British 'mini-Madoff' living in fear

Alleged rogue trader Terry Freeman's house has been vandalized

Yesterday Bernard Madoff arrived in a bullet proof vest as he arrived at a New York court accused of running a massive Ponzi scheme which lost investors billions of dollars. He is yet to be sentenced and remains in custody until June.

Madoff’s arrival in a bullet proof vest indicates the building anger towards rogue traders who have lost investors’ money. Although not on the same scale as Madoff, a British trader is also said to be in fear for his own safety following his arrest in February [BBC].

Arrest

Terry Freeman, 60, was arrested by City of London police who would only say that their Economic Crime Department had begun an investigation into GFX Capital Markets Ltd., a licensed, but separate, affiliate firm of the Swiss-based GFX Capital.

The Swiss firm grants clients like Freeman limited power of attorney, enabling them to act as effective “money managers” and solicit their own clients to trade on the GFX platform. Investors in Freeman business gave him the power to place trades, disburse money and pay fees in their name, though “critical account functions”, such as cash withdrawals, were supposed to remain with the investors.

GFX’s trading platform is run by Saxo bank, a Danish bank specialising in providing currency speculation services for retail clients across Europe. According to a Saxo bank spokesman, GFX Capital were an “institutional partner”. Saxo and GFX clients may prove to be big losers in the affair and Saxo’s lawyers are said to be looking into the case as a matter of urgency.

Speculation over disappearance

The tangled nature of Freeman’s affairs may take some time for authorities to unravel. However, the alleged fraud is already estimated to be in excess of £40 Million. Dubbed a ‘mini-Madoff’, Terry Freeman disappeared from his home on the outskirts of London. Speculation grew on internet forums as to where the trader had gone. Some suggested he may have fled to an apartment in Cyprus, said to be owned by Freeman.
The property is described as a “luxury resort apartment” close to the beach and town centre. The property which has a large living area, a balcony with sea views and access to a communal pool area, is a 5 minute walk to Paphos beaches and World Heritage Sites according to the property rental website Owners Direct. The website has been removed since Freeman‘s arrest.

Anger amongst investors

Since it was revealed Freeman had changed his name and continued trading despite being a disqualified director, anger has grown amongst those who have lost thousands in his so-called Ponzi scheme.

In mid-February, a week after his arrest, the Financial Times said Freeman had changed his name from Terry Sparks and that he had been authorised to act as a director by the Financial Services Authority more than two years ago. This in spite of being barred from taking such a role in companies until 2012.

The revelation has gathered investors together with many now seeking compensation from the FSA [Times]. The multimillion-pound compensation claim is the latest in a series of problems facing the regulatory body. In recent months they have been accused of being negligent in its monitoring of Northern Rock, the financial institution which ran into trouble last year.

“Living in fear”

Terry Freeman has not personally updated his blog since late January. However updates are still being posted.

Meanwhile Terry Freeman continues to protest his innocence. In a letter to his clients Freeman talks about how he has been continually libelled and slandered. “My right to a fair trial is constantly being compromised,” Freeman says. He also talks about how he has been living in fear. “My life and those of my family have been threatened continually, to the extent that I am effectively being forced to live a hand to mouth existence, under constant and real threat, unable to return to our home address,” Terry Freeman says. He also insists that he has not absconded and will defend himself vigorously in court. “I have not ‘disappeared’ and I am not living in a villa in the Cayman Islands,” Freeman tells his investors. “The reported ‘losses’ are obscenely exaggerated...and I expect to contest any allegations and charges and to be completely vindicated.”

The trader has much to fear. The anger amongst his clients has already spilled over with his house being vandalised. Obscene graffiti has been daubed on the property and white paint has been splashed on his windows. Police have said they are concerned but have yet to increase security around the former trader [Times / Daily Telegrapg]. It is not yet clear when any action by investors will start against the FSA, nor if any charges will be made against Freeman himself. It may be months before the true facts are exposed.

Anger rises as unemployment soars

Flashback to the 1980s when unemployment was around 3 million

Anger and resentment in Britain is growing as the recession deepens. While there is of course concern amongst the unemployed as to how they are going to pay their bills or find another job, there is increasing anger directed towards the government and more recently top bankers. The rhetoric coming daily from the politicians is not solving the economic problems that Britain faces. And many see government actions as only helping the banks and financial institutions instead of the ever increasing numbers of unemployed and others struggling to pay their bills and mortgages.

Banks have been a particular target as many seem to be failing in their responsibility of passing on interest rate cuts to customers. In addition, most of the financial institutions have become unwilling to lend despite the government bail-outs amounting to billions of pounds. In the last week there has been an explosion of criticism mounted against the main high street banks. From individuals to high profile celebrity chefs, there have been complaints that the banks are just plain refusing to increase overdrafts or make loans available. Antony Worrall Thompson a well known celebrity chef said he had been forced to close four of his restaurants after Lloyds bank deemed him a credit risk. He said he was furious that the bank had refused to extend his overdraft by the £200,000 needed to keep the business afloat. The closures have added a further 60 people to the unemployment lines.

