching a deal tonight.

His caution reflects the complexoptions being discussed, ongoingpolitical differences and the sheerscale of reducing Greeces debt pile.

Under a proposal discussed byministers, Greece would offerprivate-sector bondholders around30 cents for every euro of Greek debtthey hold, allowing Athens to paydown some of its vast outstandingobligations, a senior official involvedin the discussions told Reuters.

Finance chiefs

wrangle overGreek aid talksBY CITY A.M. REPORTER

Xstrata investors backGlencore megamergerTHE 56bn soap opera between com-modity giants Xstrata and Glencorefinally came to a head yesterday asXstrata investors approved the min-ing mega-merger.

In a meeting lasting just over twohours, investors green-lit the merg-er whose twists and turns haveentertained the market sinceGlencore first approached Xstrata inFebruary and paved the way for thecreation of what both sides hope willbe a trading and mining power-house.At shareholder meetings held yes-

terday in Zug, Switzerland, almost79 per cent of Xstrata investors votedthe merger through, although theyvetoed the controversial pay pack-ages for top executives.The deal at a sweetened merger

ratio of 3.05 new shares for everyXstrata shares is a victory for activeshareholders, including QatarHolding. The sovereign wealth fund,Xstratas largest shareholder afterGlencore, said last week it wouldback the deal but abstain from vot-ing on the remuneration, essentiallyscuppering the pay plans.The resolution to back pay pack-

ages for around 70 executives thatXstrata insisted was key to retain keymanagers failed by about eight percent, and led to chairman Sir John

TNK-BP fails in London civil suit bidTNK-BP, Russias third-largest oilproducer and the subject of a high-profilesale, has failed in its attempt to sue aformer director for civil fraud in Englishcourts. A 39m (31m) freezing ordergained by TNK-BP on its former head oflogistics, Igor Lazurenko, his wife, formerbusiness partner and a string of offshorecompanies used to finance hotels inMontenegro, must be discharged, theHigh Court ruled, after it found thatRussian courts, not English ones, were theproper venue to resolve any dispute.

Clinton seeks de-escalation in GazaHillary Clinton, US secretary of state, hascalled on Israel and the Islamist Hamasgroup to de-escalate their week-longbloody conflict, lending US support to theintensifying international effort aiming toend the conflict in the Gaza Strip.

Greenhouse gases hit record levelThe amount of greenhouse gases presentin the atmosphere once again rose torecord levels last year, the UN hasreported, reinforcing scientists warningsthat the world may be on course fordangerous global warming.

CofE votes against women bishopsThe Church of Englands vote last night toreject women bishops has thrust it into itsbiggest crisis for decades. Justin Welby,the next Archbishop of Canterbury, wasdealt a blow after speaking out in favour.

Reckitt ready for US vitamin boostThe withdrawal of a rival bidder has putReckitt Benckiser in the driving seat tosecure a $1.4bn (879m) takeover ofSchiff Nutrition, an Americanmanufacturer of vitamins.

France deplores Moodys downgradeFrances foreign minister Pierre Moscovicisaid yesterday he deplored the decisionof Moodys to strip the country of its AAAcredit rating but still dismissed thedowngrade as irrelevant.

Huawei donates to Tories/Lib DemsThe Conservatives and Liberal Democratshave taken more than 18,000 indonations from Huawei, a Chinesecommunications company accused ofposing a threat to US national security.

News Corp buys 49pc of YESNews Corp has agreed to buy a 49 percent stake in New York sports networkYES. A price was not disclosed, butsources said that the entire network isvalued at near $3bn (1.8bn).

Treasury official potential SEC chairA US Treasury official who played a keyrole during the debt-ceiling debate, MaryJohn Miller, is under consideration to bethe next chairman of the Securities andExchange Commission.

2 NEWS

BY CATHY ADAMS

To contact the newsdesk email [email protected]

LET us hope yesterday wonteventually be remembered asanother disastrous day for theCity of London. Hewlett Packards

inflammatory attack on the accountsof Autonomy, the UK tech giant itnow owns, is either a wrong-headedattempt by a struggling US firm to try

and justify why it failed to do its duediligence properly and over-paid forAutonomy or it is a damningindictment of what was once the UKsflagship tech giant and its blue chipCity advisers. Crucially, Autonomysfounder Mike Lynch emphaticallydenies all the allegations.

On the plus side, however, KwekuAdoboli, the former trader was sen-tenced to seven years in jail for thebiggest fraud in British history. Whilehis behaviour dealt the City anotherhorrid blow, highlighting that con-trols were too lax in some institu-

EDITORSLETTER

ALLISTER HEATH

Fresh allegations overshadow welcome cultural shift in City

WEDNESDAY 21 NOVEMBER 2012

tions, and helped accelerate thou-sands of job cuts at UBS, at least jus-tice has now visibly been meted out. Itis vital for Londons battered reputa-tion that those who engage in finan-cial crime be punished. We now needto see people jailed for Libor rigging.It was also excellent news to see share-holders defeat the executive pay pro-posals that accompanied Xstratasmerger with Glencore; this exercise inshareholder democracy and owner-ship rights led Sir John Bond, one of

the Citys most distinguishedgrandees, to resign as Xstrata chair-man last night. During the goodyears, shareholders failed to scruti-nise their boards sufficiently; the factthat this is now changing is anextremely important shift.

But none of these improvements

will be remembered if the rowbetween HP and Autonomysfounders gets really ugly. We shallsoon find out what is to be.

PENSION TAX RAIDWE knew since the Tory party confer-ence that George Osborne would belaunching another tax raid on therich next month. This may take theform of limiting the size of contribu-tions eligible for to tax relief to nomore than 30,000 or 40,000, downfrom the present 50,000 (itselfslashed from 255,000).

Osborne is well on his way to finish-ing Gordon Browns destruction ofthe once great UK pensions market-place a great paradox given thatauto-enrolment into the new officialpension system is just starting.The alternative for the government

if it wants to continue providing tax-

privileged savings vehicles would beto expand individual savingsaccounts (Isas). These dont offer a taxbenefit at inception, unlike pensions;but the tax benefit is continuous asdividends and capital gains areuntaxed. It would reduce Osbornesrevenues very little in the first year ortwo were he to double the size of Isas;doing so at the same time as hammer-ing pensions would at least lessen theseverity of the blow to taxpayers.

The tax system should be simple,with no loopholes; but this simplifica-tion should happen in a revenue neu-tral manner, not as an excuse tofurther hike taxes. It is a tragedy thatthis government still thinks it makessense to increase the average and mar-ginal tax rates of people who are

already toiling away to make a living.That this would come as quid pro quofor welfare reform is irrelevant, a sor-did deal between Tories and Lib Dems.

Cutting the amount that can be puttax free into a pension makes moresense than further reducing the limiton the value of the pot, now 1.5m.But we are close to a tipping point forthese kinds of products: they onlyexist because of tax breaks. Whywould you put any cash in a pension and be unable to touch any of it, evenin an emergency, for many decades,without a massive tax advantage?

Bond standing down from his position.Mick Davis, chief executive of Xstrata,

said he was disappointed with thedecision not to approve the retentionagreements deemed crucial to thesuccess of the combined group.

In my view, this introduces unneces-sary risks to the merged companysfuture value proposition, Davis added.Alexander Keepin, co-head of mining

partner at law firm Berwin LeightonPaisner, said Bonds departure was notwithout precedent.

The earlier shareholder spring sawremuneration reports voted down and

executives stepping down, he said,adding that Mick Davis position asinterim chief executive is not impact-ed at all by the vetoing of the paypackages. Davis will stay at the helm ofthe merged firm for six months beforehanding over to Glencore boss IvanGlasenberg.The enlarged company will be called

Glencore Xstrata, and headquarteredin Zug. The tie-up, which is thought tobe one of the largest deals in the min-ing sector, still needs approval from EUantitrust regulators and the Chineseauthorities. MORE EUROZONE: Page 14

The new jobs website for London professionalsCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

John Bond, who was due to become chairman of the combined group, has stepped down

GLENSTRATAIN NUMBERS

THE CRUCIAL VOTESFor the merger with the retention

package: 67.85 per centFor the deal without the retention

package: 78.88 per centAgainst the retention package:

78.43 per cent

A HUGE NEW FTSE 100 PLAYERRank Name Mkt cap (m)*1. Royal Dutch Shell (A+B) 130,372.62. HSBC Holdings 108,207.23. BP 79,247.24. Vo dafo ne Group 77,780. 95 . Gla xo SmithKli ne 6 5, 932. 86. Brit American Tobacco 61,143.47. Diageo 44,934.68. SABMiller 41,708.59. Rio Tinto 41,404.910. BHP Billiton 39,559.111. AstraZeneca 35,241.412. BG Group 33,985.5

13. GLENCORE-XSTRATA? TBC14. Standard Chartered 33,841.215. Lloyds Banking Group 30,936.8*Source: Morningstar

A GLOBAL COMMODITIES GIANTGlencore-Xstrata will be the 4thbiggest commodities company in theworld by market capitalisation, afterBHP Billiton, Vale and Rio Tinto.

