21/07/2011 Newsnight


21/07/2011

In-depth investigation and analysis of the stories behind the day's headlines with Mishal Husain.


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A new eurozone bailout, but is it simply delaying the inevitable

:00:08.:00:13.

final act of a Greek tragedy. France and Germany lead the way on

:00:13.:00:18.

the compromise. Is it more of the same old sticking plaster. We will

:00:18.:00:23.

hear the verdict of the new head of the International Monetary Fund.

:00:23.:00:28.

If possible, the News International story just got a bit murkier.

:00:28.:00:34.

Newsnight has been told that three lawyers acting for the phone

:00:34.:00:38.

hackings were themselves put under surveillance by the News of the

:00:38.:00:41.

World.Another argument in the high echelons of the legal world on who

:00:41.:00:48.

should have acted on allegations of criminality in news international.

:00:48.:00:51.

News Corporation is under attack by some of the people who invest in it.

:00:51.:00:56.

This man thinks the way that Mr Murdoch runs his empire is an abuse

:00:56.:01:00.

of power, do the biggest shareholders care

:01:00.:01:10.
:01:10.:01:12.

The British artist Lucian Freud has died 88.

:01:12.:01:16.

Good evening, decisive leadership or simply staving off an inevitable

:01:16.:01:20.

default. This is one of the many days deemed crucial for the leaders

:01:20.:01:25.

of the eurozone, as they try to stem the tide of fear over the

:01:25.:01:28.

crisis gripping the continent. The latest summit does appear on the

:01:28.:01:32.

surface to have gone further than before, making it easier for Greece

:01:32.:01:38.

to pay back its debts and getting the private sector to help out too.

:01:38.:01:41.

Will it just be another stopgap measure.

:01:42.:01:46.

You know the journalists are still arguing here about the figures in

:01:46.:01:49.

tonight's package, and whether or not they add up, the first kalde

:01:49.:01:56.

tails are very complex. But the - fiscal details are very complex.

:01:56.:02:01.

But the diplomatic issues are stark and simple, well known to people in

:02:01.:02:04.

European politics, is when the Franco German motor works well the

:02:04.:02:11.

EU can move forward. In recent weeks Franco German differences

:02:11.:02:16.

over Greek debt created an unstable situation that was punished by the

:02:16.:02:19.

markets. Overnight President Sarkozy and Chancellor Merkel had

:02:19.:02:25.

meetings and patched up their differences. It was clear from the

:02:25.:02:28.

details of a plan released, that things would be different at the

:02:28.:02:35.

summit, it is a began today. Brussels awoke to the Belgian

:02:35.:02:39.

national holiday, and yet another emergency summit on the euro. That

:02:39.:02:43.

brought tanks to the streets, and Europe's political big guns to slug

:02:43.:02:51.

it out over Greece. But their battle has caused

:02:51.:02:55.

consternation in the markets, as faith in the euro as faltered, so

:02:55.:03:02.

giving a sense of urgency to today's meeting.

:03:02.:03:06.

TRANSLATION: I assume we will be able to sign off a new programme

:03:06.:03:09.

for Greece, that is an important signal to give out. European

:03:09.:03:13.

compromise often demands looking glass solutions. This place is

:03:13.:03:17.

certainly no stranger to them. But the leaders coming here knew that

:03:17.:03:22.

those who had already lent money to Greece were bound to take a hit, a

:03:22.:03:25.

partial default was on the cards, but few wanted to acknowledge it,

:03:25.:03:30.

for fear of the harm that might do to Europe's other big debtor

:03:30.:03:35.

nations. It is worrying, we have to have a formal default or something

:03:35.:03:38.

considered by Credit Rating Agencies as a default, it is

:03:38.:03:42.

something to be avoided. A lot of these financial markets still

:03:42.:03:46.

relies on forms of self-regulations or regulation by big market

:03:46.:03:48.

organisations what are the markets doing now, reading what is going on,

:03:48.:03:53.

they see a lot of uncertainty and disagreement on member states on

:03:53.:03:57.

how to handle this, of course they are selling. If they see there is a

:03:58.:04:03.

consensus and a strong willingness to go together in the one direction,

:04:03.:04:06.

they think probably they have been overdoing the situation.

:04:06.:04:09.

President Sarkozy and Chancellor Merkel came hotfoot from meeting

:04:09.:04:13.

last night in Berlin. They brought to Brussels agreement to shelf a

:04:13.:04:18.

German idea that the new bailout be funded in part by a tax on European

:04:18.:04:22.

banks. Instead, the leaders promised to underwrite the new loan,

:04:22.:04:28.

and gave Greece twice as long to repay the old one. I think it is

:04:28.:04:33.

satisfactory, especially for the Greeks. Because the burden now goes

:04:33.:04:36.

down, that's very important, but it is also a very good sign to the

:04:36.:04:41.

market, we have already seen that the markets reacted positively. And

:04:41.:04:46.

I wonder why this sign, this important big sign, couldn't have

:04:46.:04:51.

been made earlier. A couple of hours ago the leaders emerged to

:04:51.:04:55.

announce that those draft proposals had been adopted. It was a better

:04:55.:05:00.

outcome than many expected, and it is intended, its architects say, to

:05:00.:05:05.

seal off the Greek situation, and prevent uncertainty from

:05:05.:05:09.

undermining other debt ridden European economies. Today we

:05:09.:05:15.

tackled a prob blem by addressing two main - problem by addressing

:05:15.:05:21.

two main factor, investors feared that losss were being posed on a

:05:21.:05:24.

non-voluntary basis on bond holders Greece and maybe in other countries

:05:24.:05:28.

as well. The second fear, market uncertainty over the eurozone's

:05:28.:05:32.

ability to resolve the crisis. it comes to the looking glass

:05:32.:05:36.

quality of this summit, Britain's position is even curiouser, David

:05:37.:05:41.

