US appeals court deals Trump his latest setback over tax returns
Ruling says president cannot claim immunity to shield filings from Manhattan prosecutor
A federal appeals court has issued the latest legal blow to Donald Trump, ruling that he could not invoke presidential immunity to shield his tax returns from New York state prosecutors.
The decision on Monday by the 2nd Circuit Court of Appeals came after Mr Trump sued to stop the Manhattan district attorney from obtaining his returns with a subpoena sent to his accountants, Mazars USA.
The ruling, which sets up a fight at the conservative-majority Supreme Court, argued that the idea of presidential immunity from indictment did not apply to the investigative steps in a criminal investigation.
Robert Katzmann, the chief judge for the 2nd Circuit, dismissed Mr Trump’s claims that compliance with the subpoena would put an undue burden on the president and interfere with his constitutional duties.
“The subpoena at issue is directed not to the president, but to his accountants; compliance does not require the president to do anything at all,” he wrote, noting also that the past six presidents “all voluntarily released their tax returns to the public”.
“While we do not place dispositive weight on this fact, it reinforces our conclusion that the disclosure of personal financial information, standing alone, is unlikely to impair the president in performing the duties of his office,” he wrote.
Jay Sekulow, an attorney for Mr Trump, said the decision “will be taken to the Supreme Court”.
“The issue raised in this case goes to the heart of our republic. The constitutional issues are significant,” he said in a statement.
The decision was the latest example of US courts pushing back against the expansive claims of immunity from oversight that Mr Trump has made as he faces impeachment in Congress and a criminal probe led by Cyrus Vance, the Manhattan district attorney.
Mr Vance is investigating possible crimes linked to alleged hush-money payments paid to two women who claimed affairs with Mr Trump.
Mr Trump has sought to block the release of information to congressional committees investigating his finances, the testimony of former administration officials in his impeachment inquiry and the release of his tax returns to either Congress or prosecutors.
He has argued that Congress has no right to investigate his business affairs, while also arguing that presidential immunity from federal indictment — a long-held policy of the Department of Justice that has never been affirmed by the courts — prevents prosecutors from doing so either.
In October, the federal appeals court in Washington, DC, also ruled against Mr Trump as he tried to stop House Democrats from using a subpoena to obtain his tax returns from Mazars. The decision in that case pointedly cited a nearly century-old court opinion that said the separation of powers existed in the US government to “save people from autocracy”.
IAG/Air Europa: suave Latin cover
Deal makes good sense, assuming the buyer can squeeze out costs
Air Europa merits rebranding under its new owner. It is not focused on Europe. This Spanish low-cost carrier covers the same number of cities in the Americas, including the US, as it does across the Atlantic. That explains why International Consolidated Airlines Group (IAG) is buying the privately held business for €1bn from Globalia. This deal makes good sense, assuming IAG can squeeze out costs — and avoid the strikes that have hit its British Airways subsidiary.
Air Europa should fit well with IAG’s main Spanish airline Iberia. IAG wants to make Madrid a bigger regional hub to rival London, Paris, Amsterdam and Frankfurt.
Air Europa is no regional tiddler, busing passengers to local holiday spots. It flies into New York and Miami and cities across Central and South America. Those airports are the attraction. IAG’s main rival for those Latin American destinations so far has been Air France-KLM. That will change post-deal. IAG’s market share into Latin America from Europe will leapfrog Air France-KLM to a leading 26 per cent.
Yet IAG does not stretch its balance sheet unduly to do so. It will pay a low enterprise value to ebitda of 2.5 times. That is well below European peers which trade at more than 4 times, or even IAG’s own multiple of 3. This reflects profitability that is distinctly earthbound. Operating margins last year were below 5 per cent, less than half the figure for IAG and below those of Iberia and Vueling, IAG’s other regional carrier.
The deal will push IAG’s net debt up by a quarter. But the ratio relative to ebitda — 1.5 times post-deal — should not trouble credit analysts.
IAG promises to extract costs in the same way as in other transactions, but provides no targets. It will need to lift profitability at Air Europa to avoid margin dilution. In its favour, IAG has form having successfully integrated Iberia, British Midlands and Aer Lingus in the past decade.