THE ADVISERSThe mega-merger pulled in some ofthe Citys biggest names, with JPMorgan Chase, Goldman Sachs,Nomura Holdings and Deutsche Bankadvising Xstrata on the deal, whileMorgan Stanley and Citigroupadvised Glencore, and Lazardadvised shareholder Qatar Holding.

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WHEN Autonomy was sold toHewlett-Packard (HP) for $11bn(6.9bn) in October 2011, the dealwas hailed as a defining moment forCambridges technology scene andchief Mike Lynch was made a posterboy for British entrepreneurship.

But seven months later, Lynch wasout of HP, fired by the US giants newboss Meg Whitman. It was an abruptend to his tenure at the company hestarted in 1996, spun from an audiohardware business Lynch founded inthe 1980s after being loaned 2,000from a band manager in a pub.Autonomys enterprise software,

which processes, understands andarchives information from sourcessuch as voice recordings or videos,was a hit, and the company listed onNasdaq in 2000, at the height of thedotcom boom, followed by a Londonfloat six months later. It sufferedtemporarily when the technologybubble burst in 2001, but recoveredrapidly, and when HP came knock-ing, Autonomy had retaken its FTSE100 position and was still growing.

However, by the time it was bought,

UK technologydarlings rockyroad to HP deal

BY JAMES TITCOMBthe company had already seen somefinancial controversies.

US IT giant Oracle alleged thatLynch had tried to shop the busi-ness to president Mark Hurd a fewmonths before the HP deal, a claimLynch denies. Oracle said thatAutonomys valuation, at $6bn, wasway too high, even at just over halfof what HP ended up paying.

In May, Lynch was shown the doorafter Autonomys initial months atHP disappointed. Other executives,including chief financial officer SteveChamberlain, also left the firm.As for HP, the fallout from the deal

has come at the worst possible time,as the company tries to turn itselfaround in the face of falling PC sales.

AVIVA, the UKs second-biggest

insurer, yesterday announced it hadappointed former AIA boss MarkWilson as chief executive.

The New Zealand-born insuranceveteran prepared AIA for its 2010listing and was credited withsuccessfully steering the Asian firmthrough the financial crisis in hisfour-year tenure.

His appointment at strugglingAviva comes six months aftershareholders forced out former

BY JAMES TITCOMB chief Andrew Moss in May.The groups chairman John

McFarlane, who has been acting as

interim boss, said he wasdelighted to havesecured Wilson.

He has anoutstanding trackrecord of leading amajor insurer, oftransforming itsperformance andculture, of

implementing a growth agenda andof producing significant shareholdervalue, all of which are essential for

Avivas success going forward,McFarlane said.The move was welcomed in the

City yesterday. This endsuncertainty and means thecompany can move forward,Barnard Marcus, an analyst at OrielSecurities, said.

Mark Wilson said it was aprivilege to lead Aviva

WEDNESDAY 21 NOVEMBER 20123NEWScityam.com

Aviva appoints former AIA headMark Wilson as chief executive

A Silicon Valley legend, Quattrone advisedAutonomy on its $11bn sale to HP. He tookdozens of technology companies public inthe 1990s, including Amazon, but disap-peared from investment banking after hewas accused of blocking a governmentinvestigation into price-fixing on flotations.He returned in 2008 to set up QatalystPartners, which advised Autonomy on itssale after apparently offering the firm

around to a number of other US companies.

Also advising Autonomy on the deal was anunusually large collection of big investmentbanks: Goldman Sachs, Citigroup, UBS, Bankof America Merrill Lynch and JP Morgan.HP was advised on the acquisition byBarclays Capital in London, with the teamheaded up by Richard Taylor, who was madehead of its European investment bankingarm on Monday.However, more scrutiny may fall on thedeals auditors. Deloitte ran the numbers onAutonomys side in Cambridge, with thebooks signed off by senior manager NigelMercer. KPMG were hired by HP to partici-pate in the due diligence process.Neither HP nor KPMG commented on thealleged accounting irregularities yesterday,citing client confidentiality.

James Titcomb

ADVISERS HPS $11BN AUTONOMY ACQUISITION

FRANK QUATTRONEQATALYST PARTNERS

HPS TWO CLASHING PERSONALITIES

MIKE LYNCHFOUNDER, AUTONOMYLynch started Autonomy after running a series of technol-ogy companies in the 1980s and 1990s, following his PhDin mathematical computing at Cambridge. Thoughdescribed as an exceptionally bright and motivated indi-vidual, Lynch had a tense relationship with the City, con-tinually claiming it undervalued his business. Lynchpocketed 500m from Autonomys sale, and was forcedout of HP in May this year.

MEG WHITMANCHIEF EXECUTIVE, HPAfter stints at Procter & Gamble and Disney in her earlycareer, Whitman joined the flourishing startup eBay aschief executive in 1998. She held the position for nineyears, turning the firm into a global giant. After a failedcampaign to be governor of California in 2010, Whitmanreturned to Silicon Valley, joining HPs board in January

2011 and took over in September after ex-boss LeoApothekar was sacked.

Hewlett-Packard Co

20 Nov14 Nov 15 Nov 16 Nov 19 Nov

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12.00

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13.00

$ 11.7120 Nov

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Guilty: Adoboli

gets seven yearsfor trading fraud

BY MICHAEL BOW

WEDNESDAY 21 NOVEMBER 20124 NEWS cityam.com

ROGUE former UBS trader KwekuAdoboli, whose unauthorised tradeslost the bank Swiss bank $2.3bn(1.4bn), was yesterday jailed for sevenyears after being convicted of one ofthe biggest frauds in British history.Adoboli, once pegged as a rising star

on the Exchange Traded Fund desk atthe banks Finsbury Avenue offices,was found guilty on two counts offraud by abuse of position. He wascleared on four counts of falseaccounting with a view to gain forhimself or another.

Sentencing Adoboli to seven years,Justice Keith told the former City trad-er: Whatever the verdicts of the jurywould have been, you would foreverhave been known as the man whowas responsible for the largest trad-ing loss in British banking history.

Your fall from grace as a result ofthese convictions is spectacular.Adoboli will serve half of his sen-

tence on licence. Adding in timealready spent in custody, it means heis set to be freed within two-and-a-halfyears.

Adoboli looked unmoved as the ver-dicts were read out. He acknowledgedhis father, a former United Nationsdiplomat from Ghana, and uncle, sit-

ting behind him in the public galleryas he was led away.Adoboli was arrested by City of

London police last September at UBSsoffices after the bank uncovered hugediscrepancies in trades booked byAdoboli.

In a bombshell email sent fromAdoboli the day before, he admittedto fabricating counterparties in theETF ledger to cover up losses he wasmaking in off-book trades.The losses to the bank were calculat-

ed at $2.25bn. Shares in the Zurich-based bank subsequently dropped 10per cent when the loss wasannounced.

The amount of money involved wasstaggering, impacting hugely on thebank but also on their employees,shareholders and investors, CrownProsecution Service deputy head offraud Andrew Penhale said. This wasnot a victimless crime.

DCI Perry Stokes, from City ofLondon police, said: Rules put inplace to protect the banks positionand the integrity of the markets werebeing bypassed and broken by ayoung man who wanted it all and wasnot willing to wait.A UBS spokesman said it was glad

criminal proceedings had finished.

First of all, the ETF trades that you see on the ledgerare not trades that have been done with acounterparty as I have previously described. I usedthe bookings as a way to suppress the PnL lossesthat I have accrued through off book trades that Imade. Those trades which were previously profitmaking, became loss making as the market sold offaggressively through the aggressive selloff days ofJuly and early August.

