News Archive

SEC probes companies’ treatment of whistleblowers: WSJ

(Reuters) – The U.S. Securities and Exchange Commission has sent letters to several companies asking for years of nondisclosure agreements, employment contracts and other documents to investigate whether companies are muzzling corporate whistleblowers, the Wall Street Journal reported.

The inquiries come as SEC officials have expressed concern about a possible corporate backlash against whistleblowers, the newspaper said.

It couldn’t be determined how many or which companies were sent the letters or what penalties the SEC could potentially levy in the probe, the Journal said.

Reuters could not immediately reach the SEC for comment.

The 2010 Dodd-Frank Wall Street reform law gave the SEC the power to start a whistleblower program that lets the agency reward people who report misconduct, if that tip leads to the collection of more than $1 million in monetary sanctions.

Last year, the SEC received more than 3,500 tips from whistleblowers, the largest number received since the program went into effect three years ago.

There is growing momentum for other programs similar to the SEC’s.

New York’s Attorney General Eric Schneiderman is expected to propose legislation on Thursday to protect and reward employees who report information about illegal activity in the banking, insurance, and financial services industries.

Schneiderman’s bill, called the Financial Frauds Whistleblower Act, provides for financial compensation for whistleblowers who voluntarily report fraud in their industry and whose tips lead to more than $1 million in penalties or settlement proceeds.

Last September, U.S. Attorney General Eric Holder called for Congress to take steps to help prosecutors build criminal cases against senior Wall Street executives, saying companies often insulated their leaders from responsibility for misconduct.

He called on Congress to boost rewards for Wall Street whistleblowers and fund more FBI agents with forensic accounting expertise.

(Reporting by Supriya Kurane in Bengaluru and Karen Freifeld in New York; Editing by Anupama Dwivedi)

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Citigroup to be latest to embrace proxy reform for shareholders

BOSTON (Reuters) – Citigroup Inc (C.N) said it will support a rule change to make it easier for shareholders to nominate directors, making it the latest large company to embrace the controversial reform.

James McRitchie, a private shareholder who often files corporate governance resolutions, said on Wednesday that Citigroup officials told him they will back a proposal he submitted for a vote at the company’s annual meeting in April. It calls for including on Citigroup proxy statement and voting forms candidates nominated by shareholders who may not own much stock, a change known as “proxy access.”

    McRitchie said he expects other companies to make similar reforms soon. “It’s the beginning of a huge wave,” he said.

    A bank representative confirmed it will support the shareholder resolution. “Citi has always worked to stay at the forefront of good governance and we value robust engagement with our shareholders,” the bank said in an e-mailed statement.

    General Electric Co said on Feb. 11 it had put a similar change in place with new bylaws. [ID: nL1N0VL2P0] Advocates say the change helps make boards less insular and more responsive to investor concerns.

    But some business groups including the U.S. Chamber of Commerce worry such rules could advance the agendas of activist investors who buy stakes in companies and then lobby for strategic shifts or spinoffs.

    The shareholder resolution that Citigroup will support would allow groups of up to 20 shareholders who together own at least 3 percent of company stock, held for at least three years, to nominate directors for up to 20 percent of its board seats, terms similar to those GE put in place.

    McRitchie said he hoped Citigroup would quickly adopt the changes if approved by a majority of shareholders. The bank representative declined to comment on what would happen if the measure passes.

The company’s annual meeting is scheduled to take place on April 28, Citigroup said in a separate securities filing on Wednesday.

(Reporting by Ross Kerber in Boston; Editing by Ken Wills)

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Asian shares near five-month high, dollar loses steam

TOKYO (Reuters) – Asian shares prices held near five-month highs on Thursday after upbeat U.S. housing and Chinese factory data, while the dollar nursed modest losses following Federal Reserve Chair Janet Yellen’s comments.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS stood little changed near the five-month high hit on Wednesday while Japan’s Nikkei .N225 rose 0.2 percent.

MSCI’s 46-country world index .MIWD00000PUS stood just below its double-top of its September peak and a record high hit in July.

“On the whole, the world’s markets seem likely to be in a risk-on mode. The valuation still looks not that expensive, except for U.S. markets,” said Hirokazu Kabeya, senior strategist at Daiwa Securities.

The price-earnings ratio of U.S. shares stood at 19.6, but the world’s markets on the whole were traded at 16.3 times the earnings, according to Thomson Reuters Starmine.