This week the Labour government released new figures showing unemployment had reached a 12 year high of more than 1.97 million [BBC]. The figure does not take into account those who have lost their jobs since the end of December and excludes many jobless who are unable to apply for benefits. The Office for National Statistics has reported that nearly 3,000 people are being made redundant every day and much of the UK press have drawn parallels to the 1980’s Conservative party election campaign when a famous poster showed a long queue of unemployed under the banner ‘Labour isn’t Working’.

While the long list of unemployed queue for their benefits and search for new jobs, it is the bankers who are being blamed. Despite the economic crisis gripping the country, many top bankers are still being paid massive bonuses. Even those bailed out by the government have continued with the controversial policy. The grilling by MPs this week has only tarnished their image further and led to lurid headlines in the British press. Branded ‘Scumbag Millionaires’ by one tabloid newspaper, four top bankers apologised for misjudging the economic crisis. Lord Stevenson, former Chairman of Halifax Bank of Scotland [HBOS], Andy Hornby, former Chief Executive of HBOS, Sir Fred Goodwin, former Chief Executive of the Royal Bank of Scotland [RBS], and Sir Tom McKillop, former Chairman of RBS, were subject to a four hour interrogation by a selection of cross party MPs.

Sir Fred Goodwin had once received a salary of £1.29 M and a bonus in excess of £2.8 M. The bank he was once in charge of has been bailed out to the tune of £20 billion by the British government. Andy Hornby had received a salary of £1.93 million and a bonus of nearly half a million pounds. His bank, HBOS has so far received £17 billion from the government. Hornby said the bonus culture had been “proven to be wrong in the last twenty four months”. But the apologies and statement will mean little to those struggling to pay their mortgages, worrying about debt, unemployment or worse. On the street members of the public said the bankers were only “motivated by self interest”, with many expressing disgust at the huge salaries and bonuses paid out to bosses while ordinary customers were dealt increasing bank charges and interest rates.

During the four hour debate it emerged that Paul Moore, a former employee at HBOS, had warned the bank and the Treasury Select Committee of problems ahead. In a memo to the TSC he said there was “... a total failure of all key aspects of governance. In my view and from my personal experience at HBOS, all the other specific failures stem from this one primary cause” and adds that “...I was obliged to raise numerous issues of actual or potential breach of Financial Services Authority regulations and had to challenge unacceptable practices...”

However, Lord Stevenson dismissed Moore’s interpretation of the risks. Paul Moore meanwhile has alleged he was ousted from his job at HBOS and replaced by Sir James Crosby who himself has since been appointed as a key advisor by the government to help sort out the mortgage and banking crisis. Moore was critical of his replacement saying Crosby “had never carried out a role as a risk manager of any type before”.

The accusations by Paul Moore has resulted in calls for a new investigation by the Conservative party. “What we need to know is whether the allegations now made at the time he was running HBOS are true or not, and I think the government need to find out if those allegations are true, then we can decide as country whether it’s right that Sir James Crosby is involved in the regulation of the banks going forward” the Shadow Chancellor, George Osborne, said.

But before Prime Minister Gordon Brown could raise any allegations with Sir James Crosby, the millionaire banker quit his position as vice-chairman of the FSA. Yesterday he was holed up at his million pound mansion in Harrogate in northern England as journalists and photographers waited outside [BBC].

On television and radio chat shows the anger coming from the public is still only simmering. But on picket lines and protests outside oil refineries in recent days the anger was definitely boiling over. The fight for jobs may becoming dirtier in the coming months as foreign workers take up UK jobs. New statistics show that the number of non-UK born workers increased by 214,000 in the year up to December while the number of British workers fell by 278,000 over the same period. It is a growing situation that has prompted calls to cut back the number of non-EU work permits being issued. Last year a record 151,000 work permits were handed out to foreigners. The statistics will only fuel the anger in a difficult job market. With opportunities at home drying up some may be looking abroad to beat the credit crunch. The Jobcentre Plus website is advertising almost 200,000 posts in Europe, far less than the number offered in the UK. However many offer very low wages and are no real solution to the millions of job seekers. But there are some opportunities even further a field, if one doesn’t mind the cold [Bloomberg]. The British Antarctic Survey is advertising several posts on its website paying upwards of £23,000 per year [antarctica.ac.uk].

2008 leaves little to rejoice about

Oil prices, China, the US election & a global recession dominated 2008

2008 has been an eventful year but perhaps it is the cataclysmic events that have left the most lasting of memories. January saw the price of oil pass the $100 per barrel mark. The month also saw a stand off between Iranian forces and US warships over territorial water disputes. The year also started with Israeli incursions into Gaza leaving nearly 50 Palestinians dead. Financial markets were also rocked after rogue trader Jerome Kerviel lost more than €4.9 billion for the French bank Societe Generale in what at the time was described as a “large scale internal fraud” by President Sarkozy.

China saw the beginning of what was a turbulent year after thousands became stranded in the worst snow storms the country had seen for years. The clear up continued well into February and left dozens dead. The US also experienced rare February storms which left around 60 dead. The New York Philharmonic Orchestra played a rare concert in North Korea to soften the diplomatic tension between the two countries. But tensions continued in many other countries. Violent clashes occurred in Serbia and Kosovo after the latter declared its independence and bombings continued to wreak havoc in Iraq and Pakistan.

