NEWS,17.07.2012

Olympic security group in tatters, admits CEO

 

The chief executive of G4S admitted that his management of the London Olympics staffing scandal had embarrassed the British government and left the world's biggest security group's reputation in tatters as he fought to save his job on Tuesday.G4S has been at the centre of a political firestorm that has wiped $US1.1 billion ($NZ1.37 billion) off its market value since it announced that it could not provide the promised 10,400 security guards only two weeks before the Games.Shares in the group closed down 5.7% after Chief Executive Nick Buckles appeared before a parliamentary committee, struggling to answer several questions and saying he wished he had never taken on the Olympics contract.At one point, when asked whether his staff would be able to speak fluent English, he responded that he did not know what fluent English was.After being assured that he was speaking English himself, Buckles went on to say that the group still expected to take its 57 million pound ($NZ111.7 million) management fee from the Games.G4S has said that it could lose up to 50 million pounds on the Olympics security contract, worth 284 million pounds.The embarrassing staffing admission has ignited a wider row over the British government's decision to outsource key work to the private sector and left ministers from the Prime Minister down trying to explain how the failure was allowed to develop."Many would take the view that the reputation of the company is in tatters," Buckles was told by one member of the Home Affairs Select Committee after being summoned at short notice to explain the debacle."I think, at the moment, I would have to agree with you," Buckles said, looking uncomfortable and sitting ramrod straight before lawmakers in the ornate wood-panelled room."We have had a fantastic track record of service delivery over many years in many countries, but clearly this is not a good position to be in," he added.The debacle has overshadowed the build-up to the Games only 10 days before the world's biggest sporting event begins, reviving memories of previous embarrassments for the company, such as a string of prisoner escapes and riots.Last year the group left inmates locked up for almost 24 hours at a British jail after losing the keys to cells. In another incident, guards tagged a man's false leg, allowing him to remove it and break a court-imposed curfew."Certainly my view, and the view of the board, is I'm the best person at the moment to take this through," Buckles insisted.To fill the gap left by G4S, the government has called up an additional 3500 soldiers, many of whom had just returned from lengthy deployments in Afghanistan.On Monday it emerged that, as well as extra troops, police officers were being deployed earlier than planned to cover for some G4S staff who had failed to show up for work.The row is a blow for Buckles, who worked his way up through G4S over 27 years with a no-nonsense management style.” Clearly we regret signing the contract, but now we have to get on and deliver it," he said after being asked to answer questions more directly.Only 11 days ago, the managing director of G4S Global Events, Ian Horseman Sewell, told Reuters that the company was so confident about the Olympics that it believed it could stage another similar-sized event at the same time if needed - a line that was repeated numerous times at the committee hearing.In a blow to the group's future earnings, Buckles indicated that the group would now not bid for work at either the soccer World Cup or the next Olympic Games, both to be held in Brazil, a key emerging market for G4S.Buckles said that the company would seek to compensate the police and consider a bonus for police and troops, prompting the chairman of the committee to ask if he was making up plans on the spot. A further 500 troops are on standby in case needed, Buckles said.Espirito Santo analyst David Brockton believes that G4S will come out relatively unscathed in the longer term, though Buckles could pay the price for the company's failures."If G4S can deliver the minimum 7000 (venue guards) that they expect to deliver, then today is the eye of the storm and the vitriol will subside over time and (we) will perhaps see the departure of Nick Buckles after the Olympics."The company's second largest shareholder Invesco, however, said that it thought the market had overreacted and told that Buckles should not be forced to stand down for failures made by local staff.

