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The Morning Risk Report: U.S. Adds Chinese Firms to Blacklist, Citing Repression of Muslim Minorities
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Surveillance cameras made by Hangzhou Hikvision Digital Technology Co. mounted on a post near the company’s headquarters in Hangzhou, China. PHOTO: QILAI SHEN/BLOOMBERG NEWS
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Good morning. The U.S. will add 28 Chinese entities to an export blacklist—citing their role in Beijing’s mass-internment campaign in the country’s northwest—just days ahead of a high-level meeting where officials will work toward settling the nations’ long-running trade war.
Targets of the action include video-surveillance and facial-recognition giants Hangzhou Hikvision Digital Technology, Megvii Technology Inc. and SenseTime Group Ltd. The decision by the Commerce Department to add the firms to its “entity list” alongside telecommunications giant Huawei Technologies Co. and others means suppliers will be barred from providing U.S.-origin technology to them without a license.
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The companies and other entities “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups” in northwest China’s Xinjiang region, the Commerce Department said.
The U.S. will also add the Xinjiang Public Security Bureau and 19 subordinate entities to the entity list, along with Chinese firms Dahua Technology Co., IFLYTEK, Xiamen Meiya Pico Information Co., Yitu Technologies and Yixin Science & Technology Co., the Commerce document said. The new policy will take effect Thursday.
The companies couldn’t immediately be reached for comment. Responding to the possible blacklisting in May, a Chinese Foreign Ministry spokesman accused the U.S. of “using national powers to smear and oppress certain Chinese companies. We firmly oppose that and our position is consistent and clear.”
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European Union Adopts Whistleblower Protections
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The European Union has adopted new protections for whistleblowers, giving member states two years to bolster protections for corporate tipsters.
The European Council, made up of leaders from the bloc’s 28 countries, on Monday approved the rules, which require companies with at least 50 employees to create effective internal reporting channels, according to a statement from the council. The rules also direct companies to protect whistleblowers from retaliation, such as demotions or suspensions, the council said.
Member states will have two years to incorporate the EU whistleblower directive into their national laws, according to the release. Ten of the bloc’s members currently have laws in place to protect corporate tipsters, the council said.
“No one should risk their reputation or job for exposing illegal behaviors,” Anna-Maja Henriksson, Finland’s minister of justice, said in the statement.
—Kristin Broughton
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Flex Discloses Potential Sanctions Violation
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Contract manufacturer Flex Ltd. made a voluntary self-disclosure to the U.S. Treasury Department’s Office of Foreign Assets Control in February indicating that certain company-affiliated operations outside of the U.S. may have violated American sanctions, according to regulatory filings.
The company, which is based in San Jose, Calif., has also initiated an internal investigation and the issue is at a preliminary stage, according to the company's recent filings with the Securities and Exchange Commission. A Flex spokeswoman declined to comment beyond the filings.
The disclosure was discussed between Flex and a division of the SEC, which in an August comment letter asked Flex to provide more information on the underlying activities related to the disclosure. The correspondence was made public last month, according to the SEC filings. Flex responded to the SEC, saying the activities do not involve Syria, Sudan or North Korea, which have been designated as state sponsors of terrorism by the U.S.
The SEC is increasingly questioning public companies about compliance with U.S. sanctions. At least 42 companies received letters from the SEC last year regarding activity in areas subject to sanctions enforced by OFAC.
—Mengqi Sun
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Nancy Gougarty Leaves SKF Board Following SEC Bribery Probe
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Sweden’s SKF AB said Monday that Nancy Gougarty decided to step down from its board with immediate effect.
The Swedish ball-bearing maker said Ms. Gougarty’s resignation was a result of having been the subject of U.S. Securities and Exchange Commission proceedings concerning violations of the U.S. Foreign Corrupt Practices Act, unrelated to SKF.
