GSK Admits China Corruption Claims 'Shameful'

By Mark Stone, Asia Correspondent

Chinese police have released further details of what they claim is a massive programme of bribery by GlaxoSmithKline (GSK) in China.

According to a police official in Beijing, the British drugs manufacturer has transferred as much as £323m to over 700 travel consultants since 2007.

Separately, TV interviews have emerged with some of the GSK staff alleged to have been involved in the bribery.

The Chinese authorities allege that GSK officials used the travel agents as vehicles through which to bribe doctors, hospital bosses and government officials. According to Chinese police, the travel agents were paid to offer services to officials in return for the purchase of GSK branded products.

Gao Feng, the head of the Economic Crime Investigation Unit of China's ministry of public security, claimed that some travel agents offered "sexual bribery" to GSK employees to secure favours. He did not elaborate on those allegations.

In a statement to Sky News, GSK said: "We are deeply concerned and disappointed by these serious allegations of fraudulent behaviour and ethical misconduct by certain individuals at the company and third-party agencies. Such behaviour would be a clear breach of GSK's systems, governance procedures, values and standards. GSK has zero tolerance for any behaviour of this nature. 

"In the meantime, we are taking a number of immediate actions. We are reviewing all third party agency relationships. We have put an immediate stop on the use of travel agencies that have been identified so far in this investigation and we are conducting a thorough review of all historic transactions related to travel agency use.

"GSK fully respects the laws and regulations in China and expects all staff to abide by them. GSK shares the desire of the Chinese authorities to root out corruption. These allegations are shameful and we regret this has occurred. We will cooperate fully with the Chinese authorities in the investigation of these new allegations.

The GSK global headquarters in Brentford, west London

"We will take all necessary action required by the outcome of this investigation," the statement concluded.

According to police, four senior Chinese executives from the firm are being held and questioned.

China's Xinhua State News Agency named them as: Vice President and Operations Manager Liang Hong, Vice President and Human Resources Director Zhang Guowei, Legal Affairs Director Zhao Hongyan, and Business Development Manager Huang Hong.

In TV interviews aired by China's state-run CCTV (China Central Television), the suspects are heard apparently confessing to the bribery.

Speaking in Chinese, one of the employees, Liang Hong said: "We began to cooperate with Shanghai Linjiang International Travel Service Co Ltd since 2010.

"Within the following three years, about 10 meetings had been held, with participants ranging from over 100 in small meetings to 2,000 in large-scale meetings."

A reporter then asks him how much money would be involved in one of the large scale meetings.

"The expenses for the largest-scale one exceeded ten million yuan (£1.07m)." Liang says.

In another interview, an employee from one of the travel firms reportedly used by GSK staff, explains the alleged process.

"He (Liang Hong) said he need to visit a professional or a leader and bring some gifts with him," Weng Jianyong, Boss of Shanghai Linjiang International Travel Agency said.

"But according to the company (GSK) discipline, the gift can only value 100 or 200 yuan, (£10-£20) so it doesn't work at all. Then he said to me to give him some cash.

"The money sometimes reaches 500,000 yuan (£50,000) for an activity," Weng Jianyong alleged.

Last week, Sky sources confirmed that a British national was detained and questioned by Chinese authorities in Shanghai last week. He or she has since been released.

Sources revealed that dozens of Chinese police entered the GSK Shanghai offices on June 27, went into the offices of senior British staff and seized paperwork.

After the raid GSK circulated an internal memo, seen by Sky News, which said: "At this stage, it is unclear about the precise nature/purpose of their visit and investigation.

"We will of course cooperate with their inquiries, but are unable to comment further at this stage."

GSK operates a zero-tolerance policy toward bribery and issues staff with a 16-page booklet outlining its guidelines.

The Brentford-based company said in June that it had already investigated an accusation that its sales people in China bribed doctors and found no evidence of wrongdoing.

The drug-giant has a growing business in China. It currently employs more than 5,000 people at eight sites across the country and has investments totalling £300m.

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Warm Weather Gives High Street A Boost

Glorious Sun: Heatwave Here To Stay

Updated: 11:13pm UK, Sunday 14 July 2013

Parts of the UK remain on heatwave alert, as the hot weather shows no sign of letting up.

Following the hottest day of the year on Saturday, Sunday was another scorcher with temperatures into the high 20s in many regions.

The hot weather is forecast to continue until at least next weekend, with the rest of the week hovering between the mid to high 20s.

Wednesday could be particularly hot, according to forecasters, when temperatures could reach 32C (89.6F).

On Sunday, the Met Office issued a level three heatwave alert for southwest England. The alert "requires social and healthcare services to target specific actions at high-risk groups".

