MPs To Fuel Royal Mail Sale Row In New Report

By Mark Kleinman, City Editor

The controversy over the £3.3bn privatisation of Royal Mail will be reignited this week when MPs criticise Vince Cable and the body responsible for state-owned assets over their handling of the sale.

Sky News has learnt the Business, Innovation and Skills (BIS) Select Committee has agreed a hard-hitting report which endorses a finding by the National Audit Office (NAO) that taxpayers were left short-changed by Royal Mail's flotation.

The Committee intends to publish its report on the sell-off on Friday, according to insiders.

Its recommendations will include a ban on independent City advisers to the Government being allowed to buy shares during future asset sales, as well as the way future flotations are marketed to investors.

Lazard acted as the independent adviser to the Government, receiving a fee of £1.5m for its work.

Mr Cable faced criticism in April when it emerged that the investment bank's asset management unit had been among a group of so-called priority investors which were given outsized allocations of shares when they were sold for 330p last October.

The fund management arm, which is segregated from Lazard's advisory business, then sold its entire holding within days of the flotation, banking a substantial profit for clients.

The post-flotation surge in Royal Mail's share price, which included a rise of more than 35% on the first day of trading, sparked criticism that the stock had been undervalued at a cost to taxpayers of at least £750m.

Other major shareholders at the time of the initial public offering (IPO) included sovereign wealth funds owned by the Kuwait and Singapore governments as well as leading City institutions.

Sources said that the MPs' report would be critical of Mr Cable's remarks in the wake of the flotation that the increase was "froth" which would subside within six months.

Although the shares have retreated from their post-privatisation peak, they were trading on Wednesday at around 473p, roughly 45% higher than the price at which they were sold by the Government.

Mr Cable appeared before MPs on several occasions during the course of their inquiry, defending the Government against their assertion that the privatisation was botched.

A source familiar with the report said that it would also be critical of the Shareholder Executive, the body responsible for managing state-owned businesses such as the Land Registry and Urenco, the uranium processor.

MPs are said to have concluded that the Shareholder Executive "shirked its responsibility" by not providing clearer guidance about its expectations of the value of Royal Mail ahead of the sale.

The report will also say that taxpayers will miss out on prospective increases in the value of Royal Mail-owned property assets, such as the former mail centre site at Nine Elms in Vauxhall, central London.

Committee members are understood to be critical of the fact that there is no provision for taxpayers to benefit from future disposals of those sites.

The report does not include a formal recommendation about whether the banks which worked on the privatisation should receive several million pounds of discretionary fees, although Mr Cable is considered unlikely to provoke further anger by handing over the money.

A Whitehall source said on Wednesday that the MPs' report was unexpectedly critical given the number of Conservative and Liberal Democrat committee members.

Since last autumn's sale, Royal Mail has become embroiled in a public row with Ofcom, the industry regulator, over the ability of rivals to cherry-pick the postal services they offer.

Moya Greene, the company's chief executive, has argued that its ability to deliver its Universal Service Obligation, which guarantees delivery to every UK address for the price of a stamp, could be jeopardised by the regulatory regime and has called for an urgent review.

The Government still owns 30% of Royal Mail and could decide to sell its remaining stake ahead of next year's General Election.

The row over Royal Mail's sell-off is unlikely to diminish in the wake of this week's report.

The Public Accounts Committee is also drafting a report on the privatisation, which is expected to be published soon.

A BIS Committee spokesman declined to comment.

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Bomb Fears: 'Charge All Gadgets' For UK Flights

Airlines To Scrutinise Smartphones Amid Threat

Updated: 8:12am UK, Friday 04 July 2014

Airlines with direct flights to the US have been told to tighten their screening of mobile phones amid fears terrorists could use them in bomb attacks.

US officials singled out Apple iPhones and Samsung Galaxy handsets for extra security checks.

They will apply to US-bound direct flights from Europe, the Middle East and Africa, the officials said.

The new precautions come in response to requests from US authorities, who fear attacks on planes flying to America.

US security officials said they fear bomb makers from the Yemen-based al Qaeda in the Arabian Peninsula (AQAP) have worked out how to turn the phones into explosive devices which can avoid detection.

They also are concerned that hard-to-detect bombs could be built into shoes.

A US official said that other electronic devices carried by passengers also are likely to receive more intense scrutiny.

Airlines or airport operators that fail to strengthen security could face bans on flights entering the US.

