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U.S. SEC paid $3.75 million to BHP Billiton whistleblower: report

MELBOURNE The U.S. Securities and Exchange Commission paid a BHP Billiton (BHP.AX) (BLT.L) insider $3.75 million for detailed information in an investigation into alleged bribery of Asian and African officials, the Australian Financial Review reported on Monday.

Citing legal sources, the newspaper report said it was the first time an employee of an Australian company had received a U.S. whistleblower bounty.

BHP last year settled the SEC case, paying $25 million to resolve charges it violated a U.S. anti-bribery law by failing to properly monitor a program in which it paid for dozens of foreign government officials to attend the 2008 Olympics in Beijing.

The Australian Financial Review said it did not spell out the evidence that the whistleblower disclosed because it wanted to protect the person’s identity.

BHP Billiton said on Monday it had fully co-operated with the SEC inquiry and a subsequent investigation by the U.S. Department of Justice (DOJ).

“We are not aware of the involvement of any whistleblower as part of the SEC’s or DOJ’s investigation,” BHP said in an emailed statement to Reuters.

“We respect and fully support protections for all whistleblowers and the importance of providing confidential avenues for reporting,” the company said.

The world’s biggest miner remains under investigation by the Australian Federal Police over the matter.

(Reporting by Sonali Paul; Editing by Andrea Ricci and Richard Pullin)

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Herbalife may have misled investors, SEC on impact of FTC deal, one short-seller says

BOSTON After U.S. multi-level marketing company Herbalife (HLF.N) settled a probe of its sales practices with the U.S. Federal Trade Commission last month, top executives assured investors that the company would be able to thrive under the new rules.

The consumer protection agency had questioned the company’s sales methods.

Billionaire investor William Ackman in 2012 claimed the company was running a pyramid scheme, recruiting members with a promise of payment for enrolling others in distribution, rather than depending on the actual sale of its nutritional supplements and weight management products.

In its July 15 ‎settlement Herbalife agreed to restructure its U.S. business so distributors are rewarded for sales rather than for recruitment of sales agents and it agreed to pay a $200 million fine.

But Herbalife’s filings with the U.S. Securities and Exchange Commission painted a much less optimistic picture than its presentation to analysts and investors, according to a private investor who flagged the differences to the SEC this month.

Matthew Handley, an investor based in Lakewood Ranch, Florida alleged Herbalife made “purposefully deceptive statements” in its Aug. 3 quarterly earnings conference call and regulatory filings.

Handley, who is betting Herbalife’s stock price will fall, told Reuters about his outreach to the SEC and provided a copy of his letter to its whistleblower office.

“The transcript of the conference call, when compared directly against the actual language the company issued in their 10Q, depict a clear pattern of purposeful intent to deceive investors and the market,” Handley wrote in the Aug. 16 letter.

“The things you say on the call and write in the filing have to match up, and I thought they just didn’t,” he later said in an interview with Reuters.

Because Herbalife’s conference call transcript and its SEC filings are publicly available, securities law experts said the company probably did not violate the SEC’s disclosure rules such as Regulation FD.

Corporate filings are often more legalistic and technical than what executives say during presentations to analysts and investors, when they may sound optimistic about the company’s outlook, law professors and private lawyers noted.

But such presentations are usually highly scripted, with companies trying to ensure oral statements are not inconsistent with their filings, and the difference in tone and substance in Herbalife’s case is noteworthy, securities lawyers said.

“Securities laws say that you cannot lie,” said Yale law professor Jonathan Macey. “Reading these two documents (the filing and transcript of the conference call), would suggest they’ve changed their point of view,” he added.

Herbalife spokesman Alan Hoffman declined repeated requests from Reuters for comment. Brian Lane, a partner at law firm Gibson Dunn, which vets Herbalife’s disclosures, did not respond to a call or email seeking comment. Herbalife has disclosed inquiries from the SEC and other government authorities in the past.

