Watchdog Magazine | Winter Edition
In This Edition Of
Features 2 | Co-op – gross incompetence, or simple greed? 6 | Free Yourself from Smoking with Electronic Cigarettes 10 | Help to Buy scheme
Welcome to Watchdog Magazine, a publication dedicated to spreading awareness about scams being perpetrated across the UK.
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Watchdog Magazine is here to combat fraud by exposing the tricks used by fraudsters and con-artists to dupe their victims. We report on any and all types of fraud so that our readership has every bit of knowledge necessary to avoid being scammed by the unscrupulous thieves that are out there.
22 | China friend and foe 28 | Cheap Air Fare Scam
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Watchdog Magazine | Winter Edition
Co-op – Gross Incompetence, or Simple Greed? You can’t pick up a newspaper, or for that matter switch on a TV, without reading or hearing about the Co-operative Bank. Posting a £634m loss last year, and a further £709m loss this half year, what on earth has happened, seemingly overnight, to destroy the financial performance of what is arguably Britain’s last bastion in ethical banking?
ethical brand which didn’t invest in things like the arms trade or overseas sweat-shops, and furthermore wasn’t driven by greedy shareholders. In fact the mortgage portfolio was so small banking staff knew customers who had missed payments by name! So, what on earth could have brought catastrophe to this idyllic business?
Born in 1872 as the Loan and Deposit Department of the Co-operative Wholesale Society, the bank grew to become a warm and friendly alternative to other aggressive and relatively pricey high street banks. In 1974 they offered free banking to personal customers who remained in credit, and throughout the following years the offering grew to current accounts, credit cards, personal loans and mortgages, all sold under an
You may or may not recall the Co-op / Britannia merge back in 2009. Britannia traces its heritage to a building society which first opened for business in Leek in 1856, and went on to merge with various other societies and bits of banks right through until April 2009 when it was in turn merged with the then Co-operative Financial Services(CFS). The combination, toted as a ‘supermutual’ and an extension of Co-op’s
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ethical branding, would see one mutual running a banking business across three sites – Manchester, Leek and Plymouth. But was there any thought, planning, consideration or due diligence conducted throughout this merger – seemingly not! We can only assume that the Chief Financial Officer at the time, Barry Tootell, didn’t put any thought into this, as he probably would have realised what a crock of proverbial Britannia was. Although it liked to harp on about being ethical too, Britannia was actually built on an operating model similar to that of HBOS, and had a hunger for the risky commercial property market and high loan-to-value buy-to-let mortgages. Had there been any scrutiny of the figures whatsoever by anybody with any intelligence the deal would have been off the cards. It was only months before
Watchdog Magazine | Winter Edition
the deal was struck that Britannia was forced to write off some £40m of its specialist lending portfolio, threatening its dividend. Britannia’s exposure to the worst parts of the property market was strikingly obvious to analysts. Odd then that Co-op accepted Britannia’s version of the truth as it described its commercial property portfolio as “low risk”. On the 21st January 2009 Co-op and Britannia proposed a merger, and by the 1st of August 2009 the Britannia Building Society was legally dissolved. As it transpired, the Chief Executive of the troubled Britannia, Neville Richardson, became the Chief Executive of the new and larger CFS. Subsequently, as Co-op entered talks with Lloyds over the Verde deal in 2011 Watchdog Magazine | 3
Watchdog Magazine | Winter Edition
(a 600+ branch network and mortgage portfolio the European Commission was forcing Lloyds to sell) Neville resigned, promptly disappearing with £4.6m for his final year, which included a £1.4m handshake for loss of office. So far, looking past the costly financial shortcomings of course, I can kind of understand the underlying strategy as one which would fit in with the general ethos of the brand – “let’s stick two ethical mutuals together to make a bigger one”. But what happened next exposed just how incompetent CBG’s senior staff had been. Barry Tootell was appointed acting Chief Executive upon Neville’s departure and, possibly having caught a whiff of the huge quantity of sterling notes shoved down Neville’s pants as he left, proceeded to enter the Co-op into a bid for the Verde business. Now, as Neville received a loss of office payment, it is clear that he was asked to leave, and as it is widely rumoured within the bank that Neville opposed the Verde deal, we could assume that the Group board decided against Neville and gave him the flick. Looking past this though, how does Verde fit in with the ethical brand and ethos of a bank which was offering free services to its ‘in credit’ customers back in 1974? Why would you want to take a huge chunk of another bank on, having not tidied up the mess created by the Britannia merger back in 2009? Still to this day the systems are disparate and poorly managed – they hadn’t even re-branded all the branches yet! Could it be that Neville knew there would be close scrutiny of Co-op’s existing business from bank regulators, and that the mess created by Britannia would be uncovered? Is that why he took the money and ran? Or worse, could it be that Co-op Group board knew of the issues and hoped that taking on a massive portfolio like Verde would cover the gaping financial holes already in existence? Or my final and favourite theory, that this bunch of numpties didn’t have a clue what they were doing right the way through the entire Britannia and Verde disaster, and simply thought they were expanding their ethical bank to become a competitor in an otherwise shareholder driven market. What happened next was kind of like health and safety inspectors doing a spot check and finding chemical weapons in your garage. Throughout the bid for the Verde business the bank worked closely with the FSA who, understanding the 4 | Watchdog Magazine
