Adoboli pleads not guilty Arab Times

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					                                                                                                                                                                                                                            ARAB TIMES, FRIDAY, SEPTEMBER 21, 2012
    BUSINESS                                                                                                                                                                                                                                                                         40

 In this Sept 13, 2012 file                                                                                                                                                                                   caution urged on Libor reform
    photo, specialist Sean
 O’Brien works at his post
   on the floor of the New                                                                                       Libor, the interest rate at the centre of an inter-    lishing its recommendations for legal changes          necessary for the off-exchange derivatives mar-
    York Stock Exchange.                                                                                         national rate-rigging investigation, must not be       to Libor on Sept. 28.                                  ket to function properly.
Stocks rose after a pair of                                                                                      scrapped hastily and any shift to alternatives            However, the prospect of changes to a                  Replicating Libor across derivatives would be
      encouraging reports                                                                                        should be gradual to avoid market disruption, the      benchmark used as a basis for pricing $350 tril-       a very large and difficult task, he told the ISDA’s
    about the US housing                                                                                         derivatives industry’s leading global body said.       lion of products from home loans to credit cards       annual conference. “Libor must continue to be
 market. Home sales and                                                                                             Reform of the London interbank offered rate         has alarmed the derivatives market, a major            published.” The authorities should encourage
    construction of single-                                                                                      is inevitable after Barclays and Royal Bank of         user of the rate for its complex financial prod-       banks to continue to participate in setting Libor
  family homes in August                                                                                         Scotland (RBS) were hauled before British and          ucts.                                                  in the short and medium term until a longer-
      both occurred at the                                                                                       U.S. regulators. Barclays was fined a record              Stephen O’Connor, chairman of the                   term solution is in place, O’Connor added.
fastest pace in more than                                                                                        $450 million in June for attempted manipulation        International      Swaps    and     Derivatives           Libor is compiled by a panel of banks sub-
           two years. (AP)                                                                                       of the rate and RBS is expected to be the next         Association (ISDA) and managing director of            mitting quotes for the interest rate at which they
                                                                                                                 bank to settle.                                        Morgan Stanley, said on Thursday that Libor            believe they could borrow from one another.
   See Markets Page 46                                                                                              Britain’s Financial Services Authority is pub-      remained hugely relevant economically and is           (RTRS)

                                                                                                 Success attributed to long-term thinking

Family-owned firms outperform global benchmark
LONDON, Sept 20, (RTRS): With all the         story of mom-and-pop shops, local widg-       long-term thinking — doffing a cap more        there is an inherent logic to the idea that    Strategy and Thematic Research at Credit        the battered financials that whacked
booms, busts, policy fixes and financial      et-makers or entrepreneurial startups.        to the German or continental European          they are longer-term in their horizons —       Suisse Private Banking, adding that a lot       global indices over the period. Moreover,
turbulence of recent years, investors            This universe, for example, is probably    style of capitalism that a heavily market-     if only to pass on a healthy business to       of family businesses in Europe in partic-       size does play a part, with more than 40
would have done well to keep it in the        successful more for its inclusion of such     driven British bias, for example.              the next generation — and that they jeal-      ular have more stable long-term bank            percent of the firms surveyed employing
family — or family businesses at least.       corporate behemoths as Volkswagen,               Post mortems of the credit crash all        ously guard hard-won reputations.              financing as opposed to equity financing.       a thousand people or more.
   Even though family ownership to            BMW, Samsung, Wal-Mart, Carrefour             point in some way to the preceding short-         Nearly half the companies surveyed in          One question is whether this is just            A sharp recovery or world markets and
some conjures up thoughts of cronyism,        and L’Oreal.                                  termism and myopia of company owners,          a poll of the family firm universe con-        some old-world bolthole for fearful             the global economy over the coming
internecine feuds and succession prob-           Indeed consultants McKinsey estimate       executives, shareholders and investors —       ducted by Credit Suisse are the more           investors looking for something instinc-        years, as a result, could therefore under-
lems, performance data shows that listed      that a third of all companies in Wall St’s    banks and financial firms most obviously       weather-worn firms who are in at least         tively conservative in testing times.           mine the theme.
