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The Morning Risk Report: Allianz Subsidiary Pleads Guilty to Defrauding Investors as Part of $6 Billion Settlement
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Good morning. One of Allianz SE’s U.S. investing divisions pleaded guilty to securities fraud and agreed to pay about $6 billion in penalties and restitution to investors who suffered losses when some of the subsidiary’s hedge funds tanked during the March 2020 market selloff.
Allianz Global Investors U.S. admitted Tuesday that it lacked internal controls and oversight for a series of private-investment funds and made false and misleading statements to investors, according to a plea agreement reached with the Manhattan U.S. attorney’s office. The U.S. subsidiary also settled civil-fraud claims brought by the Securities and Exchange Commission.
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Content from our Sponsor: DELOITTE
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How Common Hospital Contracts Can Bruise Financial Health
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The pandemic exposed unchecked issues related to professional service agreements that are standard fare in the health care industry. Read More ›
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The $6 billion will resolve the government’s criminal and civil claims, as well as those from defrauded investors. The agreement is among the largest criminal resolutions between a financial institution and the Justice Department in recent years.
The settlements draw a line under one of the biggest early casualties of the market meltdown sparked by the Covid-19 pandemic. Investors, including pensions that managed the retirement plans of Arkansas teachers, Milwaukee city employees and New York City subway workers, lost billions on the funds.
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U.S. Senators Call for More Funding to Fight Illicit Finance
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A bipartisan group of U.S. senators called for additional funding for the U.S. Treasury’s anti-money-laundering efforts on Tuesday following a survey that ranked the country as the most secretive in the world.
In a letter to the leaders of the Senate appropriations committee, Senators Sheldon Whitehouse (D., R.I.) and Chuck Grassley (R., Iowa) said the Treasury’s financial crimes bureau should be given the maximum funding possible so that it could finish implementing a series of reforms to the U.S.’s anti-money-laundering laws.
The letter, which was signed by 21 other senators, followed the release of the U.K.-based nonprofit Tax Justice Network’s 2022 financial secrecy index, which scores countries on the level of secrecy their laws permit and the size of their financial-services sector. The U.S. was deemed the most secretive, after being ranked No. 2 in 2020 behind the Cayman Islands.
The U.S. in early 2021 passed a landmark anti-money-laundering reform law, which will create for the first time a corporate ownership registry that lawmakers hope will tamp down on the use of anonymous shell companies. The law is still in the process of being implemented.
—Dylan Tokar
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Securities and Exchange Commission headquarters in Washington. The agency extended the comment period for the proposed rules until next month. PHOTO: TING SHEN FOR THE WALL STREET JOURNAL
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The cost of proposed rules on climate disclosure is emerging as a key battleground as businesses and politicians fight over a plan to require companies to tally their impact on the environment and the risks they face from climate change.
The Securities and Exchange Commission estimates the plan will raise the cost to businesses to comply with its disclosure rules from $3.9 billion to $10.2 billion. The leap in expense equates to an ongoing additional cost of $420,000 a year on average for a publicly listed small company and $530,000 a year for a bigger firm, the SEC said.
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The Justice Department sued casino mogul Steve Wynn Tuesday to force him to register as a lobbyist in connection with his 2017 efforts to obtain a diplomatic favor long sought by Chinese authorities.
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The lawsuit comes almost a year after the department told Mr. Wynn to register under the Foreign Agents Registration Act and signaled that it would go to court to compel him to do so if necessary, as The Wall Street Journal reported at the time, citing people familiar with the matter.
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The IRS is preparing for an extended fight over a deduction created in the 2017 tax law that could put the government at odds with some of the largest U.S.-based multinational companies.
The Internal Revenue Service is auditing the first batches of tax returns that include the deduction for foreign-derived intangible income (FDII), and the government earlier this month unveiled a legal argument that shows it is likely to contest many companies’ claims.
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The U.S. extended a limited license held by Chevron Corp. on Tuesday that allows the oil company to maintain its operations in Venezuela and negotiate future business in an attempt to encourage talks between the government of Venezuelan President Nicolás Maduro and the U.S.-backed opposition to open a path to free and fair elections.
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Federal investigators said they found a more than 1,700-foot-long drug-smuggling tunnel connecting San Diego to Tijuana, Mexico, and authorities charged six people for conspiracy to distribute more than 1,750 pounds of cocaine.