Cameron is not here, Britain is not part of the euro, of course, but he

:05:41.:05:44.

declined to come as an observer, either. But his Chancellor, this

:05:44.:05:48.

week, has urged the eurozone countries to integrate their

:05:48.:05:53.

finances more closely, to avoid similar crises in the future. What

:05:53.:05:57.

reality could be more inverted than a British Conservative Chancellor

:05:57.:06:03.

trying to urge forward the process of European integration?

:06:03.:06:07.

Despite today's agreement, Britain's intervention has struck a

:06:07.:06:12.

chord, the eurocrats are quaking in their boots at the prospect of a

:06:12.:06:17.

Spanish or Italian crisis and want a proper system to even out the

:06:17.:06:22.

debt imbalances within the euro. There is some scepticism, that

:06:22.:06:28.

today's package alone can prevent spreading of the Greek contagion.

:06:28.:06:32.

I think it is absolutely necessary now, to make the next big step

:06:32.:06:38.

ahead. We were discussing too long about the no bail out rule b things

:06:38.:06:45.

out of the past. We have now to think not of federal Europe, but of,

:06:45.:06:49.

especially concerning fiscal affairs, and the monetary union, a

:06:49.:06:58.

very united European Union. The Belgian national day parade

:06:58.:07:02.

went on outside the summit. The last few months have shown the

:07:03.:07:07.

consequences of what happens when Europe's nations can't keep in step.

:07:07.:07:11.

It will take careful coaxing, new political and fiscal language, even,

:07:11.:07:16.

to form the eurozone recruits into a disciplined force. If they fail,

:07:16.:07:22.

there is little doubt that defeat awaits them in the markets.

:07:22.:07:26.

Just before we came on air I spoke to the head of the IMF, Christine

:07:26.:07:30.

Lagarde, she was in Brussels, and was instrumental in today's deal. I

:07:30.:07:35.

suggested what had been agreed was, effectively, a Greek default?

:07:35.:07:39.

not at all, that is not what I have seen and heard today. It is

:07:40.:07:44.

certainly not the spirit in which discussions were held. It was most

:07:45.:07:48.

amazing, from my perspective, as new managing director of the IMF,

:07:48.:07:52.

to see the European leaders of the eurozone come together in the way

:07:52.:07:57.

they did. And clearly it was a new experience, I used to be minister

:07:57.:08:02.

of finance, for France, but it was very comforting, and I found it, it

:08:02.:08:07.

was a combination of being, you know, collective, comprehensive and

:08:07.:08:10.

constructive. I was very impressed. It is great to hear there was such

:08:10.:08:14.

a great spirit, looking at the detail of what was decided, debts

:08:14.:08:18.

are being rescheduled, the amount to be repaid is reduced, the

:08:18.:08:24.

interest rates are being taken down, it is some kind of default, surely?

:08:24.:08:27.

You can't prevent members of the eurozone to actually decide that

:08:27.:08:30.

they are going to reduce the interest rate, simply because they

:08:30.:08:34.

want to make sure that one of the partners, who has been under severe

:08:34.:08:40.

attack, who has delivered under the programme so far, needs to be

:08:40.:08:45.

supported, and needs help. That's really what happened tonight. What

:08:45.:08:51.

I found really most amazing is the collective resolve to actually

:08:51.:08:57.

continue to support countries until such a time when they regain access

:08:57.:08:59.

to markets, provided they deliver under the programme. I think it is

:08:59.:09:03.

am combination of give and take. You deliver, you do what you have

:09:03.:09:09.

to do, and we will back you. But it is not just the verdict of the IMF

:09:09.:09:13.

and the other countries in the eurozone that matter, it is

:09:13.:09:16.

organisations like the Credit Rating Agencies, and all these

:09:16.:09:19.

countries will be vulnerable to what they decide you did today?

:09:19.:09:24.

rating agencies will have to take a view, they will have to decide

:09:24.:09:29.

whether a group of banks that are concerned about being part of the

:09:29.:09:33.

pack, who are volunteering into negotiations, who sit at the table

:09:33.:09:39.

together with the Greeks, eventually coming to terms, if that

:09:39.:09:43.

is you know, voluntary, or otherwise, it is for them to decide,

:09:43.:09:47.

what I regard as critically important from my perspective, and

:09:47.:09:53.

forgive me, but I'm not a rating agency, nor do I pretend to be one.

:09:53.:09:55.

From my perspective what was important was the determination of

:09:56.:09:59.

the members of the zone, to continue to back and support the

:09:59.:10:03.

country that is delivering under its commitment, until it returns to

:10:03.:10:08.

market. But you can understand, you can understand, can't you, or

:10:08.:10:10.

acknowledge why whether it is Credit Rating Agencies, whether it

:10:10.:10:14.

is investor, and right around the world, look at what is happening in

:10:14.:10:18.

the eurozone, over more than a year now, and wonder about the

:10:18.:10:23.

leadership, everything seems to be so incremental, almost grudging, we

:10:23.:10:26.

have to reach one crisis point after another, before anything

:10:26.:10:30.

happens? I concede to you, because that is really what you are after,

:10:30.:10:35.

but it has been, up until now, incremental, sometimes labourous,

:10:35.:10:40.

but I can tell you today that it was game changing. It was quite

:10:40.:10:46.

amazing to see premiers and heads, as different as the premier of

:10:46.:10:51.

Slovenia or that of Italy, of Germany, as of Slovakia, come

:10:51.:10:57.

together and say, yes, we have to do that collectively, we all have

:10:57.:11:01.

to do it, because what happens to one could happen to another, and

:11:01.:11:05.

what affects one could affect another. What must happen to get to

:11:05.:11:09.

this resolve, we see the risk of contagion spreading around the

:11:09.:11:14.

eurozone? What matters today is they have decided to transform the

:11:14.:11:18.

