London Olympics Gournd Banker Flights After VIP-Jet Influx

Story first reported from Bloomberg News

This time last year Nick Candy’s Challenger 605 business jet was kept busy flying the U.K. real estate magnate to destinations across Europe.

In the summer of 2012 the Bombardier Inc. (BBD/B) aircraft has made fewer trips as Candy takes time out in London to watch the Olympics. Other corporate jets are seeing less action as the games deter overseas business people from visiting Britain.

Airports including Oxford and Farnborough report fewer business flights, and London Heathrow, Europe’s top hub, has banned private planes following the closure of airspace above the capital for the duration of the games. While Olympic events such as the opening ceremony and men’s 100 meters final have led to traffic surges as VIP and celebrity visitors including Madonna and Brad Pitt fly in, that’s brought complications as aprons become crowded and turnaround times come under pressure.

“To some extent the aviation community has shot itself in the foot by implying that it was going to be so challenging and constrained,” said James Dillon-Godfray, commercial director at Oxford airport and Battersea heliport. “The volumes of business aircraft and executive aircraft that were predicted two or three years ago are just not happening.”

‘Armed Interception’

Britain’s Civil Aviation authority anticipated a maximum 5,000 extra private aviation movements in southeast England during the two weeks of the games, up 33 percent on 2011. The real increase may be about 20 percent, Dillon-Godfray estimates.

Flights above London are restricted to the police, armed forces, emergency services and an Olympic-broadcast helicopter, with infringements triggering prosecution or even “interception by armed military aircraft,” the CAA says. London’s skies are being patrolled by Royal Air Force Typhoon jets and Puma helicopters, backed up by six surface-to-air missile batteries.

Some 32 airports across southern England, extending as far from London as Coventry, are also having to coordinate takeoff and landing times to avoid overcrowding along flight-paths that have themselves been redrawn for duration the games.

Battersea, London’s premier heliport, is operating only after authorities were persuaded that it posed no security threat, according to General Manager Simon Hutchings, who says the U.K. aviation industry has “mixed feelings” about the games.

Bookings Slump

From July 14 to Sept. 12 no flights are permitted within London east of Battersea Bridge, according to the heliport’s website. Prior to the Olympics, choppers were able to serve the Vanguard Helipad south of the Canary Wharf financial district.

RotorMotion, which operates three AgustaWestland AW109 helicopters based at Redhill, six minutes by air from Battersea, has only three bookings for August after anticipating dozens of extra flights, according to Operations Manager Sue Spencer.

“We thought ‘great, the Olympics are coming, we’re going to be flying our socks off,’” she said. “But the traffic we are picking up is nothing like we hoped. We are very disappointed.”

Like other U.K. helicopter companies, RotorMotion operates “flat out” during sporting events such as the British Formula One grand prix, Spencer said, adding that the realization that there would be no dedicated Olympic helipad came as a blow.

Flight plans must also be submitted four hours in advance and everyone on board must have photographic proof of identity that matches the names on the roster. That’s been a “shock to the system” for helicopter operators which trade on their ability to go where they want, when they want, and typically employ visual flight rules -- following railway lines and motorways -- and aren’t required to supply plans, Spencer said.

Boat Link

Still, at Battersea the boost from Olympics traffic has compensated for the loss of some regular custom, with 276 more flights scheduled during the main games than a year earlier. The number was initially swelled by bulk bookings, supplemented by additional demand as wealthy sports fans make side trips.

The heliport -- bought by brothers David and Simon Reuben for about 25 million pounds ($39 million) in February -- is offering river-boat services to clients wishing to go further east and inconvenienced by the flight ban. Vessels provided by Water Chariots can reach the Olympic Park in about 70 minutes, though interest has been limited, according to Hutchings.

“We’ve remained open but we’re certainly not as flexible,” he said in an interview at the heliport, located next to the Thames about three miles upstream from parliament. “Normally we can give these people flexibility and meet their needs, so I was a bit concerned people might defer their business travel.”

Missed Chance

Dan Foster, general manager of air traffic services at TAG Aviation Holding SA’s Farnborough airport, said business flights that usually constitute about 35 percent of aircraft movements have been “totally confused” by a combination of the Olympics, last month’s air show and the Islamic month of Ramadan, which has reduced the number of flights from the Middle East.

“Overall we’re about the same as last year, maybe a couple of percent down,” Foster said. “Those principals who might have come across in Gulfstream Vs may have come on scheduled flights because they perceived it was too busy to fly privately. We suspect some sponsors also chose to take scheduled flights.”

Heathrow airport, which operates close to capacity, opted to close to private and charter planes to ease operational pressure during the games, spokesman Richard Scott said today.