Initially I had been short futures through June andthose lost money when the first Greek confidencevote went through in mid June. In order to try andmake money back I flipped the trade long throughthe rally. Although I had a couple of opportunities tounwind the long trade for a negligible loss, I did notmove quickly enough and the market weakness onthe back of the first bad macro data and then anescalating Eurozone crisis cost me the losses you willsee when the ETF bookings are cancelled. The aimhas been to try and make the money back before

the September expiry came through, but clearly that

has failed. There are still live trades on the book thatwill need to be unwound. Namely a short position inDAX Futures (which have been rolled to Decemberexpiry) and a short position in S&P 500 Futures thatare due to expire on Fr iday. I have now left the officefor the sake of discretion. I will need to come back into discuss the positions and explain face to face, butfor reasons that are obvious, I did not think it wiseto stay on the desk this afternoon.

I fully expect that questions will be asked as to whynobody else was aware of these trades. The reality isthat I have always maintained that these were EFPtrades to the members of my team, BUC, tradesupport and John DiBacco. I take full responsibilityfor my actions and the shit storm that will nowensue. I am deeply sorry to have left this mess foreveryone and to have put my bank, and mycolleagues at risk.

Thanks,

Kweku

THE BOMBSHELL EMAIL SENT BY ADOBOLI

Adoboli, seen by many at UBS as a rising star, was convicted at Southwark Crown Court

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How one rogue traders actionshave inspired changes at UBSTHE UBS of today is quite a differ-ent bank to the one that employedKweku Adoboli up to the time of

his fraud last year.It has a different chief executive,following the departure of OswaldGrubel very shortly after the scan-dal broke, and it has a finely tunedstrategy that now emphasises theclient-focused and advisory activi-ties of the investment bank, ratherthan the riskier and more complextrading strategies that were some-times a bit too prominent.

Chief executive Sergio Ermotti,

BY DAVID HELLIERwho joined UBS from UniCredit inApril last year, has brought in one ofhis former allies, Andrea Orcel, fromBank of America Merrill Lynch, wherehe worked for 18 years. And Orcel, who

is very much a relationship advisorybanker, now leads an investment bankthat has put equity advisory at the topof its focus.

I think the whole trading scandalhas tilted UBS in the right direction,said a banker yesterday. It is best stick-ing to the traditional activities thebank was always so good at.

Recently UBS said it planned to trimabout SFr100bn of risk-weighted assetsby the end of 2017, after already cut-

ting a similar amount over the pastyear. The investment bank said itwould focus on its advisory businesses,equities, foreign exchange and pre-cious metals, while keeping limited

capabilities in rates and credit.Insiders say the Adoboli case did notfundamentally impact on the banksstrategy. The strategy of the bank isquite definitely not linked to this case,it was in the process of being devel-oped for some time, said one sourceyesterday. But there is a feeling thatUBS has arrived at where it is todayquicker than it would have done if ithad not been for the fraud that at onestage seemed to knock it off balance.


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THE WORLDS BIGGEST TRADING LOSSES1984-1995Daiwa Bank bondtrader ToshihideIguchi (r) was respon-sible for 1.1bn of loss-es at the Japanesebank over 11 yearsSentence: Four yearsat Allenwood prisoncamp

FEBRUARY 1995Barings Bankcollapsed afterderivatives trader NickLeeson (r) lost $1.3bnwhile working in itsSingapore officeSentence: Six-and-a-half years in ChangiPrison, Singapore

JANUARY 2008Societe Generaletrader JeromeKerviel (l) lost 5bnthrough unautho-rised tradesSentence: threeyears in prison (plustwo suspended)and a 4.9bn fine

1997 - 2002Allfirst (then part ofAllied Irish Banks)currency trader John

Rusnak (l) hid$691m of lossesSentence: Seven-and-a-half years

TIMELINE

SEPTEMBER 2012Adoboli goes on trial atSouthwark Crown Courton four counts of falseaccounting and two of

fraud

14 SEPTEMBER 2011Adoboli leaves UBS

building at 1.30pm andsends bombshell

email disclosing trades.

He returns at 3.45pm

MARCH 2010Adoboli becomes

director in role as atrader on UBS ETF desk.He earns 110,000 and

a bonus of 95,000

APRIL 2011

UBS re-organises divisions.Adoboli earning 110,000

and a 250,000 bonus

DECEMBER 2005Promoted to trader at

UBS. Moves to ETF desk

15 SEPTEMBER 2011Adoboli is arrested by Cityof London police at office

3am and charged.

SEPTEMBER 2003Adoboli joins UBSinvestment banks

operations departmentas a graduate trainee

on 30,000 pa

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A FORMER hedge fund manager who

worked for a fund affiliated withSteven A Cohens SAC Capital wasarrested yesterday in what USprosecutors are calling the mostlucrative insider-trading schemeever.

Mathew Martoma, who worked forCR Intrinsic Investors in Stamford, aunit of SAC Capital, has beenaccused of making more than$276m in illicit profits based on tipsabout Elan Corp and Wyeth, whichwas bought by Pfizer in late 2009.

Authorities contend Martoma andSAC Capitals CR Intrinsic mademore than $276m in illegal profits oravoided losses in July 2008 by tradingahead of a negative publicannouncement involving clinicaltrial results for an Alzheimers drugjointly developed by Elan and Wyeth.

Martomas lawyer, CharlesStillman, said his client was an

exceptional portfolio manager andhe is confident that Martoma will beexonerated. A spokesman for SACCapital and Cohen, who was notcharged, said he was notimmediately prepared to comment.

The criminal complaint filed byfederal prosecutors and a relatedcivil lawsuit filed by the US SECcontend Martoma got insiderinformation from a doctor, who onceworked as a consultant for a so-calledexpert network.

Ex-SAC hedgiearrested in USinsider scheme

BY CITY A.M. REPORTER

Credit Suisse Group AG


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Private bank co-head Hans-Ulrich Meister Eric Varvel is joint investment bank boss

Americas wealth boss Robert Shafir Gael de Boissard is new to the exec board

CREDIT SUISSE shares slumped yes-terday as new plans to streamline thebank disappointed analysts andinvestors who had hoped for toughercuts to fixed income operations.The Swiss bank is part way through

a SFr4bn (2.67bn) cost-cutting plan,and is now folding its asset manage-ment arm into its private bank, aswell as reasserting its commitment tofixed income and equities activity.The rejig will see Credit Suisses

international investment bank opera-tions separated from those inSwitzerland.

Four top members of staff saw theirroles change as part of the move.The new private banking and

wealth management division will beheaded by Hans-Ulrich Meister andRobert Shafir, with Shafir in chargeof the Americas and Meister responsi-ble for other geographies.

The investment banking divisionwill be run by Eric Varvel who willrun equities and investment bank-ing, as well as heading up Asia Pacific and Gael de Boissard, who will head

Credit Suissecuts back asset

managementBY TIM WALLACE up the fixed income department and

lead the Europe, Middle East andAfrica (EMEA) operations.

De Boissard joins the other three onthe executive board, which sits belowthe board of directors and is responsi-ble for the day to day operations.

But the reshuffle saw EMEA regionalhead Fawzi Kyriakos and Asia Pacificboss Osama Abbasi lose their jobs.

Despite the increased clarity on howcosts will be cut, the share pricedropped. Were disappointed CreditSuisse did not follow UBS route andchop back their fixed income arm,said one analyst, who declined to benamed.

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BUSINESS groups yesterday blastednew government plans to ensure

lower energy bills for consumers.Energy secretary Ed Daveyannounced the proposals, intended tobe included in the forthcomingEnergy Bill, which will limit suppliersto four core tariffs and ban so-calleddead tariffs, so that no consumer isleft on an out-of-date deal.

But business groups hit out at thereforms, which followed regulatorOfgems earlier proposals.The Institute of Directors (IoD)

labelled the reforms as missing thepoint. Clumsy regulation restrictingchoice would simply allow energycompanies to increase their lowest tar-iff, ensuring a higher minimum pricefor consumers, said Corin Taylor, sen-ior economic adviser at the IoD.

Issues over a lack of competition alsostruck a note with corporations.John Taylor, chairman at the

Federation of Small Businesses, said:

We need to see the detail since thereis a very real risk that forcing energycompanies to put customers on thecheapest tariff could erode what littlecompetition there is in the market.The IoD warned that the govern-

ment should be promoting competi-tion and making it easier for newcompanies to enter the energymarket.

