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March 9 - 15 2011

News

The Telegraph

μNews

PAGES 2-13

μWorld News PAGES 14-17

μComment PAGES 18-21

μ Letters

PAGE 20

μObituaries PAGES 22-23

μ Features

PAGES 24-26

μCulture

PAGES 27-29

μExpat Life PAGES 30-32

μBusiness

μClassified

μPuzzles

μSport

PAGES 33-37

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NEWS P13

NEWS P12

‘Drugs fraud’ German professor accused of putting millions at risk

Front-line troops face sack 1 in 10 serving British soldiers could lose their jobs as cuts bite

BUSINESS P33

CULTURE P27

Into orbit Anish Kapoor’s tower takes shape on the London Olympic site

Murdoch given green light News Corp allowed to take over BSkyB if it hives off Sky News

LOTTO 02/03

LOTTO 05/03

25 1 27 41 46 49 4 13 23 29 41 43

Bonus Ball 4

Bonus Ball 49

There were no winners of Saturday’s £13.1m jackpot and no winners of Wednesday’s £7.9m prize

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The Telegraph

By Robert Winnett, Deputy Political Editor BRITAIN risks suffering another financial crisis without reform of the country’s banks, the Governor of the Bank of England warned last Saturday.

In an interview with The Telegraph, Mervyn King said that “imbalances” in the banking system remained and were “beginning to grow again”.

Mr King urged high-street banks to take a better, longerterm view towards their customers and to stop focusing on the need to “simply maximise profits next week”.

He accused them of routinely exploiting their millions of customers. “If it’s possible [for financial services firms] to make money out of gullible or unsuspecting customers, particularly institutional customers, [they think] that is perfectly acceptable,” he said.

The Governor criticised the “weight put on the importance and value of takeovers” and raised concerns that companies with good reputations had been “destroyed” in the search for short-term profits.

Mr King expressed regret for not sounding a louder warning over his concerns before the last banking crisis.

The Governor’s remarks were a warning to George Osborne, the Chancellor, as a government commission considers whether to force high-street banks to sell off their investment banking arms.

Mr Osborne is thought to be against such a plan, but Mr King is due to ultimately become responsible for banking regulation and his views are, therefore, critical.

The Bank Governor said: “We allowed a [banking] system to build up which contained the seeds of its own destruction.

“We’ve not yet solved the ‘too big to fail’ or, as I prefer to call it, the ‘too important to fail’ problem. The concept of being too important to fail should have no place in a market economy.”

When asked whether there could be a repeat of the financial crisis, Mr King said: “Yes. The problem is still there. The search for yield goes on. Imbalances are beginning to grow again.”

Mr King, who rarely gives interviews, suggested that the culture of short-term profits and bonuses within the banks may ultimately be responsible for the problems.

He said that traditional

Warning: Mervyn King was scathing about banks’ attitudes to customers and wants urgent reform manufacturing industries had a more “moral” way of operating.

“They care deeply about their workforce, about their customers and, above all, are proud of their products,” he said. “[With the banks] there isn’t that sense of longer-term relationships.

“There’s a different attitude towards customers. Small and medium firms really notice this: they miss the people they know.”

The Governor added that good businesses “keep a clear vision of who their customers are, and are run by people who don’t think they should simply maximise profits next week.” He said that the payment of bonuses was part of this cultural problem. “Why do banks in general want to pay bonuses?” Mr King asked. “It’s because they live in a ‘too big to fail’ world in which the state will bail them out on the downside.”

Over the past 30 years, he said, “we changed Britain away from a sclerotic economy with inefficiencies and problems in labour relations. Everyone got to the point where we no longer expected government to bail us out.”

He said this changed with the banking crisis. “But, surprise, surprise, the institutions bailed out were those at the heart of the crisis. Hedge funds were allowed to fail, 3,000 of them have gone, but banks weren’t,” he said.

The comments will embarrass the Chancellor, who recently concluded a deal with the banks under which they would be able to resume the payment of bonuses in return for boosting lending.