size and complexity of the deal on the table, and of course the political and social implications of splitting up Lloyds (one of the naughty banks) and giving it to Co-op (a nice friendly bank), quite rightly wanted to know how the Co-op was dealing with its current book. With poorly regulated banks bringing on the demise of the British economy a few years earlier, political stakeholders needed a phoenix to rise from the ashes, create competition for the larger shareholder driven banks and somehow clean up some of the mess caused by Lloyds and RBS in the first place. But as the then FSA and Lloyds seniors began poring over the Coop’s figures it quickly became apparent that they didn’t know what they were doing. Independent officials remarked that the Co-op, as well as barely having started the Britannia integration and also not really understanding the implications of such a project, did not have the skills to manage the much larger integration of the Verde business. And then out came a string of damning management blunders which set the world’s media alight. Throughout the Britannia merger the Co-op had initiated projects to build a single IT system to service both heritage portfolios, which managed to run up a bill of £250m. As Verde came with its own IT system, Co-op was forced to writeoff much of this cost. What a complete waste of time and money – I bet the executives to blame don’t have that on their CV do they! Of more concern was the vast capital hole in the business. All that risky commercial property, buy-tolet mortgages, corporate loans, the list goes on, which was acquired during the Britannia merger was all poorly provided for in terms of capital. Upon uncovering this dirty great hole in Co-ops figures regulators quickly sanctioned the bank and ordered it to raise more capital. To put this into perspective, the Verde
business came with assets of £60bn, which following this blunder had to be more than halved. As the long string of incompetent management blunders continued to be uncovered by the regulators, executives began to leave one by one. Even the Group Chief Executive Peter Marks stepped down, along with the bank’s Chief Executive Barry Tootell and a handful of other IT and Finance related executives. It was plain for all to see – Verde was off the cards altogether. Finally the Co-op’s yearend figures were published and the true cost of the Coop’s poor grasp of banking was realised as they posted a £634m loss, tripling impairment losses to £469m. So where did all this begin? Seems to me to be the Britannia merger! Could it be the greed of a few men that brought disaster to so many? Is Neville Richardson to blame? Did he know what he was doing throughout the merger, or was he just as blind to the dirty great capital holes in Britannia? Neville is due to appear in front of the Treasury Select Committee this Wednesday as MP’s call for an inquest into the collapsed Verde deal and mount pressure on Richardson to hand back part of his £4.6m final year salary. Speculation has it that he will vehemently defend his role in the whole disaster – and wouldn’t you? Last Thursday the Co-op posted a half year loss of £709m amid plans for £1.5bn of capital restructuring, and is expected to announce a further £500m in loan losses for the rest of the financial year. In October it will outline the full terms of its financial restructuring which will see the group retain the majority share in the bank while bondholders holding £1.3bn of debt will take a hit. It is yet to be seen whether the Group’s long term commitment to the bank holds any certainty as it is expected to post losses for years to come.
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Watchdog Magazine | Winter Edition
Researchers expect traditional cigarette smoking to cause 1 billion deaths during the 21st century through cardiac and lung disease. In the UK alone, 114,000 people die a year from smoking-related illnesses. Smoking causes 90% of lung cancer cases but can cause many forms of cancer throughout your body. Other conditions involving your heart and breathing difficulties are often caused as well. But, it’s not only damage to yourself you should be concerned about, smoking in pregnancy and second hand smoke are also still big issues. In recent years the amount of smokers has decreased due to bans and more pro-active advertising to try and stamp it out. There are many aids you can use to try and stop, such as, nicotine patches, gum, TruVape electronic cigarettes, hypnotherapy & many other avenues to
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look at. Electronic cigarettes, such as TruVape electronic cigarettes, have been marketed in recent years as a safer habit for smokers. Dr Konstantinos Farsalinos from Greece presented his findings on electronic cigarettes versus traditional cigarettes at the 2012 European Society of Cardiology in Germany this past weekend. Dr. Farsalinos conducted a study to compare the acute effects of regular cigarettes on cardiac function with those of electronic cigarettes, since they are growing in popularity and becoming an alternative habit. Miami Beach, FL (PRWEB) August 27, 2012. The study measured the myocardial function in 20 healthy young daily smokers aged 25-45 before and after smoking one traditional cigarette against 22 daily experienced e-cig users of similar age, before and after using an e-cig for 7 minutes. The researchers found that smoking one single tobacco
cigarette led to a significant acute myocardial dysfunction while the electronic cigarette had no acute adverse effect on cardiac function. Smoking a tobacco cigarette had important haemodynamic consequences, with significant increases in systolic and diastolic blood pressure and in heart rate. In contrast, electronic cigarettes produced only a slight elevation in diastolic blood pressure. Heart disease is the main cause of morbidity and mortality in smokers. Forty percent of deaths in smokers are due to coronary artery disease alone. Electronic cigarettes, or e-cigs as they are popularly known, are a high-tech, non-flammable solution for obtaining nicotine without exposure to tobacco. Smokers enjoy a dose of vaporized liquid nicotine solution and exhale water vapour that resembles a puff of smoke,
Watchdog Magazine | Winter Edition
Free Yourself from Smoking with TruVape Healthier and Cost Effective Electronic Cigarettes Watchdog Magazine | 7
Watchdog Magazine | Winter Edition
providing a physical sensation and flavour akin to inhaled tobacco smoke. A TruVape electronic cigarettes contains no tobacco, smoke, tar or carcinogens — the most detrimental components of standard cigarettes.
