Sunday, 29 April 2012

Death in China

Investigations Editor
Sunday Telegraph 29 April 2012

IN THE gondola of a balloon tethered above an English seaside resort stands a woman named in China as a suspected murderer, and the French architect she introduced as her friend.
The woman is Gu Kailai, now suspected of ordering the cyanide-assisted killing of Neil Heywood, the Briton whose death has created shock waves here and in China, and ended the gilded political career of her husband, Bo Xilai, the Communist leader of the city of Chongqing.
Beside her is Patrick Henri Devillers, who has disappeared from public sight, and who seems to be a key figure in her dealings.
The photograph was taken as the woman in the dark glasses carried out an extraordinary business deal, uncovered by The Sunday Telegraph, to supply British balloons to China. 
One of the people involved in the deal claims she wanted to use it to fund the prep school fees of her son, Guagua, a “princeling” who is now a student at Harvard University, and whose lifestyle has been highlighted as evidence of his parents’ corruption.
The deal casts new light on Mrs Gu, her life in Britain, and how she transformed herself from scion of a Communist dynasty to a businesswoman of extraordinary wealth.
Her rise has been accompanied by a fall every bit as spectacular. She is now being held by the Chinese authorities, while the whereabouts of her once-powerful husband, who was removed from the Politburo, are not known.
Their disappearance coincides with the 10-yearly renewal of the Chinese communist party’s leadership amid speculation that Mr Heywood’s untimely death may have been used by Mr Bo’s enemies to purge him from the ruling elite.
Mr Heywood, educated at Harrow, was found dead in his hotel room in Chonqing in November last year. The authorities initially said he had died of alcohol poisoning, while his family were told he had suffered a heart attack.
Mr Heywood had acted as an adviser and fixer to Mr Bo and his wife, and was said to have helped their son achieve a place at Harrow. 
The death remains a mystery, and British police may now be ordered to open their own investigation. 
Dr Andrew Harris, a London coroner, is considering using special powers to request that Kenneth Clarke, the Justice Secretary, gives him authority to hold an inquest into Mr Heywood’s death. That would pave the way for Scotland Yard to be called in and British diplomats to ask Chinese police for their notes.
The downfall of Mrs Gu comes more than a decade after this photograph of her was taken in — of all places — Bournemouth, thousands of miles and a world away from her home in China. It was around 1999, at a time when Mrs Gu was embarking on her own business venture while her husband was creating a political power base in China. Quite why she should have been interested in bringing hot air balloons from Dorset to China is not clear but one person involved in the deal, worth £600,000, told The Sunday Telegraph he believed that she attempted to use the contract to move cash out of China secretly.
Incredibly, that included an extra £200,000 to pay for her son’s long-term education at British public schools — an allegation that chimes with claims in China that Mrs Gu enriched herself by laundering the gains of corruption in her home city by moving it overseas.
The discussions over the balloons began in 1998 when Mrs Gu, now 53, was living in a penthouse flat in central Bournemouth while her son, Bo Guagua studied English at a college in the town before transferring to Papplewick prep school, near Ascot, and a place at Harrow. Mr Guagua, now 24, said last week that his education was funded through scholarships and family savings.
The balloon deal began rather informally, when Mrs Gu approached Giles Hall, whose firm, Vistarama Balloon Systems, ran the “Bournemouth Eye” at the time. The “eye”, a tethered balloon, offered views from 500ft above the resort. A similar attraction is now run by another firm.
“She could see our balloon in Bournemouth’s lower gardens from her apartment and she came and introduced herself,” said Mr Hall. “She was dripping with expensive jewellery and told us she was from China and her husband ran the city of Dalian and that she thought it would be a wonderful thing for the city to have a similar balloon.”
Mrs Gu was telling the truth about her husband — at the time, Mr Bo was mayor of Dalian. But there was one thing she was not truthful about: her name. For months, Mr Hall and the other Britons involved thought she was called Horus Kai.
It was the name she used for her business deals in the US and Britain for more than 20 years — an apparent reference to Horus, the name of the ancient Egyptian god of the sky, war and hunting.
Mrs Gu ran a company called the Law Office of Horus L Kai, which had offices in Beijing and Shanghai, as well as Dalian, and held a stake in Horas Consultancy and Investment, which was registered under a slightly different spelling. She advised clients who wished to do business in China as the country’s economy boomed in the 1990s.
Mrs Gu was accompanied in Bournemouth by Mr Devillers, who she said was her “middleman”. Vistarama was a small company and its staff found themselves thrust into negotiations with people who promised contracts worth millions. Mr Hall said: “At first the talk was of supplying one balloon for Dalian but quickly we were being told that if things went well there would be hundreds more orders for other parts of China.
“Gu introduced us to Patrick Devillers. He was her frontman. He signed the contracts.
“I also met Neil Heywood. I think his involvement was meant to reassure us. He was an Englishman who knew how to work in China.
“When we met him without Gu he even offered to work for us as our fixer. He said it was important to have someone working on your behalf, but I was intrigued about how someone so young was involved with Gu and her husband. He was only in his late 20s or early 30s at the time.