companies where families have substan-        S&P 500 index and 40 percent of the 250       — that led to rash decision-making is          their third or fourth generation of the           But the CS index has about 21 percent           “If in the next five years, if there’s a
tial shareholdings outstripped benchmark      largest companies in France and               search of the fastest buck at the expense      same family. And most of these tend to         of emerging market companies and the
                                                                                                                                                                                                                                          big rally in the high-beta stuff — banks,
global indices over the past five years.      Germany are defined as family business-       of longer-term stability.                      stay focussed on what they do best by          parallel survey also gives a more dynam-
   A Credit Suisse index of 225 family-       es — defined as firms where a family             This so-called “quarterly capitalism”,      concentrating on their core business.          ic hue by showing more than 50 percent          mining etc — then that would probably
dominated or influenced companies             owns a significant share and can steer        where horizons were little further than           But, perhaps critically in a credit         planning to expand into new countries.          leave family businesses behind,” said
around the world, for example, has out-       decisions like choice of chairman and         the next three-month earnings report and       crunched world, they are less leveraged           Yet outperformance in such defensive         O’Sullivan at Credit Suisse.
performed the broad MSCI World by             CEO.                                          outsize annual bonus payments were rife,       than many of their corporate peers and         times does point toward at least some              “But because private indebtedness
some eight percent since August 2007             So what’s the secret of outperfor-         is perhaps best illustrated in the collapse    prefer internal financing or one-off strate-   sectoral skew alongside a perhaps count-        remains so high and deleveraging will be
despite nominal losses of about 10 per-       mance? Is it all smoke and mirrors or a       in the average length of US shareholding       gic investments to equity or debt financ-      er-intuitive bias toward corporate size         likely continue to be severe for some
cent.                                         temporal quirk related to the peculiarities   to just seven months in 2007 from 2 years      ing on capital markets.                        that may draw safety bids.                      time, family businesses should continue
   With European small cap stocks down        of the credit shock?                          in 1987.                                          “This really is a distinctive model and        And the family index is indeed heavily       to be interesting as they tend not to be
twice as much as that over the same peri-        The theme that seems to shine through         Yet for all the squeamishness about         one that seems to be working,” said            weighted toward the likes of consumer           overleveraged and have that longer-term
od, this is clearly not just a speculative    all reports on the subject is longevity and   vagaries family ownership and control,         Michael O’Sullivan, Head of Portfolio          staples and luxury goods and is light on        view.”

                    Adoboli pleads not guilty

    UBS risk limit did not
                                                                                            Britain plans to ease rules
    matter: trader’s lawyer
    LONDON, Sept 20, (RTRS): A cul-
    ture existed at UBS where traders felt
    they could ignore risk limits as long
                                              ETFs desk,” wrote fellow trader John
                                              Hughes, who will appear as a witness
                                              later in the trial.
                                                                                            for tech firms share listing
    as they were making money for the
    Swiss bank, the lawyer for accused
                                                 “He would benefit from additional
                                              cynicism,” wrote colleague Makram
                                                                                                                                           London Olympics dents UK retail sector
    “rogue trader” Kweku Adoboli told a       Fares.
    London court on Thursday.                    Greenidge’s own comments, at a             LONDON, Sept 20, (Agencies): Britain plans to make it easi-                                   was looking to create a British version of US President Barack Obama’s JOBS Act,
       Adoboli, 32, was arrested on Sept      time when he was Adoboli’s manag-                                                                                                           which eases regulatory rules for small companies listing on US exchanges.
    15, 2011, and is now on trial accused     er, included that the young trader
                                                                                            er for technology firms to list their shares in London in a bid                                  Britain should learn from rivals like Nasdaq and make listing more flexible and com-
    of fraud and false accounting that        worked too hard.                              to stem the flow of high-growth companies heading across the                                  petitive, he told a room of tech entrepreneurs and investors in London’s East End - an
    cost UBS $2.3 billion. He has plead-         “He needs to achieve a better              Atlantic to raise capital.                                                                    area the government hopes will become a technology centre to rival California’s Silicon
    ed not guilty.                            work/life balance. We would hate to             Europe has seen a slowdown in initial public offerings (IPOs) over the last                 Valley.
       The hearing on Thursday morning        see him burn out,” Greenidge wrote.           two years as euro zone debt worries buffeted stock markets.                                      Willetts said the proposals, developed with the London Stock Exchange and report-
    laid bare the human drama behind the         The friendly relations between the           Some technology firms have ditched attempts to go public in Europe in favour of the         ed by Reuters last week, would allow tech companies to offer less than the 25 percent
    jargon of the trading floor, with         defendant and the witness were in             United States - a more well-established hub for tech flotations.                              of shares needed for a premium listing and ease reporting requirements.