In March Dmitry Medvedev won the Russian election but was widely seen as Putin’s puppet. Attempts at developing a peace process in the Middle East once again fell on stony ground and incursions and terrorist attacks continued. China returned to the headlines after riots in Tibet left up to 100 dead and the fallout became a PR disaster for the country after protests followed the Olympic torch around the globe during April. There were further troubles after a train crash in Shandong province left 70 dead.

May became a cause for celebration for many Londoners after Boris Johnson won the Mayoral election. But it was the natural disaster in Myanmar which dominated headlines after a cyclone left thousands dead and without help as the country’s dictatorship refused foreign aid. China was the next victim after a massive earthquake struck Sichuan province. Around 80,000 died in the earthquake and a quarter of a million were injured, but China was far more accepting of foreign help, though it was less appreciative of the criticism of its building regulations after it emerged many schools appeared to have been badly built. May also saw oil rise beyond $135 per barrel leaving many motorists around the world with increased running costs.

June brought further rises in the price of fuel and tanker strikes in Britain which nearly saw the pumps run dry. Zimbabwe was once again in the news after Robert Mugabe stole another election. But in the US election Hillary Clinton finally conceded defeat in her bid as Democratic candidate and endorsed Barack Obama. China once again suffered the wrath of nature’s power after floods left millions homeless and more than a hundred dead.

July saw violence return to Israel after a man used a tractor to unleash an attack on civilians. Four were killed and nearly 40 were injured before the man was shot dead by police. Bomb attacks in Afghanistan and Pakistan left more than 60 dead. July also saw the first signs of the impending recession after Fannie Mae and Freddie Mac ran into trouble and stock markets around the world began to fluctuate wildly. But it was the Olympics which hit the headlines as August arrived. However, despite the show of the century, the media could not help but criticise the poor air quality, the arrests of foreign journalists and highlight terrorist attacks that struck in parts of the country.

As the US election campaign got into full swing the financial crisis began to bite hard and one institution after another began to fold. China was also suffering from its own crisis after it was revealed that milk had been contaminated with the industrial chemical melamine leaving thousands sick and at least four babies dead. But it was the financial downturn that gripped most people’s attention well into October. Almost everyday there was further bad news as one company after another announced it was running into financial difficulty.

November brought with it a moment of history after Barack Obama became the first black American President. But the celebrations were short lived as the reality of the deepening financial crisis set in. There was further tragedy after Pakistani terrorists killed dozens on the streets of Mumbai in India. A three day siege ensued and around 156 were killed. India was left reeling from the attacks and there were calls from many to retaliate against Pakistan. THere was no retaliation, though tensions remain high between the two nuclear powers.

December saw Greece gripped by riots after police shot a young teenager dead. Zimbabwe, already suffering from financial collapse, was now becoming the victim of a cholera pandemic which Mugabe blamed on the West. But the West was more concerned with its own demise as one company after another shut its doors. For many retailers it was far from a very merry Christmas as many were forced to slash prices in order to drum up trade. And in the Middle East, the birthplace of Christ, it ended much as it had begun with Israeli bombardments on Gaza and with tanks preparing to roll into the Palestinian territory.

Bush bails out US car giants

With Christmas round the corner the American car industry has been given an early gift in the form of a massive $17.4 billion bail out. President Bush announced the loan on Friday, less than three weeks before he hands his office to President elect Barack Obama.

The reasoning behind the President’s decision was that allowing the US car industry to fail would not be "a responsible course of action". He said that not helping out the industry would leave Obama with added problems. There are conditions though. The firms must show they’ve spent wisely and not paid out in executive perks including the much publicised private jets. But sceptics suggest the problems in the automotive trade cannot be solved quickly. Speaking to
Channel Four News, Dr Daniel Griswold of the Cato institute said that other Foreign car manufacturers were not suffering the same problems and that Bush’s claims suggesting that the US car industry failure would be “too much to bear” were highly exaggerated [BBC].

It is not just US car manufacturers that are running into financial difficulties. As consumers tighten their belt car sales the world over are falling. Britain has seen massive drops in car sales with Jaguar Land Rover being of particular concern. The car firm, which employs about 15,000 in the UK, said last month that it faces "unprecedented trading conditions" as global sales for the whole of the car industry have fallen sharply since the summer. But there is unlikely to be the same help seen in the US. Business Secretary, Lord Mandelson told the BBC, "We are analysing very carefully what is going on in the [car] sector, and we will make good judgments in good time if it is appropriate for the government to take any action or if it is possible for us to do so". But he added there was not “an open chequebook” available.

The financial crisis has taken it toll in many sectors. Besides banking institutions, the retail market has been particularly hard hit. Today MFI, which filed for administration in November, finally closed its stores leaving 1,400 people out of work [BBC]. Woolworths is gradually winding up its business will all store due to shut by early January. Nearly 30,000 will find themselves unemployed when the 99 year old store finally closes its doors, a particularly sad legacy for a business that has survived the Great Depression and several economic downturns. It appears no business is immune from this current recession