Mr King did not back down from recent comments that appeared to back the Government’s strategy for reducing the deficit. Ed Balls, the shadow chancellor, recently accused the Governor of becoming too political.

Mr King said: “It is inconceivable that the Governor has no view on the size of the deficit and the need to reduce it. It would be a dereliction of duty for me not to warn. You need a credible plan to reduce it, over the lifetime of a Parliament. But it is for ministers, not for me, to say how this should be done.”

Continued from page 1

backed the Duke, while John Hayes, his departmental colleague, said it was “not appropriate” for him to comment.

The Foreign Office ministers Jeremy Browne and Lord Howell of Guildford also replied “no comment” when asked if the Duke had their support. William Hague, the Foreign Secretary, said the Duke still had his confidence, saying that he had done “a lot of good” for the country in his roving trade role. But sources later said that Mr Hague had not been properly briefed on the situation when he spoke.

Last Saturday the extent of the concern felt by Buckingham Palace became clear when an aide mistakenly sent an internal palace email to The Telegraph which read: “Will UKTI stand behind him? We need some government backing here.”

David Cameron faced calls in Parliament last week to relieve the Duke of his role as trade ambassador following questions about his “close” friendship with Saif Gaddafi, the son of the Libyan leader, and with Tarek Kaituni, a convicted Libyan arms dealer.

But it is the Duke’s links to Epstein, who is alleged to have abused up to 40 young girls, that now pose the greatest threat to his position.

The Duke, who has counted Epstein as a friend for 16 years,

was a guest of Epstein at his Florida mansion and was pictured with his arm around a 17-year-old “masseuse” who later claimed to have been one of Epstein’s victims.

Last month a photograph was published of the Duke strolling through Central Park in New York in conversation with Epstein, during a private visit that he has since described as a “mistake”.

The photograph was taken

The Duke of York, pictured at Royal Ascot in June, has counted Jeffrey Epstein as a friend for 16 years in December, and it is now alleged that the Duke took the opportunity to discuss his exwife’s £5million debts with Epstein.

A source close to the negotiations with the Duchess’s creditors has told The Telegraph that the Duke was “sorting the offer” of financial help from Epstein at the time, a claim that has not been denied by Buckingham Palace. On Sunday, the Duchess’s spokesman admitted that Epstein had paid £15,000 to Johnny O’Sullivan, her former personal assistant, as part of the £78,000 she owed him in wages and expenses. The spokesman described the payment as an “independent arrangement” between the two men and said the Duchess intended to repay the money.

Asked if the money had been paid as a result of the Duke’s meeting with Epstein in December, the Duchess’s spokesman said: “I don’t know.”

It has also been disclosed that Gordon Brown resisted demands to sack the Duke from his role as trade ambassador during his time as prime minister.

Chris Bryant, the former Foreign Office minister who was responsible for Kazakhstan, where the Duke has forged friendships with controversial businessmen, urged Mr Brown to force out the Duke. Mr Bryant said: “I tried to raise my concerns with No10 but a Labour administration tackling the Royals would have led to charges of republicanism. Perhaps it might be easier for the Coalition to take a stand.”

The FBI is said to be considering reopening its case against Epstein, who was jailed after admitting soliciting an under age girl for prostitution in 2008.

Sources in America said investigators could seek to interview the Duke, who is reported to have been given daily massages paid for by Epstein.

Continued from page 1

the mayor said: “London’s dominance as the global capital of finance cannot be taken for granted. We need to provide a consistently competitive environment to attract and maintain the best.

“We urge HSBC, however, to recognise that London has enormous long-term advantages that others cannot match.”

Some of HSBC’s biggest investors are thought to be ready to support moves by the bank to switch its global headquarters to Hong Kong after they were briefed about regulatory uncertainties tied to remaining in London.

The domicile question has been a central issue in discussions with the bank following annual results showing the sharp increase in costs resulting from increased taxes in Britain and France. One source said: “The headquarters question has come up repeatedly.”

