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Friday, 22 November 2013

Co-op demands £31,000 back from Paul Flowers as next payout is halted

'No further payments' for disgraced bank chairman
Pressure mounts on Balls as Labour attacks 'smears'

The Co-operative Group last night wrote to the former chairman of its bank, Paul Flowers, to demand he return his £31,000 payoff when he left the business in June.

The 63-year-old Methodist minister, who was videoed handing over cash apparently to buy drugs, was in line to receive another £124,000. However, the Co-op said it decided last weekend, when the revelations about Flowers's private life emerged, not to make any further payments.

They were to cover his role as deputy chairman of the Co-operative Group. Flowers was elected to the position and due to remain in it until 2014.

In 2012 he was paid £132,000 to cover his role as chairman of the bank and his position on the group board. That sum also covered a company car.

Flowers, who has been suspended indefinitely by the Methodist church, resigned to take responsibility for the problems at the Co-op bank, which is racing to plug a £1.5bn shortfall in its capital identified by the Bank of the England.

The bank is urgently contacting bondholders ahead of a crucial vote next week on a deal that will leave the Co-op Group with just a 30% stake in the bank. Bondholders, led by two US hedge funds, will own the rest. Vince Cable, the business secretary, has indicated that he is ready to review the continued use of the Co-op name at the bank after the change of ownership if asked to do so.

A Department for Business spokesman said: "The secretary of state would carefully consider any representations he may receive regarding his powers under the Companies Act on the matter of company names."

The Co-op embarked on an "internal fact-finding review" after the video was released by the Mail on Sunday. It is now reviewing all emails sent and received by Flowers during his time as chairman and checking expenses he reclaimed.

Flowers apologised after the video was released, saying he had done things which were "stupid and wrong" after a death in the family and as a result of the pressures of chairing the bank. He has made no further comment since.

The Co-op said on Thursday: "When Paul Flowers relinquished his responsibilities in June, it was agreed, as per his contractual obligations, that his fees for the rest of his period of office would be paid.

"Following recent revelations, the board stopped all payments with immediate effect and no further payments will be made."

The circumstances surrounding his resignation from drug charity Lifeline Project – where he was accused of misclaiming up to £70,000 – were not known to the Co-op Group when he was named chairman of the bank in March 2010.

The political fall-out from Flowers's fall continued on Thursday. Ed Balls, the shadow chancellor, is facing renewed pressure over his links to the Co-op Bank after it emerged that he attempted to woo voters in theLabour-affiliated Co-operative party during the 2010 leadership contest by claiming that he helped pave the way for the Britannia Building Society takeover.

As the Labour leadership accused the coalition of launching a smear campaign over the party's links with the disgraced chairman, a transcript of an interview with Balls in 2010 showed that he highlighted his role in helped to create Britain's "first ever 'super-mutual'".

Balls told the Co-operative party in August 2010: "I was able to show this [my support for co-operatives] by ensuring treasury support for a new private members bill [introduced by the then Tory MP Sir John Butterfill] that led to the creation of the first ever 'super-mutual', bringing Britannia Building Society and the Co-op Bank together in the interests of customers, rather than the banking elite." A spokesman for Balls acknowledged that he supported the private member's bill but pointed out that he played no role in approving the merger in 2009 which was made on commercial grounds when he was schools secretary.

Balls said Flowers had been suspended from Labour and was "out, out, out".

Flowers resigned from the unpaid position as a trustee at the Lifeline Project in Manchester in 2004 after its chief executive Ian Wardle blew the whistle to the charity's solicitor regarding discrepancies in Flowers's expenses.

Wardle said: "These discrepancies had not been obvious and required a detailed investigation. Following legal advice from the outset from Lifeline's solicitor and further support from Queen's Counsel, the investigation continued and a process was followed to attempt to identify with the involvement of Rev Flowers, which of the expenses were reasonably incurred and which were not. The matter was fully reported to the Charity Commission."

Wardle said the charity had no record of the Co-op ever asking for a reference concerning Flowers.

The Charity Commission said Lifeline Projects had never provided any evidence that Flowers had acted in bad faith in claiming the expenses, or that he had claimed expenses incurred outside of charity business.

The commission believes that Flowers claimed under an expenses policy agreed by the Lifeline's board, which turned out to be "not in line with charity or company law and not allowed by the terms of the charity's governing document."

New management at Lifeline changed the expenses policy to make it legally compliant and asked Flowers to pay the money back. According to the charity, he never did. The Charity Commission said: "We are now writing to the charity of which the former trustee of Lifeline Projects is still a trustee to reassure ourselves that it is satisfied its governance systems are robust and there are no concerns relating to the issues raised by Lifeline Projects.

