The case against Jeffrey Epstein

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The feds lay out their Epstein case

Federal prosecutors unsealed their indictment against the financier yesterday, revealing sordid details about sex-trafficking allegations against Mr. Epstein.

Mr. Epstein and his employees brought dozens of vulnerable girls, some as young as 14, to his mansions in Manhattan and Florida between 2002 and 2005, according to the indictment. He then engaged in sexual acts during naked massage sessions and told the girls to recruit others.

Prosecutors also said he had a trove of lewd photos of girls hidden in a safe. The cache, they said, showed that the financier was unrepentant even after reaching a 2008 plea deal with prosecutors in South Florida to avoid federal charges. They asked a federal judge to deny him bail.

Mr. Epstein’s lawyer argued that the new case was “ancient stuff,” and an attempt to rerun the 2008 investigation.

Plenty of questions now hang over Mr. Epstein. How much is he actually worth? Where did he get all his money? Who exactly are his clients, whom the financier said were all billionaires? (His most famous, Les Wexner of Victoria’s Secret, apparently severed ties a decade ago.) And what shadow will his indictment cast over them?

The fallout so far:

• House Speaker Nancy Pelosi called on Alex Acosta, who oversaw the controversial plea agreement with Mr. Epstein in 2008, to resign as Labor secretary.
• A spokesman for Bill Clinton said that the former president traveled with Mr. Epstein on the financier’s private jet four times, but knew nothing about the “terrible crimes.”
• Federal authorities called on other associates of Mr. Epstein to come forward — or be brought in for questioning.
• Speaking of his contacts, Mr. Epstein’s Manhattan mansion featured photos of the financier with Mr. Clinton, Woody Allen and Mohammed bin Salman, the Saudi crown prince.

The ax has fallen at Deutsche Bank

Laid-off employees at the German lender’s offices around the world walked out with boxes of personal belongings yesterday, as the bank started on its sweeping restructuring plan that involves 18,000 job cuts.

Staff members were called into work early for H.R. officials to announce the layoffs. Groups emerged, many carrying white envelopes containing severance details. Some employees cried. Others headed to nearby bars. To some, the scenes were reminiscent of the 2008 financial crisis.

Survivors didn’t feel much better. “There’s still a sense that I could go soon,” one unnamed employee told the FT. “People are very demotivated.”

Deutsche Bank’s C.E.O., Christian Sewing, defended the plan. Though the firm will close its equities trading business, he said it remained committed to investment banking. And he pledged to invest “a substantial amount” of his fixed salary into Deutsche Bank stock.

But investors are unconvinced. The bank’s shares plunged about 6 percent, to almost their lowest levels in its 149-year history. “There is nothing exciting about this plan,” an unnamed shareholder told the FT.

And competition isn’t going away. The WSJ points out that Deutsche Bank and other European lenders face stiff competition from U.S. rivals in their own backyards.

What happens if there’s a $15 minimum wage?

Thanks to a new report by the Congressional Budget Office, we now have a better idea, Jim Tankersley and Emily Cochrane of the NYT write. If the federal minimum wage is lifted to $15 an hour by 2025, the report projects:

• Higher pay for at least 17 million workers in the U.S., and maybe as many 27 million.
• As many as 1.3 million people lifted out of poverty.
• But an estimated 1.3 million Americans could be put out of work, and that figure could be as high as 3.7 million.

“Lower-paid workers would see their incomes rise, mostly at the expense of business owners, who would earn lower profits because of increased labor costs, and other higher-earning Americans, who would pay more for goods and services,” Mr. Tankersley and Ms. Cochrane write. “The economy would be slightly smaller than it would have otherwise been, because of lost efficiency, the report said.”

The results are “likely to fuel both supporters and critics of a House bill,” Mr. Tankersley and Ms. Cochrane write. “Representative Steny H. Hoyer of Maryland, the majority leader, said in a letter to Democrats that the legislation would be considered next week, signaling that the House leadership felt confident in its ability to secure enough votes to pass the measure.”

U.S.-China trade talks are restarting. They may be slow.

American and Chinese negotiators will begin to discuss trade again this week, according to Reuters and the WSJ, after President Trump and Chinese President Xi Jinping agreed to do so at last month’s Group of 20 meeting.

“Senior officials from each side, including Robert Lighthizer, the U.S. trade representative, are set to speak by telephone this week, a U.S. official said,” according to the WSJ. “If successful, that could lead to face-to-face talks, likely in Beijing, people following the talks said.”

But “the summit did little to clear the path for top negotiators to resolve an impasse that caused trade deal talks to break down in early May,” according to unnamed sources cited by Reuters. It’s also unclear what the starting point of this round of negotiations will be, and one source told Reuters that there’s no indication that it would be the draft agreement that China backtracked from in May.

“The pressure for one side to give into the other is diffused right now,” Derek Scissors, a China expert at the American Enterprise Institute, told Reuters. “I expect this to drag out for months.”

Recession risks are up. Central banks aren’t ready.

The world’s monetary authorities have limited wiggle room right now, and it’s unclear whether their backup plans will be enough to bolster growth and halt inflation if — or when — things go wrong, Jeanna Smialek, Jack Ewing and Ben Dooley of the NYT write.

• “The capacity for the type of decisive response that prevented an even worse outcome in 2008 has been hindered.”
• “Back then, central banks cut rates, bought up bonds, extended government backing to financial products, lent money to banks and in some cases coordinated with government authorities to make sure their rescue packages didn’t work at cross-purposes.”
• But today, interest rates are low, and even zero in some countries. And “most central banks still hold huge amounts of the bonds and other securities they bought to prop up their economies the last time, which could make another buying binge more difficult.”
• “Monetary policy is also running low on credibility.”
• “Those constraints are especially worrying at a time when governments show little appetite for working together to offset a broad-based global slowdown.”

Wall Street C.E.O. pay is out of step with returns

Financial titans might not have delivered for their shareholders last year — but you’d never guess that from the paychecks of their C.E.O.s, according to Charlie McGee of the WSJ.

• Financial institutions recorded a median total shareholder return, inclusive of stock-price changes and dividends, of negative 17 percent in 2018. The median return for the S&P 500 as a whole was negative 5.8 percent.
• But bank C.E.O.s enjoyed a median raise of 8.5 percent. The median across the broader index was just 5.6 percent. (Those figures are based on total compensation as defined by the S.E.C.)
• Richard Handler of Jefferies, for instance, more than doubled his compensation to $44.7 million. That’s more than any other banking and finance C.E.O., even though his company posted a total shareholder return of negative 14.9 percent for the year, Mr. McGee writes.

But banks don’t pay C.E.O.s based just on shareholder returns. The size of the firm, its growth and metrics like return on equity can all play into the calculation. And compensation doesn’t always correspond to that year’s results, either.

Leo Strine, arbiter of corporate America’s rules, will retire

The quick-witted, sharp-tongued judge will step down as the chief justice of Delaware’s Supreme Court, after years of overseeing cases that shaped the laws governing most U.S. companies.

His legacy, according to Bloomberg:

Either at the trial or appeal level, Strine has had a hand in deciding some of the biggest merger-and-acquisition cases and corporate contretemps over almost two decades. Delaware is corporate home to more than half of U.S. public companies and more than 60 percent of Fortune 500 firms. Its chancery court specializes in quickly resolving big-dollar business cases.

Pop-culture allusions and acerbic barbs cropped up in many of Mr. Strine’s opinions and appearances at the Corporate Law Institute M.&A. conference in New Orleans every year. (His references included Kim Kardashian, President Trump, Tiger Woods and more.)

Next up may be politics. There’s speculation that he could run for governor of Delaware in 2024.

Revolving door

Mark Carleton has stepped down as C.F.O. of Liberty Media. The company named Brian Wendling, its controller, as principal financial officer.

Liam Booth is leaving his post as Mark Zuckerberg’s personal head of security amid accusations of sexual misconduct and racism.

The British banking start-up Revolut has appointed Michael Sherwood, a former co-head of Goldman Sachs’s European arm, to its board.

Credit Suisse has hired Joe Heyer, the head of business development at Ford Motor, as its head of auto technology investment banking.

The speed read

Deals

• Virgin Galactic, Richard Branson’s space-tourism business, reportedly will go public by merging with a special-purpose acquisition company. (WSJ)
• The investment bank Piper Jaffray is said to be near a deal to buy a rival, Sandler O’Neill, for $485 million. (WSJ)
• WPP is reportedly close to selling 60 percent of its Kantar ad data unit to Bain Capital. (Bloomberg)
• Alex Navab, a former dealmaker at KKR once seen as a potential successor to Henry Kravis and George Roberts, died on Sunday. He was 53. (NY Post)

Politics and policy

• A federal judge blocked the Trump administration’s effort to force drug companies to disclose treatment prices in advertising. (NYT)
• President Trump’s economic advisers have gone from opposing low interest rates to favoring his easy-money policies. (Politico)
• The Treasury Department could breach the federal debt ceiling in September, earlier than expected, because tax revenue has fallen sharply. (WaPo)
• Tom Steyer, the hedge fund billionaire who has pushed to impeach Mr. Trump, is said to be planning a run for the 2020 Democratic presidential nomination. (NYT)

Brexit

• Britain’s economy may have shrunk for the first time in seven years. (Bloomberg)

Trade

• New Japanese trade limits on semiconductor materials may not be as hard on South Korean chip makers as expected. (FT)

Tech

• Here’s how Facebook tracks — and responds to — public concerns about itself among its users. (Bloomberg)
• Instagram introduced new anti-bullying features, including A.I. that urges users to reconsider sending messages that may be deemed offensive. (WSJ)
• Qualcomm asked a federal appeals court to pause a huge antitrust ruling against it in a case brought by the F.T.C. (Reuters)
• Facebook wasn’t invited to a White House summit on social media scheduled for Thursday. Rumors suggest that Twitter wasn’t, either. (Reuters, CNN)
• Activism is widespread among tech employees. But unionizing is proving to be difficult. (NYT)
• The F.T.C. has reportedly asked whether disabling ads for kids on YouTube could ease parents’ privacy concerns. (Bloomberg)

Best of the rest

• Volkswagen stalled an investigation into whether it defrauded bond investors who weren’t told about its attempts to cheat on diesel-emissions tests, according to the S.E.C. (WSJ)
• Heavy debt is hurting China’s business champions, and its economic slowdown has shrunk the ranks of its millionaires. (WSJ)
• SunTrust will no longer finance private prisons. (Bloomberg)
• Kohl’s hopes that accepting and processing unwanted orders from Amazon will help get more people into its stores. (NYT)
• The latest side hustle in Silicon Valley: hosting “Dungeons & Dragons” games for $500 a pop. (Bloomberg)

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