HSBC linked to Mexican drug trafficking

 

HSBC Holdings Plc told a US Senate panel today that it has dealt head-on with allegations of pervasive money-laundering through bank accounts, saying it has overhauled how it polices transactions, exited lucrative businesses and shaken up executive leadership.HSBC offered up the changes after the Senate's Permanent Subcommittee on Investigations released a report accusing the British bank of a "pervasively polluted" culture, underscoring money-laundering problems have been flagged by regulators for nearly a decade.The report said the bank routinely acted as a financier to clients routing funds from the world's most dangerous corners, including Mexico, Iran and Syria.During a hearing on the Senate report, David Bagley, a top compliance executive at HSBC since 2002, said he would step down.The resignation was part of HSBC's effort to apologize and show that it has cleaned up its act, even as the bank faces fresh questions about whether it has really fixed major flaws in catching and stopping money laundering.A  investigation has found persistent lapses in the bank's anti-money laundering compliance since 2010.Senator Carl Levin, who chairs the Senate's Permanent Subcommittee on Investigations, kicked off the hearing by detailing how HSBC's lapses have systematically allowed suspicious actors to access the US banking system."Accountability for past conduct is essential. That's what's been missing here," Levin said, adding that the bank's charter could be at risk if it did not do better.The bank is still facing a Justice Department investigation could soon yield a fine that dwarfs the record $619 million that Dutch bank ING agreed in June to pay to settle similar accusations.Bagley told the hearing that while reforms had been made at HSBC, it was time for him to go."I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance," he said.Bagley also told the Senate panel that the bank would close thousands of Cayman Islands accounts as part of its renewed compliance efforts."That's good news," Levin said.The Senate report said HSBC had little oversight of client accounts housed in a shell operation in the Cayman Islands, well known for offering secret accounts and a limited tax regime. By 2008, the Cayman accounts held $2.1 billion.Bagley was on a panel with other high-level HSBC executives, but the harshest spotlight is expected later when Stuart Levey, who joined the bank in January as chief legal officer, is due to testify.He had been the Treasury Department's top official on terrorism finance from 2004 to 2011 - during which time he was involved in cracking down on HSBC for Iran-related transgressions.In prepared testimony released at the start of the hearing, Levey placed much of the blame on HSBC's rapid expansion, which left in place a decentralized management structure that did not implement consistent standards across the bank and viewed compliance only as an advisory job.Levey said the bank has reorganized its businesses to make the firm better connected to manage risk.The changes Bagley and Levey talked about are coming at a great cost to the bank, as spending on anti-money laundering systems and staff have increased substantially.HSBC Bank USA CEO Irene Dorner, in prepared remarks, said the bank now has 892 full-time anti-money laundering compliance professionals.HSBC shares closed 1.7% lower in London trade. Analysts warned that the bank faced huge financial penalties -- but perhaps worse, was now in the crosshairs of politicians."(The) most important consequence is that the bank is now under the microscope ... at a very bad time where banks are used as scapegoats by politicians globally," analysts at Italian bank Mediobanca said in a research note, adding that they expect HSBC to face a $1 billion fine as well.In a statement to British regulators today, the bank began its mea culpa."We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect," it said.The Senate report detailed how between 2007 and 2008, HSBC's Mexican operations moved $7 billion into the bank's US operations.Both Mexican and US authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds, the report said.It also examined banking HSBC did in Saudi Arabia with Al Rajhi Bank, which the report said has links to financing terrorism.HSBC will have company in the Senate's harsh spotlight - the report was also highly critical of the Office of the Comptroller of the Currency, a major US bank regulator.In prepared testimony, the OCC acknowledged the need for changes in its oversight of anti-money laundering operations, as called for in the Senate report.The OCC will also testify on the extent of the failings it found in HSBC's money laundering controls, and the orders it issued to the bank to correct them.The exhibits for the hearing also provide new clues about how the Justice Department and regulators developed their probes of HSBC and Mexican drug trafficking.A July 2009 email from an OCC official to the bank relates a call received from the US Attorney's office in Brooklyn.The OCC official said that an assistant US attorney "said that his office is in the early stages of investigating possible money laundering through the repatriation of US currency through accounts at the banknotes division of HSBC-N.Y."The author of the email, Daniel Stipano, is an OCC lawyer scheduled to testify today.Later that day, Stipano told his peers at the OCC, "From what I can tell, this has the makings of potentially being a major criminal case- we need to be all over it."According to the Senate report, the OCC didn't take strong action against the bank until the fall of 2010, after the agency had learned of US law enforcement probes.