The man who conned the world
Banks, billionaires, charities and film stars are among the victims of the '$50bn fraudster', whose exposure deals a fresh blow to financial confidence, according to one tycoon facing a $9bn loss.
By Stephen Foley in New York
Tuesday, 16 December 2008
Investors around the world are counting the spiralling cost of the biggest fraud in history, a $50bn scam that has ensnared billionaire businessmen and tiny charities alike and whose tentacles have stretched further and deeper than anyone imagined.
The fallout from the arrest of the Wall Street grandee Bernard Madoff was continuing to grow last night, as institution after institution detailed the extent of their possible losses, and the victims in the UK were headlined by HSBC and the Royal Bank of Scotland, which is majority-owned by the British Government.
A charity set up by the Hollywood director Steven Spielberg was among those revealed to be among the victims, along with a foundation set up by Mort Zuckerman, one of the richest media and property magnates in the United States, dozens of Jewish organisations, sports team owners and a New Jersey senator.
But the biggest confessions were coming from Wall Street, from the City of London and from the headquarters of European banks and from banks around the world. They have poured billions of dollars into Mr Madoff's too-good-to-be-true investment fund, which appeared to post double-digit annual returns come rain or shine.
RBS said that it could take a hit of £400m if American authorities find there is nothing left of the money Mr Madoff had pretended to be investing for many years. HSBC, Britain's largest bank, said a "small number" of its clients had exposure totalling $1bn in Mr Madoff's funds.
The Spanish bank Santander, which owns Abbey and the savings business of Bradford & Bingley in the UK, could be on the hook for $3.1bn. Japan's Nomura said it has hundreds of millions of dollars at risk. City analysts said that even banks who invested only on behalf of clients could end up on the hook, because clients are almost certain to sue for bad advice.
Mr Madoff confessed last week that his business was "all one great big lie". The investment returns were fake, and he had been paying old clients with money from new ones. In its conception, the scam is a classic. In its size, it is breathtaking, eclipsing anything seen before. He personally estimated the losses at $50bn, according to the FBI, and as investors owned up to their exposure yesterday that did not seem impossible. For 48 years, until Thursday morning, Mr Madoff was one of Wall Street's best-respected investment managers, able to harvest money from a vast network of contacts and to trade on his name as a former chairman of the Nasdaq stock exchange.
His arrest has further shaken confidence in the barely regulated hedge fund industry, which is already suffering some of the worst times in its short history. Mr Madoff – who is now on a $10m bail and under orders not to leave the New York area – was able to operate his fraud under the noses of regulators for many years.
Mort Zuckerman, the owner of the New York Daily News and one of the 200 richest Americans, said that one of the managers of his charitable trust had been so taken by Mr Madoff that he invested $9bn with him, including all the money from Mr Zuckerman's trust. "These are astonishing numbers to be placed with one fund manager," he said. "I think we have another break in whatever level confidence needs to exist in money markets."
Nicola Horlick, the British fund manager known as Superwoman for juggling her high-flying City career with bringing up five children, turned her fire on US regulators. Her Bramdean Alternatives investment fund had put 9 per cent – about £10m – with Mr Madoff. She told BBC Radio: "This is the biggest financial scandal, probably in the history of the markets."
Shoe insult against Bush resounds in Arab world
BAGHDAD: A day after an Iraqi television journalist threw his shoes at President George W. Bush at a news conference here Sunday, his act of defiance toward the American commander in chief reverberated throughout Iraq and across the Arab world.
In Sadr City, the sprawling Baghdad suburb that has seen some of the most intense fighting between insurgents and U.S. soldiers since the 2003 invasion, thousands of people marched in his defense. In Syria, he was hailed as a hero. In Libya, he was given an award for courage.
Throughout much of the Arab world Monday, the shoe-throwing incident generated front-page headlines and continuing television news coverage. A thinly veiled glee could be discerned in much of the reporting, especially in the places where anti-American sentiment runs deepest.
Muntader al-Zaidi, 29, the correspondent for an independent Iraqi television station who threw his black dress shoes at Bush, remained in Iraqi custody Monday.
While he has not been formally charged, Iraqi officials said he faced up to seven years in prison for committing an act of aggression against a visiting head of state.
Hitting someone with a shoe is a deep insult in the Arab world, signifying that the person being struck is as low as the dirt underneath the sole of a shoe. Compounding the insult were Zaidi's words as he hurled his footwear: "This is a gift from the Iraqis; this is the farewell kiss, you dog!" While calling someone a dog is universally harsh, among Arabs, who traditionally consider dogs unclean, those words were an even stronger slight.
The incident has been a source of embarrassment for the government of Prime Minister Nuri Kamal al-Maliki, who, in a statement Monday, called the shoe throwing a "a shameful savage act" and demanded a public apology from Al Baghdadia, the independent satellite channel that employs Zaidi.