Wall Street shares were narrowly mixed on Wednesday as a positive mood was offset by a 2.6 percent fall in Apple (AAPL.O), which saw some profit-taking after gaining 21 percent since the start of this year.

U.S. new homes sales data showed solid sales in January despite snow storms in the Northeast in the country. [USHNS=ECI].

The U.S. data followed a survey showing activity in China’s factory sector edged up to a four-month high in February.

Also whetting investors’ risk appetite, Yellen’s congressional testimony on Tuesday and Wednesday suggested the Fed is in no rush to raise rates, even though technically she did not rule a hike as early as in June.

“The only thing that is clear is that the FOMC (Federal Open Market Committee) has given itself more flexibility than before,” said Ray Attrill, Global Co-Head of FX Strategy at National Australia Bank in Sydney.

“If U.S. data begins to positive surprise once more, the market will quickly jump back on to the ‘Buy USD’ bandwagon.”

Following Yellen’s comments, U.S. bond yields have fallen sharply this week, with the 10-year notes yielding 1.972 percent US10YT=RR, compared to 2.133 percent at the end of last week and six-week high of 2.164 percent hit on Feb 18.

That took some shine off the dollar in the currency market particularly against the British pound and the Australian dollar.

The dollar index fell 0.3 percent on Wednesday to 94.208, turning negative on the week.

The euro stood at $1.1362 EUR=, maintaining its 0.2 percent gains the previous day.

Sterling hit an eight-week high of $1.5538 GBP=D4 on Wednesday and last stood at $1.5527. Likewise the Australian dollar hit a four-week high of $0.7903 AUD=D4 and last traded at $0.7885.

The prospects of U.S. interest rates staying near zero for some time were good news for gold, which recovered to $1,205.40 per ounce XAU= from seven-week low of $1,190.80 on Tuesday.

Oil prices jumped, with Brent crude surging five percent on Wednesday following comments from Saudi Arabia’s oil minister that oil demand was growing, and the upbeat Chinese factory data.

(Additional reporting by Ian Chua in Sydney; Editing by Eric Meijer)

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Iberdrola USA to buy UIL Holdings

(Reuters) – Iberdrola USA will buy UIL Holdings Corp (UIL.N) for about $3 billion to create a newly listed U.S. electric utility.

UIL shareholders will receive one share in the new company for each share they own plus $10.50 per share in cash, the companies said in a statement.

The proposed deal implies a total value of $52.75 per share, which includes the cash component, representing a 25 percent premium to UIL’s closing price on Feb. 25.

UIL Chief Executive James Torgerson will become the new company’s CEO.

(Reporting by Supriya Kurane in Bengaluru; Editing by Anupama Dwivedi)

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Venezuela seeks annulment of Exxon award at World Bank tribunal

CARACAS (Reuters) – Venezuela has requested the annulment of a World Bank tribunal award that orders it pay Exxon Mobil Corp (XOM.N) $1.6 billion in compensation for nationalizations, both sides said on Wednesday.

George Kahale, Venezuela’s lawyer, said he did not know when the tribunal was likely to issue a decision on the request.

“The first step is for the appointment of the committee to hear the annulment application, and that has not happened yet,” said the lawyer with Curtis, Mallet-Prevost, Colt Mosle LLP.

“The schedule for the annulment process will not be determined until after the committee is appointed.”

Exxon said earlier on Wednesday the South American OPEC country had filed for an annulment of the International Centre for Settlement of Investment Disputes award on Feb. 2.

“The application alleges that, in issuing the ICSID award, the Tribunal exceeded its powers, failed to state reasons on which the ICSID award was based, and departed from a fundamental rule of procedure,” Exxon said in its 10-K filing.

The move contrasts with October, when Venezuela deemed the award a victory for its sovereignty and oil workers were shown on TV celebrating.

ICSID says on its website that “annulment is an exceptional recourse to safeguard against the violation of fundamental legal principles relating to the process.”

Venezuela had also requested revisions to the award because it argues a previous decision from Paris-based International Chamber of Commerce for $908 million should be deducted from the ICSID award.

The appeals for an annulment and revisions have led to stays on the award, Exxon said.

Delays to the enforcement of hefty arbitration awards grant Nicolas Maduro’s government some breathing room as it struggles with a tumble in oil prices, arrears with private companies, debt payments, and campaigns for this year’s parliamentary election.

