Sir Jeremy Heywood – Sell-off of BAE, the Last of Britain’s Great British Defence Manufacturers

October 5 2012: Sir Jeremy Heywood, Cabinet enforcer and a web of cronies, at centre of incestuous NEXUS lobbying to end independence of BAE

The controversial merger of the defense giant BAE Systems with a foreign conglomerate has been described by one respected global affairs expert as the ‘biggest redrawing of global defenses since the Cold War’.

The Government is now under intense pressure to stop the deal by refusing to sell its golden share in BAE (which last year sold £19?billion of defense and aerospace equipment). The golden share gives ministers the power to block a change of control of the company, to bar any non-UK nationals from top jobs at the firm and prevent any foreign investor owning more than 15 per cent of the company. Yet there are widespread fears that the merger is a done deal and that David Cameron doesn’t mind that one of the last great British manufacturing institutions, whose history dates back to Vickers-Armstrong which built the Spitfire, will fall into foreign hands.

The Prime Minister is said to be in favour of the move after coming under pressure from the Cabinet Secretary, Sir Jeremy Heywood. He has been advocating the merger to the PM and has had a series of meetings with BAE and Morgan Stanley, the American investment bank which is advising the firm and which is in line to get millions from its work on the deal.

However, there is profound disquiet over the fact that 50-year-old Heywood has very strong personal links with Morgan Stanley staff, having worked at the bank as a director during a four-year break from the civil service. There is no suggestion, though, that he will benefit financially from the BAE merger. There have been claims that as the most important civil servant in government, the uber-ambitious Heywood (who was knighted by Cameron in January) is in danger of opening himself to charges that he could compromise the scrupulous independence expected of someone in his position. Heywood’s involvement has also led to widespread suspicions that the £28?billion BAE deal is being stitched together by the Whitehall establishment.

Several MPs want him to be questioned by the Commons defense select committee, which is investigating the merger. Heywood was a highly-paid director of Morgan Stanley as recently as 2007 — having taken a break from his Whitehall career. (Previously he had been Principal Private Secretary to Prime Minister Tony Blair and Head of Domestic Policy and Strategy at the Cabinet Office under PM Gordon Brown.)

Heywood’s stint at the U.S. bank was itself highly controversial. He was accused of making a large sum of money while employed by Morgan Stanley, which dealt with the ill-fated Southern Cross care homes group. Heywood was the ultimate head of the Morgan Stanley team which advised on the sale of Southern Cross in 2006 to a U.S. equity firm which soon hived off many of the freeholds of the homes to another company. In turn, that company sold them off. The result was that 31,000 frail and elderly residents in 750 homes faced being made homeless and 3,000 jobs were lost. Although he was not directly involved in the deal, it was never made clear how much money Heywood was paid by Morgan Stanley at the time, but banking sources said it would have been a handsome sum. Justin Bowden, a union boss, said Heywood was in the scandal ‘up to his neck.’
http://www.dailymail.co.uk/news/article-2213626/SPECIAL-INVESTIGATION-Sir-Jeremy-Heywood-centre-incestuous-nexus-lobbying-end-independence-BAE.html

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Sir Jeremy Heywood – The Big Society Debacle & Allegations of a Misuse of Government and Charitable Funds.-

July 26 2014: David Cameron’s Big Society in tatters as charity watchdog launches investigation into claims of Government funding misuse

David Cameron’s flagship Big Society Network is being investigated by the Charity Commission over allegations that it misused government funding and made inappropriate payments to its directors – including a Tory donor. The organization, which was launched by the Prime Minister in 2010, was given at least £2.5 million of National Lottery funding and public-sector grants despite having no record of charitable activity. The Independent has learnt that it has now been wound up, having used much of the money on projects that came nowhere near delivering on their promised objectives.

Two senior figures on government grant awarding bodies have also made allegations that they were pressured into handing over money to the Big Society Network despite severe reservations about the viability of the projects they were being asked to support. Liam Black, a former trustee of Nesta, which was then a public body sponsored by the Department for Business, said Nesta had been “forced” to give grants that totalled £480,000 to the Big Society Network in 2010 without a competitive pitch. He described it as a “scandalous waste of money”. Another senior figure involved in the decision to award £299,800 from the Cabinet Office to the organization said the funding request had initially been turned down. “When we did the analysis we turned them down because the bid did not stack up,” they said. “But we were told to go back and change the criteria to make it work.”