Energy reformplans slammedby big business

BY CATHY ADAMS

Wim Dejonghe said marketconditions are challenging


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HPs staggering accusations drag in Citys largest firmsT

HIS paper does its best to avoideditorial hyperbole, but whena firm takes an $8.8bnwritedown on an $11bn

acquisition barely 12 months afterthe deal I might just make anexception. Its completelyflabbergasting.Analysts and shareholders alike

may have baulked at the steep pricethat Hewlett-Packard shelled out forUK tech darling Autonomy last year,but surely even the staunchest crit-ics couldnt have been expectingthis a net loss of almost $7bn atthe US computer giant and accusa-tions (strongly denied) of seriousaccounting improprieties at itsone-year-old albatross. And thatsnot to mention a serious blow to the

perception of British start-upsround the world.

Lets be clear, HP was hardly a glow-ing example of success even before ittook on Mike Lynchs baby.

Its shares have fallen more than 55per cent over the past year and theresbeen something of a revolving door atthe top, with chief executive MegWhitman brought in to replace Leo

Apotheker, who was ousted after just11 months in the job.

But its not just Lynchs name and the judgement of the Hewlett-Packard board thats beingdragged through the mud.The multi-billion dollar deal

pulled in a host of big players on theadvisory side too not leastAutonomys auditor Deloitte (and itsown auditor KPMG) singled out byWhitman on a damning conferencecall yesterday afternoon, where sheimplied it would have been a littlechallenging to go in and be askedto double check the work of arespected big four firm.

No matter that HP brought onanother of the big four PwC toinvestigate the irregularities, and no

matter that Deloitte has not actual-ly been accused of any wrongdoing,this could strike yet another reputa-tional blow to the accountingprofession.

Its already under pressure overcompetition, and with immacu-late timing as of yesterday the sub-ject of a review by the FinancialReporting Council and the Instituteof Chartered Accountants ofScotland into the competenciesand professional skills of auditors.

Being dragged into a transatlanticfiasco of these proportions is thelast thing the industry needs.

LEGAL FIRMS RESULTS IN THE SPOTLIGHTMeanwhile on the less under-scruti-ny side of the professional services

world, Allen & Overy kicked off thelegal reporting season proper yester-day with a 2.7 per cent fall inturnover.

Law firms are yet another casualtyof the stagnant corporate and M&Amarket that has dogged the City forthe past few years (bar the odd$11bn takeover...)Wim Dejonghe invoked every busi-

ness leader of recent months whenhe called the tough outlook thenew normal. With A&Os MagicCircle rivals also set to give anoverview of their first-half perform-ance over the next few weeks, wewont have to wait long to find out ifhes right.Elizabeth Fournier is news editor of City

A.M. @ej_fournier

THE CITY was given its first hint ofhow the upcoming round of lawfirm results will look yesterday,when Magic Circle stalwart Allen &Overy posted a 2.7 per cent fall inturnover for the first half.Turnover fell to 566m from

582m in the same period last year,though the firm said that with cur-rency fluctuations stripped outturnover actually grew byone per cent.

Market conditionswill no doubt presentfurther challenges dur-

ing the second half, saidmanaging partner WimDejonghe. But we areconfident that if we main-tain our focus and stayclose to our clients,the underlyingresilience of ourbusiness will

Allen & Overyrevenues fall in

tough first halfBY ELIZABETH FOURNIER

n Limiting suppliers to four core tariffs perfuel, aimed at ending the proliferation oftariffs over the last few years. Collectiveswitching schemes will be able tonegotiate bespoke prices.

n Creating within the four core tariffs one standard variable rate tariff and onefixed-term price tariff, which account for85 per cent of customers.

n The suppliers can choose the remainingtwo tariffs as they please, such as offeringgreen energy deals.

n Suppliers must offer one single price foreach of the four tariff types.

n Banning so-called dead tariffs socustomers are not left with poor value, out-of-date deals.

n Placing all customers on the cheapestprice available on the tariff of their choiceby summer 2014 at the latest.

n Households to have personalisedinformation from their supplier on bills,detailing the cheapest tariff for theirpayment method and the cheapest overall.

n Measures that require suppliers toprovide clearer information to helpconsumers switch.

n Establishing a co-ordinated network ofvoluntary organisations and groups to helpvulnerable households get a better deal.

n Proposals for the government to helpensure energy consumers can benefit frominnovative technology that helps switchingthrough smartphones and other devices.

IN BRIEF: THE REFORMS

Proposals from energy secretary Ed Davey follow on from regulator Ofgems plans

stand us in good stead.The firm has worked on several

big-ticket deals so far in 2012, advis-ing Hitachi on its 696m purchaseof Horizon Nuclear Power, andadvising Hong Kong Exchanges &Clearing Limited (HKEx) on its1.39bn recommended offer for theLondon Metal Exchange.

Meanwhile several mid-cap firmsreported more upbeat results, withWragge & Co announcing a revenuerise of 4.5 per cent from last year to

60.6m.Nabarro returned to growth

with full-year revenues of52.3m up two per cent on

2010-11.And DWF saw a massive 31 per

cent hike in revenues, after asplurge of regional mergers

helped it lift turnover to59.3m.

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IN BRIEFCBRE buys property firm EA Shawn CBRE has snapped up West Endproperty agent EA Shaw just twomonths after buying Franc Warwick.The group said the agency, whichprovides services to clients includingShaftesbury and Soho Estates, willbecome part of CBREs central Londonbusiness led by head of centralLondon, Adam Hetherington. It willcontinue to operate from its office inCovent Garden. CBRE said the dealwould significantly enhance itscentral London residential business.

Henderson sells 184m portfolion Henderson Global Investor has sold24 remaining assets in its debt-ladenCMBS Caspar regional property fundfor 184m to buy-out firmsMountgrange and Patron Capital, theproperty asset manager announcedyesterday. Mountgrange and Patronhave in turn sold on seven of thewarehouses and sites based in Londonand the south east, to CBRE GlobalInvestors for around 64m. Theproperties include Pets at Home, B&Qand Tesco retail warehouses.

L&G secures big retail lettings

n Legal & General Property yesterdayrevealed it has secured Swedish retailgiant H&M and restaurants Wasabiand Kim Chee Korean as tenants at itsCovent Garden estate on the Strand.The group said it has also signed NewLook, Pandora and Sports Direct to itsJackson Square shopping centre inBishops Stortford, which it boughtfrom Kandahar last year the firstdeals at the mall in almost five years.

BRITISH Land, the UKs second-largest property company by mar-ket value, said yesterday that itschairman will step down at the endof December, as it reported a solidgrowth in profits for the first halfof the year.

Underlying profit before tax atthe real estate investment trustrose 3.8 per cent to 137m in thesix months to 30 September, as netrental income grew by 1.1 per centto 272m.The firm said that chairman

Chris Gibson-Smith, who has ledthe board for the past six years,

would be replaced by senior inde-pendent director and City veteranJohn Gildersleeve.

In a headline-heavy update BritishLand also announced it hadsecured lettings at key West Endand City properties, with AspectCapital moving into 10 PortmanSquare behind Bond Street, andHill Dickinson signed up atBroadgate Tower.

British Land said that despite theslow market, the group had made

New chair forBritish Land as

profits increaseBY ELIZABETH FOURNIER 953,000 square feet of lettings andrenewals, while occupancy rateshad remained high at 98.3 per cent.The value of its office develop-

ment portfolio increased by 6.9 percent in the period, with 56 per centof its sites now pre-let.

Chief executive Chris Grigg saidthe results were a good set of num-bers in what continues to be atough market.

Outgoing chairman Gibson-Smith,who served as a non-executive direc-tor before taking up the top spot in2006, said: I have had a fascinating10-year journey with British Land,and the last six years as chairmanhave been deeply rewarding.

British Land Co. plc


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Model shown is a Carrera 4S Coupe a t 88,774.00 including first year roa d fund licence and first registration fee. Fuel consump tion figures for the new 911 Carrera 4S Coupe in mpg (l/100km): Urban 19.9 (14.2);

Extra U rban 37.7 (7.5); Combined 28.5 (9.9). CO2 emissions (g/km) 234.

Two impressive red lines.

The new 911 Carrera models.

The redline of a Porsche 911 has always been impressive. For almost 50 years now, each new generation has pushed the boundari es

of performance fur ther and further. The new 911 Carrera 4 models are no exception. As well as their legendary all -wheel drive handling,

they feature broad shoulders, making for a striking presence.

