CLOs

A coalition of global leaders and businesses said they are launching a new initiative aimed at aligning business interests that can also deliver social impact, reports Pensions & Investments (22 August, Bradford). The 34 leading international companies joining the Business for Inclusive Growth initiative will work with the Organization for Economic Cooperation and Development, whose chairman, French President Emmanuel Macron, is expected to promote the initiative at the upcoming G-7 meeting in Biarritz, France. Nigel Wilson, CEO of Legal & General, one of the participating firms, said, "Delivering shareholder value and furthering social progress are not mutually exclusive. It is the opposite — for companies to prosper in the long term, it is imperative that they be socially as well as economically useful."

From "New Coalition Looks to Align Business Goals with Impact Investing"
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Hasbro has inked a nearly US$4 billion deal to purchase Entertainment One, reports Reuters (22 August, Balu), expanding into the infant and preschool market by gaining access to popular TV shows like "Peppa Pig" and "PJ Masks." In 2018, Hasbro spent nearly US$520 million to add children's entertainment and merchandising franchises, most notably the characters of the superhero TV show "Power Rangers." In addition, the company has linked up with Paramount Pictures and Walt Disney and has registered growth with Marvel's "Avengers" toys, in particular.

From "Hasbro Acquires Entertainment One"
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The US manufacturing purchasing managers' index (PMI) fell below 50 for the first time since 2009, signaling that the ongoing trade war between the United States and China is taking its toll on the manufacturing sector, reports the Washington Post (22 August, Marte). In July, the PMI stood at 50.4, but it dropped to 49.9 in August. The PMI score is based on the results of a survey given to manufacturers about production, output, orders, inventory, and pricing. When the PMI stands below 50, it means that the manufacturing sector is contracting. The decrease in the PMI between July and August mirrored a decrease in the sale of US exports, a sign that normally indicates manufacturers will reduce inventory, cut production, and even trim jobs. Mark Zandi, chief economist for Moody's Analytics, had a gloomy outlook on the state of manufacturing, suggesting that "[i]f manufacturing is not in a recession, it is pretty close." The troubles in the manufacturing sector could have wide-reaching effects in other industries. With shipping and distribution curtailed, the manufacturing slowdown could hurt transportation companies, warehouses, seaports, and airports. And if manufacturing workers receive pay cuts or get laid off, they will limit their personal spending, which could hurt retail.

From "Manufacturing Sector Contracted for the First Time Since 2009, Data Show"
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National Public Radio (23 August, Booker) reports that AT&T, Sprint, Verizon, and nine other telecommunications companies teamed up with attorneys generals of all 50 states and Washington, DC, to announce a new pact to eradicate illegal robocalls. Included in the deal is call-blocking technology that will be integrated into the 12 phone networks' existing infrastructure at no additional charge to customers

From "Phone Companies Ink Deal With All 50 States And D.C. To Combat Robocalls"
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The Australian Securities and Investments Commission (ASIC) is suing National Australia Bank (NAB) for alleged breaches of consumer protection law, reports the Financial Times (23 August, Smyth). According to the lawsuit, which was filed Friday, NAB allowed unlicensed brokers to refer customers for loans. Experts predict that the NAB lawsuit will be the first among many for ASIC, now operating under a "why not litigate?" strategy after a national inquiry into misconduct in the finance industry also criticized regulators for being too lenient. ASIC said the NAB allegations are related to 16 bankers who allegedly accepted loan information and documentation from 25 unlicensed brokers, leading to almost 300 loans in breach of the National Credit Act. The maximum penalty for each individual breach is US$1.2 million. Sharon Cook, the chief legal and commercial counsel for NAB, said that the bank took the allegations very seriously and understands its policies need to change. She said that earlier this year NAB announced that the controversial program giving referral payments to brokers would be ending. In May, a former NAB banker named Andrew Matthews was sentenced to eight months in jail over misconduct relating to the now-abolished program.

From "Regulator Sues National Australia Bank Over 'Unlicensed Brokers'"
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The data-mining firm Palantir has faced internal dissent from employees unhappy with its association with Immigration and Customs Enforcement (ICE), reports the Washington Post (22 August, MacMillan, Dwoskin). Palantir provides digital profiling tools to ICE, enabling it to carry out hard-line immigration policy, including the wide-scale detention and deportation of undocumented immigrants. Last year, more than 200 Palantir employees signed a letter to the firm's chief executive, Alex Karp, expressing their concerns. And earlier this month, 60 Palantir employees asked the company to ditch its ICE contract in exchange for a nonprofit charity contract. But even as Google bowed to employee pressure and backed out of a contract with the Pentagon, Karp refused to consider canceling his contract with ICE. Instead, he doubled down and renewed a contract worth US$42 million. Palantir now faces a disconnect between its employees, largely drawn from liberal Silicon Valley, and its clients, mostly government agencies. Other big tech firms, notably Microsoft, have tried to find balance by telling employees they were not required to work on military projects, but that the company would continue to accept them. Palantir, though, has remained steadfast in its support for ICE, even as some activists allege that the company's technology is being used to curtail the civil liberties of undocumented immigrants. ICE used Palantir technology ahead of a high-profile raid on a Mississippi workplace that led to the arrest of 680 migrant workers.

From "Data-Mining Firm's Ties to ICE Under Attack by Employees"
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Google announced Thursday that it had disabled 210 YouTube channels that were uploading videos "in a coordinated manner" about the ongoing protests in Hong Kong, the New York Times (22 August, Conger) reports. The announcement came three days after Twitter and Facebook announced they had shut down a network of hundreds of accounts that were posting content aimed at undermining pro-democracy protesters in Hong Kong. Some of the accounts posed as news organizations and independent entities but in fact had links to the Chinese government, both companies said. Google said in a blog post Thursday that the discovery of the 210 YouTube channels "was consistent with recent observations and actions related to China announced by Facebook and Twitter." "We found use of VPNs and other methods to disguise the origin of these accounts and other activity commonly associated with coordinated influence operations," Shane Huntley from Google's security team wrote. Google, which owns YouTube, provided no details on how popular the YouTube channels were or how many videos had been posted to the channels.

From "YouTube Disables 210 Channels That Spread Disinformation About Hong Kong Protests"
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The Commonwealth Bank of Australia (CBA) announced Friday that it has hired Carmel Mulhern as its new general counsel, according to Reuters (22 August). Mulhern will finish out the year in her current role as general counsel for Telstra Corp. before making the jump to CBA in January. CBA, the country's top lender, also said that Scott Wharton will become a group executive for program delivery. Wharton previously guided CBA through implementing recommended reforms from Australia's financial regulator into governance and accountability.

From "Australia's CBA Appoints Telstra Executive as General Counsel"
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Overstock.com founder and CEO Patrick Byrne resigned from the discount e-commerce site, saying he was "far too controversial" to serve as chief executive, reports MarketWatch (22 August, Kilgore). His resignation comes after his recent announcement that he had assisted in the Clinton and Russian investigations. He also made public that he was romantically involved with jailed Russian agent Maria Butina. Byrne told shareholders he was concerned that his going public about "certain government matters" may complicate strategic discussions regarding the retail business moving forward. Overstock.com has appointed board member Jonathan Johnson to serve as interim CEO.

From "Overstock CEO Resigns"
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Bloomberg (22 August, Turton) reports that Palo Alto-based VMware Inc. agreed Thursday to buy two software companies for almost US$5 billion. Now that VMware has purchased Pivotal Software Inc. and Carbon Black Inc., the company has expanded its arsenal of development and cybersecurity tools. VMware specializes in virtualization and networking tools and is majority-owned by Dell Technologies Inc. Pivotal is also majority-owned by Dell. With its US$2.7 billion purchase of Pivotal and its US$2.1 billion purchase of Carbon Black, VMware is confident it can deliver secure, multicloud application development. The company said in a statement that the acquisitions will provide software to build, run, and protect any app on any device or in the cloud. Both purchases are projected to be completed in the second half of VMware's fiscal year, which finishes at the end of January.

From "VMware Agrees to Buy Carbon Black, Pivotal for US$4.8 Billion"
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The US Securities and Exchange Commission (SEC) announced in a statement that Deutsche Bank has agreed to pay a US$16 million fine in connection with allegations that it violated US corruption laws, reports Reuters (22 August, Price). The SEC had accused Deutsche Bank of hiring unqualified relatives of officials in China and Russia in violation of the US Foreign Corrupt Practices Act. According to the SEC, Deutsche Bank hired the unqualified relatives of state-owned enterprise executives between 2006 and 2014 and actively tried to hide the employment records. Under the conditions of the settlement, Deutsche Bank neither admitted to nor denied the SEC's findings. The US has also fined JPMorgan and Credit Suisse for similar allegations that the two banks hired relatives of Chinese executives, but fewer investigations have probed banks' behavior in Russia. The SEC said that in Russia, several children of government-affiliated workers were given special treatment or funneled into programs they did not qualify for in exchange for preferential treatment from the government.

From "US Fines Deutsche Bank US$16 Million to Settle China, Russia Corruption Charges"
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Large telecom companies and attorneys general from every US state unveiled Thursday a new pact for combating robocalls, the latest step toward cutting off such calls before they reach a consumer’s phone. Under the agreement, the companies are promising to work to prevent illegal robocalls on their networks and to work with state law enforcement investigating the calls’ origins. The new effort commits a wide array of companies in the absence of regulation to improving their defenses and aiding law enforcement in its investigations into illegal spam calls, which rang Americans’ phones an estimated 4.7 billion times in July alone. The participating companies include AT&T Inc., Verizon Communications Inc., T-Mobile US Inc., Sprint Corp., CenturyLink Inc. and seven other large carriers. The agreement is voluntary and does not include a deadline. It isn’t yet being signed by smaller companies — who are said to be significant conduits for illegal calls — although the larger companies are promising that when they enter into contracts with other voice-call carriers, they will seek to make sure the contract requires cooperation with call-tracing efforts. New Hampshire Attorney General Gordon MacDonald said that with more cooperation from industry in tracing calls, prosecutors will have better tools to bring cases against bad actors. “The great challenge with robocalls is the trace-back challenge,” he said, referring to the difficulty of following a call to its origin through the telephone network. Stein said states could use the new information to prosecute not only scammers but also telecom carriers that accommodate them, using laws barring unfair and deceptive business practices.

From "Large Telecoms, State Enforcers Make Pact to Combat Robocalls"
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Jumia Technologies said Wednesday that it has fired and suspended employees following an investigation into improper sales practices, reports the Wall Street Journal (21 August, Maidenberg, Wexler). Jumia is the company behind the biggest e-commerce business in Africa. In its investigations, Jumia found that some independent sales agents and sellers worked with employees to profit from what sellers pay to use the online platform and commissions that sales agents earn. That conclusion led the Berlin-based company to fire several employees and sales agents and remove certain sellers from the platform, though a Jumia spokesman declined to specify how many people lost their jobs. Co-chief executive Sacha Poignonnec stressed that the improper sales practices were isolated incidents that had little impact on the company's merchandise metrics and financial statements. Earlier this year, Jumia revealed as part of its initial public offering that it had reason to believe sales agents in Nigeria had engaged in illicit sales practices. In its Wednesday statement, the company affirmed that it sales practice reviews across all its markets from 2017 through the end of June. Still, the company's depository receipts fell 17 percent on Wednesday, and its shares are trading at the lowest levels since its initial public offering in April.

From "Jumia Fires Employees After Investigation of Sales Practices"
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In Germany, a nationwide gauge has shown that orders at factories and service companies are falling at the fastest pace in six years, reinforcing fears that a recession will soon grip Europe's largest economy. According to the gauge, more German companies now expect output to drop over the next 12 months than expect output to rise, reports Bloomberg (22 August, Look). Global trade tensions, trouble in the automotive industry, and reduced demand from China have all combined to damage the German economy, which shrank in the second quarter. European Central Bank (ECB) policymakers have already begun planning a monetary stimulus, and it is widely expected that they will cut interest rates when they meet in just under a month. But economists have criticized the German government's readiness for a recession, pointing out that Berlin has taken few steps toward a fiscal stimulus program. August is the seventh consecutive month of contraction for German factories, and the pace of hiring has slowed considerably, especially in manufacturing.

From "German Companies Signal Looming Recession After Demand Plunges"
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The world's top two coffee producers, Brazil and Vietnam, are using technological advancements and mechanization to increase productivity growth and further cement themselves atop the list of global coffee suppliers, reports Reuters (21 August, Teixeira, Nguyen, Symmes Cobb). The growth in Brazil and Vietnam is far outpacing coffee rivals in Central America, Colombia, and Africa. In recent times, the global coffee price has dropped to its lowest level in over a decade, signaling a drastic change to the coffee-producing industry and suggesting that only the strongest producers will survive. Brazilian and Vietnamese coffee producers have used mechanization, selective crop breeding techniques, and irrigation technology to increase their productivity, even as producers elsewhere in the world have increasingly turned to other crops or even abandoned their farms altogether. In Brazil, one harvesting machine does the work of dozens of people in the field, sparking cuts of 40 to 60 percent in harvesting costs. The US Department of Agriculture now estimates that Brazil and Vietnam contribute over 50 percent of the world's coffee supply, with Brazil alone accounting for more than one-third. Both nations consistently set crop production records, suggesting that they will keep expanding their shares of the coffee market moving forward.

From "How Brazil and Vietnam Are Tightening Their Grip on the World's Coffee"
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As the trade war between the United States and China continues to escalate, manufacturers are increasingly looking to move their productions out of China—only to find that other nations are not ready to become the world's factory floor, reports the Wall Street Journal (21 August, Mandhana). One such nation is Vietnam, which theoretically could be benefiting from the trade war but which has struggled to develop specialized supply chains on par with China's. China is full of factories with US-approved safety certifications and capital-intensive machinery, but Vietnam has few, and is already facing a labor shortage as manufacturers flock to the country. Most manufacturers are not looking to completely leave China, but diversify their production, and therefore move limited parts of their production lines to Vietnam, a strategy they call China+1. This strategy is slowly but surely reshaping the global manufacturing landscape, but the changes are not drastic and they are happening over time. Vietnam offers cheap labor, but it is drawn from a far smaller population than China's, while another manufacturing nation, India, has a large population but a skills deficit and restrictive government rules. For manufacturers, that means there is no obvious choice where to move production lines. Still, Hanoi is hoping to set itself apart as a premier destination. It is already known for its sneaker and sweater manufacturing, but it wants to expand its electronics and engineering industries, prompted by billions of dollars in investments from South Korea-based Samsung Electronics.

From "Manufacturers Want to Quit China for Vietnam. They're Finding It Impossible."
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Kinder Morgan Inc. left Canada's oil industry by selling its remaining holdings in the country Wednesday, becoming just the latest foreign oil company to leave Canada over the past three years, according to Bloomberg (21 August, Orland). In the past three years, Canada has seen more than US$30 billion in foreign-company divestitures, as ConocoPhillips, Royal Dutch Shell Plc., Devon Energy Corp., Equinor ASA, and Marathon Oil Corp. have departed the country. In this case, Calgary-based Pembina Pipeline Corp. bought Kinder's Canadian assets and a cross-border pipeline for US$3.3 billion. Canada's energy sector has struggled to rebound from the 2014 crash in global oil prices, leading to a gloomy outlook for the industry that accounts for a fifth of the country's exports. Capital spending in Alberta, where the oil industry is centered on oil sands, has declined for five consecutive years, and the province's unemployment is rising thanks to job cuts. Meanwhile, legal challenges have halted pipeline expansions. In spite of the difficulties facing Canada's oil industry, some foreign companies have remained, including Exxon Mobil Corp., Shell, and Total SA. And with federal elections looming in October, some experts predict that a potential incoming Conservative government would be more appealing to global investors.

From "The US$30 Billion Exodus: Foreign Oil Firms Are Bailing on Canada"
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Pharmaceutical company Gilead Sciences has filed a petition with the US Patent and Trademark Office, challenging the government's claim to have invented the use of the drug Truvada for HIV prevention. The Washington Post (21 August, Rowland) reports that Gilead is claiming scientists discussed the use of Truvada for HIV prevention up to two years before the government filed its patent claim in 2006. In its filing, Gilead included documents the company hopes will prove that the Truvada discussion predated the government's patent claim. The drug, now called Truvada for PREP, is central to the government's efforts to eradicate HIV and AIDS by 2030. In 2015, the US Centers for Disease Control and Prevention won Truvada for PREP patents after a nine-year application. Scores of government scientists and researchers using federal and private foundation grants have proved that Truvada for PREP could work for prevention in humans. The government collects no royalties from Gilead for Truvada for PREP, and though it has written letters to the company asserting its patent, it has declined to go to court with an infringement case. Gilead faces disapproval and criticism from activists and members of Congress over its US$20,000 price tag for Truvada for PREP, with opponents deriding the cost as a greedy cash grab limiting the actual use of the potentially life-saving drug. In particular, legislators have said that it is a prime example of a drugmaker profiting from a medical therapy developed with taxpayer dollars.

From "Gilead Files Challenge to Government Patents for HIV Prevention Pill"
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The Wall Street Journal (21 August, Deng) reports that Goldman Sachs has applied with Chinese regulators to take a controlling interest in an investment-banking joint venture. This marks the most recent move by a foreign company to tap the country's vast financial sector. The company filed paperwork to increase its stake from 33 percent to 51 percent in Goldman Sachs Gao Hua Securities. The goal is to eventually take over the local operation completely, a Goldman spokesman said. The move means three of Wall Street's biggest names could soon control their brokerages in China. Morgan Stanley is awaiting approval for a deal that will give it majority control of its onshore securities arm, while JPMorgan Chase received the green light to set up a majority-owned brokerage joint venture.

From "Goldman Pursues Majority Stake in Chinese Venture"
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The European Commission is planning regulation that entitles European Union (EU) citizens to control use of facial-recognition data, to revamp ethical governance over artificial intelligence (AI), reports the Financial Times (22 August, Khan). A senior official said the goal is to restrict "the indiscriminate use of facial-recognition technology" by businesses and public authorities, by letting Europeans "know when [facial-recognition] data is used," with exemptions "tightly circumscribed," to guarantee appropriate utilization. This would strengthen citizens' protections, beyond current parameters of the General Data Protection Regulation (GDPR), which bars collection of biometric data for identification. Increasing use of surveillance in public areas has invited regulatory scrutiny of facial-recognition technology. A document suggests the EU hopes to draft legislation, to "set a world-standard for AI regulation," and establish "clear, predictable, and uniform rules...which adequately protect individuals," building on current GDPR obligations, and targeting solutions like facial recognition, "which bring specific risks."

From "EU Plans Sweeping Regulation of Facial Recognition"
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