“He told us he had gone to Dalian as it had a free trade area and had introduced himself at the municipal offices and had met Bo Xilai there. He was very self-confident. He came across as very much the public school boy, very well spoken, and very smooth.”
The deal took Mr Hall company to China, and eventually, “Miss Kai’s” identity emerged. “For months we knew her as Horus,” Mr Hall said.
“It was only later that we found out who she really was and how powerful her husband was. My team had meetings with Bo Xilai in China and other provincial governors, but there was no doubt who was in charge.”
The meetings led to a deal, with the Chinese paying for a balloon that would offer views over Dalian. It was supplied by Lindstrand Balloons, owned by Per Lindstrand, the Swedish aeronautical engineer known for his ballooning record attempts alongside Richard Branson, the Virgin boss.
When the deal was struck, Xu Ming, the head of the Dalian Shide Group and China’s fifth richest man, came to Bournemouth, and took a ride with Mrs Gu and Mr Devillers.
“I remember that Xu Ming was reluctant to come to Britain,” Mr Hall said. “We were told they were to sponsor the balloon, which was designed to look like a giant football, as Xu Ming was chairman of the Dalian Shide football club.”
A British engineer for the company went to Dalian to install the balloon, where he met Mr Bo. He was the couple’s guest at a visit to the theatre, where the audience stood to show their appreciation for his work on the balloon – in itself a subtle indication of Mr Bo and Mrs Gu’s extraordinary power.
The engineer, who wants to remain anonymous, was charmed by Mrs Gu and says that it is impossible to reconcile the woman he knew with the picture of a businesswoman at the centre of an empire of deceit, international money-laundering and murder being painted by Chinese officials. “Gu was always kind, gentle and generous. She cooked me Chinese meals in her flat in Bournemouth and took me out on several occasions in London and in China,” he said.
“The picture being painted of her now does not in any way seem to be about the same person I knew and I simply cannot believe that she did the things she is accused of. To me she seemed like a woman whose only goal was to do things for the benefit of China and its people, not for her own personal gain.”
He never met Mr Heywood but saw Gu with Mr Devillers on several occasions. “I don’t want to say too much,” he said. “They seemed very close.”
As the deal progressed, however, Mr Hall became suspicious. Money was coming from more than one account — including Mrs Gu’s personal account, which he recalls as being at Coutts — and then an extraordinary suggestion was made.
“We were arranging to supply a giant winch which is used to tether the balloon to the ground and then to control its assent and descent,” said Mr Hall.
“The cost of the winch, which was second hand, was about £100,000 but Gu suggested she would give us a lot more. She wanted to give us an extra £200,000 which she said she needed in Britain to pay for her son’s school fees. We were taken aback. We didn’t want to get involved in something like that.
“When we refused she got angry. She changed from someone very friendly and gentle to someone who clearly didn’t like not getting her own way.”
The deal hit further problems when, after delays in payment, the winch failed to be loaded on to a container ship bound for Dalian and instead was flown to Beijing, where the tax authorities started to take an interest.
“She called,” said Mr Hall. “Gu accused me of not taking her seriously. She warned me that I should never come to China. If I did, she said, I would be arrested and thrown in jail.”
The deal ended in recrimination, and Mr Hall’s company was wound up, although some who were involved with him — including the engineer who installed the winch — suggest that he was largely to blame, not Mrs Gu and the Chinese.
The fate of the balloon itself seems apt given Mrs Gu’s fall: it remained in the city for two years until a hurricane blew it away and it was destroyed. A replacement balloon, supplied directly by Lindstrand Balloons without the involvement of Mr Hall’s company, was purchased by Shide Group, but it, too, was destroyed after it was hit by fireworks during a celebration in the city.
Mr Bo and Mrs Gu left Dalian afterwards and rose to power in Chongqing. But Mr Heywood and Mr Devillers — pictured here for the first time — remained significant figures in their dealings.
Mr Devillers went on to set up a “law firm” in Bournemouth three years after the balloon deal — although there is no evidence that it traded — and later lived in a £1.3 million apartment in Earls Court, west London.
The nature of Mr Heywood’s relationship with Mrs Gu has been the subject of wide speculation but Mr Hall said: “He was a ladies man, of that I have no doubt, but I don’t think he was with Gu in that sense.”
Meanwhile, Mr Devillers’s family in a small village in eastern France say they have not seen him, although they say they remain in touch by telephone. It is said that he has not been seen in Beijing and Shanghai, where he is known to have done business, for two years.
However, the first confirmation that he is following developments in the extraordinary case came yesterday, when Stephane Biver, a lawyer acting for Mr Devillers’s property company based in Luxembourg, said he would not comment. She said: “Your request was passed on to Mr Devillers, who advised us that he doesn’t want to comment on this case.”
In China, the other parties remain at the heart of the case: 
Mr Xu, who is suspected of “economic crimes”, is presumed to be in custody, as is Mrs Gu. She may now need some of the charm and fortitude her British business partners noted.
The engineer who worked with her noted: “Mrs Gu was always understanding, never cross and never blaming anybody. She was so easy to work with and I admired her calm attitude to disappointments.”