Our e-liquid is carefully sourced from the best tobacco leaves from around the world; we combine these with natural flavours to create the prefect tastes while still giving you the sensation of smoking. Unlike e-cigarettes that use synthetic flavourings, TruVape e-liquid has a longer lasting taste which creates a smoother e-smoking experience. We only use the finest ingredients from the most respected manufacturers so our customers can be assured of the quality of our products, these include: Propylene Glycol from American Dow’s and Glycerin form P&G Chemicals.
The liquids found in an electronic cigarette, after laboratory analyses, have shown to be less toxic than traditional cigarettes. Most studies found that electronic cigarettes have no nitrosamines, but the studies that did find nitrosamines in an electronic cigarette were at levels that were 500 1400 times less than the amount present in one tobacco cigarette. Meaning, if Free Yourself from Smoking with TruVape an electronic cigarette is used daily, for Healthier and Cost Effective Electronic four to 12 months, then the amount of Cigarettes: nitrosamines present will be the same as a single tobacco cigarette. Sky Throne Ltd TruVape, a UK-based company, is dedicated to providing premium quality electronic cigarettes and e-liquid to Europe and beyond. Our goal is to bring you, the customer, the latest advancements in e-smoking so you can enjoy world class products and great tasting e-liquid without many of the risks associated with traditional cigarettes. 8 | Watchdog Magazine
42A Market Street, Wigan, Greater Manchester WN1 1HX United Kingdom
www.tvcigs.com Email: shops@tvcigs.com Phone: (+44) 019 424 95 005
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Watchdog Magazine | Winter Edition
Help to Buy Scheme Short Term Fix, Long Term Disaster 10 | Watchdog Magazine
Watchdog Magazine | Winter Edition
House prices in July increased at their fastest rate in three years, according to new figures from Nationwide. The monthly index shows the price of houses in the UK rose by 0.8% last month and were 3.9% higher compared to the same period last year. The annual rise is the strongest since August 2010 and takes average prices to £170,825. It comes as some lenders and estate agents say they have seen improvement in the housing market, helped by Government initiatives. Nationwide’s chief economist, Robert Gardner said the latest figures provide “further evidence of an upturn in the housing market.”
He explained: “Signs of a modest improvement in wider economic conditions and further modest gains in employment are likely to be lifting buyer sentiment. “An improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as the Funding for Lending and Help to Buy schemes, are also boosting the demand for homes.” Mortgage rates across the market have plummeted since the Government launched the Funding for Lending scheme a year ago, giving lenders access to cheap finance.” (Sky News 02 August 2013)
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But are these government led initiatives really helping the economy? Financial Disaster – but who’s to blame? Are you, like me,wondering when this financial mess we are in is going end? Are you aware of how we got here or who is to blame? Tony Blair, Gordon Brown, the oil wars in Iraq and the terror war in Afghanistan, George Bush, ring any bells? Are you one of the masses pointing your finger at the banks whilst your government surreptitiously diverts blame and creates short term fixes to make things look better than they are? ‘Bankers get big bonuses’ they say – well, not completely condoning the multi-million pound executive bonuses, bankers work pretty damn hard. You need to be sharp, underhanded and work 24/7 to get anywhere even near the top. Would you do this for a normal wage? I wouldn’t expect so. And looking past the banks,are you aware of who has their hands in your pockets today? British Gas, Npower, EDF, 12 | Watchdog Magazine
Tescos, Sainsburys, Asda, ring any more bells? Do they pay their staff bonuses? Yes. Do they pay their top executives huge bonuses? Yes. Do they avoid paying tax? Of course they do. Everybody is out to make a fast buck, and your government is in their pockets. Where will you find retired politicians? Executive boards no less, sucking up huge pay cheques and bonuses. So why are we here? What we have is a systemic collapse of the financial system on an almost global scale, brought on by inadequate regulation of the financial services sector and over spending on pointless wars in the Middle East to satisfy the greed of the elite. Furthermore, whilst at the depth of our despair we find ourselves at the mercy of poorly regulated utilities companies and supermarket monopolies. And what did our government do? Oh that’s right, I remember, they poured all of our honest, hard earned tax payers’ money into the failing banks to bail them out.