Ms. Gougarty was chief executive of Canadian clean fuel technology company Westport Fuel Systems Inc., which last month reached a settlement with the SEC. The company “engaged in a scheme to bribe a Chinese foreign government official to obtain business and a cash dividend payment,” according to an SEC filing.
Neither Westport nor Ms. Gougarty admitted or denied the commission's findings, but the company agreed to pay a $4.05 million fine while Ms. Gougarty agreed to pay $120,000 to settle the claim.
—Dominic Chopping
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Southwest Airlines had 34 737 MAX jets in its fleet at the time of their grounding in March. PHOTO: MIKE BLAKE/REUTERS
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The union representing pilots at Southwest Airlines sued Boeing, alleging that the plane maker rushed its 737 MAX jet to market and misrepresented the plane as safe.
The MAX has been grounded since March in the wake of two plane crashes within a five-month period that killed 346 people. The nearly 10,000 Southwest pilots represented by the union say that they are losing millions of dollars a month as the grounding stretches on.
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The Supreme Court on Tuesday will consider whether federal law protects gay and transgender employees from discrimination, the first major gay-rights issue to reach the justices since their landmark decision in 2015 extending marriage rights to same-sex couples.
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Facebook could pay $40 million to settle a lawsuit from advertisers over miscalculated video metrics. A group of small advertisers sued in California federal court, alleging that Facebook engaged in unfair competitive practices by providing inaccurate information. The legal battle began in 2016 after Facebook disclosed it had incorrectly calculated the average viewing time for video ads on its platform.
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USA Gymnastics made several transfers of millions of dollars into a closely linked foundation in the years before legal challenges related to sexual assaults by former national team doctor Larry Nassar triggered a bankruptcy filing by the gymnastics federation, tax documents show. The payments came as a costly sexual-abuse crisis was emerging throughout the Olympic movement, and dwarfed the $100,000 a year that USA Gymnastics had routinely given the National Gymnastics Foundation.
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After Houston Rockets general manager Daryl Morey, right, shown with player Russell Westbrook, expressed support for Hong Kong protesters, the team’s merchandise vanished overnight from China’s largest e-commerce platforms. PHOTO: BILL BAPTIST/NBAE/GETTY IMAGES
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The National Basketball Association became the latest American business to face criticism after inflaming Chinese sensitivities, underscoring the dilemma for Western brands as China moves toward overtaking the U.S. as the world’s largest consumer market.
In addition to the risk of offending the Chinese, global companies that appear too supportive of Beijing and its political views can alienate consumers and politicians elsewhere. Top American fashion brands and other companies that have offended Chinese principles, sometimes unintentionally, have encountered a swift and powerful backlash.
While the Rockets and the NBA are under heightened scrutiny, a string of other companies from Marriott International to Tiffany & Co. have had to deal with the fallout from comments or actions that offended the Chinese government or some citizens. The CEO of Hong Kong flagship Cathay Pacific Airways, was forced to resign after some employees took part in marches, and Beijing threatened to cut off access to its airspace.
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The Twitter case examines whether the company complied with notification obligations for a personal data breach. PHOTO: ALOISIO MAURICIO/ZUMA PRESS
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A top European Union privacy regulator is moving closer to making draft decisions involving Facebook’s WhatsApp and Twitter under the bloc’s new privacy law.
Ireland’s Data Protection Commission said on Monday that its investigative unit has, in recent days, completed its investigations in two of the first cases involving big tech companies. The results are now on the desk of Helen Dixon, the body’s commissioner, for her draft decisions and possible fine recommendations, which could come by the end of the year. If the companies are found in violation, they could be liable for hefty fines under the EU’s new privacy law, known as the GDPR.
The WhatsApp case looks at whether the Facebook-owned chat app gives sufficient information to users and nonusers about how it shares data, in particular with other Facebook units. The Twitter case examines whether the company complied with notification obligations for a personal data breach the company disclosed to the regulator in January.
