Tuesday, April 23, 2019

If You Are Going To Offshore A Fraud, Maybe It’d Be Smart To Not Pick Italy

Posted by Peter Quennell

Scarlet curve BT stock, purple curve Dow stockmarket index

When BREXIT Arrives…

The UK is going to need a few world-beating companies. Relentless prods by Italy suggest British Telecom is not one of them.

Back in the day, BT was perhaps the world’s most revered national telephone provider. It fielded teams to numerous developing countries to help with the planning and training needed to develop their national infrastructures.

BT was privatized by the British government in the mid 1980s, and if you had sold its stock around 2000 you would have done very nicely.

But since then BT has steadily headed down the tubes, and its stock now is actually worth less than on its very first day on the market.

Giving BT a hard time for several years have been the formidable fraud investigators of the Italian police.

Now a damning report has been issued by them.

Prosecutors in Milan allege that three former senior BT executives, Luis Alvarez, Richard Cameron and Corrado Sciolla, set unrealistically high business targets and were complicit in false accounting at BT Italy.

Alvarez and Cameron were respectively the former chief executive and former chief financial officer of BT Global Services, and Sciolla was the former head of continental Europe for BT. The three men, two of whom were based in London, left the company in 2017.

Allegations of fraudulent bookkeeping are part of a range of suspected wrongdoing at BT Italy. Italian prosecutors allege that a network of people at the unit exaggerated revenues, faked contract renewals and invoices and invented bogus supplier transactions to meet bonus targets and disguise the unit’s true financial performance.

The company has publicly disclosed that it uncovered a complex set of improper sales, leasing transactions and factoring at the division. Factoring is a way in which firms sell future income to financiers for cash…

Italy’s financial police found an email dated 5 August 2016, from O’Ferrall in which he says that Cameron wanted operating profit to increase by 700,000 euros and suggests to Luca Sebastiani, then CFO at BT Italy, along with other colleagues across Europe, that they capitalise labour costs as a solution.

“All, I have an urgent request from Richard to find another €700K,” O’Ferrall wrote to Sebastiani and his counterparts in Germany, Benelux, France, Spain, Hungary as well as Simon Whittle, then finance manager, reporting and consolidation, at Global Services Europe.

“Please, can you look at all opportunities and come back to Simon and me asap. Labour capitalization? Regards Brian,” says the email, whose subject line reads “Another €700K EBITDA needed in [July].”

Sad business. Italy and the UK have been special friends.

Posted by Peter Quennell on 04/23/19 at 04:17 PM in

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Our friends in the UK have other cellphone options than BT (right?).

But BT seems to affect everyone everywhere in terms of the UK internet not being very fast.


Not that some of the biggest cities in the US see wider or faster Internet service yet.


And on the pretty funny side there is this about BT:



Posted by Peter Quennell on 04/24/19 at 10:09 AM | #

Hardly an exception. In fact a classic example of the big-company syndrome plaguing economies everywhere.

Stockmarkets most reward innovation, breakouts, disruption, and its very hard for large corporations with their archaic systems and bureaucratic employee mindsets frozen in time and high cost of capital to compete.

And so the dirty work begins. It’s pervasive in the US now, and some suspect it’s part of what is behind the BREXIT push.

That stock chart above is for BT USA (on the NY Stock Exchange) but the BT/A stock on the London exchange (for which I cant yet find a long-term chart) has fared even worse, down 50% in the past three years.

Luckily Italy doesn’t have too many big corporations, and its small firms can be very nimble, but it is being dragged down anyway by the Euro exchange rate and years of mounting national and bank debt.

Pedal to the floor on startups should rule. In France too. But The EC was never designed for that and the politicians are flying blind.


We’ll be back to our case with plenty of posts very soon. The site software update even now eats up time.

Also when things go sideways in countries where I worked I sometimes get tracked down by past colleagues to see if I can suggest ways forward.

There actually isnt much argument about the way of seeing things touched on above, the tough task is in getting from here to there.

See this new website going live soon.  http://growthmodeltwo.com

Posted by Peter Quennell on 04/24/19 at 12:49 PM | #

The corruption of mature systems that increasingly ails the world, writ small:

” Boeing has become a company that embodies all of its worst pathologies. It has a totally unsustainable business model — one that has persistently ignored the risks of excessive offshoring, the pitfalls of divorcing engineering from the basic R&D function, the perils of “demodularization,” and the perverse incentives of “shareholder capitalism,” whereby basic safety concerns have repeatedly been sacrificed at the altar of greed. “


Posted by Peter Quennell on 04/27/19 at 01:45 PM | #

Re “the perverse incentives of shareholder capitalism” quoted above, also often called “shareholder value”.

That’s an example of corruption of the value tool and concepts - if the economy or the corporation push that too far in the short term as too many US firms do, the long term price can be very high.

Note the crash back in 2008 - shareholders lost years of value gains and more. Boeing was clearly being managed for the short term - experts are saying the ancient 737’s should have been phased out years ago and a whole new-technology aircraft brought in.

One strong competitor was being brought in - the Bombardier C-series - but Boeing corruptly fought it at government level.

It had to be sold to Airbus. It was rebranded as the Airbus A220. It is now “eating Boeing’s lunch”. Delta and JetBlue have ordered a whole lot.


Posted by Peter Quennell on 04/28/19 at 09:42 AM | #

Today there’s a report that Boeing turned off a major safety feature on the 737.

And that without telling anyone!!  Having this switched on could all by itself have saved 189 plus 157 lives.

“Boeing didn’t initially disclose it had deactivated 737 Max safety alert, Southwest Airlines says”


It seems the aircraft came standard with only ONE flight-angle sensor unless customers paid around $100,000 for a second one.

Posted by Peter Quennell on 04/29/19 at 11:35 AM | #

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