On Thursday, the US Homeland Security Department announced on plans to step up general security checks, but offered few details on how airlines and airports will implement them.

An official familiar with the issues said the US believes that while it is possible there may be some additional delays at security checkpoints, at most major airports passengers will not be seriously inconvenienced.

The official said most passengers taking long-distance flights arrive well in advance of scheduled departures, leaving time for extra screening.

But he said the US could not rule out disruptions in countries where airport infrastructure and security procedures are less sophisticated.

In the UK, Transport Secretary Patrick McLoughlin said the additional security was not expected to cause "significant" disruption to flights.

He told Sky News: "There will be extra security checks but they will be made in the course of events people already go through and I hope there will not be significant delays."

But British aviation security expert Philip Baum said heightened security will inevitably mean longer queues and increased waiting times to board flights at UK airports.

"It will mean (more) random searches, secondary searches and an increase in the number of passengers asked to remove shoes and possibly all passengers being asked to remove shoes if they're going on certain flights," he said.

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Did Facebook News Feed Experiment Break Law?

A psychological study carried out by Facebook on its users without their consent is being investigated by the UK data watchdog.

The Information Commissioner's Office (ICO) will question the social network to establish whether strict data protection laws were broken.

If laws were contravened, the site could face a large fine.

The ICO said it will also contact the Irish data protection body because Facebook has its European headquarters in Dublin.

A spokesman told Sky News: "We're aware of this issue, and will be speaking to Facebook, as well as liaising with the Irish data protection authority, to learn more about the circumstances."

The test saw Facebook manipulate the news feeds of around 700,000 users, to see how restricting the visibility of happy or sad updates from friends affected their behaviour on the site.

But Facebook's Richard Allen said the site had implemented "appropriate protections" for people's information, adding: "We are happy to answer any questions regulators may have."

The ICO spokesman said it was too early to tell which part of the law Facebook may have breached.

The regulator has the power to fine organisations up to £500,000 and force them to change their policies if personal data is misused or processed without consent.

Facebook's week-long study took place in 2012 and found that if users were shown fewer positive stories they were more likely to post negative updates, and vice versa.

Mr Allen added: "It's clear that people were upset by this study and we take responsibility for it.

"We want to do better in the future and are improving our process based on this feedback."

Adam Kramer, a researcher on the project, said the research benefits of the study may not have justified "all of this anxiety".

He said: "The goal of all our research at Facebook is to learn how to provide a better service.

"Having written and designed this experiment myself, I can tell you that our goal was never to upset anyone."

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Sports Direct £200m Bonus Deal Gets EGM OK

Sports Direct shareholders have agreed to implement a deal that could see founder Mike Ashley and other staff offered a bonus pot worth up to £200m.

More than 60% of shareholders at the sporting apparel firm's extraordinary general meeting (EGM) agreed to implement the bonus scheme for 2015.

The company had announced the proposed resolution on June 9, seeking approval for the bonuses, if profit targets are met, for Mr Ashley and other staff.

Mr Ashley, who also owns Newcastle United and is the majority shareholder in Sports Direct, has not drawn a salary from his successful sporting business.

The bonus plan is the fourth attempt the company has made to reward Mr Ashley.

In addition to not taking a salary, Mr Ashley has not received a bonus from the retailer.

The most recent attempt to reward Mr Ashley suffered a shareholder rejection as the bonus plan did not include certain other key executives.

The Institute of Directors (IoD) raised concerns about the bonus proposal, on Tuesday, citing corporate governance concerns.

It said in a statement: "Sports Direct is seeking to push through excessively generous pay arrangements for Mr Ashley.

"The IoD is concerned that it is suggestive of weak underlying governance at the company."

The Local Pensions Fund Forum and Association of British Insurers previously asked investors to oppose the plan.

Mr Ashley established Sports Direct in 1982, and the company has grown quickly amid struggles by high street rivals.

It also owns a number of brands which are sold through its outlets.

Department store Debenhams recently announced Sports Direct concessions would be trialled in a number of its outlets.

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BAE Gets US Deal For 'Anti-Insurgent' Missile

UK defence giant BAE Systems has been chosen to further develop its 'anti-insurgent' missile system for the US military.

The Naval Air Systems Command said it intends to enter into sole source negotiations with the US subsidiary of the British firm to develop the Advanced Precision Kill Weapon System II (APKWS II).

The project expands integration into the arsenal used on aircraft, including the A-10 'Warthog'.