"We will also write to all of the charities of which the trustee in question has served as a trustee for the same purpose."

Flowers has stood down from the boards of the Manchester Camerata and the Terrence Higgins Trust. The trust said on Thursday that Flowers had not claimed expenses, sent emails from the trustee email address nor accessed the internet.

Article Source : http://www.guardian.co.uk
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Thursday, 21 November 2013

Investors: AT&T and Verizon must say how much customer data goes to NSA

Phone companies' customers could switch networks if they feel their privacy is being compromised, say investment funds

Big investors in America's two largest mobile phone companies have demanded they disclose how much customer data they hand over to the US and foreign governments. Documents from the NSA whistleblower Edward Snowden show AT&T and Verizon have installed equipment to copy, scan and filter large amounts of the traffic that passes through their networks.

AT&T and Verizon Communications, which owns Verizon Wireless, will face votes at their annual shareholder meetings following formal requests from one of New York's biggest public sector pension funds and a large private investment firm. The $161bn New York State Common Retirement Fund, which manages the pensions of more than 1 million state workers, and Trillium Asset Management, a Boston-based investment management firm with $1.3bn under management, havelodged demands with both networks to publish the number of requests they receive for customer information every six months.

The investors said customers could switch to other networks if they think their privacy has been compromised.

AT&T has also been warned that its willingness to co-operate with state-sponsored surveillance could hamper its ambitions to expand its business into Europe. The company is reported to be considering a bid for Vodafone, the British-based mobile network with outposts across Europe, Africa and Asia.

The Verizon chief executive, Lowell McAdam, when asked about the company's legal obligations, recently stated: "We are the largest telecommunications provider to the United States government, and you have to do what your customer tells you."

A Verizon spokesman said: "We've received the proposal and we're currently evaluating it." A spokesman for AT&T stated: "As standard practice we look carefully at all shareholder proposals but at this point in the process we do not expect to comment on them."

EU backs move to boost numbers of female non-executive directors

Legislators back rules demanding firms choose women when men are equally qualified – but stop short of quotas

The European parliament has backed rules that would give women preference for non-executive posts at companies, after plans for a mandatory quota to get women into top jobs were scrapped.

The rules demand that companies give non-executive directorships to women where there is no male candidate who is better qualified, until they reach a target of four in 10 being women.

"The parliament has made the first cracks in the glass ceiling that continues to bar female talent from the top jobs," said EU justice commissioner Viviane Reding, who launched the proposal.

Although the draft law envisages possible fines for firms that ignore selection rules, it has been softened from imposing a quota with a penalty. Nor do the rules help women aiming for top management roles, such as chief executive. They also exempt smaller companies and those that are not listed.

Only about 17% of non-executive board members in the EU's largest companies are women. In Britain, women hold 17.4% percent of directorships, up from 12.5% in 2010; only four CEOs at FTSE 100 companies are women.

If endorsed, the rules will take seven years to come into full force. Countries are now required to sign off on the law but are divided on whether pan-European rules on positive discrimination are necessary.

Britain and Germany have argued against mandatory quotas.

Men dominate boardrooms in the region, and many women who have risen through company ranks resent quotas because they can be seen as suggesting that women have not been promoted on merit.

Only Norway, which is not a member of the bloc, has enforced a 40% quota since 2009, although critics say this has been achieved in part thanks to a small number of women holding non-executive positions in multiple companies.

"It is essential for listed companies to evolve so as to include highly skilled women in their decision-making processes," said Rodi Kratsa-Tsagaropoulou, a member of the parliament who is playing a central role in shaping the law.

Ikea France executives under investigation amid spying accusations

Head of Ikea France among those accused of employing private detectives to snoop on employees, particularly union activists, and even unhappy clients

Three senior Ikea executives in France were put under investigation on Wednesday over allegations they spied on disgruntled customers and former staff.

The head of Ikea France is among those accused of employing a firm of private detectives to snoop on individual employees, particularly union activists, job applicants and even unhappy customers, and of fraudulently obtaining personal information from police files.

A judge decided there was enough evidence to formally mis en examen(the equivalent of being charged) Stefan Vanoverbeke, the chief executive of Ikea France, his predecessor Jean-Louis Baillo and chief financial officer Dariusz Rychert, who were arrested on Monday and held for questioning.

Under French law, the men had to be formally put under investigation within 24 hours or freed.

Since January, a total of 10 people have been arrested and put under investigation for "fraudulent use of personal information", including four police officers and Ikea's former head of security.

