FT : EU to seek UK promise on fighting illegal trade in historical objects

EU to seek UK promise on fighting illegal trade in historical objects
Greece among nations pushing for demands in Brexit talks mandate

Greece and other EU governments are calling for commitments from Britain that it will fight the illegal trade in historical objects after Brexit, saying that assurances are needed because of the country’s role as a global auction hub.

Athens has a longstanding grievance against Britain over its refusal to return the “Elgin Marbles”, sculptures held by the British Museum but originally sited on the Parthenon. It wants the UK to make guarantees that it will fight the smuggling of precious artefacts.

Greece, Italy, Spain and Cyprus have succeeded in convincing the rest of the EU to insert demands into their draft mandate for negotiations with the UK, saying that both sides should “address issues relating to the return or restitution of unlawfully removed cultural objects to their countries of origin”.

The mandate will guide the EU’s stance in the talks to come with Britain on building a post-Brexit relationship.

EU officials said the request did not relate to objects displayed in museums so much as modern smuggling and theft, but confirmed that Greece was one of the driving forces behind the move, along with Italy, Spain and Cyprus.

Greece “stressed this was an important issue for them” during discussions among EU diplomats last week, said one official.

The new language is one of the main additions to the draft mandate made by national governments. Diplomats said that, while the European Commission’s initial draft left the issue unaddressed, Athens and its allies wanted to make clear that Britain had to provide assurances.

The language added to the draft negotiating mandate says that the EU and UK should continue to honour EU rules in this area. Brussels has created a system called EU- CULTNET that brings together law-enforcement authorities to fight the illegal trade in cultural goods. The bloc also has laws regulating exports of national treasures.

Trafficking in cultural goods covers everything from theft from museums to looting of archaeological sites.

A UK government spokesperson said: “The EU are still finalising their mandate — this is currently in draft.”

“The UK’s position on the Parthenon Sculptures remains unchanged — they are the legal responsibility of the British Museum. That is not up for discussion as part of our trade negotiations,” said the spokesperson.

FT : Vatican raids home of official in London property probe

Vatican raids home of official in London property probe
Police seize records from Alberto Perlasca over purchase of luxury Chelsea building

The Vatican’s police seized computers and documents from the residence of a senior financial official as part of a probe into the city state’s purchase of a luxury property development in London.

Alberto Perlasca formerly served as head of an administrative office in the Secretariat of State, which led and funded the property deal. A priest, he is the highest-ranking Vatican official to be drawn into a corruption probe involving the alleged misuse of hundreds of millions of funds donated to the Roman Catholic church for the poor.

The raid had been “undertaken pursuant to the investigation into financial and real-estate investments by the Secretariat of State”, the Vatican said in a statement on Tuesday. It follows interrogations of the officials already under investigation, it added.

In October last year Vatican police raided the offices of the Secretariat of State, took away documents linked to the deal, and suspended five officials. “There is corruption, we can see it,” Pope Francis said a month later. The raids showed that efforts to reform the Vatican’s financial management were finally working, he added.

The secretariat invested $200m in a fund controlled by Raffaele Mincione. A London-based fund manager, he then used the money in 2014 to buy a stake in a large office building that he personally owned in the wealthy Chelsea district, at a significantly higher price than he had paid for it in 2012. Mr Mincione has denied any wrongdoing.

Mr Perlasca, 59, was directly involved in the London transaction, people with knowledge of the details of the deal have told the FT. In November 2018 he was involved in a deal for the Secretariat of State to buy back the building from Mr Mincione through a Luxembourg-based holding company.

Mr Perlasca was not reachable for comment. Cardinal Giovanni Angelo Becciu, who was his direct superior inside the secretariat when the initial London investment was made, has argued that it is normal for the Vatican to invest in real estate.

Cardinal Becciu denied on Tuesday that money from the so-called “Peter’s Pence”, the annual charitable donations made by Roman Catholics to fund the Church’s work with the poor, was involved in the London deal.

“Peter’s Pence was not affected; an investment was made on a building. It was a good and opportune occasion, which many people envy us for today,” he said. “With Brexit, the value of the building has tripled.”

