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The Morning Risk Report: EU, Canada Vow to Fight New U.S. Sanctions on Cuba
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People walking near the Cuban state bank, Banco Metropolitano—the former building of the First National City Bank of New York—in Havana. PHOTO: DESMOND BOYLAN/ASSOCIATED PRESS
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Good morning. The European Union and Canada said they were prepared to defend their companies’ interests in Cuba before the World Trade Organization, after the Trump administration opened the door to billions of dollars in lawsuits against foreign firms that do business there.
The joint statement from the U.S. allies came as the Trump administration formally announced Wednesday that the U.S., as part of its efforts to step up economic pressure on Havana, would no longer renew a two-decade-old waiver. The waiver from part of the 1996 Helms-Burton Act had prevented U.S. nationals whose property was seized by the Castro regime in Cuba after 1959 from suing for damages in U.S. courts.
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EU foreign policy chief Federica Mogherini, EU Trade Commissioner Cecilia Malmström and Canadian Foreign Minister Chrystia Freeland said the U.S. decision would have “an important impact on legitimate EU and Canadian economic operators in Cuba” and said it would seek to use the WTO dispute-resolution framework to protect the companies.
The U.S. said it had been in contact with allies ahead of the move and defended the change. “European companies that are operating in Cuba will have nothing to worry about if they are not operating on property that was stolen from Americans postrevolution,” U.S. Assistant Secretary of State for Western Hemisphere Affairs Kimberly Breier said.
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Corporate Spending on Class-Action Lawsuits Is On the Rise
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For the fourth year in a row, company spending on class-action litigation rose, hitting $2.46 billion in 2018, up from $2.24 billion in 2017, and is expected to rise further this year, according to new research from management-side law firm Carlton Fields.
About 54% of companies faced at least one major class action in 2018, down from 59% the prior year. The two most common areas of such litigation are labor/employment issues and consumer fraud cases, which together account for just over half of all class actions.
Among the big issues on the horizon for corporate legal counsel: lawsuits related to data privacy and data security breaches, some related to the European Union’s new privacy law, the General Data Protection Regulation. Carlton Fields interviewed corporate legal professionals at 395 large companies for the survey.
—Lauren Weber
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From Risk & Compliance Journal
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Iran's Revolutionary Guard troops march in a parade in 2016. The recent U.S. designation of the IRGC as a foreign terrorist organization poses a new challenge to compliance officers. PHOTO: EBRAHIM NOROOZI/ASSOCIATED PRESS
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The traditional tasks of compliance—minding sanctions, defending against bribery and money laundering—are increasingly complex. Corporate culture and executive conduct are testing compliance officers in new ways. At the same time, the geopolitical backdrop is ever more treacherous.
As a result, compliance departments are taking on new responsibilities or working more closely with other departments to determine how to monitor and mitigate emerging risks, according to compliance officers who spoke last week at an event in Houston hosted by Dow Jones Risk & Compliance and The Wall Street Journal.
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Venezuelan President Nicolás Maduro speaks during an anniversary celebration in Caracas on Saturday. PHOTO: ARIANA CUBILLOS/ASSOCIATED PRESS
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The U.S. Treasury placed sanctions on Venezuela’s central bank and its director in another step to pressure the nation’s ruling government into handing over power to the Washington-backed opposition. The action would further isolate the country and Nicolás Maduro’s government from the international financial system by targeting the payment process critical to the nation’s trade, investment and banking industries.
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House Democrats have subpoenaed nine large banks as part of an inquiry into President Trump’s financial interests, according to people familiar with the matter. The list includes U.S. giants JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, Wells Fargo & Co. and Bank of America. as well as Capital One Financial Corp. It also includes Deutsche Bank, Royal Bank of Canada and Toronto-Dominion Bank. The subpoenas come after House Financial Services Committee Chairwoman Maxine Waters (D., Calif.) last week pressed the heads of several of the banks testifying at a
hearing on whether the lenders had uncovered accounts tied to illicit Russian businesses or individuals.
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Swedish telecom-equipment maker Ericsson AB said it had begun settlement discussions with the U.S. Securities and Exchange Commission and Justice Department regarding their yearslong investigations into the company’s compliance with the U.S. Foreign Corrupt Practices Act.
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Alan García, a two-time former Peruvian president who played a central role in the Andean nation’s tumultuous politics since the 1980s, died after shooting himself in the head as police raided his home as part of a corruption investigation.
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A Los Angeles businessman whose interactions with President Trump’s inaugural committee have been under scrutiny is now ensnared in another federal probe that is examining his political donations and work with foreign governments, according to people familiar with the inquiry.