    Adoboli at one point in tears at the      evidence in another exchange on a               British vacuum technology firm Edwards tried to launch on the London stock mar-                Further details will be disclosed in the coming weeks after discussions with investors
    back of the courtroom under the emo-      chat system, which was partly read                                                                                                          and companies, the government said.
    tional impact of the evidence that was    out and partly paraphrased by                 ket last year but abandoned it in favour of a US flotation in May.
    presented to the jury.                    Sherrard.                                       David Willetts, Minister of State for Universities and Science, said the government            But it wants this route to provide a “launch pad” for European mid-sized high growth
       In particular, Adoboli heard his          “We don’t call you Mace for noth-                                                                                                                                                        businesses seeking a full premium listing
    lawyer read out long excerpts from        ing,” Adoboli told Greenidge in the                                                                                                                                                         on London’s main market.
    his performance appraisals, in which      chat, a reference to Mace Windu, a                                                                                                                                                                           Changes
    he was described as an outstanding        character from one of the Star Wars                                                                                                                                                             Any changes will need to coordinated
    and popular member of UBS staff           movies, to which Greenidge respond-                                                                                                                                                         with the UK Listing Authority, part of the
    with a great future ahead of him.         ed that he felt more like the grizzled                                                                                                                                                      Financial Services Authority (FSA) regu-
       He also watched Ronald                 Jedi knight Yoda at the time.                                                                                                                                                               lator, which carried out a consultation
    Greenidge, a former boss with whom           “He was a gamble or two away                                                                                                                                                             into listing rules earlier this year and is
    he had friendly relations, face a bar-    from destroying Switzerland’s largest                                                                                                                                                       due to report back next month.
    rage of tricky questions from his own     bank for his own benefit,” counsel                                                                                                                                                              Marcus Stuttard, head of the LSE’s
    lawyer, Charles Sherrard.                 Sasha Wass told the jury at the end of                                                                                                                                                      AIM market for smaller companies, said
       At one point during the tough          her opening statement, which lasted                                                                                                                                                         there were already suitable firms interest-
    cross-examination,          Greenidge     all day.                                                                                                                                                                                    ed in taking this new route, which would
    became unwell and had to be helped           Losses in the double-digit billions                                                                                                                                                      likely involve companies larger than a
    to a chair by a court usher. The hear-    could have been fatal to UBS at a                                                                                                                                                           typical AIM-listed business.
    ing was adjourned for about half an       time when it was trying to recover                                                                                                                                                              Entrepreneurs       and     early-stage
    hour before Greenidge resumed giv-        from previous colossal losses during                                                                                                                                                        investors at Google Campus, a seven-
    ing evidence.                             the 2008 financial crisis, when the                                                                                                                                                         floor meeting space for tech start-ups,
       His cross-examination was the first    Swiss government had to step in to                                                                                                                                                          developers and investors, welcomed the
    opportunity for Adoboli’s defence         rescue it.                                                                                                                                                                                  announcement as a step in the right direc-
    team to present his view of events.          Wass said Adoboli’s motives were                                                                                                                                                         tion but warned that the lack of institu-
       The thrust of the argument,            to increase his annual bonus, his sta-                                                                                                                                                      tional investor focus on the tech sector in
    expressed through Sherrard’s ques-        tus within the bank, his job prospects                                                                                                                                                      London remained a challenge.
    tions, was that the bank had turned a     and his ego. She said his fraudulent                                                                                                                                                            Meanwhile, London’s Olympics have
    blind eye to traders exceeding risk       deals had wiped 10 percent, or about                                                                                                                                                        had a negative impact on Britain’s retail
    limits in the pursuit of ever greater     $4.5 billion, off the Zurich-based                                                                                                                                                          sector, official data showed on Thursday,
    profits.                                  bank’s share price.                                                                                                                                                                         although the country remained set to exit
       Sherrard read out an electronic           “Like most gamblers, he believed                                                                                                                                                         a deep recession in the third quarter.
    chat that took place between Adoboli      he had the magic touch. Like most                                                                                                                                                               Sales volumes in Britain fell 0.2 per-
    and Greenidge on April 14, 2011, in       gamblers, when he lost, he caused                                                                                                                                                           cent during August compared with July,
    which Adoboli made it clear he was        chaos and disaster to himself and to                                                                                                                                                        the Office for National Statistics (ONS)
    finishing the trading day with a risk     all of those around him,” Wass told                                                                                                                                                         said in a statement, as online buying suf-
    exposure of $40 million, beyond his       the jury.                                                                                                                                                                                   fered the biggest drop in almost five
    desk’s agreed $25 million overnight          “In effect, Adoboli had ceased to                                                                                                                                                        years.
    limit. Greenidge did not raise any        act as a professional investment                                                                                                                                                                The ONS also revealed that sales in
    questions about that.                     banker and had begun to approach his          In a file picture taken on March 3, 2011 a Sky sign is pictured at the British Sky Broadcasting headquarters in west London.