A Treasury spokesman said: “While we are determined that the UK remains a world-leading financial centre, banks must pay their fair share of deficit reduction, which is why the Government has introduced a permanent bank levy raising £2.5 billion a year.”

A triennial review of the bank’s domicile gets under way shortly. telegraph.co.uk/expat

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March 9 - 15 2011

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News

By Adrian Blomfield in Ras Lanuf and Richard Spencer in Tripoli LIAM FOX, the Defence Secretary, has warned that Libya could split in two as Colonel Muammar Gaddafi unleashed the full fury of his arsenal, sending warplanes and ground troops to attack rebel-held positions.

“We could see the Gaddafi forces centred upon Tripoli,” Dr Fox said. “We could see a de facto partition of the country.” As he spoke, Libya was veering towards open civil war.

Government troops attacked three rebel-held towns: Zawiya 30 miles to the west of Tripoli, Misurata 120 miles to the east, and the oil port of Ras Lanuf, taken by the opposition last Saturday.

To the west of Ras Lanuf, the Libyan leader aimed to repel a gathering rebel advance on Sirt, his birthplace.

Bombed from the skies and confronted by artillery fire and katyusha rockets, the rebels’ disorderly ranks cracked and broke as fighters fled back to the town in disarray, abandoning vehicles, weapons and even wounded comrades.

The government was meanwhile launching an equally ferocious propaganda offensive, claiming to have recaptured large parts of the east including Misurata, Ras Lanuf, Ajdabiya and Tobruk,

Zawiya

Mediteranean Sea

Tripoli

Misurata

Benghazi

Rebel stronghold e

Sirte

Gaddafi strongholds

Ras Lanuf

Bin Jawad

L I B Y A

Areas where opposition forces are in control

0 200

miles

The child of a soldier holds his gun in the air in Green Square, Tripoli, where thousands of Gaddafi supporters celebrated what officials said was victory over the rebels and to have “driven out alQaeda”.

None of the claims appeared to be true, but neither did it appear that Ras Lanuf was fully in rebel hands. From the tops of buildings, loyalist sympathisers took up sniper positions and bursts of automatic gunfire echoed through the town.

The rebels’ lack of discipline counted heavily against them. Defying orders to consolidate, hundreds had poured out along the coast to the village of Bin Jawwad, 15 miles west, last Saturday.

But loyalist forces ambushed the outnumbered rebels as dawn broke. “I felt like I had no weapon,” said Jamal el-Goradi, a Libyan who worked in a doughnut shop in Denver, Colorado, until he flew home to join the uprising. “I didn’t even shoot one bullet, I just felt bullets coming at me, bombs coming at me. They had no mercy, they just wanted to kill us all.”

The air force then began the most sustained bombardment yet. Sukhoi and MiG fighters dropped bombs and fired missiles, while helicopter gunships strafed rebel positions. The rebels’ hold appeared to be disintegrating.

Libya’s third city, Misurata, came under heavy tank fire but a rebel spokesman

BENCURTIS/AP

insisted it remained in their hands.

In Tripoli, government officials seemed confused by the speed of events. Shooting had broken out in the capital shortly before 6am on Sunday, which witnesses described as sounding like fighting. Officials insisted it had come from citizens “celebrating the government’s victory”.

They later retracted most of their claims, but by then proGaddafi crowds were pouring through the streets. “We have beaten the enemy,” said a man in Green Square, where about 2,000 had gathered. “Our land is free.”

More reports: Page 15

By James Kirkup, Nick Meo in Benghazi and Caroline Gammell AN SAS mission to Libya has resulted in humiliation after the troops were first captured by rebels, then a diplomat’s plea for their release was broadcast on state television.

The mission was errorstrewn from the beginning, when a helicopter carrying the team of seven SAS soldiers and an MI6 officer landed near Benghazi without notifying the rebel commanders – causing the insurgents to think that they were under attack.

The team aggravated the situation by claiming to be unarmed – which only made their predicament worse when their weapons were discovered. The group were handcuffed and taken to a military base as British officials frantically tried to secure their release.