Last year, Cardinal Becciu called allegations that he had been responsible for misusing the charity money as “slanderous”.

“My conscience is clear and I know I have always acted in the interest of the Holy See and never in my personal one. Those who know me well can attest to that,” he said.

>>> US Close Dow -0.56% S&P -0.29% Nasdaq +0.02% Russell -0.24%

Closing Stock Market Summary

The S&P 500 declined as much as 0.7% on Tuesday after Apple (AAPL 319.00, -5.95, -1.8%) provided a revenue warning due to the coronavirus. The market resiliently cut its losses during the afternoon, though, leaving the S&P 500 down 0.3% for the session. 

The Nasdaq Composite (+0.02%) eked out a closing record, while the Dow Jones Industrial Average (-0.6%) and Russell 2000 (-0.2%) still finished lower. 

Apple specifically said it doesn't expect to meet its revenue guidance for the March quarter due to the coronavirus restraining its supply chain and impacting consumer demand in China. The news didn't come as a surprise given similar warnings previously issued by companies, and investors presumably viewed the situation as temporary and China-specific. 

Investors, however, did assume some defensive positioning, evident by the gains in bonds, gold futures ($1590.00, +$19.00, +1.2%), and the CBOE Volatility Index (14.83, +1.15, +8.4%). The resulting decline in Treasury yields undercut the financials sector (-0.9%), while it benefited the utilities sector (+0.8%). 

The 2-yr yield declined two basis points to 1.40%, and the 10-yr yield declined three basis points to 1.56%. The U.S. Dollar Index rose 0.4% to 99.43. WTI crude inched up 0.1% (+$0.05) to $52.10/bbl, recouping its intraday losses.

Microsoft (MSFT 187.23, +1.88, +1.0%) and Amazon (AMZN 2155.67, +20.80, +1.0%), which have a combined market cap of nearly $2.5 trillion, helped offset the weakness in Apple with 1% gains of their own. Both stocks extended their yearly gains to 18.7% and 16.6%, respectively, while Apple trimmed its yearly gain to 8.6%. 

Walmart (WMT 119.63, +1.74, +1.5%) also outperformed despite missing profit estimates. Tesla (TSLA 858.40, +58.37, +7.3%) resumed its parabolic advance after its price target was raised at Bernstein and Morgan Stanley, although both targets were well below TSLA's closing price.

Reviewing Tuesday's economic data, which included the Empire State Manufacturing Survey and NAHB Housing Market Index:

  • The Empire State Manufacturing Survey for February increased to 12.9 (consensus 6.3) from the prior month's reading of 4.8.
  • The NAHB Housing Market Index for February declined to 74 (consensus 75) from 75 in January.

Looking ahead, investors will receive the Producer Price Index for January, Housing Starts and Building Permits for January and the weekly MBA Mortgage Applications Index on Wednesday.

  • Nasdaq Composite +8.5% YTD
  • S&P 500 +4.3% YTD
  • Dow Jones Industrial Average +2.4% YTD
  • Russell 2000 +0.9% YTD

FT : Donald Trump grants clemency to Milken, Blagojevich

Donald Trump grants clemency to Milken, Blagojevich
Pardon of ‘junk bond king’ supported by Rupert Murdoch, Rudy Giuliani and others

Donald Trump extended clemency to several high-profile white-collar criminals on Tuesday, commuting the sentence of former Illinois governor Rod Blagojevich and pardoning others including financier Michael Milken.

Mr Milken, known as the “junk bond king”, was sentenced in 1990 to 10 years in prison after pleading guilty to racketeering and securities fraud charges. He ultimately served 22 months in jail, after co-operating with federal investigators. The Securities and Exchange Commission permanently barred Mr Milken from securities trading, and the financier has spent the three decades working as a prominent philanthropist.