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A PG&E lineman repairs a power line in Paradise, Calif., in November. PHOTO: RICH PEDRONCELLI/ASSOCIATED PRESS
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PG&E said it may shut off power for more than 600,000 customers across parts of 30 California counties in an effort to reduce the risk of wildfires in those communities. In a news release, the bankrupt utility owner said if it does decide to implement a shut-off, it would begin turning off power early Wednesday morning.
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Businesses would more easily be able to require workers to share tips under a Labor Department proposal released Monday. The rule would allow employers to require workers such as restaurant servers to pool tips with colleagues who traditionally don’t receive tips, such as dishwashers and cooks.
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Bonobos, the men’s apparel retailer owned by Walmart, is laying off some staff on Monday as Walmart works to narrow losses in its unprofitable U.S. e-commerce division.
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U.S. and Turkish military forces conducting a joint patrol in northeast Syria on Friday. PHOTO: U.S. ARMY/EPA/SHUTTERSTOCK
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Convoys of American military personnel began pulling back from the Syria-Turkey border after President Trump ordered the Pentagon to clear the way for Ankara to launch an offensive against Kurdish fighters, in the latest sign of his desire for a diminished U.S. role in the Middle East.
Sen. Lindsey Graham (R., S.C.) tweeted on Monday morning that he and Democratic Sen. Chris Van Hollen of Maryland plan to introduce bipartisan sanctions against Turkey if it invades Syria. He said the senators would call for Turkey’s suspension from the North Atlantic Treaty Organization if its forces attack Kurds.
Turkey’s decision to launch a military offensive in northeastern Syria once American troops have withdrawn opens a new front in the eight-year Syrian conflict, testing the country’s influence in a volatile Middle East where the U.S. wants a diminished role and Russia a bigger one.
The budding relationship between Turkey and Russia has been based largely on Ankara’s decision to purchase Russian S-400 system despite the threat of U.S. sanctions. That decision have worried officials at the NATO, seeing it as a step that will push Ankara more firmly within Russia’s orbit.
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Nissan directors at the next board meeting plan to ask for the resignation of Hari Nada, a Nissan vice president who oversees its legal department. PHOTO: BEHROUZ MEHRI/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Some Nissan directors will demand at Tuesday’s board meeting to see a list of around 80 Nissan employees who may have assisted former Chairman Carlos Ghosn in alleged wrongdoing, said people familiar with the board’s thinking, setting up a potential clash with management.
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After three decades working as a financial executive for General Electric and the Depository Trust & Clearing Corp., Oscar Raposo took a career break in 2015 to go backpacking in Asia. When it was time to return to work, he decided to move into the nonprofit sector. It is a career shift more finance executives are making.
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PHOTO: VINCENT KESSLER/REUTERS
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When Larry Culp gathered top General Electric officers for a summit north of New York City last month, the chief executive had a message for them. He wasn’t going to dismantle their company.
They could be forgiven for suspecting otherwise. The industrial giant had been through tumult, including the pressured departure of a 16-year CEO, the aborted 14-month stint of his successor, a long slide in the stock and a gutting of the dividend. A finance chief teared up in 2017 as he revealed problems that had lain hidden inside a company once seen as the apex of American manufacturing might.
Now it had a new CEO, an outsider known for running his previous company as a collection of independent businesses orbiting a small central staff.
Meanwhile, GE said it was freezing its pension plan for about 20,000 U.S. workers and offering pension buyouts to 100,000 former employees, as the conglomerate joins the ranks of U.S. companies phasing out a guaranteed retirement.
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Hong Kong’s stock exchange pulled a $36.6 billion bid for its London rival, a deal that would have united two major trading hubs even as both are clouded in political turmoil. Less than a month after it first unveiled the surprise proposal, Hong Kong Exchanges & Clearing Ltd. said it couldn’t pursue a takeover of London Stock Exchange Group without any input from LSE’s management. The target’s board had quickly rejected the approach.
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