European financial stability fund to make it precisely flexible, so

:11:18.:11:23.

it can be used as guarantee, and a precautionary instrument, it can be

:11:23.:11:27.

used to buy on the secondary market. Those are things that the IMF has

:11:27.:11:31.

been advocating for a long time. And it is a plan that is

:11:31.:11:36.

comprehensive, and you are right. For a long period of time it was

:11:36.:11:40.

piecemeal, it was sporadic, it was fragmented, but this one is

:11:40.:11:45.

different. It is clearly comprehensive, it addresses the

:11:45.:11:50.

case of Greece, it encompasses Ireland and Portugal, although

:11:50.:11:54.

clearly Greece is a unique case, in the sense it is the only one that

:11:54.:11:59.

will attract a degree of private sector involvement, although

:11:59.:12:02.

voluntarily. But the other two countries are going to benefit from

:12:02.:12:07.

the same extension of maturity and reduction of interest rate. Forgive

:12:07.:12:13.

me for being sceptical, we have heard many of these kinds of terms

:12:13.:12:16.

before. Whatever, however comprehensive the plan you have

:12:16.:12:18.

come out with today, it is still really the taxpayer who is bearing

:12:18.:12:23.

the burden of all of this. The idea that was floated of the private

:12:23.:12:27.

sector sharing the pain, that has been dropped, hasn't it? There are

:12:27.:12:31.

quite a few numbers floating around, you have clearly looked at the

:12:31.:12:34.

document, you can look at the charts as well, they are real

:12:34.:12:39.

numbers on the table. But there is no danking tax, and the involvement

:12:39.:12:42.

of the private sector is voluntary, it is up to them to decide whether

:12:42.:12:47.

they want to get involved any more in this? You before wanted it to be

:12:47.:12:52.

a selective report now it is not, I have convinced you! The private

:12:52.:12:57.

sector has largely been let off the hook, the whole idea it is

:12:57.:12:59.

voluntary, their involvement? is important is there are gives and

:12:59.:13:03.

takes. On the one hand, the partners are saying, you, Greece,

:13:03.:13:07.

have performed for a period of time, there was an element of reform

:13:08.:13:14.

fatigue, well it is time to get back on that trend of structural

:13:14.:13:18.

reform, privatisations, fiscal consolidation, and in argues for

:13:18.:13:23.

that, we will back you up, and we have trust, that confidence is

:13:23.:13:28.

restored amongst the members. The markets will see as they feel, as

:13:28.:13:32.

they see fit, they will characterise as they wish, but,

:13:32.:13:37.

sorry, the truth of the pudding is in the eating. At this time tonight,

:13:37.:13:41.

I can tell you that the heads of state, heads of Government, are

:13:41.:13:45.

determined to close ranks and be together. When you say fiscal

:13:45.:13:48.

consolidation, how far does that actually go, let's think further

:13:48.:13:52.

ahead for a moment. Your friend, George Osborne, here in Britain,

:13:52.:13:56.

believes there is a remorseless logic for monetary union on to

:13:56.:14:00.

fiscal union, is he right? There were heads of states and

:14:00.:14:06.

Governments tonight saying there had to be a federation at the

:14:06.:14:09.

financial, fiscal and economic levels. That is a change as well.

:14:09.:14:14.

So that is a step in the direction that you would welcome, a logical

:14:14.:14:18.

step? At the moment, where I stand, and in my new capacity as managing

:14:18.:14:24.

director of the IMF, what is of most concern to me is Greece, and

:14:24.:14:27.

other countries on the programme, can actually get back to the

:14:27.:14:34.

markets, in due course, and they can restore growth, that they can

:14:34.:14:37.

create jobs and their debt sustainability be significantly

:14:37.:14:46.

improved. That is what matters to Thank you for your time.

:14:46.:14:51.

Mark Urban is with us and we're joined by our economics editor,

:14:51.:14:54.

Paul Mason, who is on the road in the United States but managing to

:14:54.:15:00.

be with us. Not surprisingly, Christine Lagarde talking about how

:15:00.:15:04.

positive today was. Will this deal hold, do you think? I might allow

:15:04.:15:07.

Paul to give you the key verdict on whether or not it will hold. I can

:15:07.:15:12.

tell you more of the detail. It seems that the state element of

:15:12.:15:18.

this amounts to about 109 billion euros between now and 2014. The

:15:18.:15:22.

private sector is estimated over that time scale at about 50 billion.

:15:22.:15:26.

The interesting thing is, the state sector has been hemmed in, because

:15:26.:15:30.

of the political lack of willingness on the part of some EU

:15:30.:15:35.

members to extend this across the whole of the eurozone, it is hemmed

:15:35.:15:39.

in to the debtor countries, Greece and a couple of others, it is

:15:39.:15:44.

limited in how far this mark an extension and loosening of all the

:15:45.:15:48.

rules around the stablisation fund. The private sector thing you hit

:15:48.:15:53.

upon in your interview with Christine Lagarde, that is really

:15:53.:15:56.

interesting. We have heard widely delivering estimates of what the

:15:56.:16:00.

private sector could be. Including President Sarkozy who said at a

:16:00.:16:06.

briefing this evening, that it could be up to 155 euros, right

:16:06.:16:12.

from the low estimates to 50, to 106 which is in the commune Kay. We

:16:12.:16:17.

don't know to what degree the people lending one in the private

:16:17.:16:21.

sector will accept the guarantees made today, and take up the offers

:16:21.:16:24.

putt on the table, being underwritten by the European

:16:24.:16:28.

Governments. That is the big unknown, one of them, the other one

:16:28.:16:33.

is how far can the principles laid down today to deepen co-operation,

:16:33.:16:38.

be exlended more in the coming months. - extended more in the

:16:38.:16:41.

coming months. President Sarkozy talked about this in the briefing,

:16:41.:16:45.

they would be working on this summer, moving towards what George

:16:45.:16:49.

Osborne has said today, closer fiscal union. Those are the two big

:16:49.:16:53.

unknowns. The degree of private sector involvement, and the degree

:16:54.:16:57.

to which eurozone members are really willing to move towards a

:16:57.:16:59.

much, of closer fiscal co- ordination.

:16:59.:17:03.

Paul, you get the job of telling us, Christine Lagarde thinks this is a

:17:03.:17:09.

game changer of a deal, do you think it is one that will hold?

:17:09.:17:13.