Saturday saw the warmest day of the year so far, with the mercury hitting 31.9C (89.4F) in Southampton.

It topped the previous high of 29.9C recorded at Edenfel in County Tyrone last Monday.

The soaring temperatures have seen shoppers spend thousands of pounds on the high street and online, buying barbecues, food, sunscreen and garden furniture.

Paddling pool sales are up 816%, said online retailer Amazon, while Tesco said it was predicting a sausage surge of nine million bangers this weekend.

With many people taking to the water to cool off, emergency services have warned against swimming in lakes and quarries after three people died in the West Midlands in the last week.

"Please think twice about going into open water," said Commander George Marshall, of Hereford and Worcester Fire and Rescue Service.

"If you must take a dip please do it in the safety of a public swimming pool where there are lifeguards on duty."

Monday will see lengthy spells of sunshine for most parts, although northwest Scotland will be overcast and there could be patchy light rain.

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Welfare Cap Of £500-A-Week Comes Into Force

A £500-a-week cap on the total amount of benefits that households can receive is being rolled out across England, Scotland and Wales from today.

The cap applies to couples and lone parents aged between 16 and 64, while a £350 limit applies to single people.

It is part of the government's major overhaul of the benefits system.

Housing benefit, jobseeker's allowance, and child benefit all count towards the cap.

Iain Duncan Smith says too many people are trapped on benefits

Critics say the cap does not deal with underlying issues such as the cost of housing.

But Work and Pensions Secretary Iain Duncan Smith argues that too many people are trapped on benefits.

He said: "The benefit cap returns fairness to the benefits system.

"It ensures the taxpayer can have trust in the welfare system and it stops sky-high claims that make it impossible for people to move into work.

"The limit of £500-a-week ensures no-one claims more in benefits than the average household and there is a clear reason for people to get a job - as those eligible for Working Tax Credit are exempt."

The cap - not yet law in Northern Ireland - will be fully implemented by September 30.

The limit has been set to reflect the average working household income.

It has already been implemented in four London boroughs since April; Haringey, Enfield, Croydon and Bromley.

There is no cap on people who receive Disability Living Allowance or its successor, the Personal Independence Payment, as well some other benefits, such as industrial injuries benefit or a war widow or widower's pension.

The Department for Work and Pensions says the cap will save about £110m a year.

But Labour's Shadow Work and Pensions Secretary, Liam Byrne, said: "The benefit cap is a good idea in principle but its already fallen apart in practice.

"Ministers have bodged the rules so the cap won't affect Britain's 4,000 largest families and it does nothing to stop people living a life on welfare."

In a Twitter gaffe, David Cameron wrote of his support for the policy, but used the name of a spoof Iain Duncan Smith Twitter account by mistake.

The @IDS_MP account includes Tweets such as "I've always supported a Mansion Tax. Your Tax buys my Mansion. Chin chin!"

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Company Directors 'To Face New Scrutiny'

Fraudulent or negligent directors could be forced to compensate creditors, under new plans expected to be outlined by the Business Secretary.

Vince Cable will announce proposals to boost transparency and trust in British business in a speech to the London Stock Exchange.

He will float a range of options for discussion including making errant bosses liable for losses, and disqualifying directors who are already banned outside of the UK.

Mr Cable will also raise making the safety and stability of firms the main responsibility of bank directors - an idea suggested by the Parliamentary Commission on Banking Standards.

In an interview with The Sunday Telegraph, he warned that the failure to punish executives in the wake of the banking crisis had undermined public faith in regulation.

"I think the public are a little baffled by the current regime," he said.

"There is an issue around the people who used to run Lloyds and RBS, and there is a worry about how the system operates."

People who operate "rogue companies" or are involved in "serial failure" should be punished through disqualification, the Cabinet minister added.

However, he indicated that he wanted any new measures to be proportionate.

"We don't want to get into a situation where we're penalising good business people who take risks but whose business fails for whatever reason," he added.

Tougher rules are not expected to be retrospective, despite persistent calls for action against figures such as former RBS chief executive Fred Goodwin.

There also appears little chance that final proposals will reach the statute books before the 2015 general election.

On transparency, Mr Cable is to moot ending 'concealed ownership' of companies, by requiring businesses to supply information on their owners and controlling shareholders.

This could mean scrapping bearer shares, which confer ownership without requiring the holder of the shares to be identified in public, and demanding more information about nominee directors.

But shadow business secretary Chuka Umunna said Labour had been leading the charge for a "more responsible capitalism".