SEC spokesman John Nester also declined to comment.


Herbalife hailed the FTC settlement as a victory for its business model as the FTC said the company may have deceived hundreds of thousands of people but stopped short of calling it a pyramid scheme.

In August executives assured analysts and investors on a conference call that Herbalife would suffer little financial damage from the settlement.

Chief Executive Michael Johnson said, “We have the greatest confidence in our ability to comply with the agreement and continue to grow our business in the U.S. and around the world.”

Chief Financial Officer John DeSimone saw “minimal disruption to the business” and President Desmond Walsh also struck an optimistic tone, saying, “The most important thing is that we don’t see any long-term impact in our business.”

Herbalife’s SEC filing was more circumspect though, saying the company does not currently expect the settlement to have a “long-term and materially adverse impact.”

However, the filing also noted “there is no guarantee that we will be able to fully comply with the consent order” and that “the company’s business and its member base, particularly in the United States, may be negatively impacted.”

If Herbalife cannot comply with the consent order, “this could result in a material and adverse impact to the company’s results of operations and financial condition,” the filing said.

Herbalife also noted the settlement’s effect “could be significant.”


Herbalife has until next year to comply with the July 15 order from the Federal Trade Commission to restructure its U.S. business.

It is not clear whether other short sellers and investors will respond to Handley’s accusations on inconsistency between the company’s verbal optimism and its more cautious SEC filings, some experts said.

“If you invest in this company, you will want to know what the odds are of this FTC ruling screwing up their business,” Yale Law School professor Macey added.

Herbalife’s stock price has gone on a wild ride over the last four years when two billionaires began squaring off over its future. After seeing a high around $81.00 in January 2014, the stock fell to a low around $30.26 in January 2015 before recovering to close at $60.50 on Friday.

Hedge fund manager William Ackman, who called Herbalife a pyramid scheme, placed a $1 billion short bet but so far has suffered some losses as the stock climbed.

On Friday in a letter to investors, Ackman also noted differences between presentations to investors by Herbalife executives and the company’s official quarterly filing. In his letter, Ackman wrote “management’s latest commentary is a continuation of prior misrepresentations.”

Ackman and Handley, who registered his complaints about Herbalife’s communications with the SEC, both said they have never spoken to each other and reached their conclusions independently.

By contrast, in 2013 billionaire Carl Icahn expressed confidence in Herbalife, becoming its biggest shareholder and named directors to the board.

This week, Ackman and Icahn tangled anew when Ackman said an investment bank approached him to try and sell some of Icahn’s shares, but on Friday, Icahn said he was buying shares, not selling.

A key institutional owner, Fidelity, sold some of Herbalife’s shares in August, it said in a filing. Fidelity declined to make the fund manager available for an interview.

(Reporting by Svea Herbst-Bayliss; editing by Lauren Tara LaCapra, Nick Zieminski and Clive McKeef.)

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China’s BYD forecasts up to 91 percent profit rise for first nine months

BEIJING Chinese automaker BYD Co Ltd (1211.HK)(002594.SZ), backed by Warren Buffett’s Berkshire Hathaway Inc (BRKa.N), on Sunday predicted an up to 91-percent profit increase in the first nine months of the year, as government policies drive green car sales.

The Shenzhen-based company forecast an 83 percent to 91 percent rise in net profit for the first nine months, between 3.6 billion yuan ($539.8 million) to 3.7 billion yuan, according to a stock exchange filing.

For the first half of 2016, BYD reported 2.3 billion yuan in profit, a 384 percent increase year-on-year, on the low end of the company’s predicted increase of 382 percent to 425 percent.

BYD, which focuses on making green energy cars and batteries for personal electronics, had reported successive quarters of triple-digit growth since third quarter 2015 after years of favorable government policies finally sparked a boom in sales of full electric cars and plug-in hybrids.

Berkshire Hathaway’s stake in BYD fell to 8.25 percent from 9.1 percent previously after a share sale in July in which South Korea’s Samsung Electronics Co Ltd (005930.KS) and other investors bought a stake in the Chinese automaker.