Heathrow Stampede

BAA Ltd. (FER), the hub’s owner, is making final preparations for Monday, the day after the closing ceremony, which may break departure records as people who arrived for the Olympics over the space of several weeks seek to leave in just a few hours, among them about 15,000 athletes, officials, sponsors.

Competitors will be able to check in their bags before leaving the Olympic Village and on arrival at Heathrow will use a special Games Terminal with 31 desks and seven security lanes. About 6,000 people will use the temporary facility on Monday and around 8,000 in total before it closes on Aug. 15, BAA says.

One area in which the Olympics have provided a boost for business aircraft has been sales, said Steve Varsano, who runs an auto-style jet showroom near London’s Hyde Park Corner, with visitor numbers swollen by wealthy individuals, games sponsors and sports officials keen to view the latest models.

“We’ve seen American, Chinese and increasingly Russian customers, as well as Brazilian government officials who’ve come to look around before the 2014 World Cup and 2016 Olympics,” he said. “They are in town to see how London is handling things.”

Property developer Candy says people who left Britain or postponed visits overestimated the impact on ground transport of restrictions such as Games Lanes while failing to appreciate the chances to seal deals through Olympic-related hospitality.

“People were scared they wouldn’t be able to move around, but I honestly think it would take longer to get to Farnborough on a normal Friday,” he said in an interview. “Over these two weeks we will have done four sales, which is 100 percent due to the Olympics. I think they’ve missed an opportunity.”

For James Reuben, son of David and an investor in the family’s airports, the real test will be if the games encourage repeat custom. “We are seeing people fly in who haven’t been inclined to use Oxford or Battersea before,” he said. “That’s the driver for us -- to showcase our investment to the world.”

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The London Crackdown

Business Week

Insider trading and other types of financial fraud are among the toughest crimes to detect and prosecute. But Britain's market regulators are turning up the heat

It's the £30bn industry that has prospered like no other during the recession – but nobody champions its success. Those working in it operate across all sectors, from public to private, with little regard for the consequences of their actions. They might work near you in the office or they might be the bloke you say hello to down the pub. You might be sitting next to one now.

They are Britain's fraudsters: difficult to detect, almost impossible to put behind bars. But last week the big crackdown that has long been promised by the UK's authorities began.

Dawn raids by the Financial Services Authority (FSA) and the Serious Organised Crime Agency (Soca) saw seven arrests in the Square Mile, with employees from some of the City's most august firms, including Deutsche Bank (DB) and BNP Paribas (BNPQY), as well as hedge fund Moore Capital, being collared. The arrests for insider trading were the culmination of an investigation that started in 2007. In one swoop, on Tuesday morning, the FSA gathered together 143 staff and, with officers from Soca, raided the homes of the suspects – arresting one at an airport – and took them for questioning. Most of the alleged suspects are now on bail or waiting to be released.

A few weeks ago, after a four-year investigation by the FSA, Malcolm Calvert, a former partner at Cazenove, that most blue-blooded of banks, was sentenced to nearly two years in jail for his part in an insider-trading scam that netted him more than £100,000.

Across from the City, London's Serious Fraud Office (SFO), much maligned for some high-profile failures in the past, scored its own successes.

Last week the agency launched one of its biggest operations in years – more than 100 SFO officials and 40 police were involved – with the arrest of three directors of Alstom (ALSMY), the engineering company, for price-fixing.

And two weeks ago, the SFO struck a notable blow when it forced Innospec Limited, a British subsidiary of an American chemicals firm, to pay more than $12m (£8m) in fines after it admitted paying bribes to win deals.

But it's the launch of the most high-profile City insider-dealing raid in years that has really captured the imagination. "There has always been a belief among people who work and police the City that insider trading remains rife," says Tim Harvey, a former City of London fraud investigator and now director of UK operations at the Association of Certified Fraud Examiners (ACFE). "But it is so difficult to get successful convictions for insider dealing. Indeed, with increased sophistication, I think it's probably more difficult than it has ever been." He adds: "Given the huge splash the FSA and Soca have made with these arrests, using so many officers, I really hope they get a result – because, if they don't, it'll set investigations in this area back many years."

Insider dealing became a criminal offence only in 1980, a year after Baroness Thatcher came to power.

The wave of privatisations and new levels of share ownership that she forced through in the following years necessitated a cleaning up of the trading system, where dealing on the inside was endemic.

Assessments of the extent of insider dealing since have been few and far between, although a paper from the FSA in 2006 did seek to "measure market cleanliness". It estimated that between 24 to 32 per cent of takeover bids in the UK during the early part of the Noughties involved insider dealing to significantly move the target's share price.

The laws governing insider dealing have been refined a number of times since 1980, most recently taking into account a 2003 EU directive.

But despite the deterrent – insider dealing carries a maximum sentence of seven years – the number of successful prosecutions remains low.