"Since the Tory-led government came to office the number of actions taken against suspected fraudulent or reckless directors has fallen at the same time as the number of incidences of suspected fraud has increased," he said.

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India Shuts Telegram Service After 162 Years

Thousands of Indians have crammed into telegram offices to send souvenir messages, in a last-minute rush before the service was shut down after 162 years.

Sunday night at 10pm was the last point at which messages were accepted by the world's last major commercial telegram operation.

It marked the end of a service that provided millions of Indians with a fast and reliable mode of communication.

Known popularly as the "Taar" or wire, it closed because of mounting financial losses.

It had become redundant in an age of email, reliable landlines and ubiquitous mobile phones.

Telegrams cost a minimum of 32p when the service operated

Hundreds of people thronged the 75 telegraph offices remaining in the country to send their last telegrams to friends or family as a keepsake.

The Central Telegraph Office in New Delhi said it geared up to tackle the expected rush.

Shameem Akhtar, a top official in the state-run telecommunications company, said it had increased staff at all telegram offices over the weekend.

Leave for the 1,000 staff was cancelled in a bid to handle the volume of messages.

An employee asleep in the record section of the Central Telegraph Office

The telegrams cost a minimum of 29 rupees (£0.32) and were hand-delivered by messenger workers on bicycles.

Joggers, housewives and students were among those sending messages to loved ones on Sunday before the service was cut.

Many were seen making calls on their mobile phones to get the postal addresses of their friends so they could send the last dispatch.

"I have never seen such a rush before. They are some people who are sending 20 telegrams in one go," Ranjana Das who is in charge of transmitting the telegrams, said.

"The service would not have been killed had there been this kind of rush through the year," worker Vinod Rai added.

A bicycle messenger was used to deliver the telegrams

In the days before mobile phones and the internet, the telegram network was the main form of long-distance communication.

At its peak in 1985 the state-run utility sent 600,000 telegrams a day across India but the figure has dwindled to 5,000 at present, Mr Akhtar said.

Most of these are believed to be sent from government departments.

One five-word telegram sent from the telegram centre in Nerw Delhi summed up the change.

It read: "The End of an Era."               

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ABI Chief Hingley In Running For Top UKFI Job

By Mark Kleinman, City Editor

One of the City's veteran investment bankers is among a pack of candidates vying to lead the Government's sale of its £35bn stakes in two giant state-backed lenders.

Sky News has learnt that Robert Hingley has been shortlisted to become chief executive of UK Financial Investments (UKFI), the Treasury agency which manages taxpayers' shareholdings in Lloyds Banking Group and Royal Bank of Scotland (RBS).

Mr Hingley is one of a handful of names being circulated in Whitehall in relation to the role, although there is no indication that he is the frontrunner for the post, insiders said.

His rivals for the job include individuals from a range of backgrounds including non-bankers, they added.

Currently the director of investment affairs for the Association of British Insurers, the influential shareholder lobbying group, Mr Hingley has had a distinguished career in the City.

He serves as a senior adviser to Lazard, the independent investment bank, and has worked at firms including Schroders, Citigroup and Lexicon Partners, before joining the ABI last year.

The new boss of UKFI will take on arguably the organisation's most challenging brief since it was established in the aftermath of the 2008 banking crisis.

The agency, which is expected to publish its annual report later on Monday, is in the process of appointing a panel of banks to work on the sale of the Treasury's 81% stake in RBS and 39% of Lloyds.

An initial placement of Lloyds shares is expected within weeks, although a review of RBS's future structure means that a sale of the taxpayer's stake in the Edinburgh-based lender is unlikely until after the next general election.

UKFI has also been fighting for its future after the Parliamentary Commission on Banking Standards argued that it should be abolished after what it described as persistent interference from George Osborne in the running of RBS.

The Chancellor has since offered the body his public backing.

Jim O'Neil, UKFI's chief executive since last year, is returning to the private sector with Bank of America later this year.

People familiar with the process to identify Mr O'Neil's successor said the chosen candidate was also likely to be a plausible eventual replacement for Robin Budenberg as UKFI's chairman.

UKFI, which also manages the rump of Bradford & Bingley and Northern Rock's 'bad bank' declined to comment while Mr Hingley could not be reached for comment. An announcement is expected by the end of the summer.

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Spotify: Radiohead's Thom Yorke Slams Site

The frontman of Radiohead has taken action against music streaming service Spotify over its payments to new artistes.

Thom Yorke revealed he has pulled his solo songs, along with those of his alternative group Atoms For Peace, from the service.

He said that budding musicians get paid very little with the digital business model.

Yorke and producer Nigel Godrich argued that whilst streaming suits back catalogues for established acts, it simply doesn't support new artistes providing new music.

