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The Morning Risk Report: Huawei Braces for Latest U.S. Hit, but Some Say Loopholes Remain
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‘The U.S. persists in attacking Huawei, but what will that bring to the world?’ Huawei Chairman Guo Ping said Monday. PHOTO: NOEL CELIS/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Good morning. Huawei Technologies said Monday the Trump administration’s move to thwart its access to semiconductors will damage its ability to maintain its telecommunications networks, but some U.S. specialists say the latest ban has significant loopholes. The U.S. move is designed to cut Huawei off from non-U.S. companies that manufacture chips used in Huawei’s cellular base stations and servers as well as its own smartphones.
Huawei called the move “arbitrary and pernicious” in a statement Monday, saying the U.S. action “will impact the expansion, maintenance and continuous operations of networks worth hundreds of billions of dollars that we have rolled out in more than 170 countries.” But some China experts who have closely studied the rule say that it may not accomplish that goal—similar to when the administration last year put Huawei on a blacklist, only to have Huawei’s U.S. suppliers figure out a way around the move by shipping from overseas facilities instead.
[Continued below…]
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U.S. Commerce Department licenses are required when Huawei’s foreign suppliers have “knowledge” that the products are destined for Huawei and its affiliates or that designs for chips make use of U.S. technology and or software. The semiconductor supply chain is so vast and requires so many different steps that suppliers could argue that they didn’t know the products ultimately benefited Huawei, these people say.
The rules say “you have to stop selling to Huawei directly,” says Willy Shih, a Harvard Business School technology expert. “But how are you going to know where it goes if you sell to a distributor?” Another way to get around the rule would be to ship to Huawei customers, who could then assemble the chip or other product into a Huawei system, said legal experts. That wouldn’t be a shipment to Huawei, but would benefit the company.
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From Risk & Compliance Journal
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U.S. Charges Iranian Company and Executives in Sanctions Case
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The U.S. charged an Iranian online financial services company and two of its senior executives with violating U.S. sanctions on Iran, prosecutors said.
Seyed Sajjad Shahidian, Vahid Vali and the company, Payment24, were criminally charged with conspiracy to commit offenses against the U.S., money laundering, identity theft and wire fraud, according to an indictment unsealed Monday in federal court in Minnesota.
Prosecutors alleged that Payment24, which had about 40 employees with offices in Iran, primarily helped Iranian citizens circumvent U.S. sanctions to conduct transactions with U.S.-based businesses from about 2009 to November 2018, such as purchasing computer software, software licenses and computer servers. The U.S. has broad sanctions on Iran, prohibiting exports of U.S. goods, technology or services to Iran.
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Mr. Zelensky, right, at the Ukrainian legislature Wednesday as it passed a banking reform law. PHOTO: UKRAINIAN PRESIDENCY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Ukrainian President Volodymyr Zelensky has recorded some anti-corruption successes in the past year: Lawmakers no longer enjoy immunity from prosecution. Parliament introduced new impeachment procedures that give it the power to remove a president. And legislators this month adopted a law that would prohibit the return of nationalized banks to their former owners, among them an oligarch who supported Mr. Zelensky’s campaign for president last year.
But other anticorruption laws have withered and the dismissal of prominent reformers, including the independent-minded prosecutor-general and the heads of the tax and customs agencies, has drawn criticism from European officials and grass roots campaigners. Ukraine became a focus of attention in the U.S. after President Trump asked Mr. Zelensky to investigate the business dealings of the son of his main rival, Joe Biden, an episode that sparked Mr. Trump’s impeachment in addition to worsening Ukraine’s reputation for corruption.
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A former top antitrust economist in the Obama administration argued Monday that Google has used its powerful position in the digital advertising space to stifle competition, outlining a possible case against the search giant at the same time federal and state enforcers are making preparations to go to court. Google’s tactics in the online advertising ecosystem are a focus of Justice Department antitrust officials and state attorneys general who are investigating whether the company has engaged in unlawful monopolization.
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Federal Reserve Bank of Atlanta President Raphael Bostic said Monday he doesn’t plan to heavily second guess decisions banks have taken during the coronavirus crisis. “We’ve tried to be as clear as possible that we will remember that banks have operated in an emergency situation, have made emergency decisions, and we won’t penalize them for that nine to 12 months from now when we do our regulatory reviews,” Mr. Bostic said, adding “I’m going to make sure we hold to that.”
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Hundreds of small businesses have begun using a process established by Congress last year to make chapter 11 bankruptcy proceedings cheaper and faster while helping owners retain ownership.
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PG&E said it survived attempts to rally wildfire victims against a $13.5 billion settlement offer, positioning the bankrupt utility favorably to exit chapter 11 on its preferred terms. Opponents of PG&E’s bankruptcy exit strategy had spent weeks laying out their concerns, with a particular focus on a personal-injury lawyer whose firm counts 16,000 fire victims as clients and who was at the bargaining table when PG&E negotiated its proposed settlement.