Games changer when we look at some of the details. The 109 billion

:17:13.:17:16.

bailout of Greece is on top of a significant reduction in the

:17:16.:17:20.

interest rate that Ireland and Portugal, as well as Greece, have

:17:20.:17:24.

to pay. Then we get this expansion of the stability fund. This was

:17:24.:17:30.

created last May, May 2010, to save Greece, but it is now looking

:17:30.:17:34.

something like a mini-European scale IMF, with powers not simply

:17:34.:17:38.

to bail out the countries that need bailing out a lot more money we

:17:38.:17:42.

understand, but also to bail out banks in countries that are not

:17:42.:17:48.

being bailed out, aka, Germany and France. This is game changer, as to

:17:48.:17:52.

whether it work, as Mark says, the crucial thing in the short-term is

:17:52.:17:56.

whether the banks and hedge funds, and the pension funds, who have

:17:56.:18:01.

bought this Greek debt, accept the losses they will have to take on it.

:18:01.:18:05.

My understanding is it is something like 17 billion in losses out of

:18:05.:18:09.

the 50 billion they are puting into it. If they do accept it, as the

:18:09.:18:15.

briefing said, the private sector has agreed to do X, Y and Z, we

:18:15.:18:20.

don't get a contagion level event. What we have had today, let's be

:18:20.:18:24.

clear, is the transfer of risk from the private sector, from banks to

:18:24.:18:27.

pension fund, to Governments. It will be the Government who is bear

:18:27.:18:32.

the risk of the Greek bail out, and the risk of the Greek bail out

:18:32.:18:35.

going wrong. There is no guarantee that Greece does recover and start

:18:35.:18:40.

to pay its way in the world F in two or three years time we come to

:18:40.:18:44.

the place where Greece defaults again and this is a selective

:18:44.:18:49.

default, the rating agencies will say it is a selective default, if

:18:49.:18:52.

it does it again it is the European taxpayer, that includes people in

:18:52.:18:57.

the UK, who are on the hook for it. I know we will be hearing more from

:18:57.:19:04.

you in America on America's debt issues next week. Thank you to you

:19:04.:19:07.

both. Apologise for the quality of the line to Paul Mason in Arizona.

:19:07.:19:11.

If you thought that the phone hacking story was going into pause

:19:11.:19:14.

mode, I am afraid you were mistaken. The stories are still coming thick

:19:14.:19:19.

and fast. There was another sacking tonight, this time of the Sun's

:19:19.:19:25.

features editor, Matt Nixon, apparently during the time he

:19:25.:19:32.

carried out his work on News of the World.

:19:32.:19:37.

It is a pretty major story this time. It is a major development.

:19:37.:19:42.

Let's paint some context to the story. For News International the

:19:42.:19:46.

whole phone hacking scandal unravelled in 2008 with the out of

:19:46.:19:50.

court settlement with Gordon Taylor, the former head of the professional

:19:50.:19:56.

Football Association. It is thought to have cost News International �1

:19:56.:20:02.

million to keep key evidence out of court. It was Mark Lewis,

:20:02.:20:06.

representing Mr Taylor who was behind it, he went on to get a

:20:06.:20:09.

strong reputation for the phone hacking cases, celebrities came to

:20:09.:20:16.

him, such as Chris tarnt, and many others, - Tarrant, resulting him in

:20:17.:20:21.

representing 70 people, most significantly of all he's

:20:21.:20:25.

representing the Dowler family. Is it Mark Lewis at the heart of

:20:25.:20:28.

the allegations we are talking about now? Clearly Mark Lewis has

:20:28.:20:32.

been a major thorn in the side to News International over the last

:20:32.:20:37.

two or three years. A well mazeed source has told me today, that not

:20:37.:20:42.

only was - a well placed source has told me today, that not only was

:20:42.:20:49.

Mark Lewis's phone hacked, but someone at News of the World set a

:20:49.:20:54.

private investigator on to him and trailing him, and put him on

:20:54.:20:57.

surveillance, covert surveillance and fofd photographed him. I can't

:20:57.:21:01.

name the individual for legal reasons, we do have his name. I

:21:01.:21:04.

have been told by other sources that two other solicitors, also

:21:04.:21:07.

involved in the phone hacking scandal, representing claimants,

:21:07.:21:11.

have also been targeted in a similar way. I'm told that one of

:21:11.:21:15.

these solicitors was shown a dossier of confidential information,

:21:16.:21:19.

quite recently, earlier this year. That information could only have

:21:19.:21:25.

come from illegal means. That was a very serious development. If we

:21:25.:21:29.

have three solicitors targeted in this way, it raises fundamental

:21:29.:21:32.

questions about what News of the World were doing at that time.

:21:32.:21:36.

We did try to put this to News International tonight, there was no

:21:36.:21:39.

comment at this time, there was nobody available to give a comment

:21:39.:21:43.

on. That the curious thing about this, finally, is my understanding

:21:43.:21:47.

is that News of the World weren't doing this for actual story

:21:47.:21:51.

research. That raises the possibility they were doing it to

:21:51.:21:55.

discredit solicitors who were their opponents, if that is true, it is

:21:55.:21:59.

pretty serious. Also tonight, other information has

:21:59.:22:02.

emerged about senior legal figures in the scandal, when they were

:22:02.:22:05.

first made aware of hacking allegations, what they actually did

:22:05.:22:09.

with that knowledge. We will be exploring this issue with the

:22:09.:22:13.

former Attorney-General, Lord Goldsmith in a moment. First of all,

:22:13.:22:16.

Mark Lewis, who we were just talking about is with me now. You

:22:16.:22:20.

found out about this when Newsnight put it to you, what did you think?

:22:20.:22:28.

It was something that n a way, was scary, but not intimidating. It

:22:29.:22:33.

wasn't a surprise that they would try to find out what they could

:22:33.:22:38.

about me. But the idea of intimidating a lawyer, at all was

:22:38.:22:44.

not a surprise, because they tried it in 2009, when the story came out

:22:44.:22:48.

in the Guardian, they threatened me with an injunction to stop me

:22:48.:22:54.

acting. They threatened me throughout the cases. I haven't

:22:54.:22:58.

been scared of them, and been standing up to them. Did you have

:22:58.:23:05.

springss, when we put this to you, you weren't all together surprised?