"The act damaged the reputation of the Iraqi journalists and journalism in general," the statement said.
As of Monday night, no apology from the station was forthcoming. Instead, the network posted an image of Zaidi in the corner of the screen for much of the day. Telephone callers were invited to phone in their opinions, and the vast majority said they approved of his actions.
Opponents of the continued American presence in Iraq turned Zaidi's detention Monday into a rallying cry. Support for the detained journalist crossed religious, ethnic and class lines in Iraq - vaulting him to near folk-hero status.
"I swear by God that all Iraqis with their different nationalities are glad about this act," said Yaareb Yousif Matti, a 45-year-old teacher from Mosul, a northern city that has is contested by Arabs, Kurds and Turkmen.
In Samarra, one of the centers of the Sunni insurgency against American forces, Zaidi received nearly unanimous approval from people interviewed Monday.
"Although that action was not expressed in a civilized manner, it showed the Iraqis' feelings, which oppose American occupation," said Qutaiba Rajaa, a 58-year-old physician.
In Sadr City, thousands of marchers Monday called for an immediate U.S. withdrawal from Iraq. The demonstrators burned American flags and waved shoes in a show of support for Zaidi.
In Najaf, several hundred people gathered on a central square to protest Bush's visit Sunday to Iraq, and demonstrators threw their shoes at a passing U.S. military convoy.
But praise for Zaidi was not universal. His action ran counter to deeply held Iraqi traditions of hospitality toward guests, even if they are enemies. And those who have cooperated or welcomed the American presence in Iraq were far more apt to side with the government in their condemnation.
Ahmad Abu Risha, head of the Awakening Council in Anbar Province, a group of local tribal leaders that started a wave of popular opposition against Qaeda fighters in Iraq, said that he condemned what happened "because the American president is the guest of all Iraqis. The Iraqi government has to choose good journalists to attend such conferences."
Kamal Wahbi, a 49-year-old engineer in the Kurdish city of Sulaimaniya, where pro-American sentiment is strong, said: "This is unsuitable action by an Iraqi journalist. His action served terrorism and radical national extremism. I think he could send the same message by asking Bush embarrassing questions."
Witnesses said that Zaidi had been severely beaten by security officers Sunday after being tackled at the news conference and dragged out. One of his brothers, Maythem al-Zaidi, said Monday that the family had not heard from Zaidi since his arrest, and that a police officer who picked up Zaidi's cellphone late Sunday had threatened the family.
It was unclear whether Zaidi had planned his actions beforehand, or whether - as his brother said - he had become infuriated by Bush's words of farewell to Iraqis and made a spontaneous decision to insult him.
Saif al-Deen, 25, an editor at the Baghdadia television network in Cairo, said Zaidi had been planning some sort of protest against Bush for nearly a year.
"I remember at the end of 2007, he told me, 'You will see how I will take revenge on the criminal Bush in my personal way about the crimes that he has committed against innocent Iraqi people,"' Deen said. He said he tried to talk his friend out of doing anything at the time, but that "he insisted he would do it."
Around the Arab world, the shoe throwing became the topic of the moment. In Syria, Zaidi's face was broadcast on the state television network, with Syrians calling in throughout the day to share their admiration for his gesture. Lawyers volunteered to represent him by the dozen.
In Lebanon, reactions varied by political affiliation, but curiosity about the episode was universal. An American visitor to a school in Beirut's southern suburb, where the Shiite militant group Hezbollah is popular, was besieged with questions from teachers and students alike, who wanted to know what Americans thought about the insult.
"It's the talk of the city," said Ibrahim Mousawi, a Beirut-based journalist and political analyst affiliated with Hezbollah. "Everyone is proud of this man, and they're saying he did it in our name."
In Libya, Zaidi was given a bravery award Monday by a charity group chaired by a daughter of the Libyan leader, Muammar el-Qaddafi, Reuters reported.
The charity group, Wa Attassimou, also urged the Iraqi government to release Zaidi.
"Wa Atassimou group has taken the decision to give Muntader al-Zaidi the courage award," the group said in a statement, "because what he did represents a victory for human rights across the world."
Timothy Williams reported from Baghdad, and Sharon Otterman from New York. Reporting was contributed by Atheer Kakan, Suadad al-Salhy, Mudafer Husseini, Alissa J. Rubin and Eric Owles from Baghdad; Iraqi employees of The New York Times from Mosul, Samarra and Najaf; and Robert F. Worth from Beirut.
Bush Excluded by Latin Summit as China, Russia Loom (Update1)By Joshua Goodman
Dec. 15 (Bloomberg) -- Latin American and Caribbean leaders gathering in Brazil tomorrow will mark a historic occasion: a region-wide summit that excludes the United States.
