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The Morning Risk Report: Hertz to Pay $168 Million to Settle False-Arrest Allegations
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Good morning. Hertz Global Holdings Inc. said it would pay about $168 million to settle 364 pending claims related to vehicle-theft reporting, some instances of which have allegedly led customers to face wrongful arrest for car theft.
The hundreds of settlements resolve more than 95% of outstanding claims, Hertz said. The company said it doesn’t expect the settlement to have a material impact on its capital allocation plans for the balance of 2022 and 2023. The company also expects to recover a meaningful portion of the settlement amount from its insurance carriers.
“As I have said since joining Hertz earlier this year, my intention is to lead a company that puts the customer first,” Hertz Chief Executive Stephen Scherr said. “In resolving these claims, we are holding ourselves to that objective.”
The car-rental company, based in Estero, Fla., has for years grappled with allegations that inventory mismanagement issues have caused it to falsely report some of its cars as stolen, leading to wrongful arrests of customers for car theft.
In April, two months after he was tapped to helm the company, Mr. Scherr reversed years Hertz’s denials by saying some customers had been affected in the past by false theft reports and vowed to rectify the situation for wronged customers.
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Content from our Sponsor: DELOITTE
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In Resilience Efforts, Companies Welcome Regulator Role
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Regulation can help organizations clarify priorities by setting forth specific areas of focus, objective goals, and clear reporting requirements, says a global survey report. Read More ›
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The Securities and Exchange Commission alleged moves that led to a lowered consensus sales estimate for AT&T, which the telecom company beat.
PHOTO: LARRY W. SMITH/EUROPEAN PRESSPHOTO AGENCY
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AT&T settles claims it tipped off Wall Street. AT&T Inc. will pay $6.25 million to settle a lawsuit filed by regulators that alleged it gave nonpublic financial information to analysts who then lowered their estimates, allowing the company to beat sales expectations.
The telecom company agreed to pay the fine and settle the Securities and Exchange Commission’s litigation without admitting or denying wrongdoing, according to a court filing. Three AT&T investor-relations executives each agreed to pay $25,000 individually to end the lawsuit, records show.
The federal judge in the case, Paul A. Engelmayer, in September denied motions by the SEC and AT&T to deliver an early verdict, although he wrote that the SEC’s evidence was “formidable.” The case could have gone to trial but the two sides settled the lawsuit, which the SEC filed in Manhattan federal court in March 2021.
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EU tells Illumina how to unwind cancer-test developer deal. The European Union on Monday set out the details of a planned order requiring Illumina Inc. to unwind its $7.1 billion acquisition of cancer-test developer Grail Inc.
The European Commission, the bloc’s competition watchdog, said in a so-called statement of objections that it intends to require Illumina to swiftly return Grail to the same level of independence the company had before the acquisition. Grail must also be as competitive after the divestment as it was before the deal closed, the commission said.
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In other compliance-related news...
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A federal judge Monday tossed the bulk of a public-corruption case against former New York Lt. Gov. Brian Benjamin, finding the Justice Department’s charges didn’t meet the legal bar for prosecuting alleged bribery involving campaign contributions.
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A federal watchdog is calling for Congress to establish tighter regulations on how colleges and universities describe their financial-aid packages, saying the information most schools now share with students and families is woefully inadequate and even misleading.
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Sam Bankman-Fried, the former chief executive of FTX, sought to draw in large numbers of potential new traders to a crypto-trading ecosystem.
PHOTO: JEENAH MOON/BLOOMBERG NEWS
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FTX effort to save itself failed on questionable assets. When crypto exchange FTX was struggling to raise cash early last month, it seized billions of dollars worth of collateral from its trading arm, Alameda Research, and used it to try to convince investors of its financial health, former FTX Chief Executive Sam Bankman-Fried said.
But much of it didn’t add up. A big chunk of the assets consisted of four thinly traded crypto tokens closely connected to Mr. Bankman-Fried and FTX employees and mostly held by Alameda. The tokens were likely worth far less than the $6.4 billion marked on the balance sheet FTX was shopping to investors in the hope of a bailout, according to market data and crypto researchers.
“It wasn’t meant to be casting a judgment or making a decision for people on what they thought was their worth from a liquidity perspective,” Mr. Bankman-Fried said.
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Oil prices waver after Russia cap kicks in. The West imposed sanctions on Russian crude, pitching the energy conflict with Moscow into an unpredictable new phase that could inject further volatility into global oil markets.
The European Union and U.K. barred inbound shipments of Russian crude Monday—a watershed for a continent striving to end its dependence on Russia’s fossil fuels after Moscow invaded Ukraine and weaponized supplies of natural gas. In tandem, the EU, the U.S. and allies placed curbs on shipping, insuring and funding Russian crude anywhere in the world.
Oil prices wavered. Most-actively traded futures contracts for Brent, the benchmark for international crude sales, slipped 3.4% to $82.68 a barrel. Analysts and traders said prices initially got a boost from loosening Covid-19 restrictions in China, which are likely to lift demand in the world’s second-biggest economy, but those gains faded in morning trading in New York.
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Railroad freight volumes have been bolstered by increased export demand for coal and grain.
PHOTO: MARIO TAMA/GETTY IMAGES
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Railroads focus on stabilizing workforce after strike is averted. President Biden signed a bill Friday restricting rail workers from striking, but the industry is still struggling with a big problem: having enough staff to handle customer demand.
The largest U.S. freight railroads have reported strong profits in recent years, helped by higher prices and steady business in transporting everything from automobiles to fertilizer. Export demand for coal and grain, stemming from disruptions in supply chains in Europe after Russia invaded Ukraine, bolstered freight volumes this year, railroads said.
At the same time, railroads continue to face disruptions tied to having a shortage of workers. This year, Union Pacific Corp. and BNSF Railway have issued more embargoes—restrictions placed on the amount of cargo that can be transported—than in previous years. Railroads issue embargoes as a way to control traffic movements when service is disrupted due to a disaster or to ease congestion.
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PepsiCo to lay off hundreds of workers in headquarters roles. PepsiCo Inc. is laying off workers at the headquarters of its North American snacks and beverages divisions, a signal that corporate belt-tightening is extending beyond tech and media, according to people familiar with the matter and documents reviewed by The Wall Street Journal.
Hundreds of jobs will be eliminated, one of the people said. The cuts affect the company’s North America beverage business, which is based in Purchase, N.Y., and its North America snacks and packaged-foods business, which has headquarters in Chicago and Plano, Texas, the people said.
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Slack Technologies Chief Executive Stewart Butterfield is stepping down.
PHOTO: RICHARD DREW/ASSOCIATED PRESS
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Salesforce Inc. said Stewart Butterfield, the chief executive and co-founder of the messaging app Slack Technologies, plans to leave the company next month.
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Verizon Communications Inc. replaced consumer unit chief Manon Brouillette after a little less than a year in the role, the latest sign of the wireless company’s struggle to appeal to nonbusiness clients.
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VF Corp. on Monday said Steven Rendle has retired as chairman, president and chief executive, as the apparel maker cut its sales and earnings guidance amid flagging consumer demand.
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