BusinessDay 26 Feb 2018

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Monday 26 February 2018 FT C002D5556 BUSINESS DAY FINANCIAL TIMES A7 Crunch Brexit talks hint at compromise within Conservative factions EU leaders push Theresa May to provide more clarity on Britain’s approach to Brexit GEORGE PARKER Theresa May’s Brexit inner cabinet ended eight hours of talks on Thursday night with signs that the factions in her top team have stitched together a fragile compromise on a plan for Britain’s future EU relationship. But the prime minister’s respite over Brexit was brief after it emerged that Jeremy Corbyn will shift Labour’s position on Brexit on Monday, arguing that — if the party were in government — it would seek to keep the UK in a customs union with the EU. If Labour sides with pro-European Conservatives, Mrs May could be forced by the House of Commons to negotiate to stay in the customs union, a move that she has rejected and which would outrage Tory Eurosceptics. The talks at Mrs May’s Chequers country retreat ended with Brexiters proclaiming that Britain was on course to make a clean break with the EU. “Divergence has won the day,” said one cabinet source. But pro-Europeans also insisted that the talks had gone well. One person in the room said it would be wrong to say that divergence had “prevailed”, adding: “It was genuinely positive and substantial.” Another person at the Chequers meeting said: “It all finished rather positively. It seems like everyone thinks they got what they wanted.” Asked about the Chequers meeting on Friday, Jean-Claude Juncker, EU commission president, said he would not comment until he knew the “exact outcome”of UK ministers’ talks. “I know that there was a meeting Latvia’s embattled central bank governor Ilmars Rimsevics has claimed that he is the victim of a concerted campaign by several banks to have him removed from his position. Mr Rimsevics suggested that the bribery accusations against him had been manufactured by banks unhappy with his moves to improve transparency in the country’s 2m-strong outsized nonresident banking sector. “I just vehemently deny [these allegations],” the member of the European Central Bank’s governing council said in an interview with the Financial Times. “I could only guess that I have been a very inconvenient public figure for several financial institutions in this country, thus making them for an extended period of time try to gather some evidence or [organise] provocations in order with Theresa May in Chequers last night. I haven’t seen the results so I can’t comment on it,” he told reporters in Brussels, adding: “I am not a British prime minister, it would be good for Britain if I was.” Mark Rutte, prime minister of the Netherlands, also remained tightlipped but promised to keep bringing “difficult messages” to the UK prime minister, saying he would ask Mrs May “to be as clear as possible on what she wants to achieve on the second phase of negotiations”. Mrs May will give a public exposition on her approach to Brexit in a speech next week, although there are already signs that Brussels is likely to reject outright her vision of a future trading relationship. The 11-member Brexit cabinet committee was said by those at the Chequers meeting to have endorsed a proposal dubbed “Canada plus plus plus” by David Davis, the Brexit secretary. Under the plan, Britain would seek to negotiate a free trade agreement similar to the EU-Canada deal, but then try to embellish it by securing better access to the single market for goods and services through close regulatory co-operation. Brexiters seized on the broad agreement at Chequers that Britain should be able to set its own rules and regulations, allowing an “ambitious managed divergence” with the EU over time. But Remainers, led by Philip Hammond, the chancellor, insisted that the starting point should be that Britain and the EU would have high levels of alignment, with some sectors such as automotive and chemicals likely to be fully aligned with EU rules. Latvian central bank governor accuses banks of trying to oust him Ilmars Rimsevics tells FT that bribery allegations are ‘totally ridiculous’ NEIL BUCKLEY Berkshire Hathaway gains $29bn on back of US tax reforms World Business Newspaper Page A9 to remove me.” He added: “It is a well-orchestrated action in concert among several individuals and banks who have served non-resident clients at various times . . . to whom I have become a burden.” In events that have rocked the Baltic republic, Mr Rimsevics was detained by police last weekend before being released on bail on Monday. The country’s corruption prevention bureau said he was suspected of soliciting and receiving a bribe of at least €100,000, from a financial institution not currently functioning in Latvia. Separately, Grigory Guselnikov, main