And the iconic red LED light strip across the rear, means other road users can now app reciate the red line of a 911 too.

To find out more visit www.porsche.co.uk/redlines

British Lands arguably overleveraged position constrains improvementopportunities whilst Land Securities majors on medium-run developments...Land Securities, despite the previous two dull results, offers relativeappeal and we think is the better stock over the medium and long term.

ANALYST VIEWS

You own British Land in the current environment because as we havesaid in the past, it does what it says on the tin. Its stable portfolio andpredictable income stream continue to deliver IPD outperformance and apredictable and attractive dividend yield (5.1 per cent). We remain Buyers.

Whilst the group has the longest-dated income streams in the sector, an

above sector average 5.1 per cent dividend yield and a solid balance sheet, its highlevel of gearing remains a risk in our view. The tough retail occupationalmarket, highlighted by the spate of tenant failures, remains a challenge.

WHAT IS YOUR OUTLOOKON BRITISH LAND AFTERTHESE RESULTS ?Interviews by Kasmira Jefford

KEITH CRAWFORD PEEL HUNT

MARK HUGHES PANMURE GORDON

ALISON WATSON LIBERUM

PROFILE: JOHN GILDERSLEEVEBRITISH Lands incoming chairman JohnGildersleeve is a retail force to be reckonedwith. The City grandee grew up in southLondon, where he attended a grammarschool until he was 18. After a year workingas a clerk at oil company Shell, Gildersleevespotted a newspaper advert for a traineemanager role at Tesco. He joined the super-market chain in 1965, working his way upfrom shelf-stacking to become managingdirector of retail operations in 1982. He was a

board member from 1985 until 2004, whenhe left the group. Gildersleeve was closelylinked to Tescos overseas expansion and hisinternational credentials were key in his roleat the phone retailer Carphone Warehouse,where he served as non-executive chairman

from 2005 and 2010. Gildersleeve took on adifferent retail challenge in 2009 as chairmanof the fashion chain New Look, where he wasbrought in to steer the group towards a float.He stepped down last year after a string ofprofit warnings and aban-doned flotations. At66, Gildersleeve isshowing no signs ofslowing down. He iscurrently deputy

chairman ofCarphoneWarehouse and alsoserves as a non execu-tive director ofTalkTalk.

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EASYJET is treating its shareholders toa dividend twice as big as last year,after posting a 28 per cent rise in pre-tax profits to 317m.The budget airline brushed off the

fuel cost and traffic concerns that dogthe rest of the industry to deliver an11.6 per cent jump in revenues to3.85bn for the year to 30 September.

Chief executive Carolyn McCall saidyesterday that EasyJet is in a uniqueposition to grow against the legacycompetitors such as British Airways.

Investors will get an ordinary divi-dend of 21.5p, up from 10.5p a yearago, when the carrier paid out for thefirst time since its inception in 1995.The payout was welcomed by SirStelios Haji-Ioannou, the firmsfounder and a major shareholder.

McCall said a trial of allocated seat-ing had gone well, with families andolder passengers paying extra tochoose their seat alongside the busi-ness travellers EasyJet had originallytargeted with the service.

Profit per seat increased to 3.87 inthe period, while passenger numbers

Divi doubles at

EasyJet thanksto record profitBY MARION DAKERS rose 7.1 per cent to 58.4m.

Companies are being more cost con-scious, which has helped us win morecorporate work, said McCall, addingthat the adoption and attitude of MPshas been great since EasyJet struck adeal with parliament to offer flights topoliticians earlier this year.The airline is in talks to buy new

planes and plans to raise seat capacityby up to five per cent a year.

Set against the difficulties whichthe industry has been facing, typifiedby the recent Iberia announcement,EasyJet has managed to shoot thelights out, said Richard Hunter, headof equities at Hargreaves Lansdown.

DO YOU THINK YOU ARE BEINGUNFAIRLY TREATED BY YOUR ENERGY

PROVIDER? Interviews by Michael BowIt could be better I think. It should be easier toswitch energy provider accounts. My companythat I run has 20 accounts and I think keeping

track of them must be made easier.

These views are those of the individuals above and not necessarily those of their company

ADO MEDJEDOVICFIREZZA

My energy provider didnt give me a bill for awhole year. Then they gave me a bill for1,500 and they expected me to pay it within

just two months.

FARHEN ENVERBANGKOK KITCHEN

In terms of the business, the church wont letus use gas here, so our hands are tied when itcomes to energy costs and energy providers.

IAIN CAMPBELLBURGER BARN

CITYVIEWS

EasyJet plc


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Bernanke says fiscal cliff could see UStopple back into depths of recessionFALLING over the fiscal cliff could shockthe US back into recession, Federal

Reserve chairman Ben Bernanke warnedin a speech yesterday evening.The fiscal adjustment, though

necessary in the long run, would be toomuch for the weak recovery to absorb inone dose, Bernanke told an audience atthe New York Economic Club.

The realisation of all the automatictax increases and spending cuts thatmake up the fiscal cliff, absent offsettingchanges, would pose a substantial threatto the recovery, he said.

BY BEN SOUTHWOODBy the reckoning of the Congressional

Budget Office and that of many outsideobservers, a fiscal shock of that size wouldsend the economy toppling back into

recession, he added.Bernankes warning came in a speech inwhich he promised that the Fedsmonetary stance will not return tonormal until a considerable time afterthe economic recovery strengthens.

We want to be sure that the recovery isestablished before we begin to normalisepolicy, he said.

Since the Fed expects the economy toremain weak until mid-2015, hiscommitment means the unprecedented

asset purchase programme known asQE3 and the close-to-zero federal fundsrate could persist for years longer.

Bernanke used the rest of his speech to

explain why he thought Fed policy wasworking, despite the abnormally sloweconomic recovery.

Research suggests that our previousasset purchases have eased overall financialconditions and provided meaningfulsupport to the economic recovery in recentyears, Bernanke claimed. He put weakgrowth down to crisis in Europe, thefinancial and housing crash and resultanttight credit conditions, combined withslowly tightening fiscal policy.

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THE NEXT governor of the Bank ofEngland must speak to his own staffmore often than Sir Mervyn King has,to include a wider range of views inpolicymaking and to understand thedevelopment of the Banks futureleaders, City grandee Bill Winterssaid yesterday.Winters wrote a review of the Banks

liquidity operations and found staffare afraid to express honest opinionsto policymakers and senior managersbecause they fear their ideas would beshot down out of hand, and that theircareers may suffer if they disagreewith their superiors.

Future governors should show ahuman touch, he told the TreasurySelect Committee of MPs, if they areto understand the Bank and gaininsight into the risks facing the finan-cial sector.

The governor should regularlyhold meetings in small groups withstaff two or three levels below thedeputy governors, to find out the

Threadneedle

Street needs ahuman touch

BY TIM WALLACEdegree to which they feel able toexpress their views, Winters said.And it would also let him find outmore about the next generation ofsenior staff.

In future, the Bank should alsoensure it promotes people based inpart on their skills as managers, notjust with technical skills.

Management skills are very impor-tant in choosing the next governor,he said.

Ex-JP Morgan banker Bill Winters said Bankof England bosses should be more receptive


Bank of Englands Weale warnshigh inflation means end of QEINFLATION will be too high for thenext two years, ruling out any more

quantitative easing (QE), top Bankofficial Martin Weale said yesterday.But he defended the policy from

complaints that it hurts pensioners,and said that in future it may bepossible to argue QE actuallyreduces inflation by raisingproductivity.

Under QE the Bank prints moneyto buy government debt, to pushdown interest rates. This is meant tostimulate the economy, but it alsodrives up inflation.

BY TIM WALLACEIn addition, QE has been criticised

as it reduces the value of theannuity retirees can buy with theirpension pots, attracting the ire of

the older generation.Weale yesterday defended thepolicy, arguing that young peoplehave been particularly badly hit bythe downturn and so need supportfrom the central bank.

In particular he noted that almost10 per cent of young men have beenunemployed for more than sixmonths, compared with just overthree per cent for men aged 31 to 64.

As a result he feels hitting the oldwith QE has been justified because

it helps the young.However, Weale said high

inflation should rule out any moreQE for now.

It is more likely than not thatinflation will remain above targetfor much of the next two years, hetold the Manchester EconomicsSeminar. Additional stimuluswould, without any correspondingimprovement in productivity, add toinflation.

