Pierre-Olivier Bouée has resigned after revelations that the Swiss bank had snooped on a former executive. But Credit Suisse's C.E.O. was found not to be involved.
October 1, 2019
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Arnd Wiegmann/Reuters
Snooping on a former executive costs a top Credit Suisse official his job
The Swiss bank’s chief operating officer, Pierre-Olivier Bouée, resigned yesterday in the midst of a corporate espionage inquiry that has led to the lender’s “worst reputational scandal in years,” Daniel Shane of the FT reports.
Mr. Bouée claimed responsibility for the decision to have a former star banker, Iqbal Khan, followed by private investigators. Credit Suisse hired them after Mr. Khan decided to defect to UBS, out of concern that he would poach his former colleagues. (Mr. Bouée will be replaced by James Walker, a senior executive in Credit Suisse’s finance division.)
The firm had commissioned an inquiry by a Swiss law firm into the surveillance of Mr. Khan after the allegations came to light.
That investigation hasn’t found any evidence that Credit Suisse’s C.E.O., Tidjane Thiam, was involved in the scheme. “The C.O.O. said that he alone, in order to protect the interests of the bank, decided to initiate the observation,” the firm said in a statement.
But a director of the firm warned that the investigation was limited because it did not have access to police files, and it couldn’t gain access to deleted messages sent over Threema, a messaging app. Swiss prosecutors are still examining the matter.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.
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University of California, Berkeley football players. Thomas Graning/Associated Press
A big win in California for student-athletes
College athletes in California will be able to sign endorsement deals and hire agents under a bill signed by Gov. Gavin Newsom, Alan Blinder of the NYT reports. It’s a big blow to the N.C.A.A., which has long argued that student-athletes should not be paid.
California’s measure would go into effect in 2023 and let student-athletes legally promote products and companies for the first time. The law applies only in the state, but “it sets up the possibility that leaders in college sports will eventually have to choose between changing the rules for athletes nationwide or barring some of America’s sports powerhouses from competition,” Mr. Blinder writes.
Mr. Newsom described the law as “a big move to expose the farce and to challenge a system that is outsized in its capacity to push back.”
“You’ve got a multibillion-dollar industry that — let’s set aside scholarships — basically denies compensation to the very talent, the very work that produces that revenue,” said State Senator Nancy Skinner, a Democrat, who wrote the legislation.
Opponents to the bill included the N.C.A.A., the Pacific-12 athletic conference and several colleges in the state, including Stanford and the University of Southern California. The association has previously threatened to penalize schools that comply with the law, and not allow them to compete. It has also convened a committee to consider changes to its rules on endorsements, with recommendations are expected this month.
Its new co-C.E.O.s, Artie Minson and Sebastian Gunningham, said they wanted to “focus on our core business, the fundamentals of which remain strong.” The company has “every intention” of going public — just not this year.
They have a lot of work to do:
• WeWork is still renegotiating a loan from banks led by JPMorgan Chase and Goldman Sachs, which is now likely to be less than the $6 billion it would have received had it gone public.
• And it is in talks to raise fresh capital from private investors while exploring the sale of businesses.
Existing investors are growing wary. The price of the company’s bonds has fallen to 85 cents on the dollar, down from 102 cents on the dollar a month ago. And the yield on that debt, which moves inversely to price, has jumped to more than 11 percent, from 7.3 percent a month earlier.
Analysts are worried about its financial stability. At WeWork’s current cash burn rate of $700 million a quarter, it could run out of money before June 30, according to analysts at Bernstein. (The co-working company does plan to slow down its growth rate, though that means it will have to become profitable sooner to entice new investors.)
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China is injecting cash into its struggling private companies
Beijing is buying stakes in private businesses at a record clip, Shen Hong of the WSJ writes, as the trade war with the U.S. is taking its toll on the Chinese economy.
State-backed buyers have bought 47 stakes in privately run companies in the first six months of this year, according to Fitch Ratings. By comparison, 52 such deals were announced for all of last year.
Private enterprise needs the help because such companies have less access to cheap bank loans, while facing tougher regulations on pollution and overproduction. “The majority of these stake acquisitions need to be understood from the perspective of relieving financial stress,” Jing Yang, a Fitch analyst, told the WSJ.
It’s another sign of the trade battle’s damage, as the Trump administration puts tighter limits and imposes levies on Chinese imports into the U.S. “Beijing is stepping in because they are worried about a sharp rise in unemployment,” Andrew Collier of Orient Capital Research told the WSJ.
More: Beijing is commemorating 70 years of Communist Party rule with a giant military parade. Meanwhile, violence has escalated in Hong Kong, as the police fired live rounds for the first time on protesters who are marking the occasion with huge demonstrations.
Workers at a damaged Saudi Aramco oil processing facility. Amr Nabil/Associated Press
Fitch downgrades Saudi Arabia over fears of more attacks
The credit rating agency said yesterday that it was concerned about the Saudi economy in the wake of a drone and missile strike on two key oil-processing facilities. The move raises questions about the I.P.O. of Saudi Aramco, the state-owned oil giant, and the future of the world’s biggest oil producer.
Fitch cut the Saudis’ long-term rating to A from A+ because of potential future attacks, after the strike on Saudi Aramco earlier this month. Houthi rebels in Yemen claimed responsibility for the strike, though both Washington and Riyadh have blamed Iran.
The agency acknowledged that Aramco has quickly restored lost oil production, but said that Saudi Arabia is still vulnerable to further military assaults. (It also cited Saudi Arabia’s current fiscal deficit, as the government spends more money at a time of lower oil prices and production.)
Riyadh unsurprisingly criticized the downgrade, calling it “somewhat speculative” and arguing that it did not fully account for the “swift, decisive and effective response” to the attack on Aramco. But Charles Robertson, the global chief economist at the investment bank Renaissance Capital, told CNBC that the ratings cut was “understandable.”
Saudi Arabia has been working to shore up investor confidence in Aramco. Its latest move, announced yesterday, is a $75 billion annual dividend that will prioritize outside shareholders over Riyadh. It’s the latest effort to woo backers for Aramco’s I.P.O., which the kingdom is relying on to pay for a revamp of its economy.
Val Broeksmit Oriana Koren for The New York Times
Meet America’s most connected whistle-blower
What do Deutsche Bank, North Korea and President Trump have in common? Scandals involving each of them were exposed in part by a man you probably haven’t heard of, Val Broeksmit, writes David Enrich of the NYT.
• Mr. Broeksmit, “an unemployed rock musician with a history of opioid abuse and credit card theft not to mention a dalliance with North Korea-linked hackers,” Mr. Enrich writes, became a central character in an F.B.I. investigation into Deutsche Bank.
• “Mr. Broeksmit’s late father, Bill, had been a senior executive there, and his son possessed a cache of confidential bank documents that provided a tantalizing glimpse of its internal workings.”
• “For more than five years, Val Broeksmit has been dangling his Deutsche Bank files in front of journalists and government investigators, dreaming of becoming the next great American whistle-blower.”
• “He wants to expose what he sees as corporate wrongdoing, give some meaning to his father’s death — and maybe get famous along the way.”
• “In addition to Deutsche Bank’s troubles, he has figured into North Korea’s hack of Sony Pictures, the collapse of the world’s oldest bank and the House Intelligence Committee’s ongoing investigation into Mr. Trump.”
Leo Strine, the chief justice of Delaware's Supreme Court. Jason Minto/Reuters
Delaware’s top judge sticks up for workers
As chief justice of Delaware’s Supreme Court, Leo Strine has helped decide many of the biggest cases that affect the American business community. But in an FT op-ed, Mr. Strine, who is retiring this fall, writes that companies have neglected to take care of their employees — and warped the purpose of capitalism.
• “From the late 1940s to the early 1970s, workers and investors did share in the wealth generated by a strong, growing economy,” Mr. Strine writes. “But since then that social compact has frayed.”
• “We should appoint board committees focused on fair treatment of company employees and those who work for its subcontractors.”
• “Business leaders must also support sensible labor law reforms giving unions a fairer opportunity to represent and bargain for their workers.”
• “Institutional investors should be focused on EESG, adding an ‘E’ for the interests of company employees,” he said, referring to environmental, social and governance measurements.
• “We must change tax and accounting rules that encourage speculation and rapid portfolio turnover, rather than productive, sound, long-term investments. Investments in employees should get as much credit as investments in robots.”
Revolving door
Boeing named Beth Pasztor as its vice president of product and services safety, a new position focused on elevating “awareness and reporting of, and accountability for, safety issues within the company.”
The British banking start-up Revolut plans to hire 3,500 employees as part of an expansion plan backed by Visa.
The speed read
Deals
• PetSmart was criticized for buying Chewy, the online pet products retailer, for $3.35 billion in 2017. It’s now having the last laugh. (WSJ)
• Blackstone has agreed to buy a collection of industrial warehouses from Colony Capital for $5.9 billion, in a bet on the continued growth of e-commerce. (Reuters)
• Companies based in China are rethinking going public on U.S. stock exchanges after the Trump administration weighed limits on Chinese I.P.O.s in America. (Reuters)
• Sempra Energy agreed to sell its Peruvian business to China Yangtze for $3.59 billion. (Reuters)
Trump impeachment inquiry
• President Trump is said to have asked the prime minister of Australia for help investigating Robert Mueller’s inquiry into the 2016 election, while Attorney General Bill Barr is said to have asked other governments for aid as well. (NYT, WaPo)
• Secretary of State Mike Pompeo reportedly participated in the July 25 call with Ukraine’s leader that is at the heart of Democrats’ impeachment inquiry. (WSJ)
• House Democrats have subpoenaed Rudy Giuliani over his role in the Ukraine scandal. (NYT)
Politics and policy
• How Jay Powell is learning to be the Fed’s chairman under President Trump — and where critics say he’s still failing. (WaPo)
• A federal judge rejected arguments by four states, including New York, that the Trump administration’s cap on deductions for state and local taxes was unconstitutional. (NYT)
• Representative Chris Collins, Republican of New York, resigned yesterday ahead of an expected guilty plea for insider trading. (NYT)
• Senator Bernie Sanders proposed a new corporate tax that would penalize some big companies if they didn’t narrow the pay gap between their C.E.O.s and typical workers. (NYT)
Tech
• New York City officials are investigating complaints from restaurant owners that Grubhub overcharges them for food delivery and other services. (NYT)
• PayPal has become the first foreign company in China to hold a payments license there after buying a small Chinese payments company. (FT)
• Don’t expect Congress to consider any online privacy bills this year. (Reuters)
Best of the rest
• The F.D.A. has recalled the heartburn medication Zantac after finding low levels of a carcinogen in the drug. (NYT)
• Five drugmakers, including Endo International and Johnson & Johnson, may participate in Purdue Pharma’s bankruptcy in order to settle their own opioid lawsuits. (WSJ)
• Here’s what happened to 25 people who came forward with sexual assault and harassment allegations after they spoke up. (New York)
• Red meat might not be that bad for you after all. (NYT)
