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The Morning Risk Report: Justice Department Issues Guidance on ‘Inability to Pay’ Claims
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Assistant Attorney General Brian Benczkowski of the U.S. Justice Department's Criminal Division has issued guidance for federal prosecutors to use in cases where companies claim they can’t pay a criminal fine. PHOTO: JOSE LUIS MAGANA/ASSOCIATED PRESS
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Good morning. The U.S. Justice Department issued guidance for federal prosecutors to use in cases where companies claim they can’t pay a criminal fine, Risk & Compliance Journal’s Kristin Broughton reports. The move is designed to give prosecutors and companies more transparency around what to expect in cases where financially troubled companies are faced with criminal penalties, Assistant Attorney General Brian Benczkowski said during a speech at a New York conference for white-collar defense lawyers.
The guidance instructs prosecutors to look at several considerations when assessing a company’s claims, including its ability to raise capital and factors that led to its financial condition. Prosecutors are also encouraged to consider whether a possible fine could affect a company’s ability to pay restitution to victims, according to the guidance.
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In making their assessments, prosecutors are expected to collect information on a company’s financial picture, including its cash flow, operating budget and divestiture plans. If prosecutors determine that a company cannot pay, they may recommend a lower fine or the implementation of an installment schedule.
The new guidelines provide a starting point for conversations between companies and prosecutors about fairness when it comes to criminal fines, lawyers said. Inability-to-pay claims are common among companies that face potentially large penalties, they said.
“It’s more productive to have a conversation based on data, versus having an argument back and forth,” said Kara Brockmeyer, a Debevoise & Plimpton LLP partner who focuses on white-collar and regulatory defense.
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The European Union Aviation Safety Agency recently told U.S. regulators it wasn’t satisfied that FAA and Boeing officials had adequately demonstrated the safety of reconfigured MAX flight-control computers, according to people briefed on the discussions. PHOTO: LINDSEY WASSON/REUTERS
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Boeing’s delay-prone effort to return 737 MAX jets to service hit a new snag due to heightened European safety concerns about proposed fixes to the aircraft’s flight-control system, according to people familiar with the details.
Disagreements over various software details, centered on how the MAX’s dual flight-control computers are now intended to operate simultaneously, haven’t been reported before. The issue could prolong final vetting of the anticipated changes and may prompt European regulators to withhold their full support when the U.S. Federal Aviation Administration ultimately allows the planes back in the air, these people said.
The European Union Aviation Safety Agency recently told senior U.S. regulators it wasn’t satisfied that FAA and Boeing officials had adequately demonstrated the safety of reconfigured MAX flight-control computers, according to people briefed on the discussions.
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A Philadelphia jury on Tuesday ordered Johnson & Johnson to pay $8 billion in damages to a Maryland man who said his use of J&J’s antipsychotic Risperdal as a child caused enlarged breasts and the company failed to properly warn of this risk. It was the biggest award to date among more than 13,000 lawsuits against J&J alleging that Risperdal caused a condition called gynecomastia in boys, which involves enlargement of breast tissue. The lawsuits generally claim that J&J was aware of the risk of this side effect, but understated the risk to doctors.
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The European Union will introduce legislation aimed at preventing libra, Facebook’s proposed digital currency, from undermining Europe’s single currency and being used as a money-laundering tool—representing one of the toughest regulatory responses so far. Valdis Dombrovskis, who is slated to stay on as vice president of the European Commission in charge of financial regulation, said Tuesday that libra posed a systemic risk to the euro, given the size of the companies that are behind the global cryptocurrency-based payments network.
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The search for a new agreement on how countries should tax multinational corporations advanced Wednesday, as international negotiators presented a way of rewriting the rules that they expect finance ministers from the Group of 20 leading economies will support.
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Arizona, an initial backer of Purdue Pharma’s proposed settlement of opioid-related claims from state and local governments, took aim at aspects of the deal, which has divided state attorneys general nationwide. Arizona said Monday it opposed Purdue’s request to halt thousands of lawsuits targeting the company and its owners, reversing the state’s prior commitment to cease legal hostilities while the drugmaker’s bankruptcy proceedings played out.
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The Supreme Court spent two hours Tuesday weighing whether a bedrock civil-rights law forbids employers from discriminating against gay or transgender employees. The issues arrived in separate cases, but they boiled down to the same question: Does the Civil Rights Act of 1964, which outlaws workplace discrimination based on sex, nevertheless permit employers to fire individuals because they are gay or transgender?
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Kristalina Georgieva, the IMF’s new chief, warned of a synchronized slowdown in the global economy in a speech Tuesday. PHOTO: ANDREW HARRER/BLOOMBERG NEWS
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The new leaders of the International Monetary Fund and World Bank warned in twin speeches of a deteriorating global economic outlook, just a week before they will lead the annual meetings of their institutions for the first time. “The global economy is now in a synchronized slowdown,” said Kristalina Georgieva of Bulgaria, the former No. 2 official at the World Bank, who took the helm of the IMF a week ago.
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A Federal Reserve Bank president who has been warning about prices rising too high in the commercial real-estate market has a new source of concern: co-working. In an interview, Boston Fed President Eric Rosengren highlighted a potential misalignment in the property market. He noted that landlords are offering long-term leases to co-working firms, which then spend money to build out the space and rent it on a short-term basis.
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Masked students participated in a protest in Hong Kong on Tuesday. PHOTO: TYRONE SIU/REUTERS
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Activision Blizzard suspended an esports competitor from one of its tournaments for backing antigovernment protesters in Hong Kong as tensions intensify between Beijing and the National Basketball Association over a similar expression of support. Activision Blizzard, one of the world’s biggest videogame companies, on Tuesday said in a blog post that “Hearthstone” competitor Ng Wai Chung, known as “Blitzchung” in the game, violated its rules that bar players from actions it considers offensive to a public group or that could damage the company’s image.
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A Friday night tweet by Houston Rockets general manager Daryl Morey, on a banned platform in China, has thrust the National Basketball Association into the turbulent waters of Sino-American politics. Now, the issue of leverage in a rapidly escalating standoff is likely to shape the next moves in this unlikely geopolitical clash between Beijing and its most popular American sports league. The crisis will come to a head with NBA commissioner Adam Silver’s scheduled visit to Shanghai on Wednesday.
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Last year, Elon Musk puffed a marijuana blunt during a live-video interview in California. Halfway around the world, executives at Japan’s Panasonic, Tesla’s automotive battery supplier, watched with alarm. “What will our investors think?” one Panasonic executive remembers wondering. Five years after committing to invest billions of dollars in a shared battery factory in the Nevada desert, Panasonic has a strained relationship with the electric-car pioneer.
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Makoto Uchida, who headed Nissan Motor’s China operations, was named to the CEO post ahead of schedule. PHOTO: NISSAN MOTOR CORPORATION
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Nissan named a new chief executive and said the company would be led by a three-person team that will try to reverse a profit slide and repair relations with alliance partner Renault. The board tapped as CEO the head of Nissan’s China business, Makoto Uchida. Alliance decision making has slowed since the arrest of former Nissan Chairman Carlos Ghosn, the former alliance head, who faces charges of financial wrongdoing in Japan.
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Board votes are no longer a sure thing. This year, 478 public-company directors failed to win the support of a majority of voted shares, up 39% from 2015, according to a new analysis from Broadridge Financial Solutions Inc., which processes proxy votes for companies, and consulting firm PricewaterhouseCoopers. When directors lost shareholder support, it tended to reflect lack of confidence from institutional investors rather than individual shareholders, the analysis found.
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For decades, Germany’s apprentice system provided a steady flow of skilled workers to companies, but now fewer young people want to sign up. PHOTO: JAN WOITAS/ZUMA PRESS
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In Germany, workers as young as 15 can apply to be paid for on-the-job training while attending classes. For decades the system provided a steady flow of skilled workers to German companies while keeping youth unemployment—a problem for many European countries—in check. But now German companies are struggling to fill apprentice openings they have long relied on to produce the next generation of workers.
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General Motors and the United Auto Workers are down to a crucial topic at the bargaining table: wages. The UAW is pressing GM to lock in more guaranteed wage increases for members during the next four-year labor contact, while company bargainers want to give workers more pay in the form of lump-sum bonuses that don’t raise their long-term labor costs, said people close to the talks.
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A pedestrian walking past the headquarters of the Federal Bureau of Investigation in Washington. PHOTO: JOSHUA ROBERTS/REUTERS
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Some of the Federal Bureau of Investigation’s electronic surveillance activities violated the constitutional privacy rights of Americans swept up in a controversial foreign intelligence program, a secretive surveillance court has ruled.
The ruling deals a rare rebuke to U.S. spying activities that have generally withstood legal challenge or review.
The intelligence community disclosed Tuesday that the Foreign Intelligence Surveillance Court last year found that the FBI’s pursuit of data about Americans ensnared in a warrantless internet-surveillance program intended to target foreign suspects may have violated the law authorizing the program, as well as the Constitution’s Fourth Amendment protections against unreasonable searches.
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