U.S. accuses Huawei CFO of Iran sanctions cover-up

VANCOUVER/LONDON (Reuters) – Huawei Technologies Co Ltd’s chief financial officer faces U.S. accusations that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions, a Canadian prosecutor said on Friday, arguing against giving her bail while she awaits extradition.

The case against Meng Wanzhou, who is also the daughter of the founder of Huawei, stems from a 2013 Reuters report here about the company’s close ties to Hong Kong-based Skycom Tech Co Ltd, which attempted to sell U.S. equipment to Iran despite U.S. and European Union bans, the prosecutor told a Vancouver court.

U.S. prosecutors argue that Meng was not truthful to banks who asked her about links between the two firms, the court heard on Friday. If extradited to the United States, Meng would face charges of conspiracy to defraud multiple financial institutions, the court heard, with a maximum sentence of 30 years for each charge.

Meng, 46, was arrested in Canada on Dec. 1 at the request of the United States. The arrest was on the same day that U.S. President Donald Trump met in Argentina with China’s Xi Jinping to look for ways to resolve an escalating trade war between the world’s two largest economies.

The news of her arrest has roiled stock markets and drawn condemnation from Chinese authorities, although Trump and his top economic advisers have downplayed its importance to trade talks after the two leaders agreed to a truce.

A spokesman for Huawei had no immediate comment on the case against Meng on Friday. The company has said it complies with all applicable export control and sanctions laws and other regulations.

Friday’s court hearing is intended to decide on whether Meng can post bail or if she is a flight risk and should be kept in detention.

The prosecutor opposed bail, arguing that Meng was a high flight risk with few ties to Vancouver and that her family’s wealth would mean than even a multi-million-dollar surety would not weigh heavily should she breach conditions.

Meng’s lawyer, David Martin, said her prominence made it unlikely she would breach any court orders.

“You can trust her,” he said. Fleeing “would humiliate and embarrass her father, whom she loves,” he argued.

Huawei CFO Meng Wanzhou, who was arrested on an extradition warrant, appears at her B.C. Supreme Court bail hearing in a drawing in Vancouver, British Columbia, Canada December 7, 2018. REUTERS/Jane Wolsak

The United States has 60 days to make a formal extradition request, which a Canadian judge will weigh to determine whether the case against Meng is strong enough. Then it is up to Canada’s justice minister to decide whether to extradite her.

Chinese Foreign ministry spokesman Geng Shuang said on Friday that neither Canada nor the United States had provided China any evidence that Meng had broken any law in those two countries, and reiterated Beijing’s demand that she be released.

Chinese state media accused the United States of trying to “stifle” Huawei and curb its global expansion.

IRAN BUSINESS

The U.S. case against Meng involves Skycom, which had an office in Tehran and which Huawei has described as one of its “major local partners” in Iran.

In January 2013, Reuters reported that Skycom, which tried to sell embargoed Hewlett-Packard computer equipment to Iran’s largest mobile-phone operator, had much closer ties to Huawei and Meng than previously known.

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In 2007, a management company controlled by Huawei’s parent company held all of Skycom’s shares. At the time, Meng served as the management firm’s company secretary. Meng also served on Skycom’s board between February 2008 and April 2009, according to Skycom records filed with Hong Kong’s Companies Registry.

Huawei used Skycom’s Tehran office to provide mobile network equipment to several major telecommunications companies in Iran, people familiar with the company’s operations have said. Two of the sources said that technically Skycom was controlled by Iranians to comply with local law but that it effectively was run by Huawei.

Huawei and Skycom were “the same,” a former Huawei employee who worked in Iran said on Friday.

A Huawei spokesman told Reuters in 2013: “Huawei has established a trade compliance system which is in line with industry best practices and our business in Iran is in full compliance with all applicable laws and regulations including those of the U.N. We also require our partners, such as Skycom, to make the same commitments.”

U.S. CASE

The United States has been looking since at least 2016 into whether Huawei violated U.S. sanctions against Iran, Reuters reported in April.

