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The Morning Risk Report: Facebook Sets Aside $3 Billion to Cover Expected FTC Fine
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Facebook’s Mark Zuckerberg testified on Capitol Hill in April 2018. PHOTO: CHIP SOMODEVILLA/GETTY IMAGES
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Good morning. Facebook Inc. said it has set aside $3 billion for an expected fine from the Federal Trade Commission over privacy issues, cutting into the social-media giant’s profits even as its underlying business remained strong.
The FTC has been probing whether Facebook violated terms of an earlier consent decree when data of tens of millions of its users was transferred to Cambridge Analytica, a data firm that did work for the campaign of President Trump. Under the decree, approved in 2012, Facebook agreed to get user consent for collecting personal data and sharing it with others. The Wall Street Journal reported in February that FTC staff had discussed a fine of up to $5 billion.
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In announcing its earnings Wednesday, Facebook estimated that the cost of the FTC settlement would range between $3 billion and $5 billion, though it said “there can be no assurance as to the timing or the terms of any final outcome.”
The fine could mark the largest privacy-related action in FTC history, and the first major regulatory penalty for Facebook after a bruising period in which its business practices have been under intense global scrutiny.
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From Risk & Compliance Journal
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The FCA said it wouldn’t start paying whistleblowers, citing research that found no evidence showing awards improve the number or quality of whistleblower tips. PHOTO: CHRIS HELGREN/REUTERS
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A top financial watchdog in the U.K. is considering whether to disclose more information to the public about continuing investigations, citing consumer interest in certain cases, Risk & Compliance Journal’s Kristin Broughton reports. The Financial Conduct Authority says it is weighing the changes as part of a broader review of its approach to enforcement.
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Iran's Foreign Minister Javad Zarif speaks at the Asia Society in New York on Wednesday, where he proposed a prisoner exchange with the U.S. PHOTO: RICHARD DREW/ASSOCIATED PRESS
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Iran’s foreign minister said Iran would continue to sell its oil despite expanded U.S. sanctions, and warned of unspecified consequences if the U.S. tried to block oil sales that go through the Strait of Hormuz, a vital shipping channel. Meanwhile, Asian companies that had provided a lifeline to Iran after the U.S. reimposed sanctions last year are pulling back, hurting the hobbled Iranian economy and leaving the Islamic Republic with less incentive to stay committed to a multination nuclear deal, Western diplomats say.
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Regulators blocked the proposed merger between Walmart Inc.’s British grocery unit and rival J Sainsbury PLC citing competition concerns, meaning the U.S. retail giant must now find ways to drive stand-alone growth for Asda Group in the U.K.’s highly competitive retail market.
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Former Nissan Motor Co. Chairman Carlos Ghosn was granted bail by a court in Tokyo, agreeing to strict conditions such as not contacting his wife unless the court approves. This is the second time the court has approved bail for Mr. Ghosn since his surprise arrest on Nov. 19 on financial-misconduct allegations.
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The U.S. Supreme Court will decide soon whether debt collectors should have more leeway to fight steep fines for pursuing collections even after a consumer used bankruptcy to make that debt disappear. Consumer advocates worry the case could weaken protections for Americans that file for bankruptcy.
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Venezuela’s U.S.-backed opposition government took steps to seek the Trump administration’s help in making a scheduled bond payment that would protect the country’s prized crude oil refiner Citgo Petroleum Corp. from creditors. Lawmakers in Venezuela’s opposition-controlled National Assembly will vote April 30 to seek approval from the U.S. Treasury Department to tap money that was frozen under U.S. sanctions to make the interest payment. The move underscores the importance of keeping Citgo safe from foreclosure as the stalemate between rival political factions in Venezuela drags on.
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A federal appeals court in New York cleared the way for consumer advocates to sue for injunctions barring officers of Native American tribes from engaging in alleged predatory-lending practices.
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Chinese telecom company Huawei will only be allowed to construct noncore parts of the U.K.’s 5G network. Huawei’s U.K. headquarters last year in Reading. PHOTO: STEVE PARSONS/PA WIRE/ZUMA PRESS
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The U.K. government agreed to allow Huawei Technologies Co. to build part of the country’s 5G telecom system—despite U.S. pressure to exclude the Chinese telecom giant—but it will only be allowed to construct noncore parts of the network, according to an official familiar with the matter.
The decision is a victory for Huawei in its fight against a U.S. campaign to block the use of its 5G equipment in the networks of U.S. allies. The U.S. has long held that Huawei equipment is a security threat, which the telecommunications company forcefully denies.