The case is hugely damaging to the reputation of the flagship Swedish company famed for its family-friendly but infuriatingly difficult to assemble flat-pack furniture.

The accused are said to have requested a range of personal data, including criminal records and confidential details about the targets' dealings with the police or courts, even as witnesses or victims. Scores of people were alleged to have been snooped on, including a union official.

Last year, the satirical magazine Le Canard Enchainé obtained and published emails allegedly between Ikea's management in France and Sûreté International suggesting the security company was obtaining information from the national police information system on behalf of Ikea. The magazine said Ikea agreed to pay Sûreté International €80 (£66) for each request for information and that up to 200 demands were made at the same time.

Two unions have filed legal complaints against Ikea, accusing it of snooping on hundreds of people over a period of at least five years.

Among the claims is that Ikea asked investigators to find out if a customer, who was suing the company for €4,000 (£3,350), owned her own property or was known to the police. Other accusations centre on the tracing of car registration numbers.

Vanoverbek's lawyer, Alexis Gulbin, said his client denied involvement. "It was he who took corrective measures as soon as the problems were detected," Gulbin said.

Ikea France suspended and later fired the head of its risk management department last year along with three top-level executives, before publishing a new code of conduct.

In a statement in 2012, Christophe Naudin, head of Sûreté International, told journalists last year it had "consultancy and security contracts" with Ikea, but flatly denied snooping for the firm.

If found guilty of fraudulently using personal information, the accused face up to five years in prison and €300,000 in fines.Article Source : http://www.guardian.co.uk

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Royal Mail float: paying bankers' deferred fees would be 'mad', MP says

Select committee chairman says paying the extra fees would reward bankers who priced the float too low

The government would be "mad" to pay more than £4m in deferred fees to the banks that advised on Royal Mail's privatisation because they undervalued the company, the chairman of a parliamentary committee said after grilling the bankers on Wednesday.

Adrian Bailey, who chairs the Business, Innovation and Skills (Bis) select committee, said paying the fees, on top of more than £12m already handed over, would reward highly paid bankers who set the float price too low at the expense of the taxpayer.

Bailey gave his judgment after the committee questioned senior staff from Goldman Sachs and UBS, the banks that led the flotation. In more than two hours of questioning, they were accused of failing at their jobs and selling the taxpayer short.

The government sold 60% of Royal Mail at 330p a share last month, valuing the company at £3.3bn. But the shares leapt 38% on their first day of trading and closed on Wednesday at 550p, giving Royal Mail a market value of £5.5bn.

Goldman, UBS and five other banks that marketed the shares have so far been paid £12.7m between them but they could get a further £4.2m if Vince Cable, the secretary of state, thinks they warrant it.

Bailey said: "The government, in view of what has happened subsequently, would be mad to give them [the money].

"It would be seen as rewarding the private sector that lost the taxpayer potentially £1bn and, in these days of austerity, I think it would be a very politically dangerous thing to do. These are professional people, who got it wrong, and they would be rewarded despite the fact they got it wrong."

The banks in the syndicate that marketed Royal Mail to investors shared fees of 0.8% of the money raised, with Goldman and UBS splitting an extra 0.1% for leading the operation. The government's independent adviser, Lazard, has been paid £1.5m with no fees deferred.

Asked whether taxpayers would be willing to accept the banks getting the extra fees, UBS's James Robertson said: "I think that is for the secretary of state to decide. It is in his gift."

MPs questioned James Robertson and Richard Cormack of Goldman Sachs alongside bankers from Citi, JP Morgan and Deutsche Bank, which missed out on advising on the float. Gert Zonneveld of Panmure Gordon, who argued that Royal Mail was undervalued before the shares started trading, also appeared.

Goldman's initial pitch, made without inside information, valued Royal Mail at up to £3.75bn and UBS's top estimate was £4.6bn. The others were more than £1bn higher with JP Morgan's the highest at £8.5bn.

The banks' job was to sound out fund managers on how much they were prepared to pay for the shares and to generate demand in a so-called book-building process. As interest increased, they moved the price to the top of their initial 260p-330p range.

The UBS and Goldman bankers defended the sale price, saying a potential US debt default and the threat of a nationwide postal strike loomed over the flotation.

Robertson admitted the government could have got a further 20p per share if it had gone above the agreed range but he said the risks were too great because it would have caused a delay and pushed long-term investors to their limit. "Momentum can evaporate and go away very quickly … when we were looking at all the risks, on balance we chose to stick to 330p. We discussed it with the Shareholder Executive [which advises on privatisations] and Lazard and they discussed it with the secretary of state."