The case against Meng revolves around her response to banks, who asked her about Huawei’s links to Skycom in the wake of the 2013 Reuters report. U.S. prosecutors argue that Meng fraudulently said there was no link, the court heard on Friday.

U.S. investigators believe the misrepresentations induced the banks to provide services to Huawei despite the fact they were operating in sanctioned countries, Canadian court documents released on Friday showed.

The hearing did not name any banks, but sources told Reuters this week that the probe centered on whether Huawei had used HSBC Holdings (HSBA.L) to conduct illegal transactions. HSBC is not under investigation.

U.S. intelligence agencies have also alleged that Huawei is linked to China’s government and its equipment could contain “backdoors” for use by government spies. No evidence has been produced publicly and the firm has repeatedly denied the claims.

The probe of Huawei is similar to one that threatened the survival of China’s ZTE Corp (0763.HK) (000063.SZ), which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to Iran. ZTE paid a $892 million penalty.

Reporting by Julie Gordon in Vancouver and Steve Stecklow in London; Additional reporting by Anna Mehler Paperny in Toronto, David Ljunggren in Ottawa, Karen Freifeld in New York, Ben Blanchard and Yilei Sun in Beijing, and Sijia Jiang in Hong Kong; Writing by Denny Thomas and Rosalba O’Brien; Editing by Muralikumar Anantharaman, Susan Thomas and Sonya Hepinstall

New York Makes Uber and Lyft Pay a $17.22 an Hour Minimum Plus Expenses to Their Drivers

Uber, Lyft, Via, and Gett/Juno must pay on-demand drivers of their services a minimum of $17.22 an hour after expenses starting in mid-January 2019, the New York City Taxi and Limousine Commission (TLC) announced Dec. 4. The commission claimed this will result in an average nearly $10,000 rise in earnings for 96% of drivers. About 80,000 people regularly drive for ride-sharing firms.

The commission set a formula that will result in a gross hourly rate of up to $28 an hour to cover the average per-mile expenses drivers incur so that a driver’s effective freelance wage should net out to $17.22 an hour. It also factors in trips that lead outside of New York City and lack a passenger on the return leg.

The formula gets calculated per trip, and involves a “utilization” factor, which measures how many times per hour a driver has a passenger. The TLC said its utilization factor is designed to provide incentives to not have as many idle drivers on the road, which in turn reduces congestion. The formula also adds a bonus for shared rides to make sure drivers who accept those trips aren’t shortchanged.

The TLC noted that wage matches the $15-an-hour minimum wage in New York City plus the extra costs incurred by freelancers in taxes and to compensate for contractors not receiving paid time off. A TLC study found that 85% of drivers currently don’t earn an effective $15-an-hour wage, with expenses factored in.

Drivers who make more keep the additional earnings, and the rules also require more detailed statements from operators about deductions and payments.

Lyft said in statement that “the TLC’s proposed pay rules will undermine competition by allowing certain companies to pay drivers lower wages, and disincentives drivers from giving rides to and from areas outside Manhattan.” The company said the formula will provide the opposite effect from that stated and intended by the TLC, and lead to more congestion as drivers prioritizing shorter trips and congregate in denser areas.

Uber also critiqued the rules in a statement, claiming that they would lead to “higher than necessary costs for riders” without addressing issues of congestion in Manhattan. The company’s public affairs director, Jason Post, said in the statement that the TLC rules ignore incentives and bonuses that keep a supply of drivers in less-served areas of the city.

The TLC also offered a boon to cab drivers, who have been struck hard by the entry of ride-hailing companies. Taxi fleet operators have been able to charge as much as $11 per shift for credit-card processing. The commission dropped that to $7, which equates to about $1,000 a year for the average fleet driver, based on TLC data.

A freeze on adding new vehicles for ride hailing implemented in August remains in place. That number is fixed at about 80,000 vehicles, and is tied to cars, rather than drivers.