Are banks to blame for all of this? Surely your finger should be pointing at your government. Not just the current one, or the one before, or one in another country, but all of them. How do we regulate government – well, we vote for them. So until everyone wakes up and realises that Labour, Conservative, LibDem, whatever they call themselves, are all rich descendants of the public school network writing meaningless manifestos with the single motive of quite simply getting in power and cocking things up more, I am afraid this mess is here to stay. Perhaps you’re of the older generation who has bowed out of work now and just votes Labour because it’s all you’ve ever done? Think you will have paid all your tax by the time you die do you? Nope, they take pretty much half of everything you’ve already paid tax on then too. The alternative – I’m not quite sure, but this can’t go on forever, surely?
Watchdog Magazine | Winter Edition
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Watchdog Magazine | Winter Edition
Mortgage Mechanics Let’s look at how mortgages work, seeing as that’s the focus here. When a customer is unable to keep up with their monthly mortgage subscription, for example through redundancy or long term illness, the bank will implement an arrears strategy which will ultimately end in the repossession and sale of the property. These strategies are common place and fairly generic amongst banks, usually allowing around three months of missed payments before legal action kicks in. Of course there are all kinds of forbearance treatments which can be utilised to help customers who would appear to be able to rectify their monetary issues in the short term, but ultimately the path ends in foreclosure. Where the property is worth less than it was originally bought for, there results what is known as a ‘shortfall’ or ‘loss’. Technically the consumer is responsible for this loss, but in the majority of instances things are so bad for the consumer that these funds cannot be recovered, and in almost all cases they are treated in the banks’ accounting for that financial year as a loss, directly impacting profitability. In the build-up to the Credit Crunch banks were handing out so called Ninja mortgages (No Income Job or Assets) to customers with only a few thousand pounds worth of deposit, all based on the fact that the market was rising at such a rate we could only be winners once we were helped onto a rung of the property ladder. Unfortunately, when the bubble finally burst, many were left with houses worth less than anyone would have expected, and the following redundancies and subsequent lack of cash left a good proportion of these consumers without the means to keep up the repayments on their properties. Where they could banks adopted forbearance strategies like switching capital repayment loans to interest only, capitalisation of arrears, term extensions and concessions to name a few. But with increased scrutiny by what was the Financial Services Authority, these treatments had to be curbed as they were deemed to be prolonging the inevitable, and as such detrimental to the consumer and the bank. Subsequently these cases have started to be forced through banks’ accounts as losses, and the focus has almost fully switched from booking new business to managing losses. Once bitten twice shy, the banks are now requesting large deposits in order to remove the risk of these losses should the market decline again. 14 | Watchdog Magazine
The deposit is the banks’ monetary insulation against losses arising from a decline in the housing market, and the absence of which contributed to the catastrophic financial disaster of 2007. With the expectation that the market could only rise, and a fast paced commission driven sales environment, not only did banks lend to customers with inadequate finances, but they also failed to cushion themselves against a decline by holding adequate capital. Now, as the Government pressures banks to lend more to consumers and small businesses, independent regulators are reducing banks’ ability to lend by increasing the amount of capital and provision they need to hold against loans. These capital deficits are impacting banks’ profitability
as we speak, with Barclays posting the most recent capital hole of £12.8bn. As Banks’ attempt to raise funds to fill these vast monetary gaps, it would seem that new lending should be the last thing on their agenda. So we find the banks stuck between a rock and a hard place. We need them to lend, but the deposits they require are unaffordable to us, and not only that, if they do lend to us they need to hold enough capital against our loans to insulate the world from any future financial disaster. This ultimately ends in banks posting huge losses for a few years until, in layman terms, ‘things sort themselves out’. So who got us here – I would not assume it was entirely the banks’ fault, as for one
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the government should have seen this coming and forced in some regulations to cushion us against a possible disaster a little earlier. Secondly, we were all party to the property market frenzy leading up to the crunch – we were betting against the market too. Estate agents contributed by over-valuing houses, we bought, put a laminate floor in and sold for a profit the next week, re-mortgaged to the hilt to buy lavish consumables etc etc. Who bailed the banks out? The Government - with your money. Who has their hands in your pockets now? Gas companies which are as yet poorly regulated by your Government, oil barons who are again inadequately supervised, supermarkets who have destroyed the high street, small businesses, choice and now have a monopoly on prices. Hey, let’s all get a water meter, then they can get 16 | Watchdog Magazine
their hands in their too with extravagant and unrealistic price hikes. It seems that in Rip-off Britain, anything goes, and we pretty much roll over and accept it. How do we fix what we have now? Over to Mr George Osbourne.
rate of 1.5%. Sounds good, but you need a 40% deposit. I’m not sure how first time buyers are going to find this kind of cash, so it appears those with money are safe, but the new generation are priced completely out of the market.
