Three Scottish government advisers benefit from share speculation slammed by first ministerBy Paul Hutcheon, Scottish Political Editor
THREE more of Alex Salmond's economic advisers work for firms that profit from a form of share speculation the First Minister has blamed for the decline of Scotland's oldest bank.
One of the companies that "short-sells" shares, Morgan Stanley, last year received a £6 million grant from the SNP Government to boost jobs in Glasgow.
It has also emerged that the Scottish Government is funding another business, Timberpost, which creates artificial intelligence for short-selling firms.
The UK is facing economic turmoil following the collapse of several high-profile financial institutions in the US.
The global crisis reached Britain earlier this month after a run on HBOS forced a likely merger with Lloyds TSB.
Salmond blamed the possible demise of HBOS on the "spivs and speculators" who short-sell shares, a practice that has since been temporarily banned.
Short-selling is where companies sell shares they have borrowed in the hope their value falls, after which the same firms buy them back at a lower price.
The Sunday Herald last week revealed how Salmond's own chief economic adviser, Sir George Mathewson, was chairman of a hedge fund that sold shares short.
It can now be revealed that another three of Salmond's advisers, who sit on the Financial Services Advisory Board (FiSAB), work for firms that profit from the practice.
One of the advisers is Willie Watt, chief executive of Edinburgh-based Martin Currie Investment Management Ltd, a company that has reportedly built up $2bn in long-short hedge funds.
Its latest accounts show the firm made a post-tax profit of £19,932,493 for the year ending in 2007.
John Campbell, another FiSAB member, is senior vice president at State Street Corporation, a firm with extensive hedge fund interests.
A State Street spokesman said the firm's investment arm, State Street Global Advisors, sells shares short.
A third Salmond adviser is Margaret Wallace, the managing director of Morgan Stanley UK. Its investment company, Morgan Stanley Investment Management, has a long/short fund.
The latest company accounts of Wallace's company report the firm made a post-tax profit of $86,436,000.
Morgan Stanley last year received a regional selective assistance (RSA) grant of £6m to boost jobs in Glasgow, a subsidy Salmond welcomed in a press release. "These jobs not only represent the success of the existing Morgan Stanley workforce, but show that high quality employment ... the way forward for Scotland," he said.
Two other Salmond advisers, Sir Robert Smith and Otto Thoreson, are both directors of Aegon Asset Management (AAM), a company that reportedly had a long/short equity fund.
However, a spokesman for AAM said the fund was a "paper portfolio", meaning that it had never been launched.
It has also emerged that the Scottish Government is subsidising a company, Timberpost Ltd, that helps short-sellers.
Andy Kerr, Labour's finance spokesman, said: "It just gets worse for Salmond, who engaged his motor mouth before engaging his brain. His analysis of the challenges facing the Scottish financial sector is fatally flawed."
A spokesperson for the First Minister said: "The issue at stake was naked short selling and concerted shorting deliberately designed to destabilise the market and take advantage of the turmoil. Had action not been taken, financial companies would have fallen like nine pins, and it's high time Labour understood that and helped to defend the Scottish interest instead of hindering it in this ill-informed way."
