In Brief: CLO Edition
2018 Jun 20
Today's Top Story
EU Orders Luxembourg to Recover Engie Back Taxes
EU regulators ordered Luxembourg to recover €120 million in back taxes from French utility Engie after ruling that their tax deal infringed the bloc's state aid rules. The move highlights the continued crackdown against corporate tax deals that give some companies an unfair advantage, reports Reuters (20 June, Chee). The tax avoidance clampdown has resulted in a record demand for Apple to pay back taxes of up to €13 billion to Ireland, Amazon €250 million to Luxembourg, Fiat up to €30 million to Luxembourg and Starbucks the same amount to the Netherlands. Thirty-five multinationals including AB InBev and BASF have also been told to pay back a total of €700 million to Belgium. Europe's second-highest court on Thursday will hear a case in which Fiat and Luxembourg will challenge the ruling pertaining to both of them, kicking off a series of appeals by the targeted companies and countries in the coming months. The Starbucks hearing is scheduled for 2 July.
Merrill Lynch Fined for Misleading Customers
Merrill Lynch, Pierce, Fenner & Smith agreed to pay a US$42 million penalty for misleading institutional customers about how it handled their trading orders, reports InvestmentNews (19 June, Benjamin). The U.S. Securities and Exchange Commission (SEC) said that Merrill falsely informed customers that it had executed millions of orders internally when it had routed them for execution at other broker-dealers. The practice entailed reprogramming Merrill's systems to falsely report execution venues, altering records and reports, and providing misleading responses to customer inquiries, according to the SEC. By masking the broker-dealers who had executed customers' orders, Merrill made itself appear to be a more active trading center and reduced the access fees it typically paid to exchanges.
Mergers and Acquisitions
Britain Clears Path for Fox to Participate in Bidding War for Sky
Britain has greenlighted 21st Century Fox's participation in a bidding war for Sky, reports the Wall Street Journal (20 June, Woo), clearing one of the last obstacles for a corporate takeover battle that also includes Walt Disney and Comcast. U.K. Culture Secretary Matt Hancock recently indicated he would approve Fox's US$15 billion bid to acquire the 61 percent of Sky it does not already own, but on one condition: Fox sell Sky's news channel if its bid succeeds. On Tuesday, Hancock gave his blessing to Fox's sweetened proposal to sell the channel to Disney, which itself is attempting to acquire the majority of Fox. The government's approval came after Fox promised to fund a Disney-owned Sky News channel for 15 years for at least US$132 million a year. This sets up a complex bidding war for Sky.
VW Under Pressure on Governance
The boss of Volkswagen's (VW) luxury Audi brand Rupert Stadler was arrested on 18 June for his alleged role in the diesel scandal. On 19 June, VW announced a new interim chief executive, Abraham Schot, board member and sales chief at the car maker. However, the company's top directors could not bring themselves to remove the chief executive even as he sat in custody, and instead the decision was made based on Stadler's own request to resign. Governance experts interpreted this as another sign that directors were unwilling to make meaningful reforms, reports the Financial Times (19 June, McGee). Many analysts say the core of VW's cultural problem was that its supervisory board was comprised mainly of labor unions, the Lower Saxony government, and the Porsche-Piech family who own 52 percent of voting rights in the carmaker. The structure is so rigid that even when a chief executive, chairman, or compliance chief seeks to introduce major changes, it is not clear they have the power to do so.
Audi Names New Interim Leader
CNNMoney (19 June, Riley) reports that Audi has tapped Abraham Schot, its top sales executive, to lead the company on an interim basis. The move comes soon after CEO Rupert Stadler was arrested as part of an investigation into emissions cheating. Stadler requested to be released from his positions on the management boards of both Audi and its parent company, Volkswagen. German prosecutors reported Monday that Stadler had been detained because of concerns he could influence witnesses in an ongoing fraud investigation.
Bithumb Halts Trading After Hack
Bithumb, one of the largest cryptocurrency exchanges, suspended operations 20 June after announcing that hackers stole more than US$31 million worth of virtual currency. A statement from the South Korea-based exchange gave no details on how hackers penetrated the system, which is among the top sites for cryptocurrency trading. The company did say that its cryptocurrency holdings were moved to an offline "cold wallet" and any losses for traders would be covered, reports the Washington Post (19 June, Murphy).