BYD’s board recommended an interim cash dividend of 0.367 yuan per share, according to the filing.

(Reporting by Jake Spring; Editing by Stephen Coates and Raissa Kasolowsky)

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Germany’s economy minister: U.S.-EU free trade talks have failed

BERLIN Germany’s Economy Minister Sigmar Gabriel said on Sunday that talks on the Transatlantic Trade and Investment Partnership (TTIP), a free trade deal being negotiated by the United States and the European Union, had essentially failed.

“The negotiations with the USA have de facto failed because we Europeans did not want to subject ourselves to American demands,” he said, according to a written transcript from German broadcaster ZDF of an interview due to be broadcast on Sunday.

“Things are not moving on that front,” said Gabriel, who is also Germany’s vice chancellor.

The U.S. and the EU have been negotiating the TTIP for three years and both sides had sought to conclude talks in 2016 but they have differences over various issues, including agriculture.

(Reporting by Michelle Martin; Editing by Louise Ireland)

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As Fed nears rate hikes, policymakers plan for ‘brave new world’

JACKSON HOLE, Wyo. Federal Reserve policymakers are signaling they could raise U.S. interest rates soon but they are already weighing new tools they may need to fight the next recession.

A solid U.S. labor market “has strengthened” the case for the first rate increase since last December, Fed Chair Janet Yellen told a central banking conference in Jackson Hole, Wyoming. Several of her colleagues said the increase could come as soon as next month if the economy does well.

Further rate hikes are expected to be few and far between as the U.S. central bank tries to balance a desire to fuel growth against worries it could overheat the economy.

But Fed officials at three-day conference that ended Saturday also said they need to consider new policy tools for use down the road, such as raising the inflation target or even Fed purchases of non-government-backed assets like corporate debt.

Such ideas would test the limits of political feasibility and some would need congressional approval. The view within the Fed is that it could take effort to win over a public already skeptical of the unconventional policies the Fed undertook during the last crisis.

Policymakers think new tools might be needed in an era of slower economic growth and a potentially giant and long-lasting trove of assets held by the Fed. And they are convinced the time to vet them is now, while rates look to be heading up.

“Central banking is in a brave new world,” Atlanta Fed President Dennis Lockhart said in an interview on the sidelines of the conference.

At the center of the Fed’s discussions is its $4.5 trillion balance sheet, built up by bond-buying sprees to combat the 2007-09 recession but which has been criticized by many lawmakers.

While policymakers have maintained the Fed should eventually reduce its bond holdings, Lockhart said some officials were closer to accepting that they needed to learn to live with them.

“I suspect there are colleagues who are contemplating at least maybe a statically large balance sheet is just going to be a fact of life and be central to the toolkit,” he said.

Officials have said they will slowly let the balance sheet shrink, a process that would take years and would not begin until interest rate increases are well underway. Substantial progress could be made only in a very long-lived economic expansion.

“I am sure everyone in the audience would be happy if this were the reality. I certainly would be,” Simon Potter, the New York Fed’s markets chief, said during the conference.

Yellen, in her speech on Friday, said balance sheets would likely swell again in future recessions as the Fed snaps up assets to stimulate the economy.

The conference, attended by all but two of the Fed’s 17 policymakers as well as central bankers from around the world, also presented a menu of more exotic proposals. This included a Fed takeover of short-term debt markets and abolishing cash in order to charge negative interest rates.

Many of the more radical proposals, including one to abandon monetary policy altogether and focus on urging runaway deficit-spending, were seen as ivory tower musings.

Most policymakers, including Yellen, said it was likely the tools the Fed used to fight the last crisis, including rate cuts, bond purchases and jawboning on rate expectations, will be adequate.

Still, she said, “future policymakers might choose to consider some additional tools that have been employed by other central banks,” including buying a wider range of assets or raising the inflation target. She also cited the possibility of targeting the average level of prices in the economy rather than their rate of change.