Monday, 23 April 2012

Michael Brown

Fraudster Michael Brown faces questions about his £2.4 million donation to the Lib Dems

The fraudster who gave the Liberal Democrats £2.4 million before fleeing the country is to be questioned when he returns to Britain to help determine if the party will be forced to pay back the cash.

Michael Brown faces extradition (EPA) 
Michael Brown will be extradited to Britain from Spain as early as next week to begin serving a seven-year prison sentence imposed for a £36 million fraud while he was on the run and living under a false name in the Dominican Republic.
The con man, who was tracked down in the Caribbean by the Sunday Telegraph three and a half years after he absconded, volunteered to be flown to Spain last week rather than remain in jail on the island. He was arrested there earlier this year over another allegedly fraudulent scheme.
Once in a British cell the Parliamentary Ombudsman is expected to ask for his co-operation as it investigates the Electoral Commission's decision to declare that his political donation was made and accepted legally – even though the business through which he funded the Lib Dems was engaged in fraud.
The Electoral Commission said that the Lib Dems had taken the money in good faith from Brown's firm First Avenue Partners, even though it was used as a vehicle to defraud clients, including former Manchester United chairman Malcolm Edwards, who lost £6 million.
But the Parliamentary Ombudsman is examining whether the Electoral Commission decision represented "maladministration" and whether it should be forced to reopen the investigation, which could lead to the Lib Dems being forced to pay the money back.
The investigation centres on "the way it [the Commission] considered, decided and reported the issue of (the) donation ... in particular that it reached a perverse decision which the facts and law were incapable of supporting".
The Electoral Commission is also accused of contravening its "statutory function to exercise its discretion reasonably in respect of donations to a political party".
It is thought that Brown will be asked to explain his motivation for giving the cash and whether his UK firm was trading legitimately.
Another key question will be whether Brown was actually giving the money to the Party personally, which would have been banned as he was living abroad and was not registered to vote in the UK.
It was claimed that because Mr Brown's firm rented offices in Britain and employed a full time member of staff that any donation was allowed.
Brown, who flew out of the Dominican Republic last weekend, was given the choice of being expelled to either Britain or Spain, as he had lived in both countries.
He chose Spain and arrived in Madrid last Sunday. He was immediately arrested on a European Arrest Warrant issued in the UK seeking his extradition.
On Monday he appeared at a closed-door hearing at the National Court in Madrid, which handles all extradition cases in Spain.
The judge Santiago Pedraz asked whether he was prepared to be sent to Britain to serve an unfinished prison term or wanted to fight extradition. Brown said he would accept extradition.
A court spokesman said: "It is now a matter for the National Police to arrange his flight to the United Kingdom."
A senior officer at National Police headquarters in Madrid said: "There is some paperwork to be done and sent to Interpol. But that should not take long. I would expect this man to be escorted on a flight to the United Kingdom during the course of the week."
In the meantime Brown is being held at a top security prison just outside Madrid from where he will be driven to the capital's Barajas international airport.
Brown was tracked down to the Dominican Republic last year by a Sunday Telegraph investigation which revealed that he had been living under the name Darren Nally, a known criminal.
This newspaper disclosed how his escape from Britain had been arrange by a convicted drug smuggler with links to organised crime.
Brown was finally arrested in January after the Dominican Republic police, using our evidence, linked the name on his false passport to his real identity and an Interpol record which showed he was wanted in the UK.
He was discovered living at a £1.6 million over looking the Caribbean Sea on a luxury golf resort near Punta Cana. His wife was staying that the villa at the time of his arrest.
He had previously been tracked down to another luxury villa elsewhere on the island where he had been living with a much younger woman who was described as his "concubina" in court records but fled.
While in the Caribbean he attempted to put together a series of new frauds, including one bogus deal involved shares in a non-existent Russian oil refinery which he said involved Boris Berezovsky, the Russian billionaire businessman. Berezovsky knew nothing about it and the investors lost their cash.


Western allies of MI6 'kept in dark’ over mosque sting plan

MI6 and Col Muammar Gaddafi’s Libyan intelligence service set up a radical mosque in a Western European city in order to lure in al-Qaeda terrorists, it can be revealed.

MI6 and Col Muammar Gaddafi’s Libyan intelligence service set up a radical mosque in a Western European city in order to lure in al-Qaeda terrorists, it can be revealed.
Britain was encouraging Col Gaddafi to give up plans for weapons of mass destruction Photo: ALAMY

By Jason Lewis, Investigations Editor9:00PM BST 21 Apr 2012

The joint operation, which was undertaken as Britain attempted to secure a deal with Col Gaddafi to reopen diplomatic relations, shows how closely Britain’s Secret Intelligence Service was prepared to work with his regime’s spies despite widespread allegations of human rights abuses.

At the time, Britain was encouraging Col Gaddafi to give up plans for weapons of mass destruction. Four months later, the dictator and Tony Blair, then prime minister, struck the 2004 “deal in the desert” which ended Libya’s pariah status.

The cooperation extended to recruiting an agent to infiltrate an al-Qaeda terrorist cell in the Western European city, which cannot be named for security reasons.

The double agent, codenamed Joseph, was closely connected to a senior al-Qaeda commander in Iraq and had been identified as a possible spy by the ESO, Libya’s external intelligence service, on a visit to Tripoli.

MI6 began recruiting the agent without telling its allies in the European country where he lived.


The agency agreed a narrative with the agent and the ESO to fool their allies about when and how the agent had been recruited and the operation launched.

Documents seen by The Sunday Telegraph, which were sent from MI6 headquarters in London to Moussa Koussa, the Libyan intelligence chief, give a detailed outline of this subterfuge, the agent’s recruitment and plans for the operation. The papers were left behind in Tripoli as Col Gaddafi’s regime crumbled.

The plan raises questions about the SIS, MI6’s close links with the Libyan regime and whether it was acting on government orders.

Last week it was disclosed that Jack Straw, the then foreign secretary, is facing legal action over claims he signed off the rendition to Tripoli in March 2004 of an alleged Libyan terrorist leader accused of links to Osama bin Laden, claims that had been previously denied in Parliament.

But now it can be disclosed that secret anti-terrorist operations in Europe involving MI6 and Libyan intelligence began four months earlier with a series of meetings in the UK.

In December 2003, “Joseph” and a Libyan intelligence officer were flown to meetings at British hotels to discuss setting up a mosque to attract North African Islamic extremists.

They hoped to gain “information on terrorist planning”. MI6 paid for one Libyan intelligence officer, who had previously worked under diplomatic cover in the UK, to stay in a five-star central London hotel and smoothed his passage through immigration at Heathrow to “avoid the problems he experienced on his previous visit”.