Almost two centuries after President James Monroe declared Latin America a U.S. sphere of influence, the region is breaking away. From socialist-leaning Venezuela to market-friendly Brazil, governments are expanding military, economic and diplomatic ties with potential U.S. adversaries such as China, Russia and Iran.
"Monroe certainly would be rolling over in his grave," says Julia Sweig, director of the Latin America program at the Council of Foreign Relations in Washington and author of the 2006 book "Friendly Fire: Losing Friends and Making Enemies in the Anti-American Century."
The U.S., she says, "is no longer the exclusive go-to power in the region, especially in South America, where U.S. economic ties are much less important."
Since November, Russian warships have engaged in joint naval exercises with Venezuela, the first in the Caribbean since the Cold War; Chinese President Hu Jintao signed a free-trade agreement with Peru; and Brazil invited Iranian President Mahmoud Ahmadinejad for a state visit.
"While the U.S. remains aloof from a region it no longer sees as relevant to its strategic interests, other countries are making unprecedented, serious moves to fill the void," says Luiz Felipe Lampreia, Brazil's foreign minister from 1995 until 2001. "Countries in the region are more aware than ever that they live in a globalized, post-American world."
A Castro Triumph
The two-day gathering, called by Brazil at a beach resort in Bahia state, is also a diplomatic triumph for Cuban President Raul Castro, making his first trip abroad since taking over from his brother Fidel two years ago. The communist island was suspended from the hemisphere-wide Organization of American States in 1962 over its ties with the former Soviet Union.
"A lot of this is designed to stick it in the eye of the U.S.," says Peter Romero, the U.S. assistant secretary of state for the Western Hemisphere from 1999 to 2001. "But underlying the bluster, there's a genuine effort to exploit the gap left by a distant and distracted U.S."
The effort is most evident in the bloc of countries allied with the anti-American president of Venezuela, Hugo Chavez.
Bolivian President Evo Morales last month expelled the Drug Enforcement Administration, alleging that DEA agents were conspiring to overthrow him; U.S. President George W. Bush dismissed the charges as absurd and suspended trade privileges for the Andean nation.
Drug-War Defeat
In Ecuador, meanwhile, President Rafael Correa has refused to renew the lease on the U.S.'s only military outpost in South America, a critical platform for the U.S. war on drugs.
For Brazil, tomorrow's summit caps a decade-long diplomatic drive to use its growing economic and political stability to play a bigger role in the world.
While little concrete action is expected from the first-ever Latin American and Caribbean Summit on Integration and Development, the fact that the U.S. wasn't invited has symbolic importance, says Lampreia.
The summit reinforces such regional initiatives as the Union of South American Nations, which was formed in May by 12 countries to mediate conflicts such as political violence in Bolivia, bypassing the U.S.-dominated OAS.
Thomas Shannon, the top U.S. diplomat for Latin America, says the nature of American influence is only changing, not declining, as the region matures.
No Invitation Sought
The U.S. "didn't ask to be invited" to the summit, he says, although it had discussed with Brazil and Mexico ways the meeting's agenda could be used during the U.S.-backed Summit of the Americas, in April in Trinidad and Tobago.
"We don't subscribe to the hydraulic theory of diplomacy that when one country is up, the other is down -- that if China and Russia are in the area our influence has somehow waned," Shannon said in a telephone interview.
The fact that "there's no warfare, weapons proliferation, suicide bombers or jihadists" in Latin America may make its issues "less urgent," though no less important, Shannon said. The U.S. remains the region's dominant investor and trading partner: Foreign aid to Colombia to fight drug traffickers and Marxist rebels totals $700 million a year, and remittances from Latin Americans living in the U.S. totaled $66.5 billion last year.
Monroe's Doctrine
The Monroe Doctrine, which dates back to 1823, declared Latin America off-limits to European powers. Whether welcomed by the region or not, it has been invoked whenever real or imagined security threats to U.S. interests arise, says Gaddis Smith, a retired Yale University historian of American foreign policy.
"Its essence is unilateralism; no Latin American country had any say in it," says Smith, whose more than a dozen books on American foreign policy include "The Last Years of the Monroe Doctrine."
The real battle is for a larger share of the region's abundant resources and expanding economies, and China has led the way.
Two-way trade with the region shot up 12-fold since 1995 to $110 billion last year, according to the Inter-American Development Bank. China's share of the region's imports also jumped, to 24 percent from 9.8 percent in 1990, while the U.S. share shrunk to 34 percent from 43 percent. Two years after reaching a bilateral free-trade agreement, China's demand for copper made it Chile's biggest export market in 2007, replacing the U.S.