:23:05.:23:10.

There are things - did you have suspicions, when we put this to you

:23:10.:23:16.

you weren't at all together surprised? They shouldn't and can't

:23:16.:23:19.

intimidate lawyers and witnesses, you have to stand up to them. It is

:23:19.:23:23.

a very serious matter, I have had to refer it to the police because

:23:23.:23:26.

of the nature of what is going on. You have already told the police

:23:26.:23:30.

about this? As soon as I was notified I had to notify the police,

:23:30.:23:35.

because this is such a fundamental matter. It goes to the very issue

:23:35.:23:44.

of representation of a client, who leave me messages, tactical

:23:44.:23:47.

decisions, barristers might leave messages for me. They shouldn't be

:23:47.:23:50.

listening to them. They are not about getting stories, it is about

:23:51.:23:54.

legal cases. You have taken this to the police today. Ideally what

:23:54.:23:58.

would you like to see them to do, how would you like them to act?

:23:58.:24:02.

Undoubtedly the police would have to investigate. They will obtain

:24:02.:24:08.

records from phone companies as to what was happening in terms of my

:24:08.:24:15.

phone messages. They will try to obtain any report that is exist

:24:15.:24:18.

about me. News of the World, newsgroup newspapers to find out

:24:18.:24:22.

what is in their possession. And take action against the individuals,

:24:22.:24:27.

it is a very, very serious matter. Thank you very much for coming in

:24:27.:24:30.

to the studio tonight. As I mentioned earlier, in the

:24:31.:24:35.

Westminster studio now is the former Attorney-General, Lord

:24:35.:24:40.

Goldsmith. Your name came up in parliament yesterday in connection

:24:40.:24:45.

with all of this, Geoffrey Cox MP was asking questions about what you

:24:45.:24:49.

knew about the allegations at the time they first surfaced in your

:24:49.:24:52.

role as Attorney-General, when did you first come to hear of them?

:24:52.:24:57.

glad you asked me about this, what he said yesterday is I had approved

:24:57.:25:01.

and indeed instructed the police to conduct only a narrow investigation

:25:01.:25:04.

into phone hacking, that is absolutely not true. I'm very glad

:25:04.:25:07.

of the opportunity to correct that, that is certainly not the case.

:25:07.:25:12.

What did you do when you first became aware of the allegations?

:25:12.:25:16.

was briefed about the case and we are all aware of what that was, I

:25:16.:25:20.

was told there were other cases and we talked about those in due course.

:25:20.:25:27.

That particular case went ahead, we know that, that was Mulcaire and

:25:27.:25:31.

Goodman later that year they pleaded guilty. Was that the only

:25:31.:25:35.

case you were aware of, were you aware of the other allegations?

:25:35.:25:38.

wasn't aware of them. In background from the briefing I had about that

:25:39.:25:43.

case, or those cases, I was told that the police whreefd there were

:25:43.:25:47.

other cases as well. - believed there were other cases as well.

:25:47.:25:50.

There was probably further investigations in due course. I

:25:50.:25:56.

think the point to make absolutely plain, there was never any request

:25:56.:25:59.

from me or answer from me suggesting that the inquiry should

:25:59.:26:04.

be kept narrow. Let's focus on what you did with the information you

:26:04.:26:08.

received in that briefing? You were told there were a series of

:26:08.:26:12.

allegations, not just a single case, did you follow up on it at a later

:26:12.:26:17.

date? I'm not the Metropolitan Police commissioner or Director of

:26:17.:26:21.

Public Prosecutions. As I understand it, you do supervise the

:26:21.:26:27.

role of the DPP? I have general oversight. What I was told is there

:26:27.:26:31.

was a particular case or cases that ended up quite rightly in

:26:31.:26:34.

conviction, I was told the details of that, they were sensitive cases

:26:34.:26:39.

for reasons we all know. Because of the individuals who were involved

:26:39.:26:44.

in that particular case. I was told as background there were other

:26:44.:26:49.

cases and those were, it was said that they would be or might be the

:26:49.:26:53.

subject of investigation in due course. That is what I expect it to

:26:53.:27:00.

be. The superintending role that the Attorney General has over the

:27:00.:27:03.

DPP, does that not involve following up on things to see

:27:03.:27:07.

whether they have moved along or not? The particular case I was

:27:07.:27:11.

talking about went along to a conviction last year. One case?

:27:11.:27:15.

That was the case I was told about. As to what happened afterwards, as

:27:15.:27:18.

to why this wider investigation that was referred to didn't take

:27:18.:27:22.

place, you will, let me finish, please let me finish, you will have

:27:22.:27:27.

to ask the police, or the director of public prosecutions, Ken

:27:27.:27:31.

McDonald, what they did afterwards, that wasn't my responsibility. They

:27:31.:27:37.

didn't ask me for any advice, they didn't give me any advice, that is

:27:37.:27:45.

not what the Attorney-General do. - does. We have asked Ken McDonald

:27:45.:27:49.

before we came on? I will look forward to what he has to say.

:27:49.:27:53.

said there was one case in particular, that is The Good Muslmi

:27:53.:28:00.

good and Glenn Mulcaire case. You were aware there - that is the

:28:00.:28:05.

Clive Goodman and Glenn Mulcaire case. It is not my job to do that.

:28:05.:28:10.

I was told about the particular case that led to conviction, not

:28:10.:28:14.

one case, several cases. I was told the police, whose job it is to

:28:14.:28:18.

investigate, let's be clear about it, in this country politicians and

:28:18.:28:21.

even prosecutors don't tell the police what to do. Thank goodness

:28:21.:28:24.

for that. They are operationally independent, it is their job to

:28:25.:28:29.

investigate. My understanding, from the briefing I had, was that they

:28:29.:28:33.

were investigating, that they had contacted a number of other people

:28:33.:28:36.

who had been accessed, and didn't want to help them, that is what I

:28:36.:28:40.

was told. As to what happened afterwards, then the police and the

:28:40.:28:42.