A secret memo sent to Libyan intelligence in Tripoli details an early meeting with the apparently reluctant new agent in a city in the north of England.

“Our meeting in the UK on this occasion was to explore further with 'Joseph’ just what he might be prepared to do,” it said.

Headed “Greetings from MI6 London” it says: “ 'Joseph’ was nervous. He had had a paranoid walk to the hotel across [UK city] with too much eye contact from passers-by that had unduly unnerved him.

“We reassured him by going over the cover story we had discussed when we met in Tripoli. We would not be seen together in public but, in the unlikely event that anyone saw us in the hotel, I would simply be his business contact. Furthermore, there was no link between the hotel booking and MI6.

“ 'Joseph’ agreed to work with SIS but still required reassurance. A second meeting took place a few days later when MI6 and Libyan officers met 'Joseph’ at one five-star hotel and then travelled in separate taxis to” a second hotel to ensure they were not being watched.

The memo adds: “We told 'Joseph’ that under no circumstances was he to tell the [European intelligence service of country where he lived and was planning to operate] of his involvement with us and the Libyans. We would do this when we were ready.”

The agent had, the note says, already been approached by this Western intelligence service but he was told to “stall his meeting” with them.

A strategy was agreed to keep the other Western intelligence service in the dark about the full extent of their contact with the agent.

It added that MI6’s allies would later be told the agent had been recruited “as a result of our ongoing counter terrorism relationship with ESO, [and we] sought to capitalise on the relationship struck up with 'Joseph’.”

The operation was run behind the backs of Western allies in the chosen city. Critics are likely to question whether it could have backfired, with a terrorist cell launching an attack using the mosque as a base.

The disclosures come in the wake of the accusation that Mr Straw gave the green light to the plan to seize Abdelhakim Belhadj, one of the military commanders who helped to overthrow Gaddafi’s regime last year, and his pregnant wife and put them on a CIA flight.

Secret documents outlining the rendition plan, published by The Sunday Telegraph last February, showed how MI6 tipped off Libya that Mr Belhadj was being held by immigration officials in Malaysia and that the secret CIA flight was scheduled to refuel at an airbase on Diego Garcia, a British sovereign territory in the Indian Ocean.

Once Mr Belhadj was in custody in Libya, Sir Mark Allen, MI6’s then counter terrorism chief, sent a letter to Mr Koussa, saying: “This was the least we could do for you and for Libya to demonstrate the remarkable relationship we have built.”

The evidence contradicted government statements denying British involvements in renditions. Last week Mr Belhadj’s lawyers said they had issued legal proceedings against Colin Roberts, the Foreign Office official responsible for Diego Garcia.

Mrs Clegg

Deputy Prime Minister's wife and the US firm her husband attacked in Commons

Nick Clegg's wife gave highly paid advice to a company which her husband condemned for sacking British workers, it can be revealed.

Miriam Gonzalez Durantez and the US firm her husband attacked in Commons

There is no suggestion Mrs Clegg, who uses her maiden name Miriam Gonzalez Durantez, did anything wrong, but the association is likely to embarrass her husband. Photo: GETTY

By Jason Lewis, Investigations Editor
21 Apr 2012

Mrs Clegg was hired by Kraft, the US food conglomerate, three weeks before Nick Clegg called its takeover of Cadbury "just plain wrong".

She provided advice on trade at the same time as the Liberal Democrats criticised Kraft for its conduct after the deal in January 2010.

There is no suggestion Mrs Clegg, who uses her maiden name Miriam Gonzalez Durantez, did anything wrong, but the association is likely to embarrass her husband.

Concerns have also grown that Mrs Clegg could use her position to lobby ministers, and the Cabinet Secretary met her to discuss "conflicts of interest or any perception of undue influence".

It is understood the couple have confirmed they will not publicly discuss her clients and that any lobbying work on their behalf will be prohibited.
Mrs Clegg earns almost £600,000 a year as a partner in a City firm which offers legal and lobbying services, far more than the £134,565 her husband takes home as Deputy Prime Minister.

Mr Clegg announced this month that he was prepared to disclose his tax return, but when asked if his wife would make her earnings public said: "Us politicians, as servants of the public, should make our own arrangements transparent.

"But I don't think we should necessarily call on other people to do that."

Mrs Clegg was a leading member of the team at law firm DLA Piper awarded a contract to work for Kraft in January 2010 to handle "day-to-day legal needs" as Kraft's "preferred provider of legal services".

One of her team described their work as a "lobbying practice" and said Mrs Clegg offered advice on "how to lobby governments".

Sources at the firm said: "Miriam did some limited work for Kraft over a couple of years on trade issues."

Kraft awarded the contract three weeks before Mr Clegg and his colleague Vince Cable, who at the time was Lib Dem economic spokesman, attacked the Cadbury takeover.

Kraft reneged on two promises after the deal, firstly not to cut jobs in Cadbury's Birmingham base, and also to keep open a factory that had been earmarked for closure.

Mr Clegg harangued Gordon Brown at prime minister's questions, saying: "British taxpayers ... would never have believed that their money would now be used to put British people of out work. Isn't that just plain wrong?"

But at the same time, DLA Piper was advising Kraft and its chief executive Irene Rosenfeld as it tried to bring in stringent cost cutting. Miss Rosenfeld, who has refused to face MPs in the House of Commons, earned £14 million after meeting the targets.

A Commons select committee report accused Kraft of acting "irresponsibly and unwisely" during the £11.6 billion takeover, and the firm was also censured by the Takeover Panel.