Hu's Trips
Since making his first of three trips to Latin America in 2004, China's President Hu Jintao has spent more time in the region than Bush -- 22 days to 20 for the U.S. president. In October, as the global credit crunch dried up lending in the region, China joined the Inter-American Development Bank with a $350 million loan to finance small businesses. This month it pledged $10 billion in loans to state-controlled Petroleo Brasileiro SA so Brazil can develop the Western Hemisphere's largest oil discovery since 1976.
"The Chinese play up the development side of diplomacy so much better than the Americans," says William Ratliff, a research fellow at Stanford University's Hoover Institution who has a Ph.D. in Chinese and Latin American history. "Deals come with none or very few strings attached."
Even Colombia, which is spending $115,000 a month lobbying the U.S. Congress to approve a stalled free-trade pact, signed an investment treaty last month with China. During this year's U.S. campaign, President-elect Barack Obama said he opposed the accord over concerns that Colombia isn't doing enough to stamp out violence against labor organizers.
Colombian President Alvaro Uribe today canceled his plans for the summit to monitor rescue efforts involving 200,000 people affected by flooding over the weekend.
Arms Deals
Changing relationships are also evident in arms deals. Chavez turned to Russia for at least $4.4 billion in weapons after the U.S. blocked sales of aircraft parts. Brazil, the region's largest economy, is also shopping around: Defense Minister Nelson Jobimsaid in Washington this month that his government will only buy weapons from countries that agree to transfer technology for local production.
Plans to purchase 36 new fighter jets, in which Boeing's F- 18 is competing for a contract against Stockholm-based Saab AB and France's Dassault Systemes SA, "can only be justified politically if they contribute to national development," Jobim said.
Brazil may sign a deal with France for four nuclear submarines intended to help secure its oil basins in the Atlantic when French President Nicolas Sarkozy visits Brazilian President Luiz Inacio Lula da Silva this month.
Reactivating a Fleet
The U.S. plan to reassert its naval presence by reactivating the Fourth Fleet after 58 years to patrol the Caribbean has triggered negative reactions ranging from Chavez's threat to sink the convoys to the more-diplomatic Lula's demand for explanations from the Bush administration.
Latin American leaders are looking to Obama to restore relations after the Bush presidency's initial pledges of greater engagement gave way to a focus on the 9/11 terror attacks and wars in Iraq and Afghanistan. Yet the honeymoon with Obama may be short-lived, says Michael Shifter, vice president of the Inter- American Dialogue in Washington. He says that the issues that have dominated Latin American relations -- including Cuba, immigration and U.S. trade barriers on agricultural products -- may remain in dispute.
"Latin America wants the U.S. to be engaged, but in very different terms that it has in the past," says Shifter. "In any case, they're not waiting around for the U.S. to change its mindset."
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro jgoodman19@bloomberg.net
World's first refrigerated BEACH to be built next to luxury hotel in Dubai
By Daily Mail Reporter
Last updated at 4:26 PM on 15th December 2008
The world's first refrigerated beach is to be built at a luxury hotel in Dubai so the filthy rich holidaymakers don't burn their feet on the scalding hot sand.
The revolutionary beach will sit next to the new Palazzo Versace hotel and will include a system of heat-absorbing pipes built under the sand and giant wind blowers, designed to keep tourists cool in the searing 40-50C heat.
The hotel, which is due to open late next year or early 2010, will be controlled by thermostats linked up to computers and feature a cooled swimming pool.
(Above and below) Artist's impressions of the Palazzo Versace Hotel in Dubai. The refrigerated beach will include a system of heat-absorbing pipes built under the sand and giant wind blowers
Enlarge
However, the plans have been criticised by campaigners who are infuriated by the potential impact on climate change.
Rachel Noble, of Tourism Concern, said: 'Dubai is like a bubble world where the things that are worrying the rest of the world, like climate change, are simply ignored so people can continue destructive lifestyles.'
The lavish project will enhance Dubai's appeal to the celebrity jet-set and increase competition to a region that already houses the world's first seven-star hotel, the Burj Al Arab.
Luxury: The first Palazzo Versace hotel in Australia. The second luxury hotel is set to open in Dubai late next year
However, the city's continued expansion will also add to its huge carbon footprint. Each person living in Dubai has a carbon footprint of more than 44 tons of CO2 a year.
Despite the environmental fears, Versace says the beach will be environmentally sustainable.
Soheil Abedian, president of Palazzo Versace, said: 'We will suck the heat out of the sand to keep it cool enough to lie on. This is the kind of luxury that top people want.'
A source added: 'The super rich want pure luxury. They don't want to walk on scalding sand.'
A British firm, Hyder Consulting will oversee the project, and it is hoped the 10-storey hotel will help attract some of the 800,000 Brits who visit Dubai each year.
There is already one Palazzo Versace hotel, operating on Australia's Gold Coast, which has attracted the rich and famous. Fifteen more hotels are in the pipeline.
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