Yorke wrote on Twitter: "Make no mistake new artists you discover on Spotify will not get paid.

"Meanwhile shareholders will shortly being rolling in it. Simples."

Mr Godrich, who has produced for both Yorke and Paul McCartney, also used the micro-blogging site to complain.

"The numbers don't even add up for Spotify yet. But it's not about that. It's about establishing the model which will be extremely valuable," Mr Godrich said.

Thom Yorke has come out in support of young musicians

"Meanwhile small labels and new artists can't even keep their lights on. It's just not right."

The Spotify service allows for a limited free but gives unlimited access if subscribers pay monthly fees or either £5 or £10.

A spokesperson for the company told Sky News: "Spotify's goal is to grow a service which people love, ultimately want to pay for, and which will provide the financial support to the music industry necessary to invest in new talent and music.

"We want to help artists connect with their fans, find new audiences, grow their fan base and make a living from the music we all love.

"Right now we're still in the early stages of a long-term project that's already having a hugely positive effect on artists and new music.

"We've already paid $500m (£331m) to rights-holders so far and by the end of 2013 this number will reach US$1bn (£662m). Much of this money is being invested in nurturing new talent and producing great new music."

The company added: "We're 100% committed to making Spotify the most artist-friendly music service possible, and are constantly talking to artists and managers about how Spotify can help build their careers."

But some musicians say the returns from CDs and digital downloads are more rewarding because the per-stream payments are comparatively tiny.

It is believed most artistes get less than 0.4p for each Spotify stream, wiht a hit garnering one million streams on Spotify only generating some £3,800.

Last month Pink Floyd's back catalogue appeared on the music site, with hit song Wish You Were Here attracting around a million streams.

But some major catalogues are still not available on Spotify, including those of the Beatles and AC/DC.

AC/DC has long argued that its music is meant to be as part of an entire album and not as individual songs.

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China Growth Slows In The Second Quarter

By Mark Stone, Asia Correspondent

China's economy slowed in the second quarter of 2013 to 7.5% according to data released by the Chinese government.

The first quarter of 2013 saw economic growth at a level of 7.7%. The latest figure means growth slowed in all but two of the last 13 quarters for the world's second largest economy.

The slowdown to 7.5% was widely predicted and still represents an enviable growth rate. Analysts are split over whether the slowdown is a concern.

Goldman Sachs said the new figure represented "stable sequential growth at a low level". However, others said it represented a strained system.

"As of now, China's GDP has been staying under 8% for five straight quarters, a clear sign of distress. "said Xianfang Ren, an economist with IHS Global Insight in Beijing

"We are especially concerned about the rather significant downslide of investment growth, led by real estate investment. Construction sector could see lots of headwinds coming forth in the second half, if there is no marked change in policy course." she said.

China realised that it cannot rely on exports to maintain growth

The Chinese government announced the latest figure at a Beijing news conference. Officials defended the country's economic policies and insisted that they would meet their full year growth target for 2013 of 7.5%.

"Some measures, including the intensified property tightening campaign, new rules to curb misuse of public funds … will inevitably have some impact on growth in the short term, but they will benefit our economy in the long run," Sheng Laiyun, spokesman for the National Bureau of Statistics, said.

However, some analysts predict that by 2014 the GDP figure could dip below 7%.

"We downgraded our GDP growth forecast to 7.3% from 7.8% for 2013 and to 6.9% from 7.5% for 2014," Chen Shao, from Macquarie Economic Research, said.

If the Chinese government misses its annual growth target at the end of this year, it will be the first time it has done so since the financial crisis in Asia 15 years ago.

The leadership in China has said for many years that their goal is to fully rebalance their economy away from an over-reliance on exports - which have slowed markedly - and boost domestic consumer spending.

To achieve this, a slowdown in the short to medium term is inevitable but it requires certain reforms.

China has grown hi-tech businesses on knowledge built from foreign firms

It is not clear to what extent the Chinese government will push forward reforms or opt instead for a process of 'fine-tuning'.

According to official Chinese figures, which are not open to examination, the country's retail sales rose 13.3% in June compared with the same month last year.

Retail sales, widely seen as a key indicator for consumer spending, also increased 12.7% between January and June 2013, and China's industrial production rose 8.9% between in the year to June 2013.

Increased spending on infrastructure is a key tool to prompt economic growth. It is measured through fixed asset investment which rose 20.1% in the first six months of 2013 compared with the same period last year. 

"Discussions with people out in the provinces suggests that many expect a stimulus to start now and there is a genuine acceleration in infrastructure spending" Jeremy Stevens, an economist with Standard Bank in Beijing, said.