Director of Public Prosecutions need to answer the question of what

:28:42.:28:46.

happened. Do you think that there is a case for the former DPP to

:28:46.:28:49.

answer, then, do you believe he should have done more? I think it

:28:49.:28:53.

is not for me to say at the moment. I think it is important to know

:28:53.:28:57.

what he says about T it is important to know what the police

:28:57.:29:04.

say happened afterwards, what I'm making clear is that the suggestion

:29:04.:29:08.

that I instructed, still less Government ministers, I don't think

:29:08.:29:12.

Government ministers knew about this, as it would be quite wrong as

:29:12.:29:15.

Attorney-General to tell other ministers about on going police

:29:15.:29:20.

investigations. What I'm a saying is neither I nor any other minister

:29:20.:29:24.

instructed anybody, or approve. you wish you had done more and

:29:24.:29:31.

asked more questions? I have asked meself why not ask Ken McDonald

:29:31.:29:39.

more about what took place. I look forward to what he said about it.

:29:39.:29:43.

My job was done by responding on a particular briefing, the police are

:29:43.:29:48.

there, good police force too, that is what we absolutely rightly

:29:48.:29:52.

believe, investigating this cases, and an independent Crown

:29:52.:29:55.

Prosecution Service, under its independent head, giving the police

:29:55.:30:01.

advice. It would be interesting to know what it was to cause the

:30:01.:30:05.

investigation not to continue in the way it seemed to be, from the

:30:05.:30:10.

briefing I had, going to go. suggestion is you think the DPP

:30:10.:30:14.

could have done more, you have mentioned him several times in this

:30:14.:30:19.

conversation? The D psm P is the conduit to the Attorney General,

:30:20.:30:27.

the DPP is the conduit to the Attorney General, not the police.

:30:27.:30:35.

It appears they were seeking advice of the DPP. The answer they give

:30:35.:30:39.

should be what people are looking The Murdochs' appearance in

:30:39.:30:42.

parliament on Tuesday has ramped up the debate about the way their

:30:42.:30:46.

company is run, both the fact it is not a one share one vote system,

:30:47.:30:51.

and also the way Rupert Murdoch remains as the chief executive and

:30:51.:30:56.

chairman of the business. Some sharehold rrs not happy, is there

:30:56.:30:59.

anything they - shareholders are not happy, but is there anything

:30:59.:31:06.

they can do about it? Phone hacking has dominated

:31:07.:31:16.
:31:17.:31:19.

politics here for weeks. Is it just a storm in a British tea cup?

:31:19.:31:24.

A global tycoon like Rupert Murdoch must hope so. The News of the World

:31:24.:31:30.

is less than 1% of our company, I employ 5 3,000 people around the

:31:30.:31:38.

world. Who are proud and great and ethical, and distinguished people.

:31:38.:31:42.

The scandal that has engulfed Rupert Murdoch, directly concerns

:31:42.:31:47.

one tiny part of his empire, but it has the potential to damage his

:31:47.:31:52.

business worldwide. His biggest problem now may be that

:31:52.:31:56.

in denying knowledge of events involving the News of the World, he

:31:56.:31:59.

has raised wider questions among News Corporation shareholders

:31:59.:32:03.

worldwide, about the way the company is governed and about his

:32:03.:32:07.

own competence as its head. One of the concerns I think shareholders

:32:08.:32:13.

will have with that, is that we look to senior management to have a

:32:13.:32:18.

strong grasp as to what's actually going on within the company. The

:32:18.:32:23.

admission from Rupert Murdoch that he knew little or nothing as to

:32:23.:32:27.

what was happening in certain parts of his business empire, was not

:32:27.:32:30.

something which would encourage confidence in the systems and

:32:30.:32:36.

controls that were in place within the group.

:32:36.:32:45.

In the US some shareholders want change. The trade union ownedAm

:32:45.:32:51.

Malagaated Bank of America have filed suits, and others have said

:32:51.:32:54.

that News Corp doesn't have one share one vote, a corruption, it

:32:54.:32:58.

says, of the governance system. Other city voices also want more

:32:58.:33:06.

democracy in the company. If I look at the way the board is

:33:06.:33:10.

structured, you might want to question the prevalence of one

:33:10.:33:16.

particular family within that board. Whether there should be a greater

:33:16.:33:19.

representation of genuinely independent non-executives, and

:33:19.:33:26.

potentially a smaller representation for the family.

:33:26.:33:31.

Besides its ethical mistakes in Britain, News Corp has made big

:33:31.:33:36.

business mistakes in America. It bought Dow Jones, publishers of the

:33:36.:33:43.

Wall Street Journal, for $5.6 billion in 2007, two years later it

:33:43.:33:49.

was worth just $2.8 million. MySpace, the social networking

:33:49.:33:59.

website was bought by $580 million in 2005, sold for only $35 million

:33:59.:34:02.

this year. But one of the larger shareholders still has huge

:34:02.:34:06.

confidence in the company. You have seen a business in the last 20

:34:06.:34:10.

years that has evolved, moving from strictly newspapers into other

:34:10.:34:15.

media, and moving more into a fee- based business model as opposed to

:34:15.:34:21.

an advertising business model. I think there are an awfully lot of

:34:21.:34:25.

good steps that have been made. I'm very impressed overall with the

:34:25.:34:30.

company's success. Rupert Murdoch's now back in

:34:30.:34:34.

America. More comfortable perhaps in a country where some big

:34:34.:34:39.

investors still back him as News Corp's chief executive. Here is a

:34:39.:34:46.

man, who has, even though he is 80 years old, Warren Buffet is 890

:34:46.:34:51.

years old and doing well. These are - 80 years old and doing well.

:34:51.:34:55.

These are men with long track records of great success. To not

:34:55.:35:02.

want some of that wisdom in there, I think would be a mistake. As Will

:35:02.:35:06.