Mrs Clegg left DLA Piper this year and is now head of European Union trade and government affairs at the law firm Dechert LLP. Sources said her salary was around £500,000 a year, and she has also earned £140,000 over the past two years as a non-executive director of Acciona, a Spanish energy and construction firm.

Mrs Clegg's commercial activities have been discussed at the highest level of the civil service and she is banned from lobbying Government ministers.

Sir Jeremy Heywood, the Cabinet Secretary, revealed the extent to which officials had gone to avoid any conflicts of interest. Mrs Clegg had talks which with him, his predecessor Lord O'Donnell, Sue Gray the director of propriety and ethics.

"We have clear procedures in place to protect Miriam Gonzalez Durantez and the Deputy Prime Minister from any conflicts of interest or any perception of undue influence; and I am fully satisfied that these are rigorously complied with," said Sir Jeremy.

The Deputy Prime Minister's Office said these arrangements and Law Society rules barred the couple from discussing Mrs Clegg's work.

Jonathan Oates, Mr Clegg's chief of staff, said: "Miriam Gonzalez Durantez does not lobby ministers. Her only engagement with ministers is at official Government events or party/social events.

"She does not discuss her clients with her husband or any other Government minister."

Death in China

Neil Heywood death: how news of an Old Harrovian's murder went straight to Barack Obama

The death in China of Neil Heywood, the British businessman, took on a series of dramatic twists yesterday as it was disclosed that President Barack Obama was taking personal interest in the alleged murder.

The death in China of Neil Heywood, the British businessman, took on a series of dramatic twists yesterday as it was disclosed that President Barack Obama was taking personal interest in the alleged murder.

Mr Obama was informed of suspicions over Mr Heywood’s death within hours of a Chinese police chief walking into an American consulate and telling officials that the Briton was murdered Photo: Getty

By David Eimer in Dalian, Jason Lewis and Josie Ensor
21 Apr 2012

Mr Obama was briefed immediately on the suspected poisoning of the 41 year-old, which Chinese officials are linking to Mr Heywood’s powerful political allies, when American diplomats were told of the murder allegation.

Gu Kailai, Mr Heywood’s former business partner and the wife of Bo Xilai, a senior politician who had been tipped for the highest political office, is suspected of ordering the Briton’s murder in a case at the centre of a political storm in China. The couple have disappeared from sight as the Communist Party attempts to regain stability.

In a series of developments yesterday:

* A dissident website that has revealed key details in the story was hacked, suggesting that the Chinese authorities want to clamp down on the flow of information.

* One of Mr Bo’s allies at the top of the Chinese political establishment was facing fears that he too may be purged from the party.

* Concern grew over the whereabouts of another European business partner of Mrs Gu, a French architect who has lived in London.

* More claims emerged that Mr Bo and Mrs Gu had siphoned off vast amounts of wealth in corrupt business deals, in which it has been claimed Mr Heywood was enmeshed.

* The couple’s Harrow and Oxford-educated son, Bo Guagua, was claimed to be plotting to move the family’s assets beyond the reach of authorities in case they seized them, while defying demands to return home from the US.

Mr Obama was informed of suspicions over Mr Heywood’s death within hours of a Chinese police chief walking into an American consulate and telling officials that the Briton was murdered.

Security guards surrounded the consulate as diplomats sought advice from their superiors in Washington.

Mr Obama learnt that Mr Heywood was being described as a murder victim before British officials told William Hague, the Foreign Secretary, about the development.

Sources in Washington last night said that for the American president to be so quickly informed of the death of a British citizen was almost unprecedented.

“This was a very high official with extraordinary intelligence,” John Tkacik, who worked for the state department in China for 20 years, said of Wang Lijun, the head of Chongqing police.

“In all of my experience, I can’t recall its equal.”

America is increasingly being drawn into the claims of murder and corruption that have rocked the Chinese establishment.

The hacking of the website, which has been a consistent source of information on the murder investigation, was blamed on the Chinese security services by the US-based dissidents who run it.

A senior Washington intelligence official, who analyses Chinese cyber activities on a daily basis, said: “There is no question that the Boxun denial-of-service attack was ordered by the authorities in Beijing. It has their fingerprints all over it.”

Also based in the US is Bo Guagua, 24, whose lavish lifestyle has been highlighted in official Chinese reports.

Despite his father’s official salary of £600 a month, he was educated at prep school and Harrow. He went to Oxford, from which he was rusticated, and now studies at the Kennedy School of Government at Harvard.

Claims surfaced in Taiwan yesterday that Chinese diplomats had told the young Mr Bo to return home immediately, and that he was working on hiding the family’s gains from alleged corruption from the Chinese and American authorities. He is also reported to have hired private security.

Mr Heywood had told a friend he was instrumental in gaining Mr Bo the place at Harrow, and seems to be at the centre of the scandal rocking the Communist party.

When Mr Lijun arrived in an agitated state at the US consulate in Chengdu one night in February, he described a web of corruption and fear presided over by his boss, the Chongqing party chief Mr Bo.

The consulate was surrounded by local police, who wanted the Americans to hand Mr Wang over to Mr Bo’s enforcers. Eventually he was given to Chinese state police, leading to questions in the US over why he was not offered asylum.

Analysts believe Mr Heywood’s alleged killing is only the most public element of a bitter power struggle which has ended Mr Bo’s hopes of joining the nine-strong politburo which runs China.

Mr Bo rose to national prominence as mayor of Dalian before he was mayor of Chongqing. His wife, also scion of a Communist dynasty, was equally powerful and reports in Chinese state media have made claims of extraordinary levels of corruption and crime.