"(There are) many announcements about how the government will accelerate 'slum renovation', water projects, and roads," he said.

"Indeed, steel demand from infrastructure has outstripped demand from housing, which is a new thing this year. There is also the gargantuan urbanisation program, still in gestation."

China has seen a rise in worker disputes amid a rapid growth over 20 years

Managing expectations seems to form a large part of the Chinese government's economic game-plan.

Last Thursday, the Chinese Foreign Minister Lou Jiwei said that a growth rate of 6.5% this year would not be a 'big problem'. He said the target was 7%.

China's Xinhua News Agency later claimed that Mr Lou said the target was 7.5%, fuelling confusion over what the government really believes is a tolerably low rate.

At Monday's Beijing news conference, officials said that the government's bottom line for tolerating slower growth "is definitely changeable, it won't be fixed at one point".

"Two years ago, most would have never believed that panic wouldn't have swept the government with such a low print," Standard Bank's Jeremy Stevens said.

"Yet, fast-forward to 2013 and 7.5% is an achievement. Remarkable."

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Broker Oriel Eyes Merger Amid Weak Trading

By Mark Kleinman, City Editor

Oriel Securities, one of the most prominent names in the City's broking sector, is casting around for a merger partner amid continuing pressure on industry revenues.

Sky News understands that Oriel, which is led by Simon Bragg, its chief executive, has in recent weeks begun holding discussions about a tie-up with Panmure Gordon, another mid-cap broker, according to people familiar with the situation.

Oriel, which has a multi-million pound loan outstanding from HSBC and like other brokers has been hit hard by the weak trading environment since the financial crisis, has also been in talks with other firms said to include CIBC, the Canadian bank, about a potential deal.

The talks between Oriel and Panmure Gordon are at an exploratory stage and it is far from certain that they will progress any further, sources said on Monday.

Panmure's chairman, Ed Warner, and chief executive, Philip Wale, are understood to be on holiday at the moment, suggesting that further discussions are unlikely to take place in the coming days.

The discussions with CIBC are logical because it distributes Oriel research in North America.

A major round of consolidation has been expected in the industry for several years. Some brokers, such as Seymour Pierce, succumbed to the downturn, falling into administration and being carved up earlier this year.

Oriel has had a long-standing relationship with HSBC but is understood to pay a high coupon on its loan from the bank.

In February, the broking firm lost its chief executive when David Knox stepped down amid "strategic differences" with other executives. Mr Bragg, who holds a big chunk of Oriel's shares, took over from him.

Oriel has around 100 employees and boasted in April that it had raised more than £1bn for clients during the first quarter of the year.

Last month, the Financial Times reported that several rival brokers were in talks about combining their back office operations in an effort to save costs.

People close to Oriel said the merger talks were not being conducted from a position of weakness but that profits had recovered strongly during the first half of the year and that a tie-up was "not a must-do deal".

Oriel and Panmure declined to comment.

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New London Airport Shortlist Revealed

By Enda Brady, Sky News Correspondent

Boris Johnson has unveiled a shortlist of three locations on which a new London airport will be built.

He put forward his outer Thames Estuary, artificial island plan - dubbed "Boris Island" - for a new four-runway hub airport in a report published on Monday.

He also said that a new, four-runway airport on the Isle of Grain on the Hoo Peninsula in Kent - a plan already outlined by architect Lord Foster - should be considered and was his first choice.

And Mr Johnson's third proposal for a four-runway hub would be at Stansted in Essex, where the existing airport would be expanded.

Mr Johnson's plans, which rule out expansion at Heathrow airport in west London, will be submitted later this week to the Government-appointed Airport Commission headed by Sir Howard Davies.

A list of 20 options were whittled down to the final three.

Mr Johnson said that a new hub airport would be able to support more than 375,000 new jobs by 2050 and add £742bn to the value of goods and services produced in the UK.

He said a new hub airport could be delivered by 2029, with a hybrid bill being passed by parliament to secure approval for the airport, the surface access and the acquisition of Heathrow.

He also wants to shut Heathrow at a cost of £15bn and create a new London borough for 250,000 residents, with housing and a university.

"This is a global race and we can still win it," Mr Johnson told reporters as he unveiled the plans at City Hall.

"Ambitious cities all over the world are stealing a march on us and putting themselves in a position to eat London's breakfast, lunch and dinner by constructing major airports that plug them directly into the global supply chains that we need to be part of.

"Those cities have moved heaven and earth to locate their airports away from major centres of population in areas where they have been able to build airports with four runways or more."

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