Mr Milken’s pardon was backed by a gaggle of high-profile figures in politics, media and finance, according to the White House. They included: Sheldon Adelson, the Republican donor; Rupert Murdoch, the media mogul; Elaine Chao, the US transport secretary; Rudy Giuliani, Mr Trump’s personal attorney; David Rubenstein, chairman of The Carlyle Group; and Sean Parker, the Facebook investor.

Mr Milken said in a statement on Tuesday afternoon that he and his wife, Lori, were “very grateful to the president”.

Mr Blagojevich, a Democrat, was impeached and removed from office for corruption in 2009. He was later convicted by a federal jury on 17 counts of bribery, wire fraud, attempted extortion and conspiracy, and sentenced to 14 years in prison.

Mr Trump told reporters on Tuesday afternoon that he had commuted Mr Blagojevich’s sentence, saying: “He served eight years in jail, a long time.

“He seems like a very nice person, don’t know him,” the president added, although Mr Blagojevich had appeared as a contestant in 2010 on the Celebrity Apprentice television programme, which Mr Trump hosted.

Some of the charges against Mr Blagojevich related to him looking for money in exchange for an appointment to replace Barack Obama in the US Senate. Mr Obama, who was the junior US senator from Illinois from 2005 to 2008, vacated his seat when he was elected president.

The Blagojevich case was part of a long-running drive by federal prosecutors to clean up Chicago’s notoriously corrupt politics.

Commuting Mr Blagojevich’s 14-year prison sentence means the former governor will be released from jail, but his criminal record will not be expunged.

Mr Blagojevich had been prosecuted by Patrick Fitzgerald, who was the US attorney in Chicago at the time. Mr Fitzgerald, now a partner at law firm Skadden, is a friend of James Comey, the former FBI director, and represented Mr Comey after he was fired by Mr Trump.

The president referenced Mr Fitzgerald and Mr Comey in his remarks to reporters, saying: “It was a prosecution by the same people — Comey, [sic] Fitzpatrick — the same group.”

Mr Fitzgerald and the other prosecutors from the Blagojevich case said in a statement on Tuesday afternoon: “The fact remains that the former governor was convicted of very serious crimes. His prosecution serves as proof that elected officials who betray those they are elected to serve will be held to account.”

Mr Trump also commuted the sentences of three other people, and pardoned seven more, including Mr Milken; Bernard Kerik, former New York City police commissioner; and Edward DeBartolo, a real estate magnate who owned the San Francisco 49ers football team for more than two decades.

Mr Kerik served four years in jail for tax fraud and making false statements. He was an associate of Mr Giuliani, who was previously mayor of New York City and was more recently at the centre of the president’s impeachment scandal. Mr Kerik was indicted in 2007 and sentenced in 2010.

He said in a statement on Tuesday afternoon: “There are no words to express my appreciation and gratitude to President Trump . . . Going to prison is like dying with your eyes open. Its aftermath of collateral consequences and the permanent loss of many of your civil and constitutional rights are personally devastating.

Earlier on Tuesday, Hogan Gidley, deputy White House press secretary, announced that Mr Trump had pardoned Mr DeBartolo, who pleaded guilty to corruption charges in 1998. Mr DeBartolo did not go to prison, but was given two years probation, paid a $1m fine and was suspended for a year by the National Football League.

Jim Brown, widely considered to be one of the greatest NFL players of all time, spoke to reporters at the White House on Tuesday, saying: “I take my hat off to Donald Trump for what he did.”

FT : David Tepper joins throng of hedge fund managers in Intelsat

David Tepper joins throng of hedge fund managers in Intelsat
Veteran trader urges the satellite operator to fight US regulator’s 5G spectrum plan

David Tepper’s Appaloosa Management has taken a 7 per cent equity stake in Intelsat, becoming the latest hedge fund to weigh on the high-stakes battle over the satellite operator’s valuable wireless spectrum.

Mr Tepper on Tuesday urged Intelsat to reject a plan put forward by US regulators to auction off its airwaves for use by phone companies for new 5G mobile networks. If it cannot be renegotiated, Mr Tepper said, the company should seek bankruptcy protection and launch a legal challenge.

Under the plan put forward by the Federal Communications Commission, Intelsat stands to make as much as $4.85bn for giving up airwaves that can be sold to cellular operators such as Verizon and T-Mobile.

But many investors last year expected it could make much more, and numerous hedge funds had taken positions in the company’s shares and bonds and are now sitting on significant losses.

“The token compensation offered to Intelsat is an affront when compared to the values achieved in auctions of comparable spectrum across the globe over the past decade,” Mr Tepper wrote in a letter to the company’s board on Tuesday. Appaloosa disclosed a 7.4 per cent stake in Intelsat in a securities filing, making it the company’s third-largest shareholder. 

Luxembourg-based Intelsat was among a consortium of satellite companies which had pushed for permission to sell parts of their spectrum privately to wireless operators, but the plan was opposed by members of the US Congress who said a public auction would allow a fairer distribution of assets.

FCC chairman Ajit Pai announced in November that the government would auction off a portion of the “C-band” spectrum used by the satellite operators for video and radio transmission. 

Bonds issued by Intelsat, which has about $15bn in debt, hit record lows at the end of January and shares in the company are down 85 per cent since Mr Pai’s announcement. PointState and Solus are among the hedge funds to have taken positions.

Under the terms of the regulator’s proposal, the company would be required to front up its own cash to cover the costs of clearing the spectrum for auction, something Mr Tepper said could run into billions of dollars. 

Intelsat will be made to bear the “full weight of financial and execution risks” related to the auction while the FCC and US government reap the benefits, he wrote. “For a highly leveraged operator, such as Intelsat in particular, the cash required to conduct that process imposes a hardship that could easily trigger an insolvency before relocation can be accomplished,” Mr Tepper said. 

Intelsat said in a statement that it would “assess all options to maximise value for the benefit of our stakeholders” and that its focus was on “successfully improving” the FCC’s plans. “We look forward to continuing to engage and work with our stakeholders as appropriate in this process,” a spokesperson said.

>>> USGapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • FLR -8.4%, CAG -5.9%, WLK -5.5%, TSEM -5.4%, HSBC -5.1%, GOGL -4.8%, BRKR -4%, AAPL -3%, ALLE -2.9%, MDT -2.7%, VMC -2.5%, RIG -2.2%, GIS -1.5%, WAB -1.4%, BHP -1.3%, WMT -1.1%

Select AAPL suppliers and related names showing weakness:

  • TSM -3.4%, LITE -3.1%, SWKS -2.7%, CRUS -2.6%, IIVI -2.1%, QCOM -1.9%, AVGO -1.9%, SMH -1.7%, NVDA -1.5%

Other news:

  • AGRX -4.2% (FDA approves AGRX transdermal system)
  • YETI -3.3% (commences public secondary offering of 15.0 mln shares of common stock by selling shareholders)

Analyst comments:

  • TME -4.4% (downgraded to Sector Weight from Overweight at KeyBanc Capital Markets)
  • EIDX -4.1% (downgraded to Underweight from Equal Weight at Barclays)
  • PBF -3.7% (downgraded to Sell from Neutral at Goldman )
  • KOD -3.3% (downgraded to Equal Weight from Overweight at Barclays)
  • SCCO -3.2% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
  • AR -3% (downgraded to Sell from Buy at MKM Partners)
  • AEO -2% (downgraded to Market Perform from Outperform at Cowen)
  • KTB -1.4% (downgraded to Hold from Buy at Stifel)
  • ADS -1% (downgraded to Mkt Perform from Mkt Outperform at JMP Securities)
  • YNDX -1% (downgraded to Equal-Weight from Overweight at Morgan Stanley)

>>> USGapping up

Gapping up
In reaction to strong earnings/guidance:

  • GSX +13.7%, VG +7.5%, AAP +3.7%, LDOS +2.8%, WLKP +1%, SCI +0.7%

M&A news:

  • LM +22.8% (to be acquired by Franklin Resources (BEN) for $50.00/share in all-cash transaction), BEN +10.8%

Other news:

  • CEL +7.4% (announces that it is in negotiations with Golan Telecom Ltd.'s, or Golan Telecom, shareholders, in regards to possible purchase of their holdings in Golan Telecom. The Company cannot guarantee that such discussions will mature into a transaction)
  • KR +6.5% (new positions for Berkshire Hathaway in 13F filings)
  • BIIB +3.6% (new positions for Berkshire Hathaway in 13F filings)
  • BCRX +1.8% (NDA for the approval of oral, once daily berotralstat (BCX7353) for the prevention of hereditary angioedema attacks has been accepted by FDA)
  • BBBY +1.5% (1-800-FLOWERS to acquire PersonalizationMall.com from Bed Bath & Beyond)

Analyst comments:

  • KN +1.5% (upgraded to Overweight from Neutral at Piper Sandler)
  • MCFT +1.5% (upgraded to Outperform from Mkt Perform at Raymond James)
  • MBUU +1.3% (upgraded to Outperform from Mkt Perform at Raymond James)
  • ETN +0.7% (upgraded to Buy from Neutral at UBS)

FT : Kirin investor demands board changes or risk proxy battle

Kirin investor demands board changes or risk proxy battle
Clashes erupt at Japanese companies including Sekisui House and Sun

One of Kirin’s biggest investors has given the brewer an ultimatum, demanding it choose between a significant change to its board or risk a proxy battle at the annual meeting.

The confrontation between Kirin and UK-based Independent Franchise Partners (FP) comes as more Japanese boards are being dragged into public conflicts with investors and the market braces for what could be Japan’s most contentious season of shareholder meetings.

The clashes, and the prospect of proxy battles, are symptomatic of what analysts said is a shift in corporate Japan as emboldened shareholders confront management over what they see as value destruction, opaque strategic decisions and other lapses of governance. 

In the past week alone, investors have initiated showdowns with three Japanese companies: Kirin; Sekisui House, one of the nation’s largest homebuilders; and technology group Sun. In each case, shareholders are demanding a board shake-up, an approach that has, until now, been a rarity.

The March season for annual meetings involves a relatively small fraction of listed Japanese companies, but acts as bellwether for the much busier season in June when thousands of listed companies face their shareholders. The number of shareholder proposals introduced in June has been rising for years, but is expected to smash records in 2020, said analysts.

On Tuesday, FP, which owns roughly 2 per cent of shares in Kirin, said it was willing to withdraw all four of its shareholder proposals but only if the company agreed to accept its two candidates for independent directors and if the group’s business plan for 2027 was submitted to the new board for “a thorough and independent review”. 

The new proposal came after Kirin recently spurned FP’s demands for a ¥600bn ($5.5bn) share buyback, changes to executive compensation and nomination of new non-executive directors, causing its shares to fall 8.7 per cent in the past two days. 

The Japanese group defended its strategy to diversify from its core beer business into biotechnology, pharmaceuticals and cosmetics, outlining for the first time profit targets for its “health science” businesses.

“All the executives unanimously agreed that it would not be possible to ensure sustainable growth by solely focusing on the beer business,” Kirin chief executive Yoshinori Isozaki said at an earnings presentation on Friday, citing a shrinking population at home and a global regulatory backlash against alcohol consumption. 


But Kirin attempted to address some of the points raised by FP as it disclosed plans to create a new board that would be majority composed of independent directors, and to introduce performance-based compensation schemes for directors.

The company declined to comment on the latest proposal from FP but added that there was no change to the strategy it outlined on Friday.

Meanwhile, a boardroom battle has erupted at Sekisui House as its long-serving former chairman and another company executive, who own a tiny stake in the company, called for the removal of its current management for their handling of a fraudulent land sale in 2017. 

The confrontation stems from lingering questions on how an established housing giant fell victim to a land scam deal that led to losses of ¥5.5bn for the group. Sekisui House said it was still studying the shareholder proposal and declined to comment further. 

Oasis Management, a Hong Kong-based fund that has initiated a string of activist campaigns in Japan, has also called an extraordinary meeting of shareholders in Sun to replace the current top management with a new board of directors it nominated.