An unnamed man in Dalian, who was managing the couple’s overseas assets, died in suspicious circumstances, while the presumed suicide of a Chongqing investigator is also now being dealt with as murder.

Leaked party memos claim that Mrs Gu was behind these deaths, in addition to that of Mr Heywood.

The day before Mr Bo’s removal from office for “economic crimes”, one of his family’s close allies was arrested. Xu Ming, a Dalian-based billionaire, has not been seen since. There is speculation that Mr Heywood’s wife worked for him.

The scandal is also threatening Zhou Yongkang, the politburo security head and another ally of Mr Bo. Boxun reported he had been forced “to make tearful self confessions” to President Hu Jintao. His fate has yet to be decided.

The whereabouts of another European linked to Mrs Gu are also unknown. Patrick Devillers, an architect, helped her set up a company in Poole, Dorset. He grew up in Rainans, eastern France, where his father Michel said he had not seen him for three years. “We speak on the phone, but he doesn’t give me much news,” Mr Devillers said. “He’s a busy man with lots to do.”

In China, residents at the architect’s last known address, an apartment overlooking the Bird’s Nest Stadium in Beijing, claimed not to have seen him for years.

The Angdao law firm, where Mr Devillers was based, and which is believed to have been quietly run by Mrs Gu, would not comment on his whereabouts. Some workers said they thought he had moved back to France in 2008.

Mr Devillers is perhaps right to be wary: Mr Heywood’s wife and two children are coming to terms with him being the apparent victim of a cyanide poisoning plot.

There are even claims he was held down and forced to swallow the poison. Friends in China have found it strange that the Old Harrovian, who cultivated the image of an Englishman abroad by wearing a linen suit and driving a Jaguar with a 007 number plate, could be caught up in an international scandal.

In Dalian, where Mr Heywood settled on moving to China following a degree at Warwick University, Eddie Casey, 61, an Irish expat who ran a bar called the Tin Whistle, said: “He was a happy guy. He was very intelligent, always came in for the pub quiz and his team would win. He wasn’t a party guy. He’d have a couple of beers and then he’d say, ‘I’m going home’. The foreign community in Dalian was very, very small then and so we all knew each other.”

Nothing in Mr Heywood’s lifestyle or his business career pointed to fabulous wealth.

He reportedly left very little in his will and his wife is said to be struggling with the mortgage on their three-storey house in Beijing, as well their children’s £50,000-a-year fees at the Beijing branch of Dulwich College.

A former associate reportedly even had to pay for the family’s plane tickets to attend Mr Heywood’s memorial service in London.

“I knew he was involved with Bo Xilai,” said a friend. “The first time I met him he claimed he’d been instrumental in getting Bo’s son into Harrow, but that didn’t seem very remarkable. Now, when I read the stories saying he was a money launderer, that’s just mind boggling to me.”

A Shanghai-based businessman also said the story did not chime with the man he knew. “You meet people who have zeal in their eyes; Neil didn’t,” he said.

“He seemed easy-going and gave no indication that he was driven or ambitious. I got the impression that he was quite lost: a nice guy but a bit of a drifter really.”

The last time the businessman saw Mr Heywood was a month before his death at a regatta in Beijing. “We all sat on the grass watching the rowing. It was very pleasant and our kids got on well. We were going to arrange for the kids to play together again. But it never happened.”

Monday, 16 April 2012


GCHQ warns it is losing terrorists on the internet

Controversial proposals to "snoop" on every email, phone call and text message have been driven by a warning from spies that new technology has "eroded" their ability to eavesdrop on terrorists and criminals.

The new measures would force internet firms to install hardware enabling GCHQ to examine 'on demand' details of any phone call, text message or email, and any website visited Photo: PA

By Jason Lewis, Investigations Editor, and David Barrett 8:50AM BST 08 Apr 2012

GCHQ, the Government's listening post, have grown increasingly concerned that modern internet technology has left them unable to intercept calls which use new technology instead of traditional phone systems.

Systems known as Voice Over Internet Protocol, or VoIP, route telephone calls over the world wide web.

They include computer to computer calling systems like Skype, but also many of the discount phone deals offered to make calls abroad from landlines.

Senior intelligence sources with detail knowledge of the problem said GCHQ had seen their access to telephone intercept information "eroded" by the use of the internet telephone services.

A highly placed source said: "We need to take action to maintain the continued availability of communications data to the police and other agencies investigating criminality and it is true that the ability of these agencies to get access is eroding due to changes in communications technology and usage."

Plans for the controversial move to make internet and phone companies keep a record of every email, phone call, text message and message on social networks such as Facebook, were first disclosed by The Sunday Telegraph in February.

They are at the centre of mounting concern from civil liberties groups and backbench members of both Coalition parties, with senior Conservative backbenchers now increasingly outspoken in opposition to the measures.

The new measures would force internet firms to install hardware enabling GCHQ to examine "on demand" and in "real time" details of any phone call, text message or email, and any website visited.

Last week Theresa May, the Home Secretary and Ken Clarke, the Justice Secretary, used a joint letter to attempt to calm the unease among backbenchers.

But security sources last week offered the most explicit explanation for the measure yet.

The source, speaking on condition of anonymity, pointed to a statement given to the Parliamentary Intelligence and Security Committee by Sir David Pepper, the then head of GCHQ, four years ago, in which he warned of the problems it was facing due to the growth of this technology, and which was not widely published at the time.

He said: "One of the greatest challenges for GCHQ is to maintain its intercept capability in the face of rapidly evolving communications technology. This relates in particular to the growth in internet-based communications and voice over internet telephony.