But he added that he hopes QEmay one day be shown to improveproductivity, allowing the Bank toprint more money without fear ofinflation soaring.

BANKS and finance firms increasedtheir fundraising through bonds,shares and commercial paper inOctober, according to Bank ofEngland data published yesterday,as improving financial marketconditions allowed firms to tap upmore investors.

Gross share issuance hit itshighest level in more than a year at1.3bn in the month, up from0.2bn in September. Bond issuancerose from 14.5bn to 17.8bn, whilecommercial paper issuanceincreased from 14.1bn to 15.4bn.

By sector, monetary andfinancial institutions raised

Bond and share issuance jumpon improved market conditionsBY TIM WALLACE 13.6bn, up from 12.1bn in

September, while other financefirms raised 12.7bn up from 7bn,though non-finance firms issuanceslid from 9.3bn to 7.7bn.

Schemes like QE3 in the US, theEuropean Central Banks plan to

buy Spanish bonds and sustainedlow interest rates have all calmedinvestors and improvedfundraising conditions.

However, net issuance fell 5.8bnas not every maturing debtinstrument was rolled over, with

banks net issuance dropping9.9bn, but other institutionsissuance turning positive at 1.2bn

and non-finance firms coming inat 2.9bn.

Martin Weale defended the Bank of Englands purchase of 375bn in bonds

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Roger Lambert, who led the 20m shareplacing for Secure Trust, is chairman of cor-porate broking at Canaccord Genuity.Despite being a generalist, he has beenheavily involved in some of Canaccordsmost recent fund raises in the financial sec-tor.These include a 25m fundraising for pri-vate wealth manager Rathbone Brothers,and its 25m fund raising at the start of thismonth.Lambert came under the Canaccord

Genuity umbrella after it snapped up Collins

Stewart in March 2012, having worked forthe firm since 2010.Before joining Collins Stewart he spent 26years at stockbroker Cazenove, where heworked in corporate broking.Working alongside Lambert was PaulBaines, chairman of Canaccord GenuityHawkpoint, who performed the advisoryand Nomad role for Secure Trust.Baines joined Hawkpoint in 2001, whichwas then was acquired by Collins Stewart in2011.He was previously head of corporatefinance at Charterhouse, which wassubsequently taken over by ING in 2006.The Secure Trust deal is the third fundrais-ing in as many weeks for CanaccordsFinancial Services team.Last week Canaccord was sole broker andadviser to Brookes MacDonald on a 21.5m

placing.

ADVISERS CANACCORD GENUITY

ROGER LAMBERTCANACCORD GENUITY

13NEWSWEDNESDAY 21 NOVEMBER 2012

Banks are pressing the BBA toconsider a trade group mergerSEVERAL UK banks want theirtrade association to consider

merging with other industrygroups as part of a radical re-think of the British BankersAssociations (BBA) structure andfinances.

The BBA used to be able tocharge for the use of Libor data,but the association has lost thatmulti-million pound revenuestream since the interest ratefixing scandal broke over thesummer.

Now members are urging it to

BY TIM WALLACEconsider every avenue incutting costs and boostingrevenues.

We expect the BBA to think

about all sensible options tomanage the budget forexample, considering a mergerwith one o f the host o f tradebodies out t here, said a bankingsource.

A few of us have suggestedthis, but it is down to the BBA topull together the options andassess them, then put it to themembers.

The BBA is unde rstood to beconsidering a range of options

which could be put to its boardin the near future.

But rival industry bodies havealready poured cold water on the

idea.We are not in discussion withthe BBA, said a spokeswomanfrom the Council of MortgageLenders yesterday, arguing thepair would likely make a poormatch.

We are mortgage marketspecific, covering a wide range oflenders in the market. The BBA issector specific, coveringorganisations of a particulartype, she added.

PAYDAY lenders must do more tocheck borrowers can afford theirloans, delay more foreclosures andmoderate their debt collection prac-tices, the Office of Fair Trading (OFT)warned yesterday as it announcedinvestigations into several lenders.

But the bodys new report alsofound most customers of paydaylenders are satisfied with the servicethey receive, often using the creditservices as a lifeline when they areshort of funds.

Despite concern from con-sumer groups, the OFTreport pointed to industry

evidence that 56 per centof customers used paydayloans to prevent a one-off financial difficultybecoming a wider finan-cial crisis, while 54 percent felt the loans made iteasier to pay bills on time.

However, the OFT stillwrote to all 240 pay-day lenders toexpress concerns

Payday lendersin trouble over

customer careBY TIM WALLACE

over their behaviour.We are concerned about the extent

to which advertising appears to targetpeople in financial difficulty andencourage rolling over of loans, thereport said. For example, around onethird of websites [reviewed] includedstatements such as no credit checks,loan extension guaranteed andextend loans up to four or five times.That would suggest irresponsible

lending and failure to carry outaffordability checks.And the OFT also fears that giving

the annualise interest rate on a loan isinsufficient to give a balanced view of

the service, as the full risks of tak-ing on a loan are not always

explained clearly.The organisation revealed sev-

eral investigations relate to wor-ries over debt collection,

including allegations firms mis-lead customers, pestered debtorsover the phone and threatened

excessive collection charges.

David Fisher headsthe OFTs review

THE FINANCIAL reportingwatchdog has kicked off a projectto try and help auditors to rebuildtrust in their profession.

On the same day that auditorsfor Autonomy came underscrutiny following Hewlett-Packards $8.8bn (5.5bn)post-acquisition writedown, the

Financial Reporting Council said itwants to examine the skills andresponsibilities needed to publishuseful audits.

The regulatory body will alsoconsider allowing sector experts toassist auditors in combing throughthe accounts of particularlycomplex firms such as banks orinsurers. The report will bepublished by September 2013.

Plans to restore audit reputationBY MARION DAKERS

SECURE Trust Bank, a subsidiary ofArbuthnot Banking Group, yesterdaydefied tough fundraising conditionsto place 20m of shares with newand existing investors.

The bank, which is majorityowned by Arbuthnot Banking, saidit would use the funds to supportfuture growth and potential

acquisitions. It will also be used torepay its existing subordinated debtof 5m to Arbuthnot, reducing theparent banks stake down from 75.5per cent to 70.7 per cent.

The new shares were sold at13.50, about twice the 7.20 pricepaid for its shares when it floatedon the market one year ago.

This a 4.9 per cent discount to thelast closing price.

BY MICHAEL BOW

Secure Trust raises 20m

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INVESTORS fear the Eurozone crisis isnot going away, despite EuropeanCentral Bank boss Mario Draghisassurances that he will do everythingto help, according to a Fitch studypublished yesterday.And analysts from Swiss bank UBS

warned Draghis policies may bemaking the crisis worse in the longrun by reducing the pressure fortroubled governments to reformtheir damaged economies.

Draghi hopes to ease the massiveeconomic readjustment taking placeby holding down interest rates andsupporting banks but analysts fearthis simply postpones the inevitablepain, dragging out the crisis.

Earlier this month Draghi insistedhis outright monetary transactions(OMTs) which would see the ECBbuy Spanish government bonds if thegovernment asks for a bailout area fully effective backstop that isdevised to remove the tail risk for theEurozone while not removingincentives for fiscal discipline.

But although 86 per cent ofinvestors told ratings agency Fitch

Draghi warned

his loose policyworsens crisisBY TIM WALLACE the OMTs and banking union are

important, 81 per cent say they arenot enough to bring an end to theturmoil.They still fear significant econom-

ic, financial and political risksremain.And UBS warned the policies could

even be making the crisis worse byreducing incentives for vital reforms.

In Spain, the OMT has actuallyreduced pressure to reform andstalled a much needed aid requestfrom the government, said analystMatthew Mish.

Unfortunately, without marketstress tough decisions are rarelyenacted.

He added that the ECB is not alone,as the Bank of Englands policies arepropping up inefficient zombiefirms those who cannot pay offtheir debts and only survive thanks tolow interest rates thus slowing theeconomy, and the US Federal Reservepotentially fuelling a dangerous newhousing bubble with its loosepolicies.

The inherent problem is that cen-tral bank policies seem to rewarddebtors, not creditors, he said.

Buzz

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LAST week executives fromAmazon, Google and Starbucksappeared before the House ofCommons public accounts

committee to discuss the issue oftax avoidance, which led to somecalls for consumers to boycott bigbrands that are accused of notpaying their fair share.

