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The Morning Risk Report: Luckin, Rival to Starbucks in China, Says Employees Fabricated 2019 Sales
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Luckin Coffee has opened more than 5,000 coffee shops in China in the last two years. PHOTO: BRENDAN MCDERMID/REUTERS
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Good morning. Luckin Coffee, an upstart rival to Starbucks in China that touted itself as the country’s largest coffee chain by stores, said several employees fabricated much of its reported sales in 2019, the year the company went public on the Nasdaq Stock Market.
The Xiamen-based company on Thursday said an internal investigation found that its chief operating officer and several others fabricated transactions amounting to 2.2 billion yuan ($310 million) from the second quarter to the fourth quarter of last year.
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The company said it has formed a special committee to look into the matter. It said the investigation is at a preliminary stage, and that the company will “take all appropriate actions, including legal actions, against the individuals responsible for the misconduct.”
Luckin went public in May 2019, raising a total of $645 million in a U.S. initial public offering arranged by Credit Suisse, Morgan Stanley, state-backed investment bank China International Capital Corp. and other investment banks. Earlier this year the company raised another $865 million by selling convertible bonds and additional stock. Some of Luckin’s early investors sold out of their stakes when the company went public.
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From Risk & Compliance Journal
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Russian Fund Behind Coronavirus Aid Is on U.S. Lending Blacklist
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A Russian state-owned fund that says it footed half the bill of a coronavirus aid shipment delivered to the U.S. on Wednesday has been on a U.S. Treasury restricted lending list since 2015.
The Russian Direct Investment Fund, a $10 billion sovereign-wealth fund started by Russian President Vladimir Putin in 2011, said Thursday it paid for half the cost of a shipment of medical supplies promised by Moscow in a call with President Trump on Monday.
The RDIF was launched to help attract investment into Russian companies and infrastructure projects. In 2015, the Obama administration placed the RDIF on a U.S. Treasury sanctions list that prevents U.S. individuals and businesses from making loans to or buying equity in the fund. A State Department spokesperson said Thursday that the U.S. sanctions on RDIF didn’t apply to the provision of medical equipment.
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Anti-Money-Laundering Group Shifts Its Certifying Process Online
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The Association of Certified Anti-Money Laundering Specialists LLC has moved its certifying process online in response to social distancing efforts intended to stop the spread of the novel coronavirus.
The membership organization for anti-financial crime professionals has started offering online proctoring for all of its certification exams conducted world-wide, except for China, Japan and Slovenia, according to the organization, whose credentials have become a required designation for many anti-financial-crime compliance positions.
Members of the Miami-based organization are required to take an exam to be certified for their knowledge on relevant areas, such as detecting and combating money laundering or sanctions compliance. Before the change, which went into effect on Wednesday, candidates generally needed to physically visit a test center to take the final test. But testing centers in many countries have closed due to the coronavirus pandemic.
Now, candidates can take the exam from their home or office with a computer, a web camera and internet connection, said Rohit Sharma, president and managing director of ACAMS, which has about 77,000 members in 175 countries.
More than 60 people signed up to take the test online within 24 hours of ACAMS announcing the details on how to take the exams on Tuesday, Mr. Sharma said. An estimated 2,000 to 3,000 people may take the certification exams during the second quarter, according to Mr. Sharma. He expects more people would be open to taking the tests online after the pandemic ends as well.
— Mengqi Sun
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President Trump had been initially reluctant to use the Defense Production Act. PHOTO: OLIVER CONTRERAS/ZUMA PRESS
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President Trump moved to use a Korean War-era national security mobilization law to help major manufacturers secure supplies companies need to make ventilators.
In an order under the Defense Product Act, the president directed Health and Human Services Secretary Alex Azar to “use any and all authority” to supply materials to General Electric, Hill-Rom Holdings Inc., Medtronic PLC, ResMed Inc., Royal Philips NV and Vyaire Medical.
The president praised the companies for ramping up production of the machines and said the order “will save lives by removing obstacles in the supply chain that threaten the rapid production of ventilators.”
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As banks around the world come under stress from the coronavirus crisis, a New York Fed paper says there is a benefit of limiting disclosure of information on the soundness of banks in times of stress.
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A day before small businesses can apply for forgivable loans from the $2 trillion financial-relief package, banks say they are still struggling to understand how to make these loans eligible for a government guarantee. Meanwhile, the federal government doubled the interest rate—to 1%, up from 0.5%—under its emergency lending program for small businesses.
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China’s new coronavirus policies roiled the operations of FedEx and UPS, rattling flight crews, disrupting cargo shipments and prompting appeals from the carriers to the White House and other U.S. officials to stave off supply-chain disturbances amid the pandemic, according to people familiar with the matter. The disruptions were caused by more stringent Chinese coronavirus testing procedures—including nasal swabs—and quarantine threats that flight crews objected to, the people said.
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New York lawmakers are expected to approve a bill that would grant sweeping civil- and criminal-liability protections to hospitals and health care workers treating the surge of patients infected with the coronavirus. The statute largely lifts the threat of malpractice lawsuits at a time when New York hospitals are reeling from ventilator and protective-gear shortages and overcrowding that could force them to make wrenching choices about allocating lifesaving care.
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Investigators examining the beginnings of the 2016 probe of possible links between the Trump campaign and Russian election interference are pushing to complete their inquiry despite the coronavirus pandemic.
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Justice Department antitrust officials are looking to find out if a deal to combine the internet’s two largest content-recommendation firms, Taboola and Outbrain, would suppress competition in a market that has provided a steady stream of revenue to online publishers.
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The stock market is gyrating wildly but the Securities and Exchange Commission may not have a complete picture of what’s going on.
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SEC’s Clayton Signals Sympathy for Pleas of Private Equity-Backed Firms
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People waited in line for help with unemployment benefits in Las Vegas last month. PHOTO: JOHN LOCHER/ASSOCIATED PRESS
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A record 6.6 million Americans applied for unemployment benefits last week as the new coronavirus struck the U.S. economy and sent a recently booming labor market into free fall.
The large number of claims was double the 3.3 million who sought benefits two weeks ago as the U.S. shut down parts of the economy in an effort to contain the virus. Jobless claims, a proxy for layoffs, provide temporary financial assistance for workers who lose their jobs.
Dallas Fed leader Robert Kaplan said Thursday elected leaders probably would need to provide more stimulus to the economy to help it navigate the coronavirus crisis, while acknowledging that ultimately it wasn’t the central bank’s call.
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Lawyers and advisers who work on the largest corporate bankruptcies in the U.S. say they expect a deluge of debt restructurings and chapter 11 filings due to the massive disruption caused by the novel coronavirus.
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U.S. corporate bonds are being downgraded at breakneck speeds, highlighting the threat posed to companies’ balance sheets by the coronavirus crisis.
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PHOTO: CHARLES PLATIAU/REUTERS
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A U.K. regulator on Thursday reprimanded and fined KPMG and one of its former partners for a lack of “professional skepticism” and a failure to obtain sufficient verification to do an accurate audit. The actions by the Financial Reporting Council, which oversees accounting and audit in Britain, come as concerns have been raised over the quality of audits by large accounting firms.
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German soldiers at a barracks in Berlin tested an app on Wednesday intended to track people’s interactions. PHOTO: ISMAEL AKBAR/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Western governments aiming to relax restrictions on movement are turning to unprecedented surveillance to track people infected with the new coronavirus and identify those with whom they have been in contact.
Governments in China, Singapore, Israel and South Korea that are already using such data credit the practice with helping slow the spread of the virus. The U.S. and European nations, which have often been more protective of citizens’ data than those countries, are now looking at a similar approach, using apps and cellphone data.
“I think that everything is gravitating towards proximity tracking,” said Chris Boos, a member of Pan-European Privacy-Preserving Proximity Tracing, a project that is working to create a shared system that could take uploads from apps in different countries. “If somebody gets sick, we know who could be infected, and instead of quarantining millions, we’re quarantining 10.”
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Google will help public health officials use its vast storage of data to track people’s movements amid the coronavirus pandemic, in what the company called an effort to assist in “unprecedented times.”
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An N95 respiration mask underwent tests at a 3M lab last month. PHOTO: NICHOLAS PFOSI/REUTERS
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American manufacturers say it will be months before they meet demand for high-quality masks, part of a broader breakdown in the effort to supply enough protective gear and lifesaving equipment to fight the coronavirus pandemic.
3M and a half dozen smaller competitors are making about 50 million of N95 masks—which block 95% of very small particles—in the U.S. each month. That is far short of the 300 million N95 masks the Department of Health and Human Services estimated in March that U.S. health-care workers would need monthly to fight a pandemic. U.S. hospitals that previously purchased masks from abroad have turned to overburdened domestic suppliers after many countries blocked exports to fight the virus within their own borders.
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Amazon has filled 80,000 jobs in the span of a few weeks, part of a hiring spree to add 100,000 workers to meet soaring demand amid the coronavirus pandemic.
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Tesla said first-quarter deliveries of its electric vehicles rose 40% compared with a year ago, while not addressing how the coronavirus pandemic might hurt future sales.
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The coronavirus outbreak is costing Trump Organization properties more than a million dollars in lost revenue daily and may have hurt the firm’s chances of earning a record price on the sale of its Washington hotel, according to an analysis of industry data and people familiar with the deal talks.
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Multinational companies and startups world-wide are reprogramming their cutting-edge 3-D printers to tackle shortages of critical medical equipment caused by the coronavirus outbreak. Industrial giants including Siemens and General Electric, tech companies such as HP and specialists like Aenium Engineering of Spain are redirecting their engineering and manufacturing capabilities to help hospitals and health-care workers.
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Disney is furloughing employees across all divisions in its domestic operations, as the world’s largest entertainment company struggles with continued fallout from the spread of the novel coronavirus.
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ESPN's new coronavirus-centric PSA features on-air talent. PHOTO: ESPN
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Disney’s ESPN has had to significantly revamp its programming with the loss of live sports during the coronavirus pandemic, and now it’s altering its marketing as well.
On Monday, ESPN is introducing two new commercials addressing the impact of covid-19 in different ways.
One features ESPN on-air talent such as Stephen A. Smith, Doris Burke and former baseball star Alex Rodriguez delivering a message of unity and advising viewers to practice social distancing. Ms. Burke recorded her portion after announcing last week that she has the virus.
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SoftBank said the termination of its multibillion-dollar offer wouldn’t affect the troubled shared-office company’s operations. PHOTO: TIMOTHY A. CLARY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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SoftBank Group terminated an offer to pay up to $3 billion for shares in office-space provider WeWork, depriving co-founder Adam Neumann of a potential windfall of nearly a billion dollars.
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JPMorgan Chief Executive James Dimon returned to work this week, a month after undergoing emergency heart surgery.
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