Notably, her laundry list of possible tools did not include negative rates, an idea that has been nearly universally panned by Fed officials. She said the Fed is not actively considering additional policy tools but participants at the conference suggested the process is already well underway.

“You are seeing an exploration of how are we going to operate in a quite different world than before the crisis,” Lockhart said.

(With reporting by Howard Schneider; Editing by Chizu Nomiyama)

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Fed could use reserves payments to stimulate U.S. economy: paper

JACKSON HOLE, Wyo. The Federal Reserve could push banks to lend more by paying Wall Street smaller returns on money stashed at the U.S. central bank when inflation is low, according to an academic paper presented on Saturday.

The proposal was one of several discussed at an international gathering of central bankers who are looking for ways to stimulate economies even after they have cut interest rates to near zero and flooded banks with money.

In his paper, economist Ricardo Reis put forward a new way for the Fed to pay banks returns on the money they keep at the central bank, a tool that could potentially put the Fed’s goal of keeping inflation at 2 percent on autopilot.

Banks currently have about $2.6 trillion at the Fed, a trove that swelled during a massive Fed bond-buying campaign aimed at fighting the 2007-2009 recession.

The Fed currently pays 0.5 percent on reserves, which some critics view as a giveaway to banks. The central bank uses that rate as a way to keep the rates for overnight interbank borrowing from going beyond its target range, relying on reverse repo operations to set the floor.

But under Reis’s proposal, the Fed would also use the reserves rate as a stimulus mechanism, indexing its payments to the inflation rate. That would give banks an incentive to lend when the economy is weak and prices are rising more slowly.

“When the central bank promises a smaller payment, reserves are a less attractive investment, so banks will … move away from reserves and into loans,” Reis, an academic at the London School of Economics, wrote in the paper.

The fluctuations in bank lending due to price changes could help the Fed keep inflation on target.

Inflation rates in the United States and elsewhere in the world have been exceptionally low in recent years, and policymakers worry that economies are vulnerable to debilitating deflation.

Reis said his proposal was “somewhat radical” and warrants more study before being tried out.

He also assessed whether the Fed could stimulate the economy through the use of so-called “helicopter drops” in which it would create money and give it to the government to spend without requiring repayment.

Reis argued that helicopter drops might be ineffective because the Fed already turns over its profits to the government and might reduce these transfers after such a move, leading the government to cut spending in the future.

(Reporting by Jason Lange; Editing by Paul Simao)

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Exclusive: Iraq plans to sell oil through Iran if talks with Kurds fail

BAGHDAD Iraq’s government would consider selling crude through Iran should talks with the autonomous Kurdish region on an oil revenue-sharing agreement fail, a senior oil ministry official in Baghdad told Reuters.

Iraq’s State Oil Marketing Organisation (SOMO) plans to hold talks with the Kurdish Regional Government (KRG), possibly next week, about Iraqi oil exported through Turkey, Deputy Oil Minister Fayadh al-Nema said in an interview on Friday evening.

“If the negotiations come to a close” without an agreement “we will start to find a way in order to sell our oil because we need money, either to Iran or other countries”, he said by telephone.

Iraq, OPEC’s second-largest producer after Saudi Arabia, depends on oil sales for 95 percent of its public income. Its economy is reeling under the double impact of low oil prices and the war against Islamic State militants.

The Kurdistan region produces around 500,000 barrels per day (bpd) on its territory and exports those volumes via Turkey. Baghdad would not be able to reroute those volumes to Iran but could order shipments of some 150,000 bpd via Iran that are being produced in the nearby province of Kirkuk. 

An agreement between Iran and Iraq could function in a similar fashion as oil-swap deals Tehran has had with Caspian Sea nations, according to an oil official who asked not to be identified.