But how is brand perception actu-ally impacted by these sort of accu-sations and subsequent politicalgrilling?

Back in April 2011 I looked at fivebrands that had been targeted byprotesters over their tax arrange-ments, such as Vodafone, Boots,Tesco, BHS and Topshop.

The figures showed that there hadbeen no big change in their corpo-rate reputations as a result of those

public protests.Looking at the three US brandsquestioned by the public accountscommittee, however, we see a moremixed reaction from consumers.

Firstly, on buzz (which measurerswhether people have heard good orbad news) there is a big drop forStarbucks, from +1 to minus 29 inthe wake of the tax avoidance storyin the UK media.The brand had slowly started to

recover before falling back againafter the appearance before parlia-ment, and now stands at aroundminus 33.There was less of a drop for

Amazon and Google, however.The biggish Google dip is largely

related to the premature release oftheir financial results in October,

which also prompted a brief col-lapse in the firms share price,rather than any concerns about itstax status in the UK.We see a similar pattern on the

Index, which is a composite of sixkey image measures including thatof corporate reputation. Starbuckssuffered a relatively steep declineafter the story broke, Amazon expe-rienced a smaller dip whileGoogles scores barely moved.

So why is there a differencebetween the brands?

It could be down to the coverage,it could be that Google fares betterbecause it doesnt so obviously havea product that the average con-sumer pays for, or it could bebecause of the levels of built-up

brand equity.Its possible that Starbucks suffers

more from the publics wrathbecause it hasnt yet earned theright to be given the benefit of thedoubt.Stephan Shakespeare is the chief executiveof YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

Google is spared the publics anger over UK tax spat

SPAIN successfully shifted 5bn(4.02bn) worth of short-term debt

yesterday, but a bond sale for theEurozone rescue fund was delayed

by Frances Monday nightdowngrade.

The Spanish treasury sold4.2bn worth of 12-month debt ata yield of 2.797 per cent, downfrom 2.823 per cent at the lastauction, but 713m of 18-month

bills went for 3.034 per cent,marginally up on 3.022 per centlast time. Still, the auction beatthe governments 3.5bn to 4.5bntarget, and the auctions were

heavily over-subscribed.However the European Financial

Spain enjoys bond success butrescue fund hitby France woe

BY BEN SOUTHWOOD Stability Facility (EFSF) suffered asetback when its three-year euro

benchmark was delayed, afterFrance its second largest

guarantor was downgraded fromAaa to Aa1 by Moodys.

EFSF chief financial officer anddeputy chief executive ChristopheFrankel played the delay down as atechnical error.

The timing of the EFSF three-year euro offering is currentlysubject to a technical issue relatedto EFSFs deeds of guarantee, hesaid in a statement.

Apparently agreeing that theproblem is not fundamental,Moodys has kept its rating for the

benchmark at Aaa, maintaining itsexisting negative outlook.

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VALUE fashion retailer New Look posted a 25 per cent rise

in underlying first half earnings yesterday, as it removedcosts and improved margins as part of a recovery planfollowing a slump in earnings in 2011-12.

The firm, owned by private equity groups Apax,Permira and founder Tom Singh, also said that its currentsales performance is now showing year-on-year growth. Aspokeswoman for New Look said the firm hoped torefinance its net debt of 1.05bn within the next 18months.

The firm reported earnings before interest, tax,depreciation and amortisation of 86.9m in the 26 weeksto 22 September, up from 69.4m last year.

New Looks earningsrise by 25 per cent asrecovery plan pays off

BY CITY A.M. REPORTER

PREMIER Foods, the maker of Hovisbread, announced yesterday it is toclose two bakeries and axe 900 jobsas part of plans to overhaul its trou-bled bread division and pay off debt.

The company said bakery sites inBirmingham and Greenford willclose during the course of next year,on top of the previously announcedplanned closure of another Hovisbakery in Hampshire.

It is also preparing to shut distribu-tion sites in Birmingham, Greenford,Mendlesham and Plymouth, result-ing in a total of 900 jobs being cutacross its bread business.

Chief executive Michael Clarke saiddecisions will not be taken lightlybut they are necessary if we are tobuild a strong and successful futurefor the bread division.

Premier, which also makes MrKipling cakes and Loyd Grossmansauces, said the restructuring willhelp offset margin pressure causedby the loss of a 75m contract with

Premier to axe900 jobs across

bread division

BY KASMIRA JEFFORD the Co-op.The bread arm, which the group

separated into a new division inAugust, has proved tricky for Premier,which has had to manage high wheatprices, costly logistics, and alsoBritons eating fewer sliced loavesprompting retailers to drop prices.

Premier said the closures will resultin a 28m charge that should berecovered through site disposals.The group has been selling non-core

businesses such as Hartleys jams andits pickles and sauces arm to help cutits debt pile.

The 1973 Hovis advert, directed by Ridley Scott, was once voted an all time favourite

Premier Foods PLC

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toshiba.co.uk/touchibaToshiba recommends Windows8.

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BRITISH utility Telecom Plusreported an eight per cent rise infirst-half profit yesterday as itadded more customers and said itexpects to post a record profit andturnover for the year.

The company, which providesgas, electricity, fixed line telephoneand broadband internet services,said customer numbers rose by22,657 to 438,146 during the sixmonths ended 30 September.

For the first half, Telecom Plusreported a pre-tax profit of 12.1m,up from 11.1m a year earlier.Revenue increased 30 per cent to210m. The company raised its

interim dividend to 13p from 10p ayear earlier.

Telecom Plus in

revenue jumpBY CITY A.M. REPORTER

BIG Yellow, the self-storage provider,yesterday posted a 20 per cent jumpin half-year profits but warned thatthe addition of VAT to storage costswil continue to weigh downearnings growth in the short term.

Chairman Nicholas Vetch said thegroup focus on London and thesouth east, where it operates 58 of its66 facilities, had helped it meetchallenges in the period includinghigher interest costs and a subduedeconomic environment.

Adjusted pre-tax profits rose to13.9m in the six months to 30September, up from 11.6m a yearearlier, as store revenues grew 11.5

per cent to 35.5m. Occupancy roseto 68.5 per cent from 63.5 per cent.

Profits surge

at Big YellowBY KASMIRA JEFFORD

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TO the Marriott hotel in GrosvenorSquare last night for the seventhannual Women of the Futureawards.The Citys fairer sex were celebrat-

ed at the black tie drinks and din-ner do, and unsurprisingly therewas no shortage of both men andwomen turning out to show theirappreciation for Britains outstand-ing ladies aged 35 and under.

The Capitalist spotted dashingDragon and entrepreneur JamesCaan chatting to one lovely ladyduring business secre-tary Vince Cablesspeech.

Cable told theroom full of gath-ered women thathe felt extremelyhumbled to bethere when hesaw the vastpool of talentin the room.Awards were

dished out tog e o l o g i s t sand doctors

but among our lovely banking ladiesbeing honoured it was Natwest port-folio manager Lucy Ellidge winningthe Young Star award, Barclays smallbusiness cards managing directorLucy Johnson as highly commendedBusinesswoman of the Future andRBS taking the Corporate award.

Patron Cherie Blair was a no-show,citing other commitments, howeverfounder of the awards Pinky Lilanisummed the night up best when shesaid: These awards are incrediblyspecial because they celebrate

women still at the begin-ning of their careers andwith the potential to go

even further. TheCapitalist could notagree more.

The Movember boys in the lead from Bank of America Merrill Lynch: Credit structurer BenSpitfire Lanning (left) and senior vice president Matt Lip Luggage Lee (right)

Left to right: LucyEllidge, portfoliomanager atNatwest andBarclays smallbusiness cardsmanagingdirector LucyJohnson

16 cityam.com

cityam.com/the-capitalistTHECAPITALISTAfter the final approvalyesterday from shareholders to

merge commodities trader Glencoreand mining giant Xstrata into GlencoreXstrata International, The Capitalisthas been pondering on other big firms

boasting tongue-twistingly longnames. Bank of America Merrill Lynchrolls off the tongue a good dealquicker than law firm Skadden, Arps,Slate, Meagher & Flom LLP. Howeverneither can compete with Pittsburgh-based law firm Holly, Kraft, Jacobs,Wainwright, Deunster, Chattersworth,Cravens, Zymbrowki, Langston,Johnson, Tillerskein, Quoss,Thompson & Dudley. Apparently thepartners were: Tired of trendy andvacuous-sounding law firm names.