"The internet uses a very different approach to communications. Rather than having any sense of fixed lines... communications are broken up... whether you are sending an email or any other form of internet communication... packets are then routed around the network and may go in any one of a number of different routes... (This is) the biggest change in telecoms technology since the invention of the telephone. It is a complete revolution..."

The rest of Sir John's testimony on the subject was blacked out on national security grounds as were the words of MI5 director general Jonathan Evans, who is believed to have confirmed that the technology was causing the Security Service real difficulties.

It is understood that in the last few years GCHQ has been working on ways to get around the problems caused by this use of the internet but its success or failure is highly classified.

However it was hoped that the new legislation being mooted by the Coalition Government would have helped the intelligence services by allowing so-called Deep Packet Inspection equipment to be installed on the UK network.

Until now intercepted telephone conversations have proved crucial in building up an intelligence picture of terrorists and criminals' operations. Calls can only be intercepted with a warrant from the Home Secretary, and special equipment at GCHQ is used.

Land line phone conversations are relatively easy to intercept, using equipment installed at telephone exchanges and satellite ground stations, but internet calls are virtually impossible to listen in on unless a bug is installed on the computer being used to send or receive it.

Increasingly it is not just Skype and similar calls between computers which are routed over the internet, but also calls from landlines, often those made through alternative call providers which offer cheap deals for long-distance and international calls.

Once the information contained in a conversation is sent over the internet it is broken up into tiny pieces, or packets, and sent using myriad different routes and is only reassembled at the other end by the computer receiving the "call".

In the United States technology has already been adopted which can intercept internet phonecalls. The National Security Agency with cooperation from telecoms giant AT&T, is using "Deep Packet Inspection technology" for internet traffic surveillance. It is used to find which packets are carrying e-mail or an internet telephone call. A similar system is also in use by the US Department of Defense.

But this form of internet sifting is highly controversial and is also used in countries including China and Iran to censor certain internet activity.

The reasons put forward by secuirty sources may not allay the fears of critics however.

Last night Gus Hosein, of Privacy International, said: "We don't want deep packet inspection 'black boxes' to be installed because it opens the door to all kinds of intrusion into private communications.

"The Government are kidding themselves if they think as soon as they have the black boxes they'll be able to check everyone's VOIP calls, and so on, because everything is encrypted.

"Unless GCHQ have a bit of magic we don't know about it would take an impossible amount of computational power to break all that encryption."

Monday, 2 April 2012

Death in China

Neil Heywood 'feared for his safety' as strains grew around Bo Xilai, his powerful Chinese friend

New questions arise daily over the death of British businessman Neil Heywood since the surprise ousting of Politburo grandee Bo Xilai in Chongqing.

Last picture: Taken just before his death, 41-year-old Neil Heywood. Friends say he looked ill

By Jason Lewis, Investigations Editor, Josie Ensor, and Malcolm Moore in Beijing
7:00PM BST 31 Mar 2012

The text message on the mobile phone screen was to the point: “Neil Heywood was killed”.

Sent anonymously in the middle of the night last February, it referred to the case of a British businessman found dead in a hotel room in the city of Chongqing, in South West China, three months earlier, apparently of natural causes.

Now the message to a Chinese investigative journalist from an unidentified number was suggesting he had been murdered.

The suspicion, another Chinese reporter revealed last week, was that Mr Heywood was a “Bai Shoutao” - literally a “white glove”, brokering a series of secretive business deals for a powerful Chinese politician not supposed to soil his hands with commerce.

On Saturday a startling new report surfaced that Mr Heywood had told friends in China that he feared for his safety after falling out with Gu Kailai, Mr Bo’s wife. Concerned that somebody in the family’s inner circle had betrayed them, she was said to have asked Mr Heywood to divorce his wife and swear an oath of loyalty, which he refused, according to the Wall Street Journal, the newspaper which broke the original story about Heywood’s death last week.

Happier times: Neil Heywood with his sister Leonie.

Whatever the truth of the claims, they have put Mr Heywood at the centre of a political storm in China and led to suggestions that the late 41-year-old Harrow-educated businessman may have been a British spy.

Disquiet in Britain’s expat community in Beijing about the official version of events - that the abstemious Mr Heywood may have been drinking heavily before his death - led the Foreign Office to ask the Chinese to reopen the case.

Now The Sunday Telegraph has learned that the Foreign Secretary William Hague is being personally briefed on the affair and, in the US, the Vice President Joe Biden has intervened after calls for a Congressional hearing into the ensuing events.

Heywood arrived in China more than a decade ago after graduating in international relations from Warwick University. His only previous business experience had been in an unsuccessful venture with his father, attempting to produce a “blind date auction” television show. There were no takers.

His break came when Bo Xilai, mayor of the city of Dalian until 2000, hired him to teach his son English and he became close to the whole family - including Mr Bo’s wife, Gu Kailai, a lawyer who is believed to handle much of the family business. It is this connection that is now at the centre of the intrigue.

Mr Bo’s tenure in Dalian was marked by the city’s phenomenal transformation into a modern metropolis fuelled by huge economic growth.

Its success propelled Mr Bo to election to the Chinese politburo and a post as minister of commerce. Helped by his father’s connections as a close friend of both Deng Xiaoping and Jiang Zemin, his career glittered until he became Communist party secretary in Chongqing, a megacity of 30 million people, where economic growth easily outstripped the already blistering national average.

It was a validation of the idea that private enterprise, welded to strict party control, could produce miraculous results.

Mr Bo’s micro-management extended to the songs that people sung and the television they watched. Under his rule, viewers were fed a diet of revolutionary dramas about the early years of the Communist party.