shareholder and chairman of Norvik Bank, Latvia’s eighthbiggest lender, alleged in an interview with the Associated Press on Monday that Mr Rimsevics had personally, or through intermediaries, tried to extort bribes from Continues on page A8 Theresa May’s inner Brexit cabinet gathered at Chequers on Thursday to hammer out a strategy for future ties with the EU European leaders deny link to Manafort in Mueller investigation Former Italian prime minister, Polish president and Austrian chancellor reject allegations SHAWN DONNAN, DEMETRI SEVASTOPULO, JAMES POLITI Three prominent former European leaders have denied they were paid to lobby on behalf of Ukraine by former Trump campaign chairman Paul Manafort after US prosecutors said he had funneled more than €2m to a group of European politicians in a secret campaign to soften Kiev’s image in the west. Romano Prodi, the former Italian prime minister and European Commission president, Alfred Gusenbauer, the former Austrian chancellor, and Aleksander Kwasniewski, Poland’s former president, all said on Saturday that they had been big backers of stronger EU-Ukraine ties in 2012 and 2013 when Mr Manafort’s secret lobbying campaign was allegedly underway. But all three denied that they had received any funds from Mr Manafort, who has been accused by US special counsel Robert Mueller of stashing millions of dollars offshore to avoid taxes and finance a secret lobbying campaign that targeted both US and European policymakers. As part of that lobbying campaign, Mr Manafort is accused of financing the creation of a secret group of senior former European leaders known as the “Hapsburg Group” that was led by an unnamed former European chancellor, according to court documents filed on Friday. Disclosures filed with the US justice department show that Mr Gusenbauer, who served as Austria’s chancellor from 2007 to 2008, Mr Kwasniewski and Mr Prodi all took part in meetings with members of the US Congress in 2013 on behalf of the European Centre for a Modern Ukraine, a Brussels-based group that US prosecutors allege was at the centre of Mr Manafort’s secret lobbying scheme. Those meetings were organised by two lobbying groups that were working with Mr Manafort and Richard Gates, one of his top associates, at the time. Mr Gates, who served as Mr Trump’s deputy campaign chair, on Friday pleaded guilty to conspiracy charges related to his and Mr Manafort’s work with Ukraine as part of a plea deal that increases the pressure on Mr Manafort to cooperate with the Mueller investigation into Russian meddling in the 2016 election. In a statement, Mr Prodi said he Trump’s protection plan to keep ‘competitor’ China at bay Page A10 backed a campaign in 2012-13 for the EU to sign an “association agreement” with the then pro-Russian government in Kiev of Viktor Yanukovych. “Such a commitment translated into numerous meetings and public speeches (some of them regularly paid), which took place in a variety of European capitals. These are serious and perfectly consistent initiatives for a former president of the European Commission,” his office said in the statement. “President Prodi denies both to have played a role in any lobbying effort and to be part of a secret lobby. Thus, he did not receive any money for these activities,” the statement added. Mr Gusenbauer told the Austrian Press Agency that he had never worked for Mr Yanukovych or his Party of Regions, which Mr Manafort was long associated with. His work in 2012 and 2013 included meetings and events across Europe and in the US and was only intended to bring Ukraine closer to Europe, he said. He stopped that work in 2013 when it became clear it was futile. In interviews with Austria’s Die Presse newspaper and the BBC published on Saturday he also said he had only met Mr Manafort a few times for coffee. “I was not aware of the fact Mr Manafort was financing this activity and of course I was also not connected to his activities within the Ukraine,” Mr Gusenbauer told the BBC. Mr Kwasniewski told Onet, Polands’ largest web portal, that he had known Mr Manafort since 2012. But he said: “No money was in play. I had no financial or political agreements with him. This is some sort of misunderstanding.” “In the years 2012 and 2013 many debates and conferences were arranged on the topic of Ukraine,” he said. “I took part in them, sometimes with Prodi, sometimes with Gusenbauer. Of course, we received fees. Maybe Manafort paid for them through his firms? But these were public, open debates.” Also identified in disclosures filed last year with the US justice department by two lobbying firms – the Podesta Group and Mercury Public Affairs – was former Ukrainian president Viktor Yushchenko. But Mr Yushchenko could not immediately be reached for comment. In a statement, Mercury said it was cooperating