A senior British diplomat was then unwittingly broadcast on state television pleading for them to be set free. The conversation, purportedly between Richard Northern, the British ambassador to Libya, and a rebel official was intercepted on Sunday.

In it, Mr Northern said there had been a “misunderstanding” as the

British contingent was only trying to contact rebel forces and assess the humanitarian situation. MPs said the intercepted calls could boost Col Gaddafi’s position by allowing him to suggest that the opposition groups are in league with Western governments. William Hague, the Foreign Secretary, was expected to make a statement to the House of Commons.

Hafiz Ghoga, a spokesman for the rebels’ national council, said: “The reason they were arrested was that they came into the country unofficially and without any arrangement with the Libyan authorities. Libya is an independent nation, we have our borders [and] we should expect them to be respected by everybody.”

The intelligence officer and escort left Libya aboard HMS Cumberland. The failed mission and subsequent negotiations are a disastrous start for any co-operation between Britain and the rebel troops.

On Sunday, Mr Hague confirmed in a statement that a “small diplomatic team” had been in Benghazi and “experienced difficulties”. Britain would send more such teams in future, he said.

Boris Johnson, page 21

The Telegraph

A POLICE investigation into phone hacking at the News of the World has been extended to The Sunday Times, the former deputy prime minister Lord Prescott claimed in the Lords last week.

The Labour peer, who has been told by police he was a potential victim, was responding to a statement by Jeremy Hunt, the Culture Secretary, on plans by Rupert Murdoch to take over BSkyB.

Lord Prescott asked: “Is the minister aware that the investigation into the Murdoch press on phone hacking has been extended now to The Sunday Times?

“So the argument that it was simply one paper and one ‘rogue reporter’ is no longer true. It’s a number of papers owned by the Murdoch press and a number of their employees who have been involved in withholding evidence and illegal practices.’’

Lord Prescott went on: “Are you happy to extend that television service, a major part of it, to the Murdoch press? And could you possibly consider extending the consultation period until the criminal inquiries have been completed?’’

He added: “This statement, to my mind, frankly, is largely about the price of shares in BSkyB, the ownership, and little to do with the democracy of our society.’’

Baroness Rawlings, a government media spokesman, replied: “It is a very serious point that you raise regarding the hacking but I’m not able to address this at this moment in this debate.’’ Reacting to Lord Prescott’s claims, Richard Caseby, managing editor of The Sunday Times, said: “It’s absolute nonsense.”

Last week the High Court ruled that Glenn Mulcaire, the private detective at the centre of the affair, must identify 17 celebrities on a “target list” whose voicemails are thought to have been intercepted.

Mulcaire, jailed for intercepting voicemails from the Royal household in 2007, had claimed that handing over the list would breach his right to avoid incriminating himself. Up to 3,000 names and contact details were found in his notes.

Clive Goodman, the News of the World’s former royal editor, was also jailed.

The paper has already settled civil claims running into millions of pounds after being sued by hacking victims including Max Clifford, the publicist, and Gordon Taylor, the chief executive of the Professional Footballers’ Association.

Among others to have said they believe their phones were hacked are Gordon Brown, the former prime minister.

Ian Edmondson, the News of the World’s assistant editor, was sacked in January after emails were found that allegedly showed he was aware of the hacking.

Andy Coulson resigned from his job as Downing Street’s head of communications after questions about his role as the newspaper’s former editor, but has denied any knowledge of hacking.

Jeremy Warner, page 34

By Emma Barnett PEOPLE outside Britain will soon be able to access BBC TV content for less than UK licence fee payers via a new global iPlayer app. Mark Thompson, the director general of the BBC, has revealed that the international version of the BBC’s popular iPlayer service, will cost less than $10 (£6.13) a month, which works out at around £73 a year, compared to the annual licence fee which currently stands at £145.50.

The BBC has not made clear exactly what content will be available internationally via the iPlayer app, but the catch-up service is expected to allow people abroad access to full seasons of BBC programmes, both past and present.

A spokesman for the BBC said the content on the global iPlayer would be very different from what British viewers receive through the licence fee.”