                                                                                            Britain’s media regulator Ofcom on Sept 20 allowed BSkyB to keep its broadcasting licences, after a probe into allega-                        August grew 2.7 percent compared with
                  Culture                     work as a naked gambler. He had                                                                                                                                                             the same period a year earlier.
                                              become what is sometimes referred                                  tions of hacking by the pay-TV giant which is part-owned by Rupert Murdoch. (AFP)
       “This is, I suggest, the first exam-                                                                                                                                                                                                   However, non-store retail sales —
                                              to as a rogue trader.”
    ple of where the culture and practice
    of the bank you were both working                       Episode                                                        UK regulator criticises James Murdoch                                                                          which is mostly online business but also
                                                                                                                                                                                                                                          includes mail order — tumbled by 6.7
    for was that risk limits didn’t matter       The episode knocked back UBS’s                                                                                                                                                           percent in August. That was the biggest
    as long as you were making money,”
    Sherrard said.
       Greenidge answered: “That’s not
                                              recovery effort. It led to a manage-
                                              ment shake-up, a change of strategy,
                                              a tightening of internal controls and a
                                                                                            BSkyB cleared of hacking scandal links                                                                                                        monthly drop since December 2007.
                                                                                                                                                                                                                                              “Feedback from online retailers sug-
                                                                                                                                                                                                                                          gests that sales were lower as consumers
    true.”                                    reduced 2011 bonus round for some             LONDON, Sept 20, (RTRS): Britain’s                “In our view, James Murdoch’s conduct       illegal payments to public officials.           watched the Olympics instead of shop-
       It was almost immediately after        staff at a firm ranked in the top three       media regulator gave pay-TV firm BSkyB         in relation to events at News Group               The subsequent scrutiny of the compa-        ping online,” the ONS said.
    that exchange that Greenidge asked        dozen banks worldwide.                        a clean bill of health on Thursday, saying     Newspapers repeatedly fell short of the        ny has meant the issue of whether the               The London Games took place for a
    for a pause because he felt unwell.          Wass urged the jurors not to think         there was no evidence it was linked to a       exercise of responsibility to be expected      Murdochs were “fit and proper” to run a         little over two weeks covering mostly the
       Greenidge was dismissed from           of the case in terms of losses suffered       phone hacking scandal which engulfed           of him as CEO and chairman,” it said. “To      British media company had become a              first half of August.
    UBS after Adoboli’s arrest on the         by “anonymous groups of rich peo-             Rupert Murdoch’s News Corp, its largest        date (however), there is no evidence that      recurring theme, after a parliamentary              The Paralympics, which were held also
    grounds that he had failed in his         ple”.                                         shareholder.                                   Sky was directly or indirectly involved in     committee said the scandal had shown            in London, occurred between Aug 29 and
    supervisory role by not detecting            The real losers, she said, were the           However, Ofcom criticised Murdoch’s         any of the wrongdoing either admitted or       Rupert Murdoch was not fit to run a major       Sept 9.
    what Adoboli was doing. He told the       bank’s shareholders and investors             son James for failing to investigate allega-   alleged to have taken place at News of the     international company.                              “The (retail) survey dates for these
    court he felt aggrieved by the            who included people “like you and             tions of criminality at the group’s newspa-    World or The Sun.”                                More than 80 people have now been            August figures included the great majori-
    “unfair” disciplinary process and that    me”, such as employees with hold-             pers properly, describing his failure to                       Prompted                       arrested over allegations of phone hack-        ty of the Olympic Games period (27 July-
    he believed he had been made a            ings in pension and trust funds.              uncover the scale of the problem as “both                                                     ing, illegal payments, computer hacking         12 August) with the Games appearing to
    scapegoat.                                   Wearing a grey suit and a purple           difficult to comprehend and ill-judged”.          Prompted by the admission that News                                                         have had a notable impact on some of the
                                                                                                                                           of the World journalists had hacked into       and attempts to pervert the course of jus-
       Earlier, the reading out of passages   tie, Adoboli sat on a bench alongside            The ruling by Ofcom, which has                                                             tice.                                           numbers,” said Investec bank analyst
    from Adoboli’s 2009 and 2010 per-         his lawyers at the back of the well-          clashed repeatedly with BSkyB in the           the voicemails of celebrities, politicians                                                     Victoria Clarke.