The high-profile compensation case is typical of the sweeping nationalizations under the late Hugo Chavez’s 14-year rule.

Chavez nationalized a range of oil projects, including the Cerro Negro heavy crude project and a smaller project called La Ceiba, both operated by Exxon.

U.S. oil company ConocoPhillips (COP.N) has also filed for arbitration over the takeover of its oil projects in Venezuela.

Arbitrator Georges Abi-Saab, appointed by Venezuela, has resigned from the tribunal for health reasons, Kahale said on Wednesday, a move that could delay a decision.

Requests for comments from Venezuela and ICSID went unanswered.

(Reporting by Alexandra Ulmer; Additional reporting by Marianna Parraga; Editing by Chris Reese and Lisa Shumaker)

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Bank of America in $300 million Fontainebleau Las Vegas settlement

(Reuters) – Bank of America Corp (BAC.N) on Wednesday said it reached a $300 million settlement of a lawsuit brought by lenders that helped finance construction of the failed Fontainebleau Resort and Casino in Las Vegas, which filed for bankruptcy protection in June 2009.

The bank, which had arranged a $1.85 billion credit facility, was accused of funneling money into Fontainebleau long after it should have known that financial prospects for the projected $2.9 billion project were worsening.

Lenders said the Charlotte, North Carolina-based bank kept making such disbursements even after it became plain that the global financial crisis was imperiling the project.

Bank of America ultimately stopped funding construction after discovering alleged cost overruns.

Located on the north end of the Las Vegas Strip, the Fontainebleau project was meant to include a 63-story glass skyscraper and feature a casino, a convention center, restaurants and bars, and more than 3,800 guest rooms.

The plaintiff lenders included affiliates of hedge fund firm Avenue Capital Group and private equity firm Carlyle Group LP (CG.O), among many others, court records show.

An entity controlled by billionaire investor Carl Icahn bought the unfinished Fontainebleau in February 2010.

A Bank of America spokesman declined to elaborate on the settlement, which was disclosed in the bank’s annual report.

The bank said it had set aside enough money for the settlement by the end of 2014.

J. Michael Hennigan, a lawyer for the lenders, said his clients “are pleased to resolve this challenging case.”

A stipulation dismissing the lawsuit was filed with the federal court in Las Vegas on Feb. 20.

The case is Avenue CLO Fund Ltd et al v. Bank of America NA et al, U.S. District Court, District of Nevada, No. 09-01047.

(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)

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Takata must save faulty air-bag inflators for litigation, U.S. probe

DETROIT/WASHINGTON (Reuters) – A U.S. safety regulator on Wednesday ordered Takata Corp (7312.T) to preserve all air-bag inflators removed through a recall process as evidence for a federal investigation and private litigation cases.

It was the first time the National Highway Traffic Safety Administration, an agency of the U.S. Department of Transportation, has ordered a company to preserve evidence for private litigation, said Gordon Trowbridge, a spokesman for NHTSA.

The defective parts, which activate air bags in case of collision – have been linked to at least six deaths and dozens of injuries, and have resulted in several lawsuits. NHTSA claims the air bags explode with too much force, spraying metal fragments at occupants.

On Friday, NHTSA slapped a $14,000-a-day fine on Takata for failing to fully cooperate with the government’s probe. Since 2008, nearly 25 million vehicles worldwide with Takata air bags have been recalled.

The directive from U.S. Secretary of Transportation Anthony Foxx also prohibits Takata from destroying or damaging any air-bag inflators except those necessary for testing. Takata is required to set aside 10 percent of recalled air-bag inflators and make them available for testing by private plaintiffs.

NHTSA wanted to ensure that all parties testing the inflators including itself, Takata, a consortium of automakers as well as private litigants could have access to them.

Several weeks ago, a federal judge in South Carolina had limited access to inflators at the request of private litigants, but opened access to parties testing them at the request of the Justice Department.

A Florida attorney who represents a client suing Takata, said a U.S. Department of Justice attorney appeared as an interested party at a recent hearing in Miami where scores of federal cases against Takata have been consolidated.

“I’ve never seen a federal prosecutorial authority appear as an interested party in a civil matter,” said Jason Turchin, who said he has been involved in more than 4,000 cases.

A spokesman for Japan-based air-bag maker Takata, Bob Rendine, said the company will continue to work closely with NHTSA.

“We believe the outcome (Foxx’s order) is in the best interest of all parties, and consistent with our commitment to the safety of the driving public. Determining the root cause of the inflator issues has been, and remains, our top priority,” said Rendine.

Foxx said NHTSA would upgrade its Takata investigation to an engineering analysis, a formal step in the agency’s defect investigation process.

(Reporting by Eric Beech in Washington and Bernie Woodall in Detroit; Editing by Peter Cooney, Matthew Lewis and Ken Wills)

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Citigroup unit probed by more authorities over money laundering

NEW YORK (Reuters) – Citigroup Inc (C.N) said additional government authorities have started probes of possible breaches of anti-money laundering laws at its Banamex USA unit.

The Financial Crimes Enforcement Network, a unit of the U.S. Treasury, and the California Department of Business Oversight have asked the company for information on its compliance with the Bank Secrecy Act and anti-money laundering rules, Citigroup disclosed in an annual filing with the U.S. Securities and Exchange Commission on Wednesday.

The disclosure comes one year after Citigroup revealed a criminal probe by a federal grand jury in Massachusetts and inquiries from the U.S. Federal Deposit Insurance Corp into the matter.

Citigroup said it is cooperating with the investigations.

Banamex USA is an affiliate of Mexico City-based Banamex, which Citigroup bought in 2001 and which operates a few branches in the United States.

The filing on Wednesday also showed that Citigroup has reduced its estimate of possible unreserved legal costs to $4 billion from $5 billion at the end of September. Citigroup said in January it was recording $2.9 billion in expenses in the fourth quarter to bolster its legal reserves.

Banamex is the second-largest bank in Mexico and was once seen as a model of Citigroup’s strategy of capitalizing on growth in emerging markets. But Banamex’s standing, and Citigroup’s management of the subsidiary, were called into question in 2013 when it lost money on loans to Mexican homebuilding companies and again in 2014 when it disclosed losses from apparent fraud in lending to a supplier of Pemex, the Mexican oil company.

Manuel Medina-Mora, who rose from being CEO of Banamex to chief executive of Citigroup’s global consumer business, said last week that he will retire in June.

(Reporting by David Henry in New York; Editing by Andrew Hay)

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U.S. refinery strike continues with no steps toward settlement

HOUSTON (Reuters) – The largest U.S. refinery strike since 1980 continued through its 25th day on Wednesday with no movement toward renewed talks to end a walkout by 6,550 union workers at 15 plants, including 12 refineries accounting for one-fifth of domestic capacity.

A spokesman for lead refinery owner representative Shell Oil Co, the U.S. arm of Royal Dutch Shell Plc, said no face-to-face meetings have been scheduled with the United Steelworkers union (USW) as of Wednesday.

“No date has been set (for talks to resume,)” said Shell spokesman Ray Fisher. “Not sure if there has been any contact (between the two sides).”

A USW spokeswoman declined to discuss the status of negotiations on Wednesday.

Talks for a new three-year contract covering 30,000 USW members at refineries and chemical plants broke off on Friday, after which the USW ordered strikes at three Motiva Enterprises refineries, which are co-owned by Shell.

The union has said its negotiators are available to meet with Shell.

Sources familiar with the talks have told Reuters that face-to-face negotiations may not resume this week.

Talks on local issues are set to begin again on Friday between LyondellBasell and the USW local union representing workers at the company’s Houston refinery, said sources close to the negotiations.

A Lyondell spokesman declined to discuss the status of negotiations with the local union.

The second-largest crude distillation unit at BP Plc’s 413,500 barrel per day (bpd) refinery in Whiting, Indiana, where about 1,100 USW members are on strike, was undergoing repairs on Wednesday after a malfunction this morning.

Companies have called on temporary replacement workers to keep plants running at nearly normal levels.

USW’s International President Leo Gerard announced an agreement on Wednesday with Sean Garvey, president of North America’s Building Trades Unions (NABTU), which represents workers who build and overhaul refinery units.

The union is seeking to win back daily refinery maintenance jobs now performed by non-union contractors, but not jobs performed by NABTU, Gerard and Garvey said.

The two union leaders also said NABTU members will respect the USW picket lines and not perform work that had been done by striking workers.

However, new construction by NABTU members will be permitted and USW will assist building trades unions in facilitating the work.

USW members work at more than 200 U.S. oil terminals, pipelines, refineries and chemical plants.

(Reporting by Erwin Seba; Editing by Chris Reese)

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