Help to Buy
So how do we solve this problem and kick start the economy then? Some tip the Help to Buy scheme as the perfect remedy to the situation, and looking at the numbers it’s quite easy to see why people are so interested. In short, the bank wants a 25% deposit, George will fund 20% of this with tax payers’ money, you provide the remaining 5% and the bank lends the rest. So, essentially, George is mitigating a risk of loss to the bank with tax payers’ money.
Unfortunately the requirement to provide a substantial deposit when buying a home has left the market somewhat stagnant. For example, say you need a 25% deposit for a £150k house, that’s £37,500. Let’s say you can afford to put away £100 a month to save for your deposit. That’s 31 years of saving! It’s easy to see why so many young people today feel that a mortgage is unobtainable. HSBC have just launched a flagship mortgage product which has an interest Sounds good? Well, the craftily marketed
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20% interest free loan is only interest free for five years. In year six it will charge 1.75%, and each subsequent year will increase by 1% plus the increase in Retail Price Index. Can you see interest rates staying as low as they are for that long? No, me neither, so after five years, along with your interest rate going up you will have to start paying interest on the 20% hand-out from Mr Osbourne too. Sustainable? No, I’m not so sure either. Looks more like a short term tool to boost the property market so that our current set of reprobates can serve another term as they appear to victoriously lead us from the deathly cold of a long and uncomfortable financial winter. What if the banks are forced to hold more and more capital, surely all these losses will lead to more redundancies? What if somebody eventually gets round to
regulating the utilities companies, in all probability there will be redundancies there too? Who knows what the economy will be like in five years, my bet is not much different from what it is now. In all honesty the only thing that’s keeping the whole system ticking over is a ridiculously low interest rate. If that went up there would be many more defaulting mortgages and the economy would decline further. It appears to me that, in insulating the banks against losses with tax payer’s money, we are gambling against an increase in the market just like we did during the credit crunch, which could potentially create another mini crunch in the not too distant future. The only difference this time is that instead of bailing the banks out afterwards, we are
putting the money down up front instead. Did you want to bail the banks out? Do you want to do it again? Do you have a choice? You should look to your government for the answer to that question. A. Banker Financial Services employee for 7 years with experience spanning subprime retail credit, debt collection, banking (in current accounts, credit cards and loans) and banking (in prime and sub prime mortgage portfolios), and with exposure at a high level of authority within several banks - and the important bit= none of which have received government bailouts.
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Group Captain Sir Douglas Bader was commissioned as an officer in the RAF in 1930 but after only 18 months he crashed his aeroplane and became a double amputee caused by “my own fault” in an aeroplane accident in 1931. Douglas was discharged from the RAF and after the outbreak of the Second World War, re-joined the RAF as a disabled pilot. Douglas was a member of 222 Squadron and was promoted to lead 242 Squadron. His skill as an aviator and contribution as an outstanding leader and fighter ace during WW2, along with his continuous attempts to escape prisoner of war camp after he was shot down, were immortalised in the book and film ‘Reach for the Sky‘.
The Douglas Bader Foundation was has enabled us to continue this inspiration – providing a wide range of formed following his death in 1982. support initiatives and information to the Douglas married Joan, Lady Bader in limb loss community. 1975. During the next six years he was a wonderful husband, step-father, father- Our original Board of Trustees consisted in-law and grandfather, resulting in many of those who had flown with him sidememorable times. His untimely death by-side, had become friends in POW aged 72 of a heart attack whilst being camps, had known him and worked with driven back from London by Joan caused him post-war in his civilian life and were a great hole in our lives. The concept family. Douglas was honoured in 1976 of the Foundation started around the with a Knighthood for his contribution kitchen table within 24 hours prompted and work on behalf of the disabled. The by the extraordinary numbers of people mission of the foundation is to continue who contacted us expressing how much Douglas’ work in conjunction with and on Douglas had been an ‘Inspiration’ to behalf of individuals with a disability. them whether able bodied or disabled, ‘A disabled person who fights back are and whether they had met him or not. not disabled….but inspired’. It is this Creating the Douglas Bader Foundation maxim that our charitable foundation Watchdog Magazine | 19
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established in Douglas’s name immediately following his death in 1982, seeks to replicate and develop. 2013 is our 30th Anniversary year. THE DOUGLAS BADER GRANT SCHEME This initiative provides practical support for the pursuance of achievements by those with disabilities. We look at all applications and, depending on the nature of the request, the scheme may help towards or provide the equipment, training, services, further education or other practical support required by the successful applicant. Our Grants have assisted countless disabled individuals and groups throughout the UK to achieve a variety of goals in diverse areas ranging from education, the arts, sport and recreation to small businesses. THE LIMB LOSS INFORMATION CENTRE A central resource information website for amputees, their families and friends, carers and health care professionals. www.limblossinformationcentre.com We aim to join up the support and information services currently offered to best pool resources and serve amputees in the most efficient and purposeful way. The recently launched forum is widely regarded as the best of its type and is managed by amputees for amputees.