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A panel of three judges approved a $15 million settlement between McKinsey & Co. and the Justice Department, resolving the government’s allegations that the consulting firm didn’t disclose conflicts of interest in bankruptcy cases it helped steer.
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Regulators Propose Sweeping Changes to U.K. Audit Industry
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A U.K. regulator is proposing sweeping changes to rules governing the nation’s audit industry, with the aim of boosting competition, avoiding conflicts of interest and restoring the reputation of a sector that has been tarnished by corporate scandals. The Competition and Markets Authority said the Big Four audit firms should split their audit and consulting businesses. The U.K.’s competition regulator also proposed that these larger firms participate in joint audits with smaller audit firms, and for corporate audit committees to be held accountable for their choice of auditor.
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Profit at the Minneapolis-based company climbed 1.4% in the first quarter, to $1.7 billion. PHOTO: DANIEL ACKER/BLOOMBERG NEWS
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U.S. Bancorp could close as many as 450 branches over the next few years, bringing the regional lender’s branch count under 3,000, as the company looks to trim its expenses and push more digital tools. The branch closure plans come as U.S. Bank now has “more flexibility” after a consent order on the company was lifted, said Chief Executive Andy Cecere on the company’s first-quarter earnings call with analysts.
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United Continental Holdings Inc. said the grounding of its Boeing Co. 737 MAX jets and the suspension of flights to New Delhi led the carrier to trim its forecast for capacity growth this year.
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SoftBank Group founder and CEO Masayoshi Son PHOTO: SHO TAMURA/AFLO/ZUMA PRESS
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Possible delays to Sprint Corp.’s planned merger with T-Mobile US Inc. threaten Sprint parent SoftBank Group Corp.’s ambition to invest in the world’s most valuable startups. The merger between Sprint and T-Mobile, announced last year, would lower SoftBank’s large debt by taking tens of billions of dollars in Sprint debt off SoftBank’s balance sheet. That would expand SoftBank’s financing options to fuel an investment machine that already manages a $100 billion investment fund and holds a big stake in Uber Technologies Inc.
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A rift between the U.S. and Canada is growing over how to ensure the safety of Boeing Co.’s grounded 737 MAX planes, as Ottawa’s focus on additional pilot training could lead to a delay in getting the jet back in the air.
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Samsung Electronics Co. said it would investigate the causes behind malfunctioning Galaxy Fold phones issued to tech reviewers, casting doubts over the rollout of the industry’s first mainstream foldable-screen device.
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A fight for control of Libya’s capital is disrupting plans to revive Libyan oil and gas production, the country’s oil chief said, raising the risk of a global increase in crude prices.
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A demonstration of an Olympus endoscope in Moscow last year. Olympus shareholders are set to establish nomination, compensation and audit committees on the board, as suggested by American hedge fund ValueAct Capital. PHOTO: PROKOFYEV VYACHESLAV/ZUMA PRESS
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When U.S.-based hedge-fund partner Robert Hale becomes an Olympus Corp. director in June, it will mark a milestone in Japan’s opening up to activist investors. Tokyo market participants say they believe it is the first time a major Japanese company is bringing a U.S. activist onto its board. Japan is entering a new era where shareholders are becoming more vocal about underperforming managers and cozy boards. But effecting change requires a more delicate approach.
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When Ynon Kreiz became Mattel Inc.’s fourth chief executive in as many years last April, he faced a daunting mandate: Revive the toy maker while cutting thousands of jobs. Mr. Kreiz, an Israeli-born television executive who’d recently joined Mattel’s board, had never worked a day at a toy company.
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ABB Ltd. has abruptly parted ways with its chief executive, just months after the European engineering giant unveiled a major new strategy.
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A new Neiman Marcus store in the Hudson Yards mall in New York last month. PHOTO: RICHARD B. LEVINE/ZUMA PRESS
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The market for secondhand clothing and accessories is going mainstream. Neiman Marcus Group Ltd. is taking a minority stake in Fashionphile LLC, an online seller of preowned designer handbags and accessories, according to company executives. The RealReal Inc., a larger competitor to Fashionphile, is preparing for an initial public offering, according to people familiar with the situation. And on Monday, a retail chain owned by H&M Group began allowing shoppers in Sweden to buy and sell previously owned goods.
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Saudi Arabia’s state oil giant is in early stage talks to take a stake in the Indian operator of the world’s largest crude refining facility by capacity, a deal which would help fulfill its goal of matching the kingdom’s production with refining outlets. Saudi Arabian Oil Co., also known as Aramco, is considering buying as much as a 25% stake in the petrochemicals and refining unit of Indian conglomerate Reliance Industries Ltd., people familiar with the matter said.
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U.S. markets will be closed tomorrow in observance of Good Friday. The Morning Risk Report will take the day off as well, and return Monday.
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