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Former Wells Fargo Execs Accused of Fraud: Live Updates

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Former Wells Fargo Execs Accused of Fraud: Live Updates 2

Credit…James Estrin/The New York Times

Federal regulators raised fresh claims against two former top Wells Fargo executives for their role in the bank’s misdeeds, accusing them of misleading investors about financial results in the unit that caters to individual customers.

The Securities and Exchange Commission on Friday said John G. Stumpf, the bank’s former chief executive, agreed to pay a $2.5 million penalty to settle the fraud claims against him. The regulator also filed a lawsuit against Carrie L. Tolstedt, the former head of Wells Fargo’s community bank, in federal court in San Francisco.

Both executives made false certifications about the bank’s finances, the S.E.C. said, because they knew or should have known that Wells Fargo’s sales metrics were inflated by the opening of customer accounts that were unauthorized or unnecessary.

“If executives speak about a key performance metric to promote their business, they must do so fully and accurately,” said Stephanie Avakian, the agency’s enforcement director.

Ms. Tolstedt “was an honest and conscientious executive,” Enu Mainigi, her lawyer, said in response to the suit. “It is unfair and unfounded for the S.E.C. to point the finger at Ms. Tolstedt when her statements were not only true but also thoroughly vetted by others as part of Wells Fargo’s policies, procedures and systems of controls.”

Mr. Stumpf’s lawyer declined to comment on the S.E.C. settlement.

Wells Fargo’s problems burst into public view in 2016 when the bank acknowledged that its employees opened what may have been millions of fraudulent accounts in customers’ names to meet the bank’s aggressive sales goals. The fallout has been extensive and brought to light other deceptive acts in Wells Fargo’s mortgage and auto lending operations. The bank has paid a succession of regulatory penalties, including a $1 billion fine, and has purged much of its top leadership.

The bank paid $500 million in February to settle charges the S.E.C. brought against the bank for misleading investors. The accusations on Friday are the first the agency has brought against individual Wells Fargo executives, although another regulator, the Office of the Comptroller of the Currency, has charged multiple executives, including Mr. Stumpf and Ms. Tolstedt. As part of his settlement with the O.C.C., Mr. Stumpf had agreed to a lifetime ban from the banking industry.

Wells Fargo is still operating under a restriction from the Federal Reserve that limits its growth until regulators are convinced that its conduct and internal controls have improved. “The amount of time and resources that the senior team is spending on this is extraordinary,” Charles W. Scharf, the bank’s current chief executive, told investors last month.

It is also facing a new claim that it is still failing to fulfill its regulatory requirements.

Kelly Halvorson, an employee in Minnesota who was responsible for monitoring Wells Fargo’s business banking group’s activities for signs that criminals were trying to use the bank for illicit purposes, said in a lawsuit filed this week that her bosses put her on administrative leave after she presented evidence to them that Wells Fargo was not keeping track of the owners of some of its business banking accounts. The bank also failed to report certain activities to regulators, she said.

A Wells Fargo spokesman declined to comment on Ms. Halvorson’s claims.

Credit…Mike Blake/Reuters

WASHINGTON — The Trump administration gave TikTok’s Chinese owner more time to reach a deal to sell the app, after demanding that it divest its interest in the social media service over national security concerns.

President Trump had signed an executive order in August requiring that TikTok’s parent company, ByteDance, sell any assets that allowed it to operate the app in the United States by Thursday. That deadline was extended 15 days until Nov. 27, according to a document that TikTok filed in U.S. District Court for the District of Columbia on Friday.

The extension keeps a deal in limbo that was aimed at preventing the U.S. government from banning the popular video app. ByteDance has offered to sell stakes in TikTok to the American cloud computing firm Oracle and the retail giant Walmart. Under the deal, Oracle would supervise TikTok’s data to mitigate concerns that the app could feed customer information about Americans to the Chinese government.

The Trump administration has put pressure on TikTok, where people share lip syncing and other videos, as part of its campaign against China’s influence in the global technology industry. American officials have limited the use of Chinese equipment in 5G wireless networks, taken issue with United States companies backing undersea internet cables into mainland China and are increasingly targeting consumer apps like TikTok and WeChat, a messaging app owned by the Chinese internet giant Tencent.

U.S. officials have said that TikTok’s Chinese ownership means the app could send data back to Beijing, under local laws that require Chinese companies to cooperate with government requests. TikTok has denied that its app poses any security threat to Americans, noting that many of its investors are American and that its customer data is not stored in China.

TikTok declined to comment on the extension. The Treasury Department, which is playing a central role in vetting the proposed deal, did not immediately respond to a request for comment.

Since President Trump’s executive order in August, the administration’s efforts to clamp down on TikTok have met legal resistance.

Under a separate executive order, the Commerce Department released rules in September to force app stores run by Apple and Google to stop hosting TikTok and WeChat. Federal judges have blocked them for now.

TikTok also asked a federal court this week to block the order demanding that ByteDance sell its interest in the app. While President Trump signaled in September that he approved the broad strokes of the deal involving TikTok, Oracle and Walmart, it still needs to be considered by a federal committee that vets foreign investment in the United States.