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BADER BRAVES Supports children with limb loss and other physical disabilities by offering unique experiences and improving life-skills to increase confidence. The Douglas Bader Foundation has always acknowledged the importance of the children’s families and carers and, in supporting the children, also aims to benefit those people involved in their lives. • Fully Funded experiences for Bader Braves and Families • Young Aviators Day Running for three years this programme provides children with limb loss and children with other disabilities the opportunity to experience flight in a light aircraft. Our goal is to hold 10 days during the summer at Flying Clubs around Great Britain. This has been achieved to date with and average attendance of 140 per day which includes 26 Bader Braves their Parents and Siblings. • The Young Adventurers Programme provides a wide range of outdoor and indoor activities held to date at the purpose built Calvert Trust facilities at Lake Kielder and Exmoor. Average Attendance is 10 families of 4 which is the maximum catered for. We have held 3 Adventure weekends in the last 18 months.. • To date there are very few initiatives aimed specifically at helping children with limb deficiency and other disabilities and supporting their families. Watchdog Magazine | 21
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CHINA
Friend or Foe
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Watchdog Magazine | Winter Edition
In recent times our portrayal of China has been fairly negative. Some may say a little unfairly? We have witnessed a strong campaign from the ancient country of scams and fraudulent behaviour targeting the western world: Fake cosmetics, dieting pills that don’t do what they say on the tin, and, badly made wedding dresses, have all featured on watchdogmagazine.co.uk in 2013. China holds a unique position in the world where cyber-crime and a general disregard for intellectual property have a real home to thrive in; If you are scammed by the Chinese fraudsters, you are not going to get your money back; there is literally no chance. Despite this, their economic rise in the past decade has been a triumph for them. So much so that recently the UK chancellor and leaders of the EU have done their best to secure a piece of the China money pie. It’s not surprising; some of China’s provinces are beginning to approach GDP’s that are comparable to the entire UK. China’s citizens have seen their savings grow from $1 trillion USD to $7 trillion in the past decade. Wealth and jobs has transferred to Asia from the west since the early 2000’s and China has taken more than most of the countries enjoying the wests own economic handover. As their economic power grows, so does their investment within the UK. It’s hard to ignore the increasing examples of Chinese writing appearing within sports advertising in recent times. Heavy investment in Merseyside is expected to give the region a boost as China looks to take ownership of it’s way in to the UK for trade. The Liverpool and Wirral Waters projects are part of the multibillion Atlantic Gateway scheme much needed by the region. In the media spotlight, Nuclear power stations, 100% owned by the Chinese government, are looking as they are already a part of the UK governments idea of a future British skyline. It’s not just the UK they are buying out, development projects are popping up world wide, landmark property in the USA is being bought out, not to mention China is the proud owner of the largest holdings of US government debt in the world. The United States, in fact, owes more to China than it does to anyone else in the world. As China stands with an economy that boasts debt of only 30% of it’s GDP, compared to the west’s figures that hover around 100%, the west is now Watchdog Magazine | 23
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reliant on the Chinese. So much so that we no longer really seem to mention their business practices and human rights issues politically any more. But beneath the veil of capitalist revolution, China are leading a financial war against the dollar cultured west. By anchoring the value of the Chinese Renminbi to the US dollar, the Chinese have effectively managed to slowly drag down the value of the world’s reserve currency by providing products at cheaper prices. So cheap, the west cannot compete; all we have done is consume. The world are now enthusiastic about China’s new role. Russia and China now trade with each other without the dollar and the Chinese are setting up a global network via London and Europe to trade in the largely state controlled currency. The global picture could not be clearer than is set out by this map produced by the IMF in April 2009: Source: http://en.wikipedia.org/wiki/ File:Cumulative_Current_Account_ Balance.png | This file is licensed under the Creative Commons Attribution-Share Alike 1.0 Generic license. It shows the accumulative current account balance between 1980 and 2008. The transfer of wealth could not be more stark. The USA is clearly very vulnerable; whilst the US have been exporting their wealth and jobs, the US have enjoyed borrowing from the Chinese at very low interest rates. What if the Chinese decide they now want 10 percent? Why don’t they just do that now? Well, China would be foolish to crash a US economy when it holds large amounts of US government bonds. The place is heaving with dollars that the Chinese still see as something could hurt them if the American dream fails. $700 trillion in US derivatives threaten the world economy, but they may have a plan for that too. China in recent times are, it seems, buying up more gold than anywhere in world. It is currently unknown exactly how much they have due to a general distrust by economists that China doesn’t really give the rest of the world true figures to how much it has. An announcement by them is expected soon and some say the world is in for a shock when they do. The USD’s high liquidity is still keeping it strong globally, but things can suddenly change. Along with Russia, the financial 24 | Watchdog Magazine