Rogers said, good judgment comes from experience, a lot of that

:35:06.:35:10.

comes from bad judgment. The phone hacking scandal has sparked

:35:10.:35:14.

political reform in the UK, which some Americans are calling a

:35:14.:35:21.

British spring. How much reform there will be in News Corp itself

:35:21.:35:27.

depend on the markets to come. We are joined now in the studio by

:35:27.:35:34.

Terry Smith, head of his company my other guest from Reuters.

:35:34.:35:38.

Do you have issues with the way it is run? The voting structure thing

:35:38.:35:46.

is important. The Murdochs only own 13% of the company, but pause 30%

:35:46.:35:49.

don't have a vote they virtually control T other people put up the

:35:49.:35:54.

majority of the money. You might this that won't matter and people

:35:54.:35:58.

would ignore it when things are going well, but it is when things

:35:58.:36:06.

are going badly, because there isn't a correct mechanism of scale.

:36:06.:36:09.

Family-run businesses are like the poem, when she was good she was

:36:09.:36:14.

very, very good, but when she was bad she was horrid. Do the funds

:36:14.:36:21.

you run have shareholding? No. this reason? This is one of the two

:36:21.:36:24.

prime reasons. One is the newspaper interests, not very profitable. The

:36:24.:36:29.

other one is, we would never own shares in a company where a family

:36:29.:36:32.

has control, without putting up most of the money. Contrary to the

:36:32.:36:39.

view that Mr Murdoch seems to have, we don't think the ideal candidate

:36:39.:36:43.

to run the country needs to be called Murdoch. Some of the smaller

:36:43.:36:48.

shareholders are getting worked up by it, the big names don't seem

:36:48.:36:53.

that bothered? They are being polite, Mr Jacman, you have to bear

:36:53.:36:58.

in mind this is 12% of his fund. He's unlikely to be rude about it

:36:58.:37:02.

at the moment. Yofpbg he's really very - I don't think he's really

:37:02.:37:09.

very pleased. Do you think times are changing or is this some blip

:37:09.:37:16.

shareholders will worry about and then it will blow over? Terry has

:37:16.:37:22.

pointed to one of the key corporate governance issues which is the dual

:37:22.:37:26.

shareholder. You have had one shareholder speak out about t it is

:37:26.:37:31.

the biggest American pension fund, known as a campaigner on corporate

:37:31.:37:35.

governance. They have been speaking out on the point Terry makes. That

:37:35.:37:38.

is an important and influential voice. The interesting thing, I

:37:38.:37:45.

think, in America, is going to be two things. First of all, whether

:37:45.:37:48.

the crisis is of the corporate culture spreads to what News Corp

:37:48.:37:53.

was doing in the United States. If you see any evidence that the

:37:53.:37:58.

hacking extended to 9/11 victims, I think that will have a huge public

:37:58.:38:03.

impact, you will see a lot more action from US shareholders.

:38:03.:38:06.

just wondering on the corporate governance side of things, the

:38:06.:38:12.

other issue that stands out is the fact he's both the chairman and the

:38:12.:38:16.

CEO, is that again the kind of thing that seemed fine at the time,

:38:16.:38:26.
:38:26.:38:26.

but now it looks suspect? In the American side of things, it is, I

:38:26.:38:31.

think it is best prak tus, but in the US it is more common than in US,

:38:31.:38:35.

a lot of companies have the CEO and the chairman. Are there changes to

:38:35.:38:40.

come in the wake of all of this? Yes, as we were saying, I think

:38:40.:38:45.

there is pressure right now on the dual shareholding structure, the

:38:45.:38:49.

other issue you are going to see is something Terry pointed to, which

:38:49.:38:52.

is the question of nepotism, it is the sort of thing that doesn't

:38:52.:38:57.

matter to anyone, as long as the company is making tonnes of money

:38:57.:39:00.

and there is no clouds over it. Now there will be big questions over

:39:00.:39:07.

Rupert Murdoch's age, and over whether he should have the right to

:39:07.:39:12.

treat News Corp like a hereditary monarchy. If tomorrow we did have a

:39:12.:39:17.

different heir apparent, a non- Murdoch heir apparent, Chase Carey,

:39:17.:39:21.

for example, would that make you feel differently about News Corp?

:39:21.:39:26.

It would make me feel differently. I would look at his strategy. It is

:39:26.:39:30.

not just the phone hacking scandal that poipbtsdz to problems with the

:39:30.:39:38.

country. They bought the Wall Street Journal for $5.7 billion and

:39:38.:39:46.

lost �2 billion on it. MySpace was another loser. They bought the

:39:46.:39:51.

company Shine, which the lawyers suing them called it rampant

:39:51.:39:57.

nepotism. We have to find out whether the same capital

:39:57.:40:00.

allocations practices would be the same. It is the same as flushing

:40:00.:40:04.

money down the drain. Hearing a list like that, it sounds like a

:40:04.:40:08.

company that could have done better, is this again one of the things

:40:08.:40:12.

with the benefit of hindsight investors take a different view on?

:40:12.:40:16.

Well the fact is that News Corp still has a lot of properties that

:40:16.:40:21.

are making a lot of money. That is why shareholders haven't been

:40:21.:40:26.

kicking up a fuss. In terms of corporate strategy, will the News

:40:26.:40:30.

Corp of the future be run to maximise shareholder value to make

:40:30.:40:34.

more money, or will it be run to maximise its public influence. Some

:40:34.:40:39.

of the investments which Terry has pointed to, which haven't made

:40:39.:40:44.

financial sense, have had the effect of giving News Corp a bigger

:40:44.:40:50.

public platform. Most notably the Dow Jones purchase. That is

:40:50.:40:53.

connected to Rupert Murdoch and the kind of man he wants to be. He has

:40:53.:40:59.

shaped the country in his imanimal. You have pointed out the issues

:40:59.:41:02.

that there r even after the appearance in parliament, which was

:41:02.:41:11.

pretty ref latery in many ways, we which they faced a grilling, on

:41:11.:41:14.

that the shares went up. It is a vote of confidence? You don't know,

:41:14.:41:18.

the shares can't tell you, it may be somebody takes the view that

:41:19.:41:23.

will be the end of the dynasty, as a result of him behave anything way

:41:23.:41:28.

that is aged. I wouldn't read that much into it. There are a couple of

:41:28.:41:31.

things that will lead to a conclusion, one of the things

:41:31.:41:34.

touched upon already, what happens with regard to the allegations

:41:34.:41:40.

about hacking of 9/11 victims, or their families. It is such an

:41:40.:41:43.

emotive subject of the United States of America, it would be an

:41:43.:41:50.

absolute bombshell if there are revelations to suggest that is true.

