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The Morning Risk Report: WeWork’s CEO Steps Down Amid Governance Concerns
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Adam Neumann’s eccentric behavior that was detailed in a WSJ article last week, including a party-heavy lifestyle, undercut his position. PHOTO: MICHAEL KOVAC/GETTY IMAGES FOR WEWORK
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Good morning. WeWork co-founder and Chief Executive Adam Neumann was forced to step down and cede control of the shared-office startup after its much-anticipated initial public offering was derailed, capping a swift fall from grace for the leader of one of the country’s most valuable startups.
Mr. Neumann and his advisers have agreed the best path forward is for him to relinquish the CEO role following a period of intense commotion inside the office-sharing startup, people familiar with the matter said. He will remain nonexecutive chairman of We Co., as the company is officially known.
[Continued below…]
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It named two internal executives as co-CEOs, effective immediately: Artie Minson, formerly co-president and chief financial officer, and Sebastian Gunningham, an Amazon veteran and a We vice chairman. Mr. Minson will focus on areas including finance, legal and human resources while Mr. Gunningham will tend to sales and marketing and technology.
Mr. Neumann’s position at the company became tenuous after We postponed an IPO earlier this month amid concerns from prospective investors about its governance and ability to reverse big losses. That skepticism has placed a major dent in the company’s expected valuation, which has plummeted to as low as $15 billion from $47 billion earlier this year .
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K2 Intelligence and Financial Integrity Network Merge
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A risk advisory group founded by several prominent former Treasury and White House officials has joined forces with K2 Intelligence LLC, an investigative and compliance firm.
K2 Intelligence’s merger with the Financial Integrity Network will augment the latter's regulatory compliance services, said Chip Poncy, president and co-founder of FIN. Under the George W. Bush administration, Mr. Poncy served as a senior adviser to the U.S. Treasury, where he helped develop the government’s post-9/11 strategy to combat terrorist financing.
K2 Intelligence was founded in 2009 by Jeremy Kroll and his father, Jules Kroll, after his departure from Kroll Inc., now a division of Duff & Phelps LLC. The firm’s regulatory compliance practice, which advises banks and other clients on anti-money-laundering laws, economic sanctions and other financial regulatory regimes, has grown to become the firm’s largest group, said group leader and Executive Managing Director Thomas Bock.
The merger with FIN will bring K2 Intelligence’s head count to about 330 employees. “Our goal is to be the premiere risk management firm,” said Mr. Bock. “We are now well-positioned to be that.”
—Dylan Tokar
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Senate Introduces Bill to Expand Whistleblower Protection
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A bipartisan bill introduced in the Senate this week proposes to extend protection to whistleblowers who report wrongdoing internally to company management before or instead of reporting to regulators, and to address the delay in award decisions.
The bill, called “Whistleblower Programs Improvement Act,” aims to close the gap in protection left after a Supreme Court ruling last year. The Supreme Court issued an opinion in a case that said anti-retaliation protections for whistleblowers provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act extend only to those who provide tips directly to the Securities and Exchange Commission.
The Senate bill also proposes to improve the speediness of whistleblower award decisions by requiring the SEC to make an initial disposition on an award claim within one year from the claim submission deadline, or asking for extensions for complex claims.
The House of Representatives in July passed another bill that expands the definition of a whistleblower by extending anti-retaliation protection to those who make internal disclosures of securities law violations.
—Mengqi Sun
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From Risk & Compliance Journal
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The U.S. has blacklisted four entities and four related vessels. Venezuela's President, Nicolás Maduro, is shown above. PHOTO: ARIANA CUBILLOS/ASSOCIATED PRESS
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The U.S. imposed more sanctions targeting Venezuela’s oil sector, blacklisting four entities and four related vessels for allegedly transporting oil from Venezuela to Cuba, the Treasury said.
The designations come after the U.S. blacklisted state-owned oil company Petróleos de Venezuela SA, an important revenue generator for the country, in January, in a move to cripple Nicolás Maduro’s government and empower opposition leader Juan Guaidó.
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A logo sign outside an office building occupied by Comscore in 2014. PHOTO: KRIS TRIPPLAAR/SIPA USA/ASSOCIATED PRESS
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Comscore and its former chief executive settled charges with the Securities and Exchange Commission that claim they inflated the analytics company’s revenue by about $50 million over a two-year period. The SEC said the Comscore overstated revenue through entering into nonmonetary deals and that Comscore and Serge Matta, its former CEO, “made false and misleading public disclosures.” The activity took place from February 2014 through February 2016.
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Federal prosecutors have filed charges against a senior manager at Fiat Chrysler for allegedly misleading regulators about the level of tailpipe emissions from the company’s vehicles, according to court documents unsealed Tuesday. Emanuele Palma, a diesel-calibration manager at the car maker, and unnamed co-conspirators are alleged to have rigged the diesel-emissions systems on models manufactured by Fiat Chrysler to help them cheat on federal tests, according to a grand jury indictment from Sept. 18.