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war comprises of a currency race to the bottom coupled with a hoarding of precious metals. Yuan backed by gold or silver are now possibilities that the Chinese have as backup should their dollar investments fail. Such an event would place the Chinese as being in control of the new de facto world currency. An achievement that would have been all down to using North America’s greed against them. The Chinese economic rise has been a display of financial genius. The prize is global power. Whilst the US struggle to fund their war efforts to keep it’s global crown, the US has resigned itself to the harsh reality about the Chinese. Here’s Fogel’s disturbing forecast in Foreign Policy: “In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China’s per-capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan as China moves “from a poor country in 2000 to a super-rich country in 2040.” We are witnessing a global paradox; ours along with the US’s trade with China is contrasted by the recent military flexing of muscle on both sides. Chinese media do not shy away from the subject of keeping up with US military development. The headline in the South China Morning Post (SCMP) reads[1]: “New US warships will prompt PLA to play catch-up.” It’s article goes on: “Beijing is closely monitoring the US’ development of two new, highly advanced marine warfare ships which will likely operate in Asia-Pacific in the coming years, several analysts say. Their deployment would prompt China to intensify efforts to accelerate the technological prowess of its navy, and ensure it could adequately defend against the sophisticated weaponry, said Li Jie , an analyst with the PLA Navy. The United States is expected to officially unveil next month the first ship in its Fordclass aircraft carriers, the successor to the Nimitz-class design. According to US Congressional documents, the nuclearpowered vessels can handle a quarter more aircraft sorties, and generate more power to support ship systems, all while requiring several hundred fewer sailors for its crew.” Watchdog Magazine | 25
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The Chinese are acutely aware that the USA are a military force to be reckoned with. They have been watching the US’s developments in it’s warship technology recently and have been quick to add some defensive rhetoric to the situation. Li Jie , an analyst with the Chinese PLA Navy told the SCMP: “Of course, it’s impossible for China to catch up with US warship-building technology within a few years, but at least Beijing will spare no effort in developing defensive weapons... The DDG-1000 will push China to develop its own electromagnetic rail gun system, which has been under development for decades, within 15 years.” 26 | Watchdog Magazine
“It’s the most challenging weapon for the PLA, because once the [US military] gets such a powerful spear … China at least should have a shield to defend itself,” Li said. In addition, tensions between their neighbours, Japan, are also rising over a set of small islands known as the Diaoyu islands. The Japanese, who call the islands Senkaku, had controlled the islands before the second world war since 1895. Japan regained control after the US handed them back to Japan in 1972 after it closed down the United States Civil Administration of the Ryukyu Islands which had been in place since 1945. It
is now thought there is oil there. This places the USA in a historically awkward position should military conflict break out; a possibility the Chinese are not ruling out. In December 2012, a Chinese surveillance aircraft flew over the Senkaku in what Japan described as the first official Chinese breach of its airspace since 1958. In the meantime, China unveiled it’s first nuclear submarine force in a display of the countries’ new found military confidence. So whilst Japan would not strike first due to it’s constitution, it’s a sign that there is a shift in the region. China are now making moves to change
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the landscape of power that had been fairly consistent since the downfall of the Nazi’s. Financially and politically, the scene is confusing and unclear; Osborne’s media smiles with Chinese investors may be the fog that blinds us from the straws falling on to the camel’s back. But for now, investment plans and world trade efforts with the Chinese compliment the favourable TV documentaries of the country as we are introduced more and more to this ancient culture. For now, at least, China are our friends.