Iran would import Iraqi oil to its refineries and export an equivalent amount of its own crude on behalf of Baghdad from Iranian ports on the Gulf. Iraq has ports on the Gulf but they are not linked to the northern Kirkuk fields by pipeline.

Iraq’s state-run North Oil Company resumed pumping crude through the Kurdish-controlled pipeline to Turkey last week as “a sign of goodwill to invite them (the Kurds) to start negotiations,” Nema said.

He said pumping had resumed on the instruction of Prime Minister Haider al-Abadi following “some understanding” between Baghdad and Erbil. Abadi said on Tuesday the decision had been made to avoid damage to reservoirs.

The flow of crude extracted from Kirkuk by North Oil and pumped in the pipeline has been running at about 75,000 bpd since last week, or half the rate before it was halted in March, Nema said.

Should there be an agreement with the Kurds, flow through the pipeline would be increased to more than 100,000 bpd, not to the previous level of 150,000 bpd, he added.

Nema said about 20,000 bpd would be supplied to the refinery of Suleimaniya, in the Kurdish region, and 30,000 bpd would be refined locally in Kirkuk.

The pipeline carries crude to the Mediterranean port of Ceyhan, where the Kurds have been selling it independently on the international market, along with oil produced in their northern region.

The Kurdish government has been calling on Baghdad since March to resume the pumping of Kirkuk crude in full to help Erbil fund its war against Islamic State. Sources in Erbil have said splitting the Kirkuk flows would divide the Kurds and complicate the task of fighting the ultra-hardline militants.

A KRG spokesman in June told Reuters the Kurds are ready to strike an agreement with Baghdad if it guarantees them monthly revenue of $1 billion, more than double what they make currently from selling their own oil.

The dispute revolves around Kurdish oil exports that Baghdad wants to bring under its control.

“If Baghdad comes and says ‘OK, give me all the oil that you have and I’ll give you the 17 percent as per the budget’, which equals to 1 billion, I think, logically it should be the thing to accept,” KRG spokesman Safeen Dizayee said in June.

“Whether this oil goes to the international market or first to Baghdad and then to the market, it doesn’t make any difference,” he added. “We are ready to enter dialogue with Baghdad.”

The Kurdish government stopped delivering crude oil to the central government about a year ago, a decision taken when Baghdad’s payment fell under $400 million a month, Dizayee said.

It is also in a dispute with the central government over Kirkuk, where North Oil produces its crude and which the Kurds claim as part of their territory. The Kurds took control of the region two years ago, after the Iraqi army disintegrated when Islamic State overran a third of the country.

(Additional reporting by Aref Mohammed in Basra; Writing by Maher Chmaytelli; Editing by Dale Hudson)

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Jobs data to be a big deal for record-high stocks

SAN FRANCISCO Wall Street will fixate on a wave of U.S. economic data next week, crested by payrolls data on Friday that could sway expectations about the timing of future interest rate hikes and spark volatility in record-high stock prices.

Fresh data about employment and consumer confidence could help investors solidify expectations for a December interest rate hike from the U.S. Federal Reserve, or lend weight to a minority of strategists predicting a rate rise as early as next month.

Fed Chair Janet Yellen said the case for a rate hike is strengthening, but she left open the timing of what would be the first increase since December 2015.

“She did put the market on notice that she’d like to raise rates, which means the payrolls data out on Friday is very important. The wage component, length of the workweek and types of jobs, all are crucial in order to extrapolate to inflation,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

Following Yellen’s speech, prices for fed funds futures implied investors see roughly a 60 percent chance of a December hike, up from just above 50 percent on Thursday. Investors see chances of a September hike at 36 percent, up from 21 percent.

Almost a decade of ultra-low interest rates has helped propel stock prices to record highs, even as the economy expands at a lukewarm rate and U.S. largecaps struggle with over a year of declining earnings.

Expectations for higher interest rates would likely continue a recent trend of investors selling high-dividend payers like utilities and telecoms, in favor of sectors tied to economic expansion like financials and industrials.