Tonight Labour said it was writing to the Cabinet Secretary, Sir Jeremy Heywood, asking him to investigate whether political pressure had been applied to give an organization with close ties to ministers, “special treatment”. The Independent understands that the Charity Commission is also looking into allegations that some of the “restricted funds” given by the Cabinet Office for a childhood obesity project were transferred to pay down the deficit of a linked company. It is also investigating payments made by the charity, “for consultancy services” to two directors of the charity and its chair, Martyn Rose. Mr Rose, who helped set up the Big Society Network, also contributed more than £54,000 to the 2010 Conservative election campaign.

Tonight he said he had no memory of the payment but added that it was possible “one of my companies did work on its behalf”. He said he had personally put £200,000 into the Big Society Network which he had not got back. “With hindsight, of course, if we had all known that the projects were not going to work we would have been idiots to do them,” he said. “[The truth] is that in the early stages of social investment some will work and some won’t.” Giles Gibbons, a trustee of the charity and a former business partner of Steve Hilton, David Cameron’s “blue skies thinker”, added that he did not believe any of the payments made by the charity had been in any way inappropriate.

An examination of the Big Society Network projects, funded by the Government and the lottery, reveal a marked discrepancy between what they claimed they would achieve and what they did. They included: A project called “Your Square Mile” whose purpose was to encourage and enable local people to improve their community. It was awarded £830,000 by the Big Lottery Fund – despite officials assessing the application as “weak” in three out of the six criteria. In February 2012 the project had attracted just 64 signed-up groups compared with the one million predicted in the funding application.

A project called Get In – to tackle childhood obesity through sport. In April 2012 it was awarded a grant of £299,800 from the Cabinet Office despite officials concluding it was unlikely to meet its stated objectives. They were told to change their selection criteria and approve the grant. The project was never even launched.

Britain’s Personal Best, which aimed to build on the Olympic Games by encouraging people to excel in athletic, educational or creative challenges. Given £997,960 in April 2013 by the Big Lottery Fund, it claimed it would sign up 120,000 people to take on challenges in their community – but was wound up within months after failing to meet all the milestones the Big Lottery Fund had set.

A long-running investigation by Civil Society News into Big Society Network funding has also discovered that the organization was given statutory grants totalling £480,000 in 2010 by Nesta – which was then an arms-length body of the Department of Business – without a competitive pitch being held. About £150,000 was to part-finance the core costs of running the organization in its early stages and £330,000 was to support four projects – called Nexters, Spring, Your Local Budget and It’s Our Community. Nesta is now an independent charity but said, “While the vast majority of Nesta’s grants are made following open calls for proposals, we do have the ability to provide grants to projects that fit with our vision and advance our objects outside of open calls for proposals. That is what happened with the grants to the Big Society Network.”

Labour is now demanding an inquiry into links between the Big Society Network and senior Conservatives. Several members of the network’s staff had worked with and for ministers including Michael Gove and Theresa May, and two had stood as Tory candidates. Giles Gibbons had been a partner in the same firm as Steve Hilton and co-wrote a book with him. He said tonight: “Am I disappointed that the network didn’t have a more positive impact? The answer is 100 per cent yes. Do I think we could have done more about that? Yes I think we could have. “There was powerful core at the heart of what we were trying to do but was our delivery was not good enough. Is there anything untoward in the way in which we have worked? I genuinely don’t think there is.” But Lisa Nandy, the shadow minister for civil society said: “It’s bad enough that millions of pounds of public money were squandered, but the connections between these organizations and the Conservative party are deeply concerning.”

A spokeswoman for the Charity Commission said: “Our case into the Society Network Foundation remains open and ongoing. We have received a response to questions we had relating to connected-party transactions and the use of a grant. “However this does not fully address our concerns and we are in the process of engaging further with the trustees. We are also awaiting copies of documents that explain the grounds on which a grant was given.”

Key players

Steve Hilton: A former advertising executive who became David Cameron’s, “blue skies thinker”. He championed the idea of the Big Society, and was instrumental in getting government backing for it when the Tories came to power.