:41:50.:41:54.

There was some sad news from the art world with the announcement

:41:54.:42:01.

that the artist Lucian Freud had died at the age of 88.

:42:01.:42:06.

We're here to talk about him. How do you think we will remember him,

:42:06.:42:12.

his ligcy. I think undoubtedly somebody who removed the whole

:42:12.:42:16.

traditional process, really, of inviting people to come into our

:42:16.:42:22.

studio, either sit down in a chair, lie on a sofa, or even actually

:42:22.:42:28.

recline on bare floorboards and submit yourself to the gaze of the

:42:28.:42:32.

painter, who is there in the room with you. It is very much a kind of

:42:32.:42:37.

intense relationship between the artist and the person he is

:42:37.:42:41.

painting. It is such a distinctive style, I think lots of people, who

:42:41.:42:46.

perhaps never even would have known the name, Lucian Freud would know

:42:46.:42:53.

one of the paintings when they see them. Was there anything derivative

:42:53.:42:58.

or somebody he would have made up on his own. When he was emerging,

:42:58.:43:04.

it was a time when modern art was at its most experimental. Most

:43:04.:43:09.

avant garde. A lot of people tended to dismiss him as somebody very

:43:09.:43:13.

traditional. Somebody who was just going over old ground, and not

:43:13.:43:19.

coming up with the goods. But gradually, by the 1970s, I think it

:43:19.:43:27.

is true to say, that Lucian Freud had established himself as somebody

:43:27.:43:37.
:43:37.:43:38.

who was taking that skill and making it ref latery. He did paint

:43:38.:43:42.

to the end? That was one of the most extraordinary thing about him.

:43:42.:43:46.

Whenever I went to see him he was painting, not just one project, but

:43:46.:43:56.
:43:56.:43:56.

maybe two or three. He had two big studios in London, he would go back

:43:56.:44:00.

and forth. He would shoot off and you would ask where he's going, and

:44:00.:44:06.

he would say he's painting a horse in stable down the road. And he

:44:06.:44:09.

would have a horse somewhere that would be a subject? The horse would

:44:09.:44:14.

be in stable, it is a were, waiting for him to come and be painted. He

:44:14.:44:19.

did do landscapes, sometimes, he painted his garden, he painted

:44:19.:44:23.

views of streets in London sometimes. But he was one of those

:44:23.:44:28.

guys, actually, who doesn't really like to travel very much. He was

:44:28.:44:33.

never happier than when he was at home, in London, with the brush in

:44:33.:44:37.

his hand, and with a lot of paint on the wall around him. You should

:44:37.:44:42.

have seen the paint, that was attached to the wall in the studio,

:44:42.:44:48.

it was extraordinary. Incredibly valuable works of art, but does the

:44:48.:44:55.

value go up overright as well? overnight as well? It is hard to

:44:55.:44:58.

imagine they could shoot up in value as they are so expensive.

:44:58.:45:01.

That tends to happen when artists die, sometimes.

:45:01.:45:07.

Thank you very much. Before we go let's have a quick look at the

:45:07.:45:17.
:45:17.:45:40.

This story is based on a statement that came out from Colin Myler and

:45:40.:45:46.

Tom Crone. The Mail wants to know how many more poison victims, the

:45:46.:45:51.

debts at the hotel. We will leave you with the pictures

:45:51.:45:57.

of a journey that came to a final end today. After 30 years NASA's

:45:57.:46:04.

space shuttle has entered aviation history, no more Cape Canaveral

:46:04.:46:12.

countdowns and lift offs. The telescope is lifted up out of

:46:12.:46:22.
:46:22.:46:42.

This is President Obama, whoam I talking to. You are talking to the

:46:42.:46:48.

crew of the space shuttle Atlantis. That was funny, I was just dialing

:46:48.:46:53.

out for pizza! A ship like no other, its place in

:46:53.:47:03.
:47:03.:47:07.

history secured, the space shuttle As advertised for some time now,

:47:07.:47:10.

the weekend is looking dryer and brighter than it has been. There

:47:10.:47:16.

will be a few notable exceptions as we will see. Friday is shaping up

:47:16.:47:20.

OK. There will be a few showers around, not as widespread as we

:47:20.:47:23.

have seen. Across the Midland there may be one or two heavy showers by

:47:24.:47:27.

the afternoon. Some sunshine inbetween. One or two of those

:47:27.:47:32.

showers could effect affect the Test Match at Lords, we might get

:47:32.:47:41.

away with T showers across the West Country, but the tip of worn wall

:47:41.:47:46.

will be dry. Most of the showers further east. - Cornwall will be

:47:46.:47:49.

dry. Most of the showers further east. Sunshine and light winds at

:47:49.:47:53.

this time of year it feels pretty pleasant. One or two showers for

:47:53.:47:56.

Northern Ireland, one or two showers for Scotland as well.

:47:56.:48:00.

Nothing like as heavy or widespread as we have seen recently. 19

:48:00.:48:03.

degrees in Glasgow. Further ahead into Saturday, across northern

:48:03.:48:06.

areas, the improvement continues, a lot of dry and bright and warmer

:48:07.:48:12.

weather, along the east coast it will be cloudier and breezy, the

:48:12.:48:18.

same applies for England and Wales, the east coast is not too bad. This

:48:18.:48:22.

is the big picture on Saturday. Dry and bright for many, along the east

:48:22.:48:26.

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