According to data compiled by Professor Paul Barnes from Nottingham Trent University, there have been just 22 successful criminal cases for insider dealing. Only two so-called "rings of City professionals" have been unearthed and received criminal sanction since 1980.

Since 2000, the FSA has also brought 15 successful civil actions for market abuse – 10 of which directly relate to insider dealing.

Barnes says: "If last week's arrests of a so-called 'insider-trading ring' across firms proves to be successful, then it will be quite remarkable. This is a biggie. The rings that have been caught in the past were quite small."

According to Barnes, the largest incident of a ring being caught was in 2003 with the case of Spearman, Smith and Payne. This involved a proofreader at a firm of commercial printers, who used his access to draft prospectuses and offer documents to profit from price changes in 27 takeovers and merger deals. The ring netted the perpetrators more than £300,000 although none actually worked in the Square Mile.

"Although I wasn't allowed to listen to the evidence directly, I gather that the case made extensive use of phone taps, something that has probably played a part in these latest arrests," says Barnes.

Alongside phone taps, the authorities now have a much larger arsenal of weapons to deploy and a much more sophisticated system by which to track suspicious movements in share prices, which often acts as the catalyst for investigations.

A few years ago, the FSA installed Sabre, a powerful – and expensive – computer system which analyses suspicious trading patterns in stocks.

The regulator is also making greater use of whistleblowers who, under new legislation, are granted immunity from prosecution if they testify against ringleaders guilty of crimes.

Praise has also been heaped on Margaret Cole, head of enforcement and crime at the FSA, for her determination to carry out the crackdown. One report described her as "an Eliot Ness for the 21st-century City of London"

The Cambridge-educated Cole – who completed her A-Levels two years earlier than normal – has an enviable CV, having played influential roles as one of the lawyers in the collapse of BCCI and having acted for pensioners looking for recompense from Robert Maxwell.

"Margaret Cole has been very vocal in promising to go after people, and she is undeniably good," says the ACFE's Harvey. "But I think Philip Robinson [a former director of financial crime at the FSA] should take some of the plaudits, too."

If reports are to be believed, a wave of further arrests are planned this week, with as many as 11 people likely to be charged over an insider-trading scam hatched at a printers in north London. Project Saturn, the moniker given to the raids, is certainly likely to further enhance the reputation of Cole and her colleagues at the FSA.

It seems that the great City crackdown has only just begun.

Banker Bonuses Come Under Fire

As Regulator Considers Options, Some Analysts Warn of Talent Drain

As the financial crisis unleashes a debate about bankers' compensation, the idea of limiting bonuses has taken an added twist in London: Will it hurt the U.K. capital's competitiveness as a place to do business?

Some regulatory consultants say the U.K.'s Financial Services Authority risks harming the country's financial-services industry if it restricts the way banks structure bonus packages.

Some warn that banks could leave London if bonus limits hurt their ability to attract talent. Any compensation limits would need to be global "because of the competitive power of the market," said Neville Bramwell, a partner at consultancy firm Deloitte & Touche LLP. "If people are subject to a salary cap at institution A, they will leave and join the institution that is not subject to that cap."

An actor in a bowler hat is silhouetted in front of the Bank of England during the filming of a television program.

Government officials turned up the heat on the issue at the Labour Party's annual conference this week by declaring that the culture of huge bank bonuses needs to be addressed. They blamed excessive bonuses, in part, for promoting the risky behavior that helped contribute to the global financial crisis. "Bonuses should encourage good long-term decisions, not short-term reckless ones," Treasury chief Alistair Darling said at the Labour Party conference in Manchester.

While the FSA has said it doesn't want to regulate pay, it does plan to look at whether compensation plans take into account long-term risks for financial firms.

"We are clear this is a global issue rather than a U.K. issue," said FSA spokeswoman Heidi Ashley. "We want to ensure that U.K. views on remuneration are properly represented in international discussions."

In the U.S., Congress is debating tying compensation limits to the $700 billion plan to rescue troubled financial firms. U.S. Treasury Secretary Henry Paulson has argued that pay limits shouldn't be part of this plan because they could discourage firms from participating.

The U.K. has been held up as a model for compensation watchdogs who note that many companies give shareholders the ability to vote on compensation plans for senior executives at annual meetings.

In Switzerland, shareholder activist Ethos, which directly and indirectly controls funds valued at about 1.4 billion Swiss francs ($1.3 billion), called Tuesday for large Swiss companies to give shareholders a say on executive compensation. Ethos said the current financial-market crisis necessitates increased transparency and a bigger say for shareholders.

"The obvious driver of the subprime crisis...is simply greed," said Stephane Gregoire, product management director at FRSGlobal, a regulatory consultancy. "A risk-based bonus policy must be driven by the regulators."

By: Adam Bradbery
Wall Street Journal; September 24, 2008