Banking by Smart Speaker Arrives, With Security Risks
Large banks and financial companies have begun to let customers check their balances, pay bills, and in the near future, send money with just their voice through virtual assistants, such as Amazon's Alexa or Apple's Siri. However, virtual assistants and smart speakers are still relatively new technologies and raise security concerns, reports the Associated Press (20 June, Sweet). Google Assistant and Alexa require users to create a secure connection between their bank and the assistant through Alexa's Skills or Google's Actions. All banks require the use of a four-digit PIN before they will provide balance and bank account info over these speakers. Meanwhile, Siri is the most restrictive, only showing a user a bank account balance on a screen, and not allowing other features like paying bills.
Elon Musk Says Tesla Employee Sabotaged Company
Tesla Chief Executive Elon Musk sent an email to employees 17 June saying a disgruntled worker had broken into the company's computer systems in an attempt to disrupt manufacturing. The disruption comes as Tesla is racing to streamline operations on the assembly line that produced its Model 3 electric car, reports the New York Times (19 June, Boudette). "I was dismayed to learn this weekend about a Tesla employee who had conducted quite extensive and damaging sabotage to our operations," Musk wrote in the email. "This included making direct code changes to the Tesla Manufacturing Operating System under false usernames and exporting large amounts of highly sensitive Tesla data to unknown third parties."
ANZ Names New Group Treasurer Amid Cartel Charges
Adrian Went has been appointed Australia and New Zealand Banking Group Ltd.'s (ANZ) group treasurer and will begin in July. Went is currently responsible for credit and capital management for the bank's Financial Institutions Group, ANZ said. The company is working to move past charges of alleged cartel arrangements related to trading ANZ stock around a 2015 share issue. ANZ's current treasurer, Rick Moscati, was among those charged by Australian authorities over the share issue, reports Reuters (20 June, Saldanha).
Telecoms Cut Off Data Providers After Customer Locations Were Revealed
Verizon Communications Inc., AT&T Inc., and Sprint Corp. pledged to stop selling the locations of individual customers to LocationSmart and Zumigo Inc., which buy access to the real-time locations of users from major U.S. carriers and allow other businesses to tap into it. The data is used for marketing, preventing credit-card fraud, and much more, reports the Wall Street Journal (19 June, FitzGerlad, Krouse). The end of the agreements followed revelations that a prison phone provider, which had access to LocationSmart’s system, created a website that let law-enforcement agencies find the location of any cellphone user without obtaining a court order.
Huawei Faces HeadWinds in Australia
Recent reports said that Australian politicians were likely to shut Huawei out of a potentially lucrative contract to upgrade the nation's mobile network over security concerns, the same reason the Chinese technology giant is already essentially shut out of the United States. After the report, Huawei sent an unusual letter to politicians in Australia, made public this week, defending its status as a longtime supplier of networking gear and other equipment to the country's biggest telecommunications companies. Barring the company from bidding on fifth-generation, or 5G, telecom networks would be "ill-informed" and "not based on facts," Huawei said in its letter. Huawei officials have said repeatedly that the company is owned by its employees, not the Communist Party, and that it is a private firm that does not answer to any government, reports the New York Times (19 June, Williams, Zhong).
Corporate Social Responsibility
Microsoft Calls On Trump Administration to Change Its Immigration Policy
Microsoft is calling on the White House to change a "zero tolerance" immigration policy that is separating families at the U.S.-Mexico border, reports CNN Tech (18 June, O'Brien). The company has taken this stand after being scrutinized for its working relationship with U.S. Immigration and Customs Enforcement, which utilizes Microsoft's Azure cloud software. "As a company, Microsoft has worked for over 20 years to combine technology with the rule of law to ensure that children who are refugees and immigrants can remain with their parents," an official statement read. "We urge the administration to change its policy and Congress to pass legislation ensuring children are no longer separated from their families."