“In the nearly two months since the President gave his preliminary approval to our proposal to satisfy those concerns, we have offered detailed solutions to finalize that agreement — but have received no substantive feedback on our extensive data privacy and security framework,” a TikTok spokesman said in a statement on Tuesday.

Oracle and Walmart declined to comment.

The Treasury Department has said little about where negotiations stand. Monica Crowley, a spokeswoman for the department, said in a statement this week that it had “been clear with ByteDance regarding the steps necessary” to resolve the situation.

  • Stocks were higher on Friday, as investors seemed to dismiss persistent concerns about the spread of coronavirus and welcome new developments that cemented the victory of Joseph R. Biden Jr. in last week’s U.S. presidential vote.

  • The S&P 500 rose more than half a percent in early trading, and is up more than 8 percent so far in November and close to its Sept. 2 record after rising for two weeks in a row. Most of those gains came last week, as clarity over the outcome of the U.S. election raised investor outlook, but sentiment was also lifted this week by promising news from Pfizer and BioNTech about a vaccine under development.

  • The gains on Friday came despite the surge in coronavirus cases in the United States and new measures being taken to contain the spread. On Thursday, public health officials recorded more than 160,000 new cases in a day for the first time, and hospitalizations for Covid-19 also set a national record.

  • The trading on Friday suggested investors were still focused on the potential for a vaccine — which still hasn’t been approved, and faces a complicated roll out even if it is — to help bring an end to the pandemic. Stocks sensitive to the pandemic were higher. Simon Property Group, the shopping mall operator, gained nearly 3 percent, while Norwegian Cruise Line jumped close to 4 percent. Airlines and retailers were also higher.

  • The Walt Disney Company was also sharply higher after the company reported that it has 73 million paying subscribers for its Disney+ streaming service, hitting a five-year target in just 11 months. Shares of its streaming rival Netflix fell on Friday.

  • Concern about the rise in virus cases was evident in other markets, however. Crude oil futures, sensitive to expectations about economic growth, fell for a second day.

  • Two of the world’s most powerful central bankers, Jerome H. Powell of the Federal Reserve and Christine Lagarde of the European Central Bank, warned on Thursday that despite the welcome news of progress toward a coronavirus vaccine, the global economic recovery was still vulnerable to the rapidly rising number of coronavirus cases globally.

  • Both have called for more fiscal support from governments. But in Washington, the chances of a sweeping coronavirus relief package winning approval before the end of the year appeared to dim on Thursday, as the Democrats renewed their call for much more spending than the Republicans had been suggesting.

Credit…Remo Casilli/Reuters

Finance ministers from the world’s leading economies agreed to a new debt forgiveness framework on Friday, one that could offer relief to poor countries struggling to cope with the coronavirus pandemic.

The Group of 20 said in a statement that the “significant debt vulnerabilities and deteriorating outlook” made it necessary to go beyond its existing debt suspension initiative, which is scheduled to expire next year.

More than 40 countries have already received over $5 billion in relief from immediate debt payments this year. Economists have warned that the poor countries face an untenable predicament as they pour resources into health initiatives and attempt to support workers who have lost incomes amid the coronavirus.

The agreement brings big creditors such as China, India and Turkey into alignment with the Paris Club of creditor nations in terms of debt restructuring and rescheduling.

A senior Treasury official said that China has been slow to go along with global debt reduction efforts and called the agreement a notable achievement. Debt relief will be coordinated on a case-by-case basis with assistance from the International Monetary Fund.

Kristalina Georgieva, the managing director of the I.M.F., hailed the agreement on Friday but said that there was more work to be done to help poor nations weather the economic impact of the virus.

“This crisis is not over,” she said in a statement. “We need further support through debt relief and through fresh financing.”

Credit…Ben Quinton for The New York Times

At the Crooked Well, a neighborhood pub in south London that prides itself on its food, the Christmas menu is already decided. There will be venison and beef stews. But whether the stews will actually be served is another question.

Under a new lockdown planned to last a month, pubs in England have closed again. From Nov. 5 to Dec. 2, restaurants, gyms and nonessential shops are being shuttered as part of a government effort to suppress a second wave of the coronavirus pandemic.

Britain’s first lockdown lasted more than three months, followed by an ever-changing array of restrictions since. No one knows how long this lockdown will really last.

The two nights before the lockdown took hold, “we were crazy busy, it was like the whole of London was out,” said Hector Skinner, one of the owners and the manager of the Crooked Well. “Now, I don’t know. I really don’t know. I feel like it’s going to go on for longer.”

Prime Minister Boris Johnson tried to sell the new lockdown to pandemic-weary Britons by saying it would, hopefully, allow families to be together over the holidays. But, he conceded, “Christmas is going to be different this year, very different.”

And that’s the problem for the hospitality industry, which fears losing out on a crucial month. Some 20 to 30 percent of a year’s revenue is made around Christmas and the holidays, according to the British Beer and Pub Association. At the Crooked Well, a good week in December would bring in double the best week in the summer.

If pubs can’t reopen in December, “then these businesses won’t survive January and February, which are like graveyard months for us,” said Emma McClarkin, the chief executive of the industry trade group, which represents about 20,000 pubs.

Credit…Leah Millis/Reuters

Joe Simons, the chairman of the Federal Trade Commission, said in a speech on Thursday that monopolies could “squash” smaller competitors by buying them, a possible warning shot ahead of the agency’s expected lawsuit against Facebook. The statement highlights how the agency’s approach to antitrust could change under a Biden administration, as the Democratic Party’s left wing pushes for even tougher enforcement, the DealBook newsletter reports.

A debate has raged between more laissez-faire conservatives and the so-called progressive “hipster antitrust movement” seeking a more muscular competition policy overhaul, especially toward Big Tech. President-elect Joseph R. Biden Jr. is expected to seek a balance between these competing ideologies.

At the F.T.C., five commissioners — three Republicans and two Democrats — hash out their differences in decisions and dissents. The Democrats, Rohit Chopra and Rebecca Slaughter, often oppose the majority’s “permissive” treatment of corporations, and one of them could be tapped to head the commission. Indeed, the House Committee on Energy and Commerce recently urged Mr. Simons to “immediately stop work on all partisan, controversial items,” noting that leadership “will undoubtedly be changing.” A member of that committee, Representative Jan Schakowsky, Democrat of Illinois, says that “there is a real opportunity to wake up the F.T.C.”

The awakening may be slow. F.T.C. commissioners serve staggered terms and need Senate approval, so it could take time for the partisan balance to shift. Regardless, experts say that the political climate isn’t ripe for an aggressive policy overhaul. The incoming administration’s F.T.C. advisory review team includes Bill Baer of the Brookings Institution, who previously led antitrust at the Justice Department and headed the F.T.C.’s competition division. His presence is thought to signal an interest in minimal friction.

Even though “antitrust laws haven’t worked very well in the digital economy,” according to David Vladeck of Georgetown Law, a former director of the F.T.C.’s consumer protection unit, he doubts a revolution is either desirable or possible. Similarly, Eleanor Fox and Harry First of New York University, who recently outlined new rules to rein in Big Tech, say that there is a lot of room for consensus in the ideological middle, balancing nuanced views on market efficiency and consolidation. “The changes we expect are on balance fairly moderate,” says Sean Royall, a partner at Kirkland & Ellis and former deputy director of the F.T.C.’s competition bureau.

Credit…Hiroko Masuike/The New York Times

WeWork released financial data Thursday that offered a bleak view of how office buildings in big cities — and co-working spaces, in particular — are faring during the coronavirus pandemic.

The company’s revenue was $811 million in the third quarter, down roughly 26 percent from the first quarter and 8 percent from the second quarter, WeWork’s chief executive, Sandeep Mathrani, and chief financial officer, Benjamin Dunham, said in an email to employees.

WeWork, a private company, did not release comprehensive financial statements. For example, the email did not say how much money the company made or lost in the third quarter.

WeWork leases space in office buildings and then charges freelancers, start-ups and large companies to use it. Its leaders once said the company would revolutionize how people worked, but its breakneck growth led it to the brink of financial collapse last year, forcing the company to withdraw an initial public offering and accept a bail out from SoftBank, the Japanese conglomerate and its largest shareholder.

As tens of millions people work from home during the pandemic, many of WeWork’s customers have let their memberships lapse. The executives said the company had 542,000 memberships at the end of the third quarter, down 11 percent from 612,000 at the end of the second quarter.

The executives said there were some signs of improvement. “Gross desk sales,” a measure of new space rentals that does not include departing customers, were 8 percent higher in the third quarter compared with the second quarter.

SoftBank has poured billions of dollars into the company to keep it going. In the third quarter, the executives said “free cash flow,” a term they didn’t define but typically describes how much cash a business took in or spent in a given period of time, was negative $517 million. That’s an improvement from the second quarter, when free cash flow was negative $671 million. The company had cash and commitments from investors or lenders to provide cash of $3.6 billion at the end of the third quarter, down from $4.1 billion at the end of the second quarter.

Because of agreements struck months ago, WeWork is still expanding. It had 859 locations in 151 cities in the third quarter, up from 843 locations in the second quarter. The company has been trying to renegotiate agreements with landlords and, as of September, had reached deals to leave 66 locations, Mr. Mathrani and Mr. Dunham said.

  • Guitar Center is planning to file for bankruptcy in the next few weeks, people familiar with the situation told the DealBook newsletter. The company, the largest retailer of musical instruments in the United States, has about $1.3 billion in debt and is finalizing bankruptcy terms with creditors. It will continue to pay its vendors and employees and doesn’t plan to announce any closures of its roughly 300 stores with the filing.

  • Disney said on Thursday that its flagship streaming service, Disney+, had 73.7 million subscribers as of Oct. 3, surpassing the low end of its initial five-year goal after only 11 months. Disney also owns Hulu (36.6 million subscribers, up 27 percent from a year earlier) and an ESPN-branded streaming service (10.3 million, triple the number from a year earlier). The company also reported an 82 percent decline in quarterly operating income, the result of steep losses at its coronavirus-devastated theme park division and the delay of major movie releases.

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