IAG shares have taken flight in the past three months, up a third despite strikes. This deal should provide added lift in the months and years ahead.
Gapping down
In reaction to disappointing earnings/guidance:
- UAA -13.5% (ALSO - Federal officials are investigating the company over accounting issues)
- CRNT -14.2%, VEON -1.6%, SOGO -0.5%
M&A news:
- SYK -1.5% (Wright Medical Group (WMGI) to be acquired by Stryker for $30.75 per share in cash)
Other news:
- OMER -18.9% (following study results for OMIDRIA)
- MCD -1.9% (CEO Steve Easterbrook separates from company following Board determination that he "violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee")
Analyst comments:
- HOG -2.2% (downgraded to Underweight from Sector Weight at KeyBanc Capital Markets)
- PZZA -1.7% (downgraded to Hold from Buy at Jefferies)
- WOW -1.4% (downgraded to Outperform from Strong Buy at Raymond James)
- DLPH -0.7% (downgraded to Equal Weight from Overweight at Barclays)
Gapping up
In reaction to strong earnings/guidance:
- EOLS +9.8%, NERV +7.1%, KPTI +6.9%, RACE +6%, SOHU +4.9%, BHC +3.7%, S +2.7%, SUP +2.3%, SPNS +1.4%, BRK.B +1%, FE +0.7%
M&A news:
- WMGI +31.5% (to be acquired by Stryker (SYK) for $30.75 per share in cash)
Select financial related names showing strength:
- DB +3.2%, SAN +2.2%, BBVA +2.1%, LYG +1.7%, MS +1.4%, HSBC +1.3%
Select oil/gas related names showing strength:
- SWN +3.8%, WLL +2.7%, RDS.A +1.8%, BP +1.6%, SLB +1.6%, HAL +1.5%, XOM +0.8%, MRO +0.6%
Other news:
- RDHL +29.3% (receives FDA approval for Talicia delayed-release capsules 10 mg1/250 mg/12.5 mg for the treatment of Helicobacter pylori (H. pylori) infection in adults)
- NIO +8.6% (provides October 2019 update -- delivered 2,526 vehicles in October )
- GPRO +1.8% (continued strength)
- ANET +1.7% (slight rebound from last week's earnings)
Analyst comments:
- USM +4.8% (upgraded to Overweight from Neutral at JP Morgan)
- FLL +4.6% (upgraded to Outperform from Neutral at Macquarie)
- MRVL +4% (upgraded to Outperform from Market Perform at Wells Fargo)
- TDS +3.3% (upgraded to Overweight from Neutral at JP Morgan)
- BB +2.7% (upgraded to Neutral from Underperform at BofA/Merrill Lynch)
- BLUE +2.6% (upgraded to Outperform from Neutral at Wedbush)
- DOCU +1.9% (initiated with an Outperform at Evercore ISI)
- HTGC +1.3% (upgraded to Outperform from Market Perform at Wells Fargo)
Sprint misses by $0.04, misses on revs (6.30)
- Reports Q2 (Sep) loss of $0.07 per share, $0.04 worse than the S&P Capital IQ Consensus of ($0.03); revenues fell 7.6% year/year to $7.8 bln vs the $8.17 bln S&P Capital IQ Consensus.
Will Boeing have to design the 737 Max all over again?
From John Tippler, Spalding, Lincs, UK — The most read letter of the last week
Megan Greene’s interesting article on Boeing’s contribution to the dragging down of American growth (October 22) prompts a question on which some expert technical views would be welcome.
An aircraft is normally designed with a high degree of inherent stability, which derives from carefully calculated disposition of weights and shapes of the main parts. Every part is designed in relation to the others. Boeing’s decision to take most of the structure of the 737 Max from a predecessor, essentially adding bigger heavier engines to a frame that had been designed for something else, appears to have defied that normal process and upset the stability norms. The adaptive design appears to have relied for stability on a software solution to keep the aircraft within narrow margins of attitude as related to speed. That in turn seems to have created the vulnerability experienced.
What is the possibility that Boeing might end up having to redo the whole physical design, with cost consequences that are likely to be devastating without US government intervention?