Martyn Rose: A businessman who gave £60,000 to the Tories in the run-up to the last election and became chairman of the Big Society Network. Worked with both Theresa May and Michael Gove.

Giles Gibbons: Co-wrote a book with Steve Hilton called Good Business. He became a trustee of the Society Network Foundation – the charitable arm of the Big Society Network. It is now being investigated by the Charity Commission.

Steve Moore: Worked for the Tories in the late 1980s and became chief executive of the Big Society Network. Was ultimately responsible for delivering the projects that failed. Had close links with Mr Hilton and the Nick Hurd, the minister responsible for the Big Society.

http://www.independent.co.uk/news/uk/politics/exclusive-camerons-big-society-in-tatters-as-charity-watchdog-launches-investigation-into-claims-of-government-funding-misuse-9629848.html

August 20 2014: Since publication of the above, an application dated 7 August 2014 has been made by the Trustees to have the corporate entity Society Network Foundation Ltd struck off the Register of Companies. The controversial charity that received over £2.5m of lottery and government grants is to be wound up amid allegations that it misused funding and made inappropriate payments to its directors. The Society Foundation Network, which ran the Big Society Network, is being probed by the Charity Commission following several failed projects.

The Network was also investigated by the National Audit Office over allegations that Government money was incorrectly allocated. The charity denies all the allegations. Yesterday, “The Independent” revealed that one project run by the organization had made a series of claims for nearly £1m of lottery funding that are now being disputed by other charitable organizations it referred to. The Charity Commission said that the trustees of the organization had contacted it to tell them that they planned to voluntarily wind it down. It said its “operational compliance” case into the terms and conditions of a grant awarded to the charity and other accountancy issues were still on-going and the trustees were co-operating.
http://www.independent.co.uk/news/uk/politics/big-society-charity-winds-up-after-claims-it-misused-up-to-25m-in-funding-9681836.html

Sir Jeremy Heywood – Pfizer / AstraZeneca Takeover Bid. Hang on David I’ll Ask the Wife!!

May 27 2014: The Failed Pfizer / AstraZeneca takeover bid

Pfizer’s audacious bid to takeover AstraZeneca is dead, for the moment. Had Pfizer succeeded, it would have been the largest takeover in UK corporate history. Whatever impact the deal would have had on the two companies involved, it would have also had profound implications for British science, exports and jobs in one of the most important sectors of the UK economy. As well as important private interests being at stake, there were also clear and distinct public interests in the deal. It was evident from the start that the takeover was being pursued for the wrong reasons and as such it would be bad for AstraZeneca, and in result bad for the UK.

It is to the credit of the AstraZeneca board that they remained clear-headed in the face of intense pressure and that, in this case, it was the board that rebuffed the offer. That is the way it should remain, it should be the existing owners of a company – the shareholders and their agents – who should determine future ownership. Here the system appears to have ‘worked’.

So this the story of how the government misjudged the situation, being readily seduced into becoming cheerleaders for a deal which ministers mistakenly viewed through a narrow, political lens as an endorsement of their tax policy:

In November 2013 Pfizer’s chairman and chief executive Ian Read made an initial approach to AstraZeneca’s chairman Leif Johansson. Pfizer subsequently made a more formal approach on 5 January 2014, valuing the company at around £60bn. A week later the AstraZeneca board rejected the offer as “very significantly” undervaluing the company, offering too little cash (30 per cent), and being too risky in terms of execution. The £60bn price tag would have made it among the largest transactions in UK corporate history.

On 26 April 2014, Pfizer made a second approach, which was also rebuffed. With the deadline imposed by the City Code on Takeover & Mergers fast approaching, Pfizer made two further offers on the weekend of 17 May, eventually valuing the company at almost £70bn in what was a final offer. Again, these offers were rejected by the AstraZeneca board without reference to shareholders.

Under the Code, Pfizer then had until 26 May to ‘put up or shut up’ with a firm offer. The significance of the deal went far beyond the price tag. The potential transaction went to the heart of the debate about the quality of jobs in the UK and the need to reform our economy so it is better balanced and more sustainable in the long term.

The question was whether the purchase – foreign or otherwise – of AstraZeneca would strengthen the company over the long-term. Would it help grow a world-leading pharmaceuticals industry and would it expand research, science and skills base? If not, would it have such a material and adverse impact on our economy that it would necessitate government action to safeguard the national economic interest? These were the questions asked of scientists, business leaders, and Ministers alike. Nobody positively made the case for the deal to go ahead.