SoftBank's Vision Fund to hire China team, set up mainland office: sources

HONG KONG (Reuters) – The SoftBank-led Vision Fund is hiring an investment team to be based in China as the $100 billion investment giant expands in one of the world’s most vibrant tech markets, two people with direct knowledge of the move told Reuters.

FILE PHOTO: The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS/Issei Kato/File Photo

The Vision Fund plans to open its first China office in Shanghai next year, followed by Beijing and Hong Kong. Altogether it hopes to hire about 20 people, said the people, who declined to be named as the information was confidential.

The Vision Fund raised more than $93 billion at its first close last May with investors including the sovereign wealth funds of Saudi Arabia and Abu Dhabi, Apple Inc and Hon Hai Precision Industry Co Ltd (Foxconn).

In a statement at the time, SoftBank said the fund was targeting a total of $100 billion within six months.

Earlier this year, the fund hired Eric Chen, who last worked as a Hong Kong-based managing director at private equity firm Silver Lake before setting up his own venture, to head its upcoming China team, the people added.

Chen joined SoftBank Investment Advisers, which oversees Vision Fund, as a partner in March and is based in San Francisco, according to his LinkedIn profile and confirmation from the people. He could not be reached for comment.

A SoftBank spokesman declined to comment.

Already this year the Vision Fund has moved to open offices in India, where it has spent $5 billion betting on the future of technology, and Saudi Arabia, home to its biggest backer – sovereign wealth fund PIF.

The openings come as the fund must manage its sprawling web of portfolio companies covering everything from shared working space to insurance and healthcare.

SoftBank is no stranger in China. Founder Masayoshi Son was an early backer of e-commerce giant Alibaba Group in 2000. Since 2013, SoftBank has invested over $13 billion in Chinese companies such as ride-hailing champion Didi Chuxing. The Vision Fund has made five investments in China, according to Refinitiv data.

Since its first close on May 17 last year, the Vision Fund has invested in truck-hailing company Man Bang Group, Ping An Healthcare and Technology Co, a one-stop healthcare platform backed by Ping An Insurance Group, and most recently Beijing Bytedance Technology Co, China’s largest media start-up managing news aggregator Toutiao and online short-video streaming app TikTok, the data showed.

Bytedance is valued at $75 billion in its latest fundraising, Reuters has reported.

The fund has also invested $500 million in the Chinese unit of U.S.-based shared working space provider WeWork Cos in July, as part of its support for WeWork’s global push.

Reporting by Kane Wu in Hong Kong, adiditonal reporting by Sam Nussey in Tokyo; Editing by Jennifer Hughes and Stephen Coates

Qualcomm says China comment will not revive NXP deal

(Reuters) – U.S. chipmaker Qualcomm Inc (QCOM.O) said on Monday it was not looking to revive its abandoned $44 billion acquisition of Dutch peer NXP Semiconductors NV (NXPI.O), a day after the White House said China would reconsider clearing a deal if it was attempted again.

Qualcomm, the world’s biggest smartphone-chip maker, walked away from its agreement to buy NXP in July, after failing to secure Chinese regulatory approval. The planned deal was first agreed between the two companies in October 2016.

Qualcomm, headquartered in San Diego, California, and NXP, based in Eindhoven, the Netherlands, needed China’s blessing for their deal because of their presence in that country.

After high-stakes talks on Saturday between U.S. President Donald Trump and Chinese President Xi Jinping in Argentina, the White House said in a statement that China was “open to approving the previously unapproved” deal for Qualcomm to acquire NXP “should it again be presented”.

But Qualcomm said there was no prospect for the acquisition to be revived.

“While we were grateful to learn of President Trump and President Xi’s comments about Qualcomm’s previously proposed acquisition of NXP, the deadline for that transaction has expired, which terminated the contemplated deal,” a Qualcomm representative said via email.

“Qualcomm considers the matter closed.”

NXP declined to comment.

On Monday, White House economic adviser Larry Kudlow told reporters that President Trump put the issue of the acquisition on the table in the talks with the Chinese president.

Kