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The Morning Risk Report: Justice Department Eyes Fraud in Lending Program for Small Businesses
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Assistant Attorney General Brian A. Benczkowski said the Justice Department ‘has a lot of leads.’ PHOTO: CLIFF OWEN/ASSOCIATED PRESS
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Good morning. Federal prosecutors are mounting a broad search for fraud in emergency lending programs designed to assist businesses battered by the coronavirus crisis, Assistant Attorney General Brian A. Benczkowski said in an interview.
The Justice Department “has a lot of leads and there are multiple ongoing investigations of individuals and small businesses,” he said. Prosecutors also will apply scrutiny to the activities of banks, which are charged with disbursing the funds in some of the programs, Mr. Benczkowski added.
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The $660 billion Paycheck Protection Program is getting the most attention now because it is rushing loans out quickly to reach small businesses in dire need of liquidity. Prosecutors also plan to look for problems in other areas, such as loan programs managed by the Federal Reserve that provide loans or other forms of credit support and are partially backstopped by Treasury Department funding, Mr. Benczkowski said. “Whenever there is lending like this, there is always a high likelihood or high possibility of bank fraud and other types of fraud,” he said.
A federal criminal complaint unsealed Tuesday in Rhode Island has many of the hallmarks of fraud that prosecutors thought they would see, Mr. Benczkowski said. In that case, two men are accused of claiming to have dozens of employees to get PPP loans when in fact they had no workers.
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From Risk & Compliance Journal
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Total Pledges Net-Zero Emissions by 2050
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French oil major Total said it aims to achieve net-zero emissions by 2050 after engaging with a group of institutional investors with more than $40 trillion in assets.
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The move comes as the oil-and-gas sector faces pressure from investors to tackle climate change and shift away from hydrocarbons amid a historic meltdown in oil prices. Fossil-fuel companies in Europe are also looking to align their strategies with the European Union’s ambition to become carbon neutral by 2050, as governments ready regulations to punish big polluters.
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A Seattle police officer wearing an N95 mask, which is named for the 95% of very small particles they are certified to block. PHOTO: TED S. WARREN/ASSOCIATED PRESS
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U.S. Immigration and Customs Enforcement and companies including 3M, Amazon and Pfizer said they are working together to curtail the flood of counterfeit masks, coronavirus tests and other equipment entering the country.
The agency’s center for intellectual-property protection said Tuesday that it was working with companies to identify suspicious shipments and take down suspect online listings for masks and other gear. The intellectual-property unit said the companies have agreed to share information and best practices with it to combat such trade.
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California sued Uber Technologies and Lyft for allegedly misclassifying their drivers as independent contractors instead of employees, a move that intensifies a battle between the ride-hailing giants and their home state. California, which is suing the companies under authority granted by a new state law, said the decision to classify drivers as contractors has deprived them of rights such as paid sick leave and unemployment insurance.
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Germany’s highest court conditionally approved a giant bond-buying program launched five years ago by the European Central Bank, but demanded more information about its economic justification, in a move that could set limits on the ECB’s firepower and invite fresh lawsuits in Germany.
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ILLUSTRATION BY MICHAEL GLENWOOD
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The arrival of Covid-19 is taking surveillance of workers to a higher level, with some employers planning to track movements and gather personal information like never before in Western democracies.
It marks a new chapter in the debate over privacy, and the trade-offs people are willing to make for safety. Some companies now see the measures as perhaps the only way to reopen offices without risking a spike in infections, at least until a vaccine becomes available.
Meanwhile, as New York prepares to reopen its economy, some upstate factories that have been operating during the coronavirus outbreak have lessons to share on how to keep workers safe.
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Whirlpool has said some of its suppliers in Mexico haven’t secured permission to remain open. A Whirlpool facility in Monterrey, Mexico. PHOTO: SUSANA GONZALEZ/BLOOMBERG NEWS
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U.S. manufacturers preparing to resume production after a month of lockdowns are returning to work without a reliable supply of parts from plants in Mexico, a majority of which remain idled by restrictions there to slow the spread of the coronavirus.
Mexico exported $358 billion worth of goods to the U.S. last year, surpassing China as the nation’s largest trading partner. But many subsidiaries and suppliers of parts or finished goods to U.S. manufacturers remain closed by the order of Mexico’s Health Ministry, limiting the flow of goods back north across the border.
The U.S. trade deficit widened in March as the economic shock related to the pandemic held down both imports and exports.
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Disney said the coronavirus pandemic took a $1.4 billion bite out of its earnings, with more to come as executives detailed how the global economic fallout would affect every part of its business for the foreseeable future.
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Wendy’s is limiting menu items, including its signature fresh-beef hamburgers, at some locations as closures of coronavirus-hit meat plants start to squeeze restaurant supplies.
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Airbnb said it is slashing 1,900 jobs, or a quarter of its workforce, and cutting investments in noncore operations, as the home-sharing giant predicted the pandemic would change its business even after more people start traveling again.
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Disputes have exploded across the garment industry as payments are delayed and orders are canceled by retailers dealing with plunging sales. Factories in Asia that have paid raw-material, labor and other costs are reeling, and many of them are realizing they have little recourse as apparel contracts have shifted to give importers more flexibility.
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The economic shutdown has exposed a dangerous flaw in fixed long-term leases that dominate the real-estate market: Companies’ revenues can plummet from one month to the next, but rent obligations typically remain constant, putting many firms in danger of default or even insolvency. Lacking sales, many tenants are asking for rent relief.
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Hertz Global Holdings inked an agreement with lenders to provide a 2½ week extension for debt restructuring negotiations after the car rental company missed a recent lease payment.
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NBCUniversal is the latest media company to reduce pay for its senior management. PHOTO: CARLO ALLEGRI/REUTERS
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NBCUniversal is cutting the pay of its senior management by 20% and rolling back pay by 3% for employees making more than $100,000 in response to the financial fallout from the coronavirus pandemic, Chief Executive Jeff Shell said in a memo to staff Tuesday.
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United Airlines Holdings expects to shrink its management and administrative ranks by at least 30% starting in October, according to a memo sent to employees Monday, as the coronavirus pandemic wreaks havoc on the airline industry.
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