Indeed the voices raised were those who would not usually argue for government involvement in the economy they were now vigorously making the case that the government should act to safeguard the national economic interest. Others urging action included the leading businessman and former Science Minister, Lord Sainsbury, who went public with his concerns, as did the former CEO of Standard Chartered Bank, Lord (Mervyn) Davies. Lord Heseltine expressed his reservations too, along with the Chief Executive of Aberdeen Asset Management. The Director General of the British Chambers of Commerce, John Longworth, put it well when he said: “we must remember that there’s a lot more to being an open economy than saying ‘yes’ to every takeover”. Of great concern was Pfizer’s record of acquiring other companies, intellectually asset-stripping them, cutting R&D spending, and shutting down research facilities with large consequent job losses.

So the worry in the science and business community in light of all this was for the long term future of the company and the sector. In spite of this, the initial response of the government looked to the short term. It seemed that the prospect of being able to boast of bringing one of the world’s largest companies on to the Exchequer’s books in the clouded their judgement on the longer-term consequences of the deal. Sources close to George Osborne had said the bid was, “a massive vote of confidence” in the UK and Grant Shapps said the takeover could be, “a great Anglo-American tie-up”. Treasury Minister David Gauke said the deal showed how, “the UK is now very much top of the list for foreign companies looking to increase their activities.

In his eagerness to take ownership of the deal as an endorsement of government policy, the media were briefed that the Prime Minister had appointed Cabinet Secretary Sir Jeremy Heywood and senior Treasury official John Kingman to, “negotiate” with Pfizer. In doing so, it both undermined the AstraZeneca board who had so far rebuffed Pfizer and gave the impression that the government were driving the deal. This impression was reinforced when AstraZeneca Chairman Leif Johansson was reported to have asked the government to take a more neutral stance.

In seemingly promoting the deal, the government found itself out of step with the business and science communities, and on the wrong side of the argument. Ministers also failed to appreciate the extent to which the desire to use tax inversion in the US was driving the deal – tax inversion being a loop hole in US law where a company can re-incorporate overseas in order to reduce the tax burden on income earned abroad. Ian Read – who started off in the accounts department at Pfizer – admitted in his evidence to the BIS select committee that one of the principal rationales for the deal was tax planning. Sir David Barnes, former CEO of AstraZeneca, put it well in an email saying, “whilst all companies should manage their tax affairs efficiently, tax should not be the driving imperative for such a transaction. Whilst there is potential (substantial) tax advantage for Pfizer through tax inversion, that is a narrow basis on which to build an enduring and constructive business partnership”.

Pfizer asserted at the Select Committee hearing on 13 May 2014 that the US was unlikely to act to end the use of tax inversion. No sooner did they do so than numerous powerful US senators – Democrat and Republican – were demanding action to stop it the day after. Now, Michigan Democrat Senator Carl Levin has introduced a bill to place a moratorium on corporate inversions for two years while the US tax code is reformed.

The 26 May deadline passed and AstraZeneca fought off the current threat from Pfizer. Under the rules, Pfizer will be prevented from making another attempt to buy AstraZeneca for at least another six months. But others may try before that, and the threat of similar takeovers in the pharmaceuticals sector and elsewhere in the future always remains. Britain has benefited enormously from inward investment which – along with the money – has also brought new ideas and ways of working. The UK must remain open to business and as an attractive destination for investment, not as a global tax-avoidance scam, but because of the positive benefits the UK is able to offer innovative companies.
http://www.newstatesman.com/politics/2014/05/pfizerastrazeneca-takeover-bid-story-what-labour-did-and-why

June 2 2014: Just let me ask the wife says Sir Jeremy – Cabinet Secretary Sir Jeremy Heywood advised the Prime Minister on what view to take on the Pfizer takeover bid for its British rival AstraZeneca. As it happens, his wife had written a report, circulated to politicians, advising pharmaceutical firms to restructure, including mergers with rivals, ‘to navigate turbulent times’. Although the Pfizer bid has now been withdrawn, some wonder if Heywood should have been involved given that he might be suspected of sharing the view of Lady Heywood and her employer, McKinsey. husbands/wives?