But committee members accused the banks of failing at their job and of being duped by potential investors, who always want to pay as little as possible.

Brian Binley, a Conservative member of the committee, told the bankers: "Somebody somewhere has failed the taxpayer and cost the taxpayer in this initial instance. I just wonder whether the taxpayer has the right to wonder whether for all the money you were paid you weren't very good at your job."

The committee's attention will now turn to Cable and his minister Michael Fallon, who will appear next Wednesday with representatives from Lazard and the Shareholder Executive. In his last appearance at the committee just before the flotation, Cable dismissed the prospect of a jump in Royal Mail's share price as "froth".

Bailey said the session with the bankers was preparation for asking Cable why he priced the privatisation so low.

"I think there was a recognition [by the committee that the price has been undervalued. Did they rate their political position as being more important than the interests of the taxpayer because if it was overpriced they would have had egg on their faces?"

Wednesday, 20 November 2013

Nokia shareholders approve sale of handset business to Microsoft

Gathering in Helsinki's Ice Hall pays their last respects to a business that once dominated European phone manufacturing

Nokia shareholders have approved the sale of its mobile phone division to Microsoft after some 5,000 people braved icy rain in Helsinki to cast their vote and pay their last respects to a business that once dominated European phone manufacturing.

In the capital's Ice Hall, usually home to the national ice-hockey team, crowds witnessed a landmark moment in Finnish history. By a 99% majority, the emergency general meeting ratified the €5.44bn (£4.6bn) sale of Nokia's handset division. Nokia's chairman, Risto Siilasmaa, said he was aware the sale "would raise deep feelings" among Finns.

"On the board of directors we understood that, as the decision-makers, we would also be heavily criticised. However, we are convinced that continuing with the old strategy would have most likely led to great difficulties for Nokia, its shareholders and employees," Siilasmaa said.

When the sale concludes early next year, Nokia will be left with a telecoms network equipment business, its online mapping division, and a trove of valuable patents, only 10% of which have been licensed, according to executives. The company will continue to employ 6,000 people in Finland.

In a marathon four and a half hour meeting, much of the backlash from small shareholders was reserved for Stephen Elop, the chief executive hired from Microsoft who guided Nokia's sale to Microsoft before stepping down in September with an €18.8m severance package. Shareholder Hannu Virtanen said Nokia's board of directors had acted naively and Elop had been a "triple-A flop" who "drove the company to ruin". Finns have watched in despair as the 150 year old company closed factories, cut tens of thousands of jobs and cancelled its dividend.

Elop, who reportedly attended the meeting but did not speak, will transfer with the phones business back to Microsoft and is among those tipped to succeed Steven Ballmer as chief executive of the American software group.

The alliance Elop founded with Microsoft while at Nokia has begun to bear fruit, with the Lumia handsets that run Windows software helping to push Microsoft's market share up to 10% in Europe, where Apple and Android still dominate.

Siilasmaa, who has stepped in as interim chief executive, defended his predecessor, saying: "I have never met anyone who had done as much work as Stephen has done."

He revealed that other companies had expressed an interest in buying Nokia at the time of Microsoft's approach, but that the board considered the American group's offer to be the best option for shareholders.

Speaking from the public gallery, Marko Mannfors argued Nokia was being sold at a discount, and that a more appropriate purchase price would have been €15bn.

Nokia's stockmarket value stands at €22.5bn. The shares have doubled in price since the deal was announced, rising to a high of €6 on Monday before falling back to €5.82 by Tuesday's close.

Microsoft had been forced to act because of the money it was losing in supporting Lumia marketing efforts, Siilasmaa claimed. For every handset sold, Nokia paid Microsoft a $10 licence fee to use its software, but Microsoft paid Nokia $20 to support its marketing efforts. "From Microsoft's point of view, the equation does not work," the chairman said.

Nokia's handset arm lost €86m in the most recent quarter. Although that is an improvement from a €672m loss a year earlier, the company is a long way from recovering the market share taken by Apple's iPhone and Samsung's Android handsets.

The remaining networks business now faces a battle with activist shareholders led by Daniel Loeb's Third Point capital, which believes the company will have €8bn in cash once the sale completes, and that it expects a "meaningful portion" to be handed to shareholders as dividends.

JP Morgan Chase agrees record $13bn settlement charges over toxic mortgages

Bank acknowledges it made serious misrepresentations to the public over the sale of numerous mortgage-backed securities

JP Morgan Chase, the biggest bank in the United States, agreed a record $13bn settlement with regulators on Tuesday, ending months of tense negotiations with the Justice Department over a string of investigations into its risky mortgage deals.