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We all like a good deal and we all think that spotting a scam is easy. However, this slick looking site may not give you what you had hoped for. Cheapair-flights. com and a Daniel DeBrau has been the subject of complaints from ScamBook users in recent months. The complaints all follow a similar thread; despite credit card and Paypal logos on the site, the site and emails claim that there are technical difficulties in using the selected payment method. Indeed we thought we would try to find a way to pay by any method other than Western Union or a direct bank transfer via this site. More on that later. Let’s first take a look around the web for anything that looks similar to this
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The home page of the site looks as professional as any leading airline ticket retailer. Much better than their old version. Now the company name at the bottom says Midor SIA, a recent change from Aerotrans Services Ltd which isn’t an active company. The slick design is matched only by ‘cheaperflights2go’ which can be found at http://zizanionews. eu/ featuring the same contact details but still bears the name Aerotrans Services LTD at the foot of the site. We have also picked up on the domain name BestCheapFlights.org as being from the same people / person. However that is now down so we cannot say for sure. A report on ScamBook does suggest that this is the case due to the similarity of the logo featured on the page itself. The report tells the tale of Paypal not working also: “I found this web site and impressed by their engine and user interface, so decided to order two tickets from Israel to Swiss. I got response from them very quickly and email was organized very professional (with company logos and official letter style). I made choice to pay through PayPal but them ask from me to pay through bank transfer (I’ve got explanation that PayPal method is not working temporary). I transferred 465.6 USD at 22.07.2013 and sent email to them about it. Them answered immediately and asked from me to send scanned bank transfer papers in order to quickly verify and confirm my payment. I sent this document to them and got email with explanation to wait. After few days I ask them what about my tickets but there was no answer. I realized that is scam and demanded my money back, but it was to late company is not answering not by their two telephones (in London and Riga) nor by email.” It would seem then that this company disappeared and then reappeared as CheapAir-Flights.com. There is a current unresolved scambook total of over 138k USD, however, this looks incorrect as one complaint was for $136,192.00 which is probably a typo. Once again the trouble of the paying via any other means than Western Union or bank transfer is on the cards when you order via this site: “I made a ticket reservation under name: (Personal Information Removed) on 10/22/2013 with order no : 28630 .the website ask me to transfer [sic] money through Western Union due to problems in vis a [sic] PayPal and the order will be confirmed 30 | Watchdog Magazine
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after 12 hours. So I send the money upon their request to receiver [sic] : PAWEL MOZDZEN and till now I didn’t get anything.” Pawel Mozden is a name of interest as we think there must be identification for that name for the recipient to recover the money from Western Union. Signs are that money is being collected in Turkey. “Bank transfer to Midor S.P., Cheap Flight Company, Staroscinska 12, 02-516, Warsaw, Poland. eTickets (for 2 people flights on Condor from Cape Town to Frankfurt and back to Cape Town) to be issued once payment has been verified. Other option not used: Western Union, recipient: Nese Yilmaz, Istanbul, Turkey. Email contact up to 11-October-2013 with Daniel DeBrau and a James, Sales Manager, CheapAir Flights.” Seeing these reports we had a go at purchasing tickets. We decided to try and select any payment method other than bank or Western Union. Overleaf is a screenshot of half way through the ordering process. You may notice at this point we are not asked for our address, nor were we asked at any other point. On clicking ‘Pay now by credit card’ we are presented with the following message: “Unfortunately due to technical problems we are temporarily unable to process international credit cards: VISA MasterCard, AmEx. Sorry for the inconvenience. To proceed, please select an alternative payment method, or reserve your ticket for 48 hours.” So within the ‘Alternative payment methods’ option we selected PayPal as the payment method. The site describes how we will receive instructions on how to pay
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We get our confirmation screen upon Flights brand. continuing with our details: Recipient name: Midor SIA But the email that arrives tells us that Recipient address: Midor Travel,17 PayPal has problems as well! How Stycznia 39F, Warsaw, 02-148, Poland unfortunate, they have been having Bank: Kredyt Bank problems with payments all year! The Recipient Bank address: 14 Warszawska, email says: Bialystok, 15-063 , Poland SWIFT/BIC : KRDBPLPW Dear Valued Customer, Account (IBAN): PL05150017191217100460840000 We have received your order and Message to beneficiary: understand that you’ve selected PayPal Payment referenceOrder# REMOVED as your preferred payment method with Payment amount: REMOVED your purchase. Unfortunately, at the moment we do not process PayPal orders IMPORTANT: Please try to use the due to technical problems. Instead, we Message to the beneficiary line EXACTLY would like to ask you to pay by sending us as given in the payment instructions. This a bank transfer, please find the payment line is used to automatically indicate and confirm your payment by our booking instructions below. software. Any alteration in this line may For your convenience, our company can result in payment confirmation delay. send you your eTickets BEFORE you Thank you for understanding. submit your payment. You will be able to confirm these tickets with your air Please keep in mind that all transfer company, but they will be fully activated fees should be paid by our company. after your payment is confirmed. Please Please ask your bank to deduct all fees let us know if you’d like to receive your from the beneficiary of the transfer, or eTickets before you submit your payment. simply deduct the fees from the outgoing transfer amount. Please note that you are sending the funds to our European office in Poland. Please check your order status, edit Midor SIA Travel, the beneficiary of the passenger info, select payment methods, transfer, is the co-owner of the Cheap Air confirm your payments in the My
Itineraries section at www.cheapairflights.com. For faster order processing, please confirm your payment online in the My Itineraries section on our website: [WWW ]. Your ticket will be sent to you within 12 hours after we receive the transfer confirmation from you. Payment confirmation submitted by email may result in delay of your order processing. Do not hesitate to contact us, should you have any questions. Thank you! So there we have it. Phone numbers and accounts in London, beneficiaries in Turkey, addresses in Poland and a long standing problem with being able to collect money via card or PayPal. We were unable to get a statement from the company regarding the complaints. We tried to contact the IATA asking whether they has an affiliation with them. IATA have not yet responded to an email asking them about the use of the organization’s’ logo at the foot of the Cheaper Flights websites. We will update the web page if we get a response in either case.
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