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Novartis said that an internal probe of data manipulation at one of its drug-development units was hindered by two brothers, both senior researchers whom it later fired. The Swiss drug giant said in a newly disclosed letter to the U.S. Food and Drug Administration that its monthslong investigation into the issue was “significantly drawn out” due to a “lack of cooperation and categorical denial of the allegations” by the brothers.
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The former chief executive of Danske Bank’s Estonian branch has been found dead, police said, as the troubled lender is embroiled in a huge money-laundering scandal. Aivar Rehe, 56, headed the Danish bank’s branch in Estonia, his death isn’t being treated as suspicious. Danske is being investigated by authorities in Estonia, Denmark, France and the U.S. over allegations that around $230 billion in suspicious funds from Russia and other former Soviet states entered Europe through its tiny branch in Estonia.
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Canadian social-media company Kik Interactive Inc., which is fighting U.S. claims that it illegally raised capital, said it would shut its messaging app and lay off most of its staff. In June, the Securities and Exchange Commission sued Kik, saying its $100 million fundraising in 2017 evaded U.S. investor-protection laws. Kik had sold its cryptocurrency, Kin, in an initial coin offering—a controversial type of fundraising popular during the bitcoin boom.
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A Chinese government official and his allies allegedly tried to convince at least seven U.S. universities to sponsor visas for purported Chinese research scholars who in reality aimed to recruit American science talent, according to a recently unsealed criminal complaint filed by the Justice Department. They succeeded at least once, the complaint says. The Wall Street Journal has identified two of the targeted institutions as the University of Georgia and the University of Massachusetts Boston.
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Federal prosecutors in Manhattan have closed an investigation into two prominent Washington lobbying firms, including one affiliated with Democratic powerhouse Tony Podesta, according to people familiar with the matter. Investigators had been examining whether the lobbying firms, the Podesta Group and Mercury LLC, or their leaders, Mr. Podesta and former Republican Congressman Vin Weber, violated a law that requires U.S. lobbyists for foreign governments to register as foreign agents and disclose their work to the Justice Department.
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The two large insurers had planned to come together in a tie-up that would generate around $16 billion in annual revenue. PHOTO: ZUMA PRESS
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Blue Cross and Blue Shield of North Carolina and Cambia Health Solutions said their deal to combine is on hold following recent revelations about the arrest of the North Carolina insurer’s chief executive in June tied to an allegedly alcohol-related traffic accident.
The two large insurers had planned to come together in a tie-up that would generate around $16 billion in annual revenue and cover more than six million people through Blue Cross Blue Shield plans. Patrick Conway, the chief executive of Blue Cross and Blue Shield of North Carolina, had been slated to lead the combined entity.
But last week, local media reports revealed Dr. Conway had been arrested in June following a traffic accident and charged with driving under the influence and misdemeanor child abuse. Two of Dr. Conway’s young children were in his vehicle during the incident
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A truck driving through the Port of Oakland in California. PHOTO: JUSTIN SULLIVAN/GETTY IMAGES
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Most commercial trucks at major operators are now equipped with GPS systems that relay information—such as route and speed—to a central hub. Other technologies can collect information to gauge whether a driver is falling asleep.
The industry’s growing reliance on technology means that bad actors could divert valuable cargo from its destination, paralyze logistical networks or enable trade secrets to be compromised, according to some in the industry. Hackers already are making attempts to break in.
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Workers in industries such as fast food, retail, higher education and nonprofits will be affected by the change. PHOTO: CHRISTOPHER DILTS/BLOOMBERG NEWS
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The Trump administration boosted the number of workers eligible for overtime, extending pay requirements for about 1.3 million people. The rule, set to go into effect Jan. 1, would increase a key salary threshold below which workers generally qualify for time-and-a-half pay for logging more than 40 hours a week. That threshold would increase to $35,568 from $23,660—a figure that hasn’t changed since 2004.
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Juul is preparing a staff restructuring, as the e-cigarette maker braces for slower sales following a mysterious vaping-related illness and a proposed U.S. ban on flavors that make up more than 80% of its sales. The San Francisco company, which employs about 3,900 people, has been adding hundreds of staff as it expands in the U.S. and abroad. It had about 225 employees at the end of 2017.
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AT&T operating chief John Stankey says the company doesn’t plan to sell satellite broadcasting unit DirecTV. PHOTO: MATT WINKELMEYER/GETTY IMAGES
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AT&T’s chief operating officer defended the company’s strategy in the media business and said it doesn’t plan to sell its DirecTV unit, viewing the satellite TV provider as central to its ambitions in streaming video. In an interview, John Stankey said, “DirecTV is an important part of what we’re going to be doing going forward.” The Wall Street Journal reported last week that AT&T was examining whether to part ways with DirecTV, and that the company had considered options such as a sale or spinoff.
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Thyssenkrupp AG’s supervisory board moved to replace the company’s chief executive, an effort to shake up the German steel conglomerate’s management for the second time in as many years as it continues to grapple with falling profits.
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