After a disappointing result forEnglands rugby boys last

weekend in their match againstAustralia, the rugby AutumnInternational series continues thisSaturday as England take on SouthAfrica at Twickenham. However eagerCity betters could be warned abouttaking on the spreads at bookmakersSpreadex. The Capitalisthears thefirms latest addition to the sportstrading room is a new rugby trader. Thename of the gentleman in question justhappens to be Jonny Wilkinson. In acase of double coincidence the firmalso has a Jon Terry among their staff,unfortunately not a football trader -nevertheless it has been cause for agood chuckle on the trading floor.

WEDNESDAY 21 NOVEMBER 2012

EDITED BY CALLY SQUIRES

Got A Story? Email

[email protected]

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BARELY more than a week left in

The Capitalistshunt to sourcethe fairest and furriestmoustache in all the City land.

As we are now past the halfwaypoint in our hairy little challenge,it is time for an update.

The Bank of America MerrillLynch boys, who have bandedtogether on the fundraisersofficial website as team JuliosMovembrs are shaping up well,as photographic evidence of self-styled Matt Lip Luggage Lee

Calling all Mo Bros - one weekleft to send your best specimen

and Ben Spitfire Lanning

suggests.Our Mo Bros sporting

handsome handlebars fromacross the City have alreadyraised almost 90,000 insponsorship onuk.movember.com

Remember it is not just for fun,there are prizes to be won courtesy of Lockonego Salon soplease send all entries [email protected] of play on 30 November.

Cable and Caancheer City ladies

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DAVID Camerons former media chiefAndy Coulson and Rebekah Brooks,the former boss of Rupert Murdoch'sUK newspaper business, will becharged with conspiring to payofficials for private information on

the royal family, prosecutors saidyesterday.

The charges against Coulson relateto his time as editor of the Murdoch-owned News of the World tabloid.

Coulson and Brooks to be chargedover illegal payments to the MoD

BY CITY A.M. REPORTER Since resigning from his DowningStreet post in 2011, Coulson has beencharged with conspiracy to hack intophone messages, and perjury. He saidin a statement he would fight the latestcharges in court.

Brooks, 44, was charged withconspiring to authorise payments of

around 100,000 to a member of theMinistry of Defence to generate storiesand will appear at WestminsterMagistrates Court on 29 November. Herlawyers were not immediately available.


Rebekah Brooks and Andy Coulson deny the charges and are appealing

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Property magnate Uri Hellercalls for shareholder backingURI Heller, the chief executive andfounder of real estate developer

Ablon Group, yesterday issued animpassioned plea to shareholdersurging them to vote against plansto remove him from the firm.

One of the companys majorshareholders and lender to thefirm, Volksbank Group, hasproposed removing Heller asdirector from the company andhas won the backing of activistinvestor Laxey Partners for theplan.

BY MICHAEL BOW Shareholders will vote at ameeting to remove Heller, whofounded the firm in 1993 andowns 28.65 per cent, next month.

Yesterday he issued a letter toshareholders urging them to keephim at the firm.

It is my duty to act in the bestinterests of the company and itsshareholders and I believe that Ihave always done so, he said.But my devotion to the companyis even more fundamental thanthat. I founded the companynearly 20 years ago and I haveworked for it ever since.

Heller also accused Volksbank,which owns 24.3 per cent ofAblon, of making an offer to takecontrol of the firm without

making a takeover offer. It wantsto appoint different directors tolead the firm.

On 12 November LaxeyPartners, which owns three percent, issued a call to arms tofellow shareholders to removeHeller from the company, citingconflicts of interest between hisrole as a shareholder and chiefexecutive. The vote is due to takeplace on 5 December.

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IN BRIEFBaker & McKenzie looks to Korean Law firm Baker & McKenzie saidyesterday it had applied to Koreanauthorities to be allowed to open anoffice in the countrys capital, Seoul.South Korea opened its doors toforeign law firms for the first timeearlier this year after agreeing tradedeals with the EU and the US. Pendingregulatory approval, Bakers office inSeoul will be led by M&A partner NamHung Paik.

Lottery runner sees record salesn National Lottery operator Camelotsaid yesterday that ticket sales hadrisen by eight per cent in the sixmonths to the end o f September. Theprivately-owned company put thesuccess down to online and mobilegaming. Camelot lost a high courtcase against Richard DesmondsHealth Lottery asking for its gaminglicence to be revoked in August, butcontinues to pursue the matter.

Pensions minister attacks EU plannNew capital rules for final salarypension schemes would add 150bn toUK firms costs, pensions minister Steve

Webb warned yesterday. The EuropeanCommission plans to regulate pensionsin the same way as insurers, makingfunds hold more capital againstadverse events. But critics say the twoare not comparable, as insurers pay outon sudden events, while pensions arelong-term products. The costly ruleswould harm businesses ability toinvest, grow and create jobs, and manymore schemes could be forced toclose, Webb warned.

HOMESERVE, the home repairsgroup currently being investigatedby UK regulators, yesterday stormedto a 25.6m half year profit afterswivelling its focus off the UK markettowards selling to people overseas.The group announced in May it

was being investigated by theFinancial Services Authority over itsUK telephone sales and marketingtactics. Yesterday it said profits hadsurged nine per cent on the back of229.6m in revenues over the halfyear ending 30 September as itturned away from the UK market.

HomeServe, which offers emer-

gency home insurance, yesterdayreported that customer numbers inthe UK had plunged 500,000 to 2.5min the past six months and wouldcarry on falling.

Chief executive Richard Harpinsaid: HomeServe is making progressin transitioning its UK business to asmaller, more customer focusedoperation and has delivered goodgrowth in its international business-es in the first half of the year.The fall off in UK activity was offset

HomeServe upafter pivoting

away from UKBY MICHAEL BOW

by strong growth in the US wherecustomer numbers increased 20 percent.The company also boosted its bal-

ance sheet by taking over French firmDomo last December, buying out theremaining 51 per cent stake fromVeolia Environnement.

The purchase increased net debt to78.1m, up from 36.6m over the sixmonths, but it also helped improveHomeServes cash flow, sending freecash flow from 2.3m to 10.3m atthe end of September.

HomeServe jumped more than tenper cent on the FTSE yesterday clos-ing up at 247.9p on the back of theresults.

Homeserve PLC


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MORTGAGE firm Paragonincreased profits by 22.5 per centin the last 12 months, according

to full-year results publishedyesterday.

The specialist buy-to-let andconsumer finance groupreported record pre-tax profit of95.5m, up from 80.8m in theprevious year.

Paragon benefited from biggerlenders cutting back credit,allowing it to expand.

The results allowed it to up thefinal dividend to 4.5p per share,up from 2.65p last year. Added to

Paragon profits soar as biggerlenders cut back on buy-to-let

BY TIM WALLACE the 1.5p given out earlier thisyear, that takes the total to 6p.

But despite rising profits anddividends, analysts warnedParagon is still not a healthy

investment prospect.Paragon is a high risk business

that has become effectively if nottechnically insolvent twice, saidNumis James Hamilton, slappinga sell rating on the firm.

Paragon is highly leveragedand despite this it generates alow return on equity (ROE). Theunderlying ROE is now just undernine per cent which we believe isdramatically below the cost ofequity.


Paragon chief Nigel Terrington said the firm is well funded for further lending growth

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BUSINESS research and developmentboomed in the UK between 2010 and2011, according to data outyesterday, despite the countrys slideback into recession by the end of theyear.

Total business R&D spending was17.4bn in 2011, eight per centhigher in cash terms than in 2010,and six per cent higher in realterms, the Office for NationalStatistics said.

The biggest gains came from a 19per cent boost to the IT sector, and a23 per cent hike in car industry R&Dspend, as the country made its waytoward becoming a net exporter ofcars for the first time in decades.Spending in the defence andpharmaceutical sectors alsoaccounted for a large portion of theincrease.

The data provided a clear pictureof how important foreigninvestment has been for recent UKeconomic success, with non-UK-owned firms spending more thanhalf of the total on R&D for the firsttime ever. UK firms spent 6.4bnout of the total 8.7bn spent in 1993,while foreign-owned firms made up8.8bn of the total 17.4bn spent in2011 ahead of the 8.6bn spent bybusinesses with UK-resident owners.

UK firms hikeR&D spend inexport sectors

BY BEN SOUTHWOOD

MORTGAGE lending climbed to an11-mon

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