Underscoring the importance of the upcoming jobs report, Yellen pointed to a recent rebound in employment and said in her speech at a symposium in Jackson Hole, Wyoming that the Fed expects the economy to continue expanding.

“Chairwoman Yellen put a magnifying glass on next Friday’s jobs report. That really I do believe is going to be a determining factor of the market’s direction for its next leg,” said David Schiegoleit, managing director at U.S. Bank Private Client Reserve in Los Angeles.

The August jobs report is expected to show the U.S. economy created 180,000 jobs this month after rising by 255,000 in July, according to a Reuters poll. The forecast is for the unemployment rate to dip one-tenth of a percentage point to 4.8 percent.

Other data in investors’ crosshairs next week include personal consumption on Monday, consumer confidence on Tuesday, and car sales and factory activity on Thursday.

The SP 500 fell Friday for the fifth time in six sessions, but is just 1 percent below its record high set earlier this month.

“Any potential strength in consumer and jobs data could be very helpful to support equity prices where they are right now,” said Jon Adams, senior investment strategist at BMO Global Asset Management in Chicago.

(Reporting by Noel Randewich, additional reporting by Chuck Mikolajczak; editing by Rodrigo Campos and Chizu Nomiyama)

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Wall Street slips in wake of comments by top Fed officials

NEW YORK U.S. stocks ended modestly lower after a volatile session on Friday, having bounced between gains and losses as investors wrestled with the likely timing of a U.S. interest rate hike following comments from top Federal Reserve officials.

The SP 500 rose after Fed Chair Janet Yellen said the case for raising rates had strengthened but did not indicate when the Fed would act.

Yellen told a gathering of central bankers from around the world in Jackson Hole, Wyoming, the U.S. economy was nearing the central bank’s goals of maximum employment and price stability but that future hikes should be “gradual”.

Stocks later traded lower after hawkish comments from Fed Vice Chair Stanley Fischer raised the possibility of a rate hike as soon as next month.

The SP 500 rose as much as 0.7 percent and declined by as much as 0.6 percent during the session.

The perceived chances of a rate hike in September climbed to 36 percent from 21 percent the previous day, according to CME Group’s FedWatch tool. Traders are now pricing in a 63.7 percent likelihood of a hike in December, up from 51.8 percent Thursday.

Banking shares, which stand to gain in a higher rate environment, advanced. The KBW Nasdaq bank index .BKX rose 0.74 percent. In contrast, sectors likely to be hurt by higher rates, such as utilities and telecoms, fell.

The SP utilities index .SPLRCU dropped 2.1 percent, its worst day in four months. Telecoms .SPLRCL fell 1.1 percent.

“When Fischer spoke and suggested September was more live than what investors had taken from Yellen comments, that did of course lead to a little bit of concern that the move would be sooner than what investors were overall anticipating,” said investment strategist Kate Warne at Edward Jones in St. Louis.

The Dow Jones industrial average .DJI fell 53.01 points, or 0.29 percent, to 18,395.4, the SP 500 .SPX lost 3.43 points, or 0.16 percent, to 2,169.04 and the Nasdaq Composite .IXIC added 6.71 points, or 0.13 percent, to 5,218.92.

Mirroring the market’s swings, the CBOE Volatility index .VIX, known as Wall Street’s “fear gauge”, touched a seven-week high of 14.93. It was last up 0.4 percent at 13.69.

In company news, Herbalife (HLF.N) lost 2.3 percent to $60.50 after a report said Carl Icahn, the nutritional supplement maker’s top shareholder, was looking to sell his stake.

Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.12-to-1 ratio favored decliners.

The SP 500 posted 29 new 52-week highs and one new low; the Nasdaq Composite recorded 118 new highs and 26 new lows.

About 6.57 billion shares changed hands in U.S. exchanges, compared with the 6.16 billion daily average over the last 20 sessions.

(Reporting by Chuck Mikolajczak; Editing by James Dalgleish)

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