                                                                                                                                           and crime victims, Ofcom had examined             Two of the most high profile to be held
    formance appraisals gave a flavour of     worn courtroom, in a scene that could         past, will lift a cloud that had long hung                                                                                                        “Indeed the sharp ‘non-store’ sales
                                                                                                                                           whether News Corp was an appropriate           are Rebekah Brooks, the former head of          drop looks to be due to the Olympics hav-
    life on the Exchange Traded Funds         hardly have been more different from          over the hugely successful group and will
    (ETFs) desk when Adoboli worked           life on a sleek financial trading desk                                                       owner of BSkyB and whether James               Murdoch’s British newspaper arm, and            ing had a negative impact on online sales
                                                                                            allow it to focus on the challenges of
    there.                                    at a major international bank.                intensifying competition and growing           Murdoch was an appropriate director.           Andy Coulson, a former News of the              in particular.
       Adoboli’s colleagues described            Following British legal tradition          economic pressures on its customers.              The ruling brings to an end one of the      World editor who became the spokesman               “With sports fans glued to their televi-
    him as an excellent ambassador for        the judge and lawyers wore white                 Ofcom concluded BSkyB was “fit and          many outstanding concerns for the              for Cameron’s government until he               sions and laptops to watch events, and
    UBS with a talent for explaining to       wigs and long robes. Telephones,              proper” to hold a broadcasting licence and     Murdoch family.                                resigned.                                       perhaps the Olympic ticketing site too,
    clients the ins and outs of ETFs, a       cameras and recording devices were            avoided making the most serious ruling            The admission of criminality at                “This was, on balance, expected but it       online sales represented their lowest pro-
    form of derivative.                       not allowed, and evidence was gath-           that News Corp should sell down some of        Murdoch’s powerful British newspaper           definitely removes an overhang on the           portion of total sales values since August
       “He could explain ETFs to my Nan       ered in huge piles of old-fashioned,          its near 40 percent holding.                   arm, including the detail that staff had       stock,” Liberum analyst Ian Whittaker           2011,” she added.
    (grandmother) and she’d get it,”          lever-arch files bulging with paper-             But it sharply criticised James             hacked into the voicemails of a murdered       said of Ofcom’s findings. “This wasn’t              Britain is currently mired in recession,
    wrote colleague Rob Pienaar in one        work.                                         Murdoch, a former chief executive and          schoolgirl, sent shockwaves through the        seen as a huge threat to the business but ...   which the coalition Conservative-Liberal
    of the appraisals.                           The court heard that Adoboli was           chairman of BSkyB who was in charge of         political and media establishment last         this was seen as a risk, because Ofcom          Democrat government blames largely on
       Adoboli was portrayed as a friend-     educated at a British private school          News Corp’s British newspaper arm when         year.                                          and Sky don’t have a great relationship.”       the debt crisis in key trading partner the
    ly and enthusiastic trader who would      where he was head boy, an early               the scandal exploded last year at its now         Under pressure for his own close ties to       News Corp said it welcomed the find-         eurozone.
    drop whatever he was doing at a           stamp of talent and leadership skills.        defunct News of the World. He stepped          Murdoch’s media group, Prime Minister          ings but disagreed with the criticism of            The main opposition Labour party
    moment’s notice to help out his col-      He graduated from Nottingham                  down as chairman of BSkyB in April in an       David Cameron ordered a judge-led              James Murdoch, pointing out that he had         claims that Britain’s downturn is mainly a
    leagues.                                  University with a degree in e-com-            attempt to protect the company’s reputa-       inquiry into press standards while some        helped to make the business the most suc-       result of hefty cuts to state spending that
       “He’s certainly the good cop of the    merce and digital business studies.           tion from being damaged, but remains on        journalists at Murdoch’s daily Sun tabloid     cessful pay-TV group in Britain with            have resulted in thousands of job losses
                                                                                            the board.                                     are still being arrested over allegations of   more than 10 million customers.                 across the civil service.

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