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A federal appeals court dealt another blow to the National Collegiate Athletic Association’s efforts to keep tight limits on compensating student-athletes, ruling that the organization’s restrictions violated federal antitrust law.
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Former KPMG Auditors Agree to Suspensions Over Test Cheating
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Three former partners at KPMG LLP agreed to temporary suspensions from public accounting roles over cheating on training exams, the Securities and Exchange Commission said.
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The settlement is the latest fallout from an earlier SEC ethics probe that resulted in KPMG paying a $50 million civil penalty to resolve. The case involved senior KPMG employees who were accused of using confidential regulatory information to better prepare for oversight examinations and other auditors who allegedly cheated to pass continuing-education tests, the SEC announced in June 2019.
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A SmileDirectClub ad in New York’s Times Square on the day of the company’s initial public offering in September. PHOTO: RICHARD B. LEVINE/ZUMA PRESS
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Teledentistry company SmileDirectClub sued Comcast’s NBCUniversal, seeking nearly $3 billion in damages for what it alleges were defamatory news reports about the company’s treatment methods. The suit focuses on a Feb. 13 “NBC Nightly News” segment that described complaints by some SmileDirectClub customers and warnings about teledentistry from an orthodontics professor. The lawsuit also says that an online article accompanying the segment is inaccurate.
SmileDirectClub’s complaint claims that the reports from NBC News contained numerous errors involving the safety and effectiveness of its products, and that the network knew its stories about SmileDirectClub were untruthful. “NBC must be held accountable for its abuse of power and betrayal of trust,” SmileDirectClub said in its lawsuit.
NBC News said, “We stand by our reporting and believe this is a meritless claim.”
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PHOTO: BRENDAN MCDERMID/REUTERS
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Kevin Mayer, who was passed over for the top job at Walt Disney Co., is becoming chief executive of TikTok, in a jump from one of the entertainment industry’s most venerable names to one of its buzziest new arrivals.
The longtime media executive, recently in charge of the Disney+ streaming service, is joining Chinese tech giant Bytedance Ltd. in newly created roles as chief operating officer and head of its blockbuster short video app TikTok. He will be in charge of Bytedance’s global expansion, including in its music and gaming businesses. He will start June 1.
Both TikTok and Disney+ have logged pandemic-fueled surges in popularity as people stuck in lockdowns are glued to their phones and TVs for entertainment.
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‘Business leaders almost unanimously provided the most negative assessment possible on present business conditions,’ Conference Board Chief Economist Bart van Ark said of the European survey. PHOTO: VICTOR J. BLUE/BLOOMBERG NEWS
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A global economic recovery from the coronavirus crisis will take between one and three years, more than 80% of top European business leaders said in a survey to be released Tuesday. The views of chief executives and chairmen in the European Round Table for Industry, a trade group, were overwhelmingly pessimistic about near-term prospects and mirror the grim outlook of American chief executives in a similar recent survey. Both surveys were conducted by the Conference Board, a U.S. business think tank.
Federal Reserve Chairman Jerome Powell, in prepared testimony, says the central bank will use its “full range of tools to support the economy” as a result of the economic shock caused by the pandemic. Meanwhile, France and Germany proposed establishing a €500 billion Europe-wide recovery fund to support European regions worst hit by the coronavirus pandemic.
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Pakistan’s Supreme Court ruled that all stores and shopping malls can open immediately, overturning government-mandated closings of businesses to slow the spread of the coronavirus as justices weighed in on the global debate over how to revive economic activity during the pandemic.
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Relations between the U.S. and China are at their lowest point in decades, and the Covid-19 pandemic has rattled consumers the world over. U.S. companies and brands are doubling down on China anyway.
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A thermal camera monitor shows the body temperature of passengers as they wait to board airplanes in Seoul, South Korea last month. PHOTO: AHN YOUNG-JOON/ASSOCIATED PRESS
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Airlines are plotting a path out of hibernation, reformulating routes and services, and balancing safety protocols with the challenge of convincing passengers to board the enclosed space of an aircraft in the midst of a pandemic.
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European ports have been the world’s hardest hit trade gateways from the coronavirus pandemic, with up to two-thirds reporting significant declines in ship calls this month in a sign of the deep contraction in global supply chains.
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Uber Technologies is cutting several thousand additional jobs, closing more than three dozen offices and re-evaluating big bets in areas ranging from freight to self-driving technology.
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J.C. Penney plans to permanently close more than 240 department stores, or nearly 30% of its locations, as the retailer tries to streamline its business under chapter 11 bankruptcy protection. The 118-year-old company filed for bankruptcy on Friday, becoming the biggest retailer to seek court protection during the pandemic.
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