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Boeing Chief Executive Dennis Muilenburg PHOTO: ANNA MONEYMAKER/BLOOMBERG NEWS
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Boeing Co. Chief Executive Dennis Muilenburg repeated three words many times Wednesday, referring to the 737 MAX plane debacle, which includes two deadly accidents: “We own it.” Making those words believable will matter more for the company’s stock-market recovery than the financial costs of the crisis, The Wall Street Journal’s Jon Sindreu writes.
Investors can no longer ignore reputational risk. In today’s social media-driven society, a stain on a household name like Boeing can instantly spread around the globe, piling pressure on companies and their regulators. Mr. Muilenburg initially chose to keep a low profile after the latest crash, which many investors saw as a blunder.
The aerospace giant said Wednesday it has begun factoring in more than $1 billion in additional costs while the plane is grounded and production of additional aircraft remains scaled back.
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Joe Ianniello has been at the helm of CBS since September. PHOTO: MARY ALTAFFER/ASSOCIATED PRESS
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CBS Corp. said it suspended its search for a new chief executive, extending the employment of its acting CEO Joe Ianniello through the end of the year. Mr. Ianniello has been leading the media company since September, when Chairman and Chief Executive Leslie Moonves was forced to resign as a result of numerous allegations of sexual assault and misconduct.
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Barclays PLC Chief Executive Jes Staley dismissed the need for any strategic changes after first-quarter net profit in its corporate and investment bank fell 28%. Activist Sherborne Investors is calling for Barclays to move capital away from the investment bank and shrink its markets business. Next week, shareholders will vote on a Sherborne proposal to appoint its chief, Edward Bramson, to the Barclays board to trigger a change in strategy.
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Companies are appointing more women to board seats than ever, yet the overall share of female directors is barely budging. The reason isn’t the pipeline, say recruiters and researchers. It is that board seats rarely become available in the first place.
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An IndyMac customer knocks on the door of a locked branch after the bank was taken over by the FDIC in 2008. PHOTO: ORANGE COUNTY REGISTER/ZUMA PRESS
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The Federal Deposit Insurance Corp. is assembling a stable of executives who could be installed in top jobs at failed banks, taking advantage of a calm spell in the business to better prepare for the next downturn.
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Nokia Corp. swung to a surprise first-quarter net loss after it was forced to push back a chunk of fifth-generation network gear sales in the North American market to later in the year while competition heated up as vendors sacrifice margin to gobble up contracts.
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Anthem Inc. raised its 2019 earnings outlook after its profit rose in the first quarter, continuing a trend of strong managed-care results despite investors’ concern about policy issues, including some Democrats’ discussion of universal government coverage.
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Nissan Motor Co. issued its second profit warning this year, weighed down by a warranty extension for vehicles in the U.S. and efforts to unwind a U.S. sales strategy by former Chairman Carlos Ghosn
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The U.S. dollar rose broadly Wednesday as a number of different economies around the world showed signs of weakness.
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Products from Walmart’s beef supply chain will debut at 500 stores in the Southeast. PHOTO: DAVID J. PHILLIP/ASSOCIATED PRESS
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Walmart Inc. is pushing into the meat business, the latest retailer to seek greater control and profits in the steaks and rotisserie chickens that fill grocery-aisle meat cases.
The Arkansas-based chain will develop a network of cattle ranches and meat-processing plants to provide Angus beef products exclusively for its stores, a move Walmart said will provide the company and its customers better visibility into their food supply.
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A contractor working in the control room at an Anadarko Petroleum oil-rig site in Fort Lupton, Colo. Anadarko’s shares were up sharply on Wednesday. PHOTO: JAMIE SCHWABEROW/BLOOMBERG NEWS
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Occidental Petroleum Corp. offered to buy Anadarko Petroleum Corp. for $38 billion, launching a potential bidding war for a company that agreed earlier this month to be purchased by Chevron Corp. for about $33 billion.
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Banking giant Deutsche Bank AG and its crosstown rival Commerzbank AG Thursday ended merger talks, leaving in tatters the German government’s hope to shore up both banks and create a banking powerhouse.
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Novartis AG raised its full-year guidance Wednesday as it reported strong growth of its newer drugs, bolstering its chief executive’s efforts to focus the pharmaceutical giant on higher-value medicines.
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Samsung Electronics Co. said it would invest about $116 billion by 2030 to further diversify its semiconductor production beyond memory chips, as the company seeks new growth drivers.
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