DealBook Briefing: What Did Jeffrey Epstein Know?
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Jeffrey Epstein said he had dirt on the rich and famous
When James B. Stewart of the NYT visited Mr. Epstein’s Manhattan mansion in August 2018, he expected to talk business. Instead, he got a glimpse into the life of the disgraced financier who killed himself last weekend.
The meeting was supposed to be about Tesla. Mr. Stewart had heard a rumor that Mr. Epstein was advising Elon Musk in the wake of his take-the-company-private Twitter debacle. Mr. Epstein “avoided specifics” on the company, but did say that everyone at Tesla would deny having talked to him because he was “radioactive.” Tesla has said it had no involvement with Mr. Epstein.
But Mr. Epstein openly talked about young women and secrets he claimed to hold about the rich and powerful.
• Mr. Epstein “said that criminalizing sex with teenage girls was a cultural aberration and that at times in history it was perfectly acceptable,” Mr. Stewart writes.
• He also claimed to know “a great deal” about many rich, famous and powerful people, “some of it potentially damaging or embarrassing, including details about their supposed sexual proclivities and recreational drug use,” Mr. Stewart writes.
• “Everyone, he suggested, has secrets and, he added, compared with his own, they seemed innocuous. People confided in him without feeling awkward or embarrassed, he claimed.”
• Mr. Epstein also said he had “witnessed prominent tech figures taking drugs and arranging for sex.”
“I was struck by how little information Mr. Epstein had actually provided,” Mr. Stewart writes. “While I can’t say anything he said was an explicit lie, much of what he said was vague or speculative.” He added that “many prominent men and at least a few women must be breathing sighs of relief that whatever Mr. Epstein knew, he has taken it with him.”
More: Mr. Epstein was reportedly left alone for hours in his prison cell and supervised by only one full-fledged correctional officer at the time of his death. Attorney General William Barr criticized the prison’s management, referring to “serious irregularities.” He added that any co-conspirators of Mr. Epstein’s “should not rest easy” after his death.
CBS and Viacom are said to be in final merger talks
The two companies are reportedly approaching a deal that would reunite them after more than a decade apart, according to the WSJ and Reuters.
The deal is expected to give Viacom shareholders from 0.59 to 0.6 CBS shares for each share that they own, according to both news outlets. That would put Viacom at just below its $12 billion market value on Friday. A deal could be announced as soon as today.
“It is smart on CBS’s part not to pay any premium for Viacom as it does very little to help CBS,” Craig Huber of Huber Research Partners told Reuters.
Leading the newly merged company would be Bob Bakish, Viacom’s current C.E.O., according to both reports. Joe Ianniello, the interim C.E.O. of CBS, would reportedly be in line to run CBS Networks.
There’s still room for things to go wrong, including if the two sides can’t agree on pricing. A previous attempt to merge was scuttled when CBS sued National Amusements, which controls both CBS and Viacom.
But combined, the two companies stand a better chance at fending off rivals in the entertainment industry, according to the president of National Amusements, Shari Redstone.
Will it be another ruinous August for the markets?
It happened in August 2007. And now some people wonder whether it might happen again in August 2019. With a trade and currency war raging between the U.S. and China, plus a slowing European economy and geopolitical strains worldwide, could financial turbulence result in disaster for stock prices this month?
Trouble seemed to continue yesterday, with declines of more than 1 percent on major indexes including the S&P 500, the Dow and the Nasdaq. Stocks in Asia followed the trend overnight.
But historical parallels offer both reassurance and angst, writes Neil Irwin of the Upshot.
• “The outlook for the economy in 2020 depends in large part on which historical moment proves to be the better comparison: August 1998 or August 2007.”
• In 1998, the real crisis was taking place in the debt of emerging nations, far away from the U.S., and the Fed was able to cut rates to fend off trouble.
• In 2007, the problem had its roots at home in the subprime mortgage crisis, and a dangerous cycle of tightening credit that fueled a slowdown in the economy and losses in the financial system took hold.
This month’s situation shares similarities and differences with both of those years. “As in August 2007, the forces unleashed in global markets this month reflect complex, intertwined forces,” Mr. Irwin writes. But, he adds, the “Fed is in an interest-rate-cutting mode” and “banks are significantly better capitalized than they were in 2007.”
“The lesson for policymakers may be this: Pray for this to be more like August 1998; plan in case it turns out to be more like August 2007.”
More: The U.S. yield curve reached it flattest level since 2007 yesterday, stoking fears about the risk of an impending recession.
SoftBank wants its Vision Fund companies to work together
The Japanese telecom company’s nearly $100 billion investment fund has created an “operating group” of 30 former executives who are advising the companies that it has invested in and encouraging them to work together, the FT reports in two articles.
• “The idea is to combine the synergies of private-equity control with the more loosely coupled style of Silicon Valley venture capital,” the FT reports. “But unlike most VC firms, SoftBank’s operating team installs its own employees to work at its portfolio companies.”
• “The operating group was founded just over a year ago and is led by Gerry Lopez, a former executive at AMC Entertainment.”
• The group reportedly advises portfolio companies on issues like how best to expand and prepare for I.P.O.s, but is also working out how to “leverage the companies and make sure they are working with one another,” Mr. Lopez told the FT.
• That will be a focus of a meeting next month in Los Angeles, where the C.E.O.s of all the Vision Fund portfolio companies will gather.
• But for now, the FT writes, “many of the ideas for potential collaboration between Vision Fund companies remain at the discussion — or even conceptual — stage.”
Trump’s new wealth-based immigration rules
Legal immigrants who rely on programs like food stamps and subsidized housing will find it harder to become permanent residents under a proposal announced by the Trump administration yesterday, Michael D. Shear and Eileen Sullivan of the NYT report.
• Starting in October, the government’s decisions on legal immigrants who apply to become permanent residents will “be based on an aggressive wealth test to determine whether those immigrants have the means to support themselves.”
• “Poor immigrants will be denied permanent legal status, also known as a green card, if they are deemed likely to use government benefit programs such as food stamps and subsidized housing.”
• “Wealthier immigrants, who are designated as less likely to require public assistance, will be able to obtain a green card.”
The benefit to taxpayers is that the system will welcome people “who can stand on their own two feet, who will not be reliant on the welfare system,” said Kenneth Cuccinelli, the acting director of United States Citizenship and Immigration Services.
But “it embraces people who have financial means while shunning immigrants who are struggling,” Mr. Shear and Ms. Sullivan write. “That is certain to affect the flow of immigrants who have sought refuge in the United States from impoverished places in Africa, Central America and the Caribbean.”
What’s behind Big Tech’s supposed patriotism?
Some of the biggest companies in Silicon Valley are tripping over themselves to cozy up to the U.S. government. But their motivations are mostly about fending off regulation and avoiding being broken up, writes Kevin Roose of the NYT.
• Mark Zuckerberg of Facebook said last year that if his social network were broken up by American regulators, “the alternative, frankly, is going to be the Chinese companies.” But that came after he had “spent much of the last decade trying desperately to curry favor with the Chinese government,” Mr. Roose writes.
• Sundar Pichai, Google’s chief executive, visited the White House last month to discuss government contracts and reassure President Trump that Google does not discriminate against conservatives. But that’s on the back of controversy about the company building a prototype search engine designed to be compatible with China’s censorship regime.
“Conspicuous patriotism is not a new tactic for companies accused of bad behavior,” writes Mr. Roose, adding that it could be a smart move because “big tech companies are in a better negotiating position than most industries under fire.”
“But lawmakers should be appropriately wary of Silicon Valley’s charm campaign,” he adds. “They should avoid conflating what’s good for Facebook, Google and other tech companies with what’s good for the nation.”
Rite Aid named Heyward Donigan, most recently C.E.O. of the health care analysis company Sapphire Digital, as its new C.E.O.
Yum Brands, the parent company of KFC, Pizza Hut and Taco Bell, named its current C.O.O., David Gibbs, as its next C.E.O.
UPS has named Brian Newman, a longtime executive at PepsiCo, as its new C.F.O.
KPMG has ousted Tim Howarth, the head of its U.K. financial services consulting division, over claims of misconduct.
The speed read
• Saudi Aramco’s agreement to buy a $15 billion stake in Reliance Industries shows how Saudi Arabia and India are strengthening their links. (NYT)
• Verizon agreed to sell its blogging website, Tumblr, to Automattic, the owner of the online publishing company WordPress, for an undisclosed sum. (WSJ)
• Facebook is part of a $125 million fund-raising round for Meesho, an Indian start-up that provides e-commerce services via social media. (Bloomberg)
• Martin Sorrell’s S4 Capital has acquired the influencer marketing company IMA for 10 million euros, about $11 million. (Reuters)
Politics and policy
• The U.S. budget gap has reached $867 billion so far this fiscal year — up 27 percent compared with the same point last year. (WSJ)
• Democrats want to revive a ban on assault weapons, even though it was one reason they lost control of the House 25 years ago. (NYT)
• The Trump administration significantly weakened the Endangered Species Act, making it harder to protect wildlife from threats posed by climate change. (NYT)
• The Fed is considering whether banks should hold more loss-absorbing capital to reduce the threat of a future credit crunch. (WSJ)
• The British government is reportedly expected to hold fewer meetings with E.U. officials to show that it’s serious about a no-deal Brexit. (FT)
• The U.S. and the U.K. could sign sector-by-sector trade agreements, ahead of a comprehensive agreement, to help Britain handle a no-deal Brexit, said John Bolton, the U.S. national security adviser. (Guardian)
• Tariffs of 10 percent on Chinese goods were bearable for U.S. businesses. But 25 percent? Not so much. (WSJ)
• The E.U. is reportedly close to a decision on whether and how to punish Facebook over its data privacy practices. (WSJ)
• The food delivery company Deliveroo will stop operating in Germany. (Politico)
• John Bolton, the U.S. national security adviser, said that Prime Minister Boris Johnson of Britain planned to reconsider his country’s use of Huawei hardware in its 5G networks from “square one.” (FT)
• New Zealand has legalized salaries paid in cryptocurrency. What could go wrong? (FT)
Best of the rest
• A new Royal Dutch Shell factory in Pennsylvania will produce more than a million tons of plastic per year — at a time when many people say the world needs to use less of it. (NYT)
• Protests are putting Hong Kong on a collision course with China’s Communist Party. (NYT)
• Two new treatments have proved highly effective against Ebola. (NYT)
• Eight women have accused the opera star Plácido Domingo of sexual harassment. (AP)
• Take this NYT quiz to find out whether you count as rich. (NYT)
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