He played cannily both on nostalgia for the “good old days” before Chinese society was tainted by materialism, and on his image as an enemy of crime - even if some now claim that a campaign to destroy the mafia focused also on destroying his own business rivals.

While Mr Bo was rising though the Party ranks, Mr Heywood used his connection to bolster a consultancy business he started, helping British firms gain a foothold in China.

His firm, Heywood Boddington Associates, registered at his mother’s house in London, described itself as “a multi-discipline consultancy focusing on serving the interests of UK businesses in the People’s Republic of China”.

Set up in 2005, its website, shut down shortly before his death, quoted from The Art of War, the ancient Chinese book on military strategy that is also a favourite of Mr Bo’s. It says: “Know yourself. Know the other party. In a hundred battles, you will never be defeated.”

The firm warned: “China has endless powers to tantalise and amaze. But its ancient civilisation evolved almost entirely independently from the western world. With a business environment of legendary complexity, China’s ability to confound is no less formidable."

Part of Mr Heywood’s work involved undertaking due diligence on Chinese firms for Hakluyt, the Mayfair-based business intelligence firm set up by former MI6 officers. But despite suggestions of an involvement in espionage, the reality was different.

Western firms want to know all they can about those they are planning to do business with, especially when millions of pounds are at stake. Mr Heywood’s role, like others in the international information trade, was to compile dry reports on companies and individuals, searching out financial information and press reports to reassure investors.

Much of his own firm’s work appears to have involved promoting the manufacturers of children’s car seats and medical inhalers.

His business partner for five years Chris Boddington, now a director of PWC, the international consultancy firm, in China, last night refused to discuss his work with Heywood, issuing a terse “no comment”.

Heywood was highly successful. He lived in an expensive home in an affluent Beijing suburb near the former Olympic rowing park with his Chinese wife Lulu. Their young son and daughter attend the local branch of Dulwich College, one of Britain’s top schools, whose fees in China are up to £22,000 a year.

But last November this modern story of a Westerner making his fortune in China ended in tragedy.

After flying to Chongqing for a meeting, reportedly with Mr Bo or a member of his family, Mr Heywood, aged just 41, was found dead in his hotel room. A cursory medical examination suggested he had been drinking and had died of heart disease.

The Foreign Office gave consular help to his grieving family. With no foul play even hinted at, Heywood was swiftly cremated, apparently at his family’s request, and his sister flew to China to take his ashes back to Britain.

On February 5 everything changed when Chongqing’s police chief, Wang Lijun, walked into the US consulate in Chengdu, 200 miles away, and asked for protection. He allegedly told the Americans that his boss, Mr Bo, was behind Mr Heywood’s death and that his own life was now in danger after he had tried to investigate.

Mr Wang had been a key ally of Mr Bo in a war against organised crime and corruption which had seen around 2,000 detained, including government officials and police officers.

Now he apparently asked for asylum but, after wrangling between the consulate and Washington DC, was refused and forced to leave. His current whereabouts are unknown and Chinese reports say he is on leave due to a “health concern”.

Meanwhile an “open letter to the whole world”, purportedly by Mr Wang, surfaced on the internet. The letter attacked Mr Bo as a “hypocrite” and “the greatest gangster in China” and accused him of corruption.

It was most likely fake. But a month later Mr Bo, who admitted he may have “trusted the wrong person” in Mr Wang, was sacked as Chongqing Communist Party Secretary and from his other posts in the city. He too has not been seen in public since.

The latest revelations add to the intrigue over what may be the most serious split in China’s secretive leadership for 20 years. Mr Bo had been a candidate to join China’s top ruling body, the Politburo’s standing committee. Could the Wang scandal and Mr Heywood’s death have offered his rivals an opening to sideline him?

The ripples spread far and wide. His spectacular fall from grace sparked rumours throughout China of a military coup - fuelled by the lack of information about what lay behind it. On Saturday the authorities arrested six people and closed 16 websites for spreading the speculation.

Meanwhile in Washington the House of Representatives Committee on Foreign Affairs is demanding to know why such a senior Chinese official as Mr Wang was apparently turned away by US diplomats.

Vice President Joe Biden is among senior figures urging them not to hold public hearings, and officials are expected to refuse to answer questions on national security grounds.

Whatever the truth about Mr Bo and his family’s connections with Heywood, the allegations that the Briton may have been murdered are a shock to his family, who still believe his death was due to a heart attack.

His father and his paternal grandparents all died at an early age - and several friends in Britain say Mr Heywood “looked ill” in pictures taken before his death.

John Summers, Mr Heywood’s brother-in-law, said: : “As far as I’m aware the Foreign Office has not been in contact with any of Neil’s family about re-opening the case, it was their decision to do that as the family had accepted the verdict.

“He never mentioned any problems or worries. He had lived out there for quite a while and seemed happy.”

Mr Heywood’s 74-year-old mother Ann, who still lives in the Streatham family home where he grew up, said: “I loved Neil very much, a mother and son could hardly have been closer. We talked several times a week on the phone and if anything was worrying him he would tell me.

“It’s distressing having it all brought up again after four months. As far as I’m concerned it was, and still is, a closed case. The Foreign Office is looking into it again, but not at our request.

“It’s heartbreaking to even think there was foul play involved. He was very ambitious, had a lot of friends and business contacts and had a nice life in China.

“I went to China often to see him, I still do to see my daughter-in-law and grandchildren, and they were always very happy.

“I don’t know why these theories have surfaced now, I don’t know about any political motivation. As far as I’m concerned he died of a heart attack. It’s tragic, but nothing more.”