The existing semi-active laser-guided APKWS system is designed as a cheaper alternative to the Hellfire missile, at around a third of the cost - $30,000 (£17,000).

The Hellfire has become renowned for use on Predator and Reaper drones and was originally designed to target armoured vehicles.

The APKWS is designed to destroy lightly armoured and "soft" vehicles, moving or stationary, in urban locations.

It can be armed with high explosives or flechettes - steel darts - in the warhead.

Earlier this year trials were carried out firing the missile from the A-10 and the new missiles hit within inches of their target.

The MkI version has been used in Afghanistan against insurgents (pic: USMC)

It is based on a 2.75 in (70mm) rocket with guidance 'canard' lead fins, and the new version has improved laser control for accurate targeting.

The original development plan for the precision weapon began in 2002 and the first version has been in full production for three years and used in war zones such as Afghanistan.

It has been fired from more than a dozen aircraft types and been sold to US allies including Jordan, for use on its airborne gunships.

BAE Systems programme manager Joe Tiano told Sky News: "Our APKWS laser-guided rocket has a long history of success in theatre and in testing on multiple platforms including the A-10, and we look forward to exploring additional opportunities for integration on the A-10."

The sole source award to BAE Systems sees a continuation of its rehabilitation in the eyes of US authorities.

In 2010 it pleaded guilty in a US court to making false statements over foreign corruption, along with arms export and trafficking violations.

It was fined $400m (£230m), which at the time was one of the largest criminal fines ever levied in the US against a company for business-related violations.

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Mothercare Shares Bounce With Joy On New Bid

Shares in Mothercare have risen sharply, after the retailer said it had rejected a takeover offer for the second time.

In early London trades shares in the company rose by more than 15% before dropping to around 11% up.

The latest proposal from North American company Destination Maternity, valued the UK firm at about £266m.

Mothercare has over 1,400 stores worldwide and in January issued a profit warning after poor UK sales.

The company has 220 UK stores branded as Mothercare and Early Learning Centres.

Destination Maternity, which is the world's largest designer and retailer of maternity wear with more 1,900 retail sites, has so far failed to persuade the board of Mothercare to engage in talks over its interest.

It disclosed that it has tabled two approaches to the struggling UK chain, with its latest cash and shares proposal on June 1 valuing Mothercare at 300p a share.

Mothercare recently recorded UK losses of £21.5m following a drop in annual sales of 7.5%.

It also is looking for a new chief executive after Simon Calver quit following poor Christmas trading.

Destination Maternity planned on introducing brands such as 'A Pea In The Pod' and 'Motherhood Maternity' to Mothercare's UK stores and international franchise stores.

The proposals would combine the two firms within a new UK holding company that would be listed in the United States.

Destination Maternity chief executive Ed Krell said: "We have long been familiar with Mothercare and hold the company's UK heritage and successful track record of international expansion in the very highest regard."

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JPMorgan CEO Diagnosed With Throat Cancer

The boss of US banking giant JPMorgan Chase has confirmed he is being treated for throat cancer.

In a memo to staff, CEO Jamie Dimon said the ailment is curable.

He also intends to remain actively involved in running the banking business, which is America's biggest.

Mr Dimon, 58, has never been a smoker.

He said the cancer was caught at an early stage, following tests within the last two weeks after he started feeling unwell.

He will undergo radiation and chemotherapy treatment for around two months.

Mr Dimon said: "I feel very good now and will let all of you know if my health situation changes."

"Importantly, there is no evidence of cancer elsewhere in my body."

He has been in charge of the bank for more than eight years and is credited with navigating the business through the fallout of the global financial crisis.

However, JPMorgan has hit recent trouble and has been tarnished as a result.

It lost $6.2bn (£3.6bn) over the so-called London Whale derivative bets in 2012, with the scandal prompting shareholders to try to push for Mr Dimon to drop his joint role as chairman.

And last year it agreed a $13bn (£7.6bn) settlement with the US government for overstating the quality of mortgages it sold to investors before the crash.

In January, it agreed to pay more than $2bn (£1.16bn) to settle claims related to Bernard Madoff's fraudulent ponzi scheme.

The US Treasury Department criticised "critical and widespread deficiencies" in its programmes to prevent money laundering and other suspicious activity.

Shares in the bank were down 0.6% in after-market trades on Tuesday, following news of the diagnosis.

In his memo, Mr Dimon told staff his treatment is still being finalised and it would curtail his travel.

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