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The Morning Risk Report: Sarclad Settlement Questioned Following Executives’ Acquittal
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The former Sarclad Ltd. executives—Michael Sorby, Adrian Leek and David Justice—on Tuesday were found not guilty of conspiring to commit corruption offenses, the U.K.’s Serious Fraud Office said. PHOTO: SERIOUS FRAUD OFFICE
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Good morning. Three former executives of a metalworking technology company were acquitted in London, three years after the company reached a deferred prosecution agreement with the U.K.’s Serious Fraud Office over the same allegations. The former Sarclad Ltd. executives—Michael Sorby, Adrian Leek and David Justice—on Tuesday were found not guilty of conspiring to commit corruption offenses, the SFO said.
Their acquittal is expected to raise questions about Sarclad’s deferred prosecution agreement with the SFO. The agreement was reached in 2016, but Sarclad’s name and other details were kept under wraps until Tuesday while the SFO pursued criminal charges against the executives. The agency has struggled to prosecute individuals on charges stemming from the agreements, which became available in 2014.
[Continued below...]
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Deferred prosecution agreements allow prosecutors to suspend criminal charges against a company if it agrees to pay a fine and carry out reforms. The U.K. has so far reached five such agreements.
The SFO has been less successful in pursuing the individuals who allegedly carried out the misconduct described in the published agreements. The SFO has charged individuals in connection with two of its deferred prosecution agreements. None have been convicted.
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A type of scam that involves impersonating vendors or corporate executives and requesting fraudulent wire transfers is on the rise, according to the Treasury Department’s financial crimes unit.
The Financial Crimes Enforcement Network, in a report published Tuesday, said it received roughly 14,000 suspicious activity reports in 2018 related to business email compromises, up from about 6,000 in 2016.
The most targeted businesses are in manufacturing and construction, according to FinCEN, which lumped the industries together. Regular interactions with overseas suppliers, as well as publicly available client information, make the industries particularly vulnerable, the agency said in its report.
Fraudulent vendor invoices accounted for 39% of all business email scams in 2018, up from 30% a year earlier, according to the FinCEN report.
—Kristin Broughton
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From Risk & Compliance Journal
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The SEC said it is processing a large number of whistleblower applications that require its attention. PHOTO: ANDREW HARNIK/ASSOCIATED PRESS
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The Securities and Exchange Commission defended its process for determining whistleblower awards in a legal filing responding to a claimant who says the regulator is taking too long to make a decision, Risk & Compliance Journal’s Kristin Broughton reports.
The unidentified tipster filed a petition in April with the U.S. Court of Appeals for the D.C. Circuit, saying his two-year wait for a determination on his claim was unreasonable. The case stems from a 2016 settlement in which Teva Pharmaceutical Industries Ltd. agreed to pay $519 million to settle charges that it violated foreign bribery laws.
The SEC said the claimant “greatly misapprehends” the work involved in reviewing applications, which can span hundreds of pages. Six claimants have filed for awards in the Teva case, the agency said in the filing. The SEC isn’t required under law to act within a certain timeline.
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U.S. Blacklists Leaders of al Qaeda’s Branch in Mali
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The U.S. blacklisted two individuals for allegedly holding leadership roles in al Qaeda’s branch in Mali, U.S. officials said Tuesday. The designations by the Treasury Department and the State Department come as the U.S. seeks to further counter the growth of Jama’at Nusrat al-Islam wal-Muslimin, or JNIM, in Mali, which says it is al Qaeda’s official branch in Mali and was designated by the U.S. as a terrorist group in September.
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North Korean leader Kim Jong Un and Chinese President Xi Jinping wave from a limousine in Pyongyang on June 20. PHOTO: SHEN HONG/ASSOCIATED PRESS
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The Mercedes-Benz limousines seen chauffeuring North Korean leader Kim Jong Un this year have stumped outsiders over how the sanctions-hit regime obtained the luxury rides. But researchers now believe they have unearthed the Kim regime’s smuggling secret: It takes three cargo jets, about four months and five countries.
The globe-trotting required to bolster Mr. Kim’s personal fleet mirrors a sophisticated trade network pumping North Korea with luxury goods. The inflow of designer cosmetics, name-brand clothes and even Apple Inc.’s iPhones has continued despite efforts for more than a decade by the United Nations Security Council to curb exports of such high-end items, according to the Center for Advanced Defense Studies.
The Kim regime has used as many as 90 different countries, including U.S. allies, for shopping sprees between 2015 and 2017, a larger number than previously believed, the organization said. The current patchwork of preventive measures are “woefully inadequate,” it said.
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Investment management firm AR Capital LLC and two of its former executives have agreed to settle charges with the U.S. Securities and Exchange Commission for more than $60 million for allegedly wrongfully obtaining millions of dollars in connection with two separate mergers between real-estate investment trusts.
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KeyCorp said it discovered fraudulent activity around July 9 associated with transactions conducted in the third quarter by a business customer of KeyBank National Association.