The fine, the biggest civil settlement with any single company, ends several investigations and lawsuits brought by the US authorities related to the sale of home loan bonds between 2005 and 2008. It is more than four times the previous record $4bn fine the US levied against BP for the Deepwater Horizon oil spill.

Settlement talks have been fraught and lengthy. JP Morgan chief executive Jamie Dimon went to the US Justice Department to personally negotiate with attorney general Eric Holder in September, a personal summit that led some critics to claim that Holder was giving the bank special treatment. Tuesday’s agreement staves off a costly and potentially embarrassing trial.

As part of the settlement, JP Morgan acknowledged it made serious misrepresentations to the public – including to investors – about numerous transactions relating to residential mortgage-backed securities. The deals collapsed in 2008 when the housing market plunged and the scale of the risks was exposed, and the resulting financial tumult led to the biggest crisis since the Great Depression.

The admission was a major victory for the Justice Department. Banks have fought shy of such statements fearing yet more legal actions from investors. The settlement leaves open the possibility of potential criminal charges.

“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” said Holder. “JP Morgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm’s behavior.”

“The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over. No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability,” Holder said.

The settlement was negotiated through the residential mortgage-backed securities (RMBS) working group, a joint state and federal initiative formed in 2012 to investigate wrongdoing in the mortgage-backed securities market prior to the financial crisis. Holder said the group’s investigations were “ongoing”.

John Coffee, a Columbia law school professor, said the fine was in marked contrast to the $1.9bn penalty Holder brought against HSBC for money laundering last December. “In that case he seemed to suggest some institutions were ‘too big to jail’,” said Coffee. In this case, Coffee said, Holder was still looking to bring charges against individuals in the future.

Coffee said the US authorities had so far struggled to charge senior individuals over the excesses of the financial crisis. “But the government is still looking. We may yet see another shoe drop,” he said.

JP Morgan sailed through the financial crisis relatively unharmed, but has been beset by legal woes in the crisis's aftermath. The fine is the latest, and largest, in a series that has led for some shareholders to call for Dimon’s resignation despite the bank's financial success and its solid share price:

• Earlier this month, the bank paid $4.5bn to settle allegations it has mis-sold mortgage bonds to pension funds and other institutional investors.

• In September, the company paid $920m to settle US investigations into the “London Whale” trading scandal.

• In the same month, JP Morgan paid another $390m in refunds and $80m in settlement for billing credit card customers for identity theft protection they did not receive.

• In July, the bank paid $410m in penalties and repayments related to alleged manipulation of California and midwest electricity markets.

The latest fine stems in large part from allegations of mis-selling of “toxic” mortgage securities by Bear Stearns and Washington Mutual, two firms JP Morgan purchased during the 2008 financial crisis at the behest of the government.

Of the $13bn resolution, $9bn will be paid to settle federal and state civil claims by various entities related to RMBS.

The heavily trailed agreement appears to have been delayed by arguments over the consumer-relief component of the pact that constitutes the remaining $4bn of the deal. That money will be used to reduce urban blight in areas such as Detroit, where the sub-prime crisis worsened an already struggling housing market and left many homes abandoned. They money will also be used to offer lower rate loans to low-income home buyers.

About $1.4bn will go to the National Credit Union Administration. “Today’s announcement by the Justice Department is extraordinary, and will greatly benefit credit unions that have been paying for the losses caused by the financial institutions covered by this settlement,” NCUA chairman Debbie Matz said.

Brian Kettenring, executive director of the Campaign for a Fair Settlement, said the size of the settlement was a “show of progress toward holding banks accountable for repeatedly breaking the law.”

“Criminal prosecution is still needed to deter future crimes. But more and likely better relief for struggling homeowners is a hard-earned victory for people across the country who have spoken out—and even gone to jail—demanding an end to Wall Street impunity,” he said.

Deborah Castillo, a member of pressure group Home Defenders League who lost her home to foreclosure said: “JPMorgan Chase should halt foreclosures while the settlement is implemented and make a good faith work with the homeowners in our communities who need fair modifications. I hope that funds from this settlement will quickly get to homeowners, who have waited far too long for relief, and are really used to help the families who are struggling and prevent the crime of more empty houses in our communities.”

While this agreement ends a troubled chapter for the bank, other issues remain. A criminal investigation of the bank over mortgages will continue. The bank is also under scrutiny for its hiring practices in China, its massive “London Whale” trading losses and its relationship with Bernie Madoff, the Ponzi scheme fraudster.