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The U.S. is talking with the European Union about ways to limit global energy price increases that could be caused by an EU-proposed embargo on Russian oil, looking at additional options like setting a tariff on imports of Russian oil, according to U.S. Treasury officials.
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Germany is racing to sever dependence on Russian energy.
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Online mental-health company Cerebral Inc. said it would stop prescribing almost all controlled substances, expanding an overhaul of its treatment practices in the wake of scrutiny over how it provided stimulants for attention-deficit hyperactivity disorder.
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Dentsply Sirona Inc. on May 10 said it was investigating its use of incentives to sell products to distributors in the second half of 2021 and whether it properly accounted for the incentives.
PHOTO: PAVLO GONCHAR/ZUMA PRESS
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Accounting for incentives continues to challenge companies. Last week, for example, dental-supplies maker Dentsply Sirona Inc. said it was looking into how it booked some marketing incentives for distributors.
Incentives, which can come in the form of volume discounts, rebates or free goods, are a common marketing strategy in the healthcare industry. In some cases, companies pay doctors fees for speeches or presentations about drugs or medical devices. Healthcare companies also offer free trials and loyalty programs.
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Flowers were left at a memorial Monday outside of a Buffalo, N.Y., supermarket, the scene of a deadly shooting. PHOTO: SCOTT OLSON/GETTY IMAGES
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Three years after a mass shooting in New Zealand was live-streamed online, the spread of footage taken by the alleged shooter in Buffalo, N.Y., shows how social-media platforms still struggle to keep their platforms from being used to broadcast violent, extremist videos.
The shooting rampage at a supermarket on Saturday, which left 10 people dead and three wounded, was broadcast on Twitch, a site owned by Amazon.com Inc. that specializes in live streaming.
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Mother Sues TikTok After Alleging 10-Year-Old Daughter Died From Doing ‘Blackout Challenge’
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JPMorgan Chase & Co. shareholders objected to a roughly $50 million bonus for Chief Executive Jamie Dimon and voted against the bank’s compensation plan Tuesday.
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Elon Musk said his $44 billion purchase of Twitter Inc. can’t move forward until the company is clearer about how many of its accounts are fake, casting fresh doubt on his planned takeover of the social-media company.
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Big U.S. companies are doling out one-time awards to executives in an effort to retain high-performing leaders amid record employee turnover and reward them for managing through a couple tough years.
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Progress Residential, the single-family rental arm of private-equity shop Pretium Partners, appointed Home Depot Inc. executive Adolfo Villagomez to be its new chief executive, the company said Tuesday.
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Pro-Russian troops stood guard before the evacuation of wounded Ukrainian soldiers from the besieged Azovstal steel plant. PHOTO: ALEXANDER ERMOCHENKO/REUTERS
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Soldiers defending the Ukrainian city of Mariupol laid down their arms at the sprawling steel plant that served for weeks as their final redoubt, ending months of bloody battle for the industrial port that has become a symbol of Russia’s invasion and Ukraine’s resistance.
More than 260 soldiers were taken to Russian-controlled territory on Tuesday morning after Ukraine announced the end of combat operations in Mariupol.
Hundreds more fighters are awaiting an evacuation that would make them prisoners of war. Ukrainian officials said they are hopeful that the surrendered troops will return home as part of a prisoner exchange with Russia, something to which Moscow hasn’t publicly agreed. Completing the capture of Mariupol is a long sought victory for Russia.
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Goldman Sachs headquarters in New York. Firms like Goldman have raced to bring workers back into the office and hire new ones. PHOTO: MICHAEL NAGLE/BLOOMBERG
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Goldman Sachs Group Inc., the 153-year-old Wall Street firm synonymous with long hours and a hard-charging culture, is telling some senior employees it won’t be capping their days off.
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Coinbase Global Inc., the largest U.S.-based crypto company, will slow its pace of hiring amid a crash in the crypto markets.
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Netflix Inc. said it is cutting about 150 employees in a new round of layoffs as the streaming company grapples with slowing revenue growth and a shrinking subscriber base.
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Nestlé SA said it would fly extra baby formula into the U.S. from Switzerland and the Netherlands as the Gerber owner looks to accelerate deliveries to alleviate a severe shortage across the U.S.
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