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A regulator proposed easing a hurdle for banks to sell pools of home-mortgage obligations, as part of an effort to spur competition in a market dominated by government-backed entities such as Fannie Mae and Freddie Mac.
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Matt Perault, Facebook’s director of public policy, testifies before the House Antitrust Subcommittee on Tuesday. PHOTO: PATRICK SEMANSKY/ASSOCIATED PRESS
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Concerns about the power of Big Tech echoed across the capital Tuesday, with politicians in both parties demanding more regulatory scrutiny of four giant companies’ reach and their plans for expansion. The three hearings were focused on Facebook Inc.’s cryptocurrency plans; alleged Google censorship; and on an antitrust examination of Facebook, Google, its owner Alphabet Inc., Amazon.com Inc. and Apple Inc. In the hearings, the companies took punches on a range of political and policy issues.
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The stakes for thrashing out a global deal on how to tax tech giants doing cross-border business are rising now that national governments are taking matters into their own hands. French lawmakers last week gave final approval to a new tax on large tech companies like Google and Amazon, retroactive to the beginning of 2019. Other countries such as the U.K. are on a similar path, and the U.S. is already pushing back.
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Amazon will face a formal European Union antitrust investigation into its dealings with third-party merchants. The European Commission, the EU’s top antitrust enforcer, said Wednesday that its investigation will look into whether Amazon is abusing its dual role as both the provider of a marketplace where independent sellers can offer products and a retailer of products in its own right. Earlier, Amazon agreed to change the terms of service on its platforms for third-party sellers around the world, following an investigation in Germany into the e-commerce giant’s practices in its fast-growing marketplace segment.
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Skyscrapers stand in the City of London's financial district. PHOTO: SIMON DAWSON/BLOOMBERG
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The U.K.’s Financial Reporting Council is proposing tighter rules for the country’s auditors, a move that follows a report the regulator released last week that found that audits of large U.K. companies’ financial statements continue to miss regulatory targets.
The FRC, the U.K.’s watchdog for audit and accounting, launched a consultation soliciting comment from the public on its proposed changes to the country’s ethical and auditing standards. The standards, which the FRC last reviewed in 2016, provide U.K. auditors with guidelines on how to conduct their work.
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In 2016, then President-elect Trump spoke during a meeting in New York with tech leaders, including Mr. Thiel. PHOTO: EVAN VUCCI/ASSOCIATED PRESS
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President Trump said the U.S. would look into national-security concerns raised by billionaire investor and Facebook Inc. board member Peter Thiel about Google’s ties to China. The statement, tweeted by Mr. Trump on Tuesday, came after Mr. Thiel, in a keynote speech Sunday at the National Conservatism Conference in Washington, called for the Federal Bureau of Investigation and Central Intelligence Agency to investigate Alphabet Inc.’s Google unit, which he claimed is working with China’s government instead of the U.S. military.
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Older workers prepare the house specialty of grilled mushrooms with prawns at the Soriano pinchos bar in Logrono, Spain. PHOTO: DAVID SILVERMAN/GETTY IMAGES
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Across a rapidly aging Europe, employers are finding ways to keep older staff on the job for longer, or adding new ones. Workers aged 55 to 74 accounted for 85% of employment growth in the eurozone between 2012 and 2018, according to the Organisation for Economic Cooperation and Development, a think tank for mostly rich countries. Around 10 million jobs were created during that period. The trend upends the usual thinking on labor markets.
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Car companies in Detroit are entering contract talks this week with the United Auto Workers with one main goal: cap fast-rising labor costs ahead of an industry downturn when nearly half their unionized workers haven’t experienced one. Within the past eight years, factory worker costs for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV have crept toward prerecession levels as the union won pay increases and other benefits sacrificed during the last downturn while car companies posted big profits.
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Wildcatter Clayton Williams Jr. made his first fortune in oil. He aims to make another off a treasure buried beneath his family’s West Texas land. It’s a massive trove of water. The powerful Williams family wants to pipe as much as 25 million gallons a day away from its property at the edge of the Chihuahuan Desert and sell it to oil companies, cities and anyone else with deep pockets and an unquenchable thirst. The plan is pitting neighbor against neighbor and rekindling a debate over who should control fresh water in a bone-dry region.
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DoorDash Inc.'s moves to make deliveries for McDonald's Corp. comes as companies jockey for a share in the fast-growing business to deliver food to customers’ homes and offices
PHOTO: PAUL THOMAS/BLOOMBERG NEWS
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DoorDash Inc. will start making deliveries from McDonald’s Corp. restaurants in Houston later this month, a blow to Uber Technologies Inc. relationship with the burger giant as the only company currently ferrying its food to customers in the U.S.
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Mexican state oil company Petróleos Mexicanos plans to ramp up investment with tax breaks and government support over the next three years to raise oil production, which has been declining for the past 15 years, government officials said.
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