with Mr Mueller’s investigation. “While [Mr Gates] and others involved with this matter may have acted criminally and tried to hide it, we have acted appropriately, following our counsel’s advice from the start,” the group said. Tony Podesta, the founder of the Podesta Group, did not immediately respond to a request for comment. According to the indictment filed on Friday by Mr Mueller’s prosecutors, Mr Manafort’s lobbying scheme led him to use four offshore accounts to wire more than €2m to pay a “super VIP” group of former European leaders. The goal was for the group, managed by a “former European chancellor” working with Mr Manafort to be “politically credible friends who can act informally and without any visible relationship with the Government of Ukraine”, the indictment charges. “The plan was for the former politicians, informally called the ‘[Hapsburg] group’, to appear to be providing their independent assessments of Government of Ukraine actions, when in fact they were paid lobbyists for Ukraine,” prosecutors wrote. Paying the European politicians to lobby is not a crime under US law. But the indictment alleges Mr Manafort and Mr Gates illegally hid their lobbying scheme for years and failed to report they were working for the Ukrainian government. Mr Manafort also faces conspiracy and money laundering charges as well as charges of lying to investigators. Among the things Mr Gates acknowledged with his guilty plea on Friday was that he and Mr Manafort sought to hide their work with Mr Yanukovych’s government when they were first approached by investigators in August 2016 following news stories out of Ukraine disclosing payments to Mr Manafort. But Mr Manafort has insisted all along that he has done nothing wrong. “I continue to maintain my innocence,” Mr Manafort said in a statement issued on Friday. “I had hoped and expected my business colleague would have had the strength to continue the battle to prove our innocence. For reasons yet to surface he chose to do otherwise. This does not alter my commitment to defend myself against the untrue, piled-up charges contained in the indictments against me.”
Monday 26 February 2018 A8 BUSINESS DAY C002D5556 FT Robert Mueller files new charges against former Trump associates Indictment includes accusations Paul Manafort and Richard Gates filed false tax returns SHAWN DONNAN AND Robert Mueller, US special counsel, has filed new fraud and tax charges against Donald Trump’s former campaign manager and an associate, increasing pressure on two important figures in his investigation into Russia’s meddling in the 2016 election. In a grand jury indictment unsealed on Thursday, Mr Mueller’s team accused Paul Manafort and Richard Gates of not reporting tens of millions of dollars in income from their political work in Ukraine over more than a decade to US tax authorities and of hiding it in a web of companies in Cyprus and other offshore jurisdictions. Prosecutors charge that Mr Manafort, with Mr Gates’ help, then NATIONAL NEWS used properties he bought with those funds as collateral to fraudulently obtain a series of mortgages worth millions, lying about his income and debts to overcome questions from banks. Altogether, the indictment charges, some $75m moved through the offshore companies involved, including $30m in income for Mr Manafort alone. The pair, prosecutors charge, also fraudulently secured more than $20m in bank loans. The 32-count indictment accuses the pair of filing false tax returns and failing to report overseas bank accounts. Each is also accused of bank fraud related to loans taken out by Mr Manafort against properties he owned in New York. None of the charges relate to either man’s work for the Trump campaign in 2016. But they stretch from 2006 to the present and include the period during which Mr Manafort was leading the campaign with Mr Gates’ assistance. The charges are the latest allegations that the Mueller team has levelled against Mr Manafort, who has previously pleaded not guilty to others that include tax evasion and money laundering. Latvian central bank... Continued from page A7 him several times. Mr Guselnikov has made similar allegations against an unnamed senior Latvian official in a complaint with an arbitration arm of the World Bank. The claims came days after ABLV, the country’s third-biggest bank, was accused by the US Treasury of “institutionalised money laundering”, including handling transfers to entities linked to North Korea’s nuclear programme. Mr Rimsevics said he had no idea which banks and how many were involved in a campaign against him. But he suggested that it was a response to initiatives to make banks undergo audits by US law firms in 2016 and 2017, reduce deposits held by those not resident in Latvia and “open their books to the US regulator”. This had “reduced the income and profit” and led to the closure of some banks’ US dollar clearing accounts with US commercial banks. Latvian banks have been implicated in a series of money laundering scandals involving funds from former Soviet republics. Under international pressure, Riga has been seen as making more concerted efforts to clamp down on such activities since 2016. Mr Rimsevics said claims that he solicited bribes from Mr Guselnikov or Norvik Bank were “totally, totally ridiculous”, though could not exclude that his name had been used improperly by third parties. He said some meetings described by the Norvik owner never took place. The central bank governor confirmed that a 2010 photo published this week of him sitting beside Dmitry Pilshchikov, then head of a Russian military technology company later sanctioned by the US, was genuine. But he said he was seated by chance next to the Russian businessman, with whom he was not acquainted, during a salmon fishing holiday in Siberia. “This picture is very well known to Latvian internal security officers,” Mr Rimsevics added, saying that its publication was “another attempt by people to defame me and screw up my reputation”. Addressing a Norvik arbitration complaint that accuses Latvian authorities of damaging the bank through unfair regulatory actions, Mr Rimsevics said the complaint had no foundation. Oliver Bramwell, the Norvik chief executive, told the FT this week that the bank had informed the UK’s Serious Fraud Office last August of its concerns; Mr Guselnikov has British citizenship. But after the SFO did not act during a three-month period, Norvik’s owner took his complaint to Latvian police and arbitration. Mr Rimsevics said that clearing his name would be “very, very difficult”. Prime Minister Shinzo Abe wants reform but is determined to allow only guest workers © AP Japan plans to ease visa rules for skilled workers Abe addresses labour shortages but stands firm against permanent immigration ROBIN HARDING Japan plans a review of visa rules by the summer as it seeks more skilled foreign workers to overcome increasingly severe labour shortages. The government says it will consider an expansion of visa categories and easing of rules. The main target is technology professionals but it will also look at sectors with severe labour shortages such as care, construction, transport and agriculture. The review shows how ageing Japan’s urgent need for workers is forcing it to rethink longstanding taboos. However, Shinzo Abe, prime minister, is determined to allow only guest workers, not permanent immigrants. That will limit the potential economic impact and raises questions about Japan’s desirability as a destination for the highly skilled. “My government has no intention of adopting a so-called immigration policy. We are sticking to that point,” Mr Abe said as he launched the review. Allegations of a massive fraud that rocked the UK tech scene in 2012 are finally about to get a full public airing, as the former chief financial officer of UK software company Autonomy goes on trial in San Francisco on Monday. Sushovan Hussain is facing charges that he falsified Autonomy’s accounts and made bogus statements to investors and regulators to inflate the company’s performance. The 15 counts of conspiracy and wire fraud carry a potential penalty of 20 years’ imprisonment. Mr Hussain denies the charges. John Keker, his lawyer, has said that the former executive acted “with the highest standards of “The preconditions are an upper limit on the duration of a stay and a basic refusal to let family members accompany a worker. With that, we want to come up with concrete proposals for reform by this summer, focusing on the sectors with greatest need.” The number of foreign workers in Japan has surged during the past five years as a strong economic recovery boosts demand for labour and an ageing native workforce reduces supply. Japan’s unemployment rate is down to 2.8 per cent and the ratio of open jobs to applicant is 1.59, the highest since the early 1970s. There were 682,450 foreign workers in Japan in 2012, the year Mr Abe was elected to his second stint as prime minister, according to the justice ministry. By 2017 the number had almost doubled to 1,278,670. About a fifth of the expansion in Japan’s labour force under Mr Abe is foreign workers. However, more than half of the growth in numbers came from loopholes in the visa system, notably honesty, integrity and competence”, and that the case “does not belong in a US criminal court”. Autonomy was at the centre of a barrage of claims and counter-claims after Hewlett-Packard, the US tech conglomerate, wrote down about $5bn of the $11.1bn it paid for Autonomy only a year after the acquisition. Meg Whitman, HP’s former chief executive officer, blamed Autonomy’s management for creating false transactions to overstate the company’s performance. Mike Lynch, the UK company’s founder and former chief executive, has maintained that HP levelled the fraud claims to cover up its own later mismanagement of the business. Autonomy’s remaining operations were students working part-time and socalled “technical interns”, who are theoretically in Japan for training but more often doing low-skilled factory work. Neither category provides a stable source of labour for shortage sectors such as construction and nursing homes. Business groups, under growing pressure to raise wages to attract native workers, have been lobbying the Abe government to offer more work visas. “Basically we are looking at revising the system for specialist and skilled workers,” said Toshimitsu Motegi, minister of state for economic and fiscal policy. He said that would include looking sector-by-sector at the minimum necessary skill levels. Japan has struggled to attract highly skilled foreign workers given steep barriers of language and culture as well as a difficult path to permanent residency or citizenship. Only 5,494 workers have arrived under a points scheme aimed at scientists and business executives since it began in 2015. Autonomy CFO trial to shine light on HP deal Criminal case comes ahead of UK civil suit claiming $5.1bn damages RICHARD WATERS eventually shed last year by Hewlett Packard Enterprise, a successor company to HP, and are now part of MicroFocus, which has taken over as the UK’s largest listed tech company. The criminal trial is a prelude to a civil suit that HP has lodged in the UK against Mr Lynch and Mr Hussain claiming $5.1bn in damages. Mr Lynch has counter-sued, seeking $160m for what he claims were lost investment opportunities due to reputational damage caused by the fraud allegations. The US trial, taking place in Federal Court, is set to turn on transactions Autonomy booked in the US that prosecutors claim were designed to make up for persistent shortfalls in its sales at the end of each quarter. US lawmakers push for crackdown on foreign companies Multinationals face being forced to divulge sensitive information about contacts BARNEY JOPSON AND DEMETRI SEVASTOPULO US lawmakers are pushing legislation that would force foreign business leaders to divulge sensitive information about their contacts with US government officials in a crackdown on lobbying spurred by concern about Russian political meddling. Special counsel Robert Mueller’s probe into Russian interference has injected new life into a bill causing concern among non-US multinationals because it could class their employees as “foreign agents” subject to stringent American disclosure requirements that could put them at a disadvantage to US rivals.. The bill would strengthen an obscure 1930s law aimed at Nazi propagandists that was thrust into the spotlight by Mr Mueller’s October indictment of Paul Manafort, US President Donald Trump’s former campaign manager accused of failing to register as a foreign agent lobbying for a Ukrainian political party. Lawyers say the legislation, which would modify the 1938 Foreign Agents Registration Act, would heap new disclosure requirements on the staff of any non-US company meeting federal officials; on American lobbyists providing services to foreign companies; and on US businesses lobbying for their own foreign affiliates. Its effect would be “chilling”, according to a Washington-based executive at one European company. “Your competitors would have extraordinary transparency into what you are doing in the US.” Multinationals with big US operations — including the likes of engine maker Rolls-Royce and German manufacturers Bayer and Siemens — have sent staff to Capitol Hill to express their concerns about the legislation in its current form, according to people familiar with the bill. Nancy McLernon, president of OFII (the Organisation for International Investment), a trade group for non-US companies lobbying for changes to the bill, said it would “lump US employees of a Canadian auto-parts company or Germany-based grocery chain in with agents of foreign governments”. The Republican-backed bill, which passed a hurried committee vote in the House of Representatives in January, is sponsored by congressman Mike Johnson and the senator Chuck Grassley, who have said it would close “loopholes exploited by lobbyists of foreign entities to conceal their work”. While the bill’s progress is making business nervous, its chances of being put to a full vote are uncertain. One person close to House Republican leaders said it would not be brought up in the near future, while Mitch Mc- Connell, the Senate majority leader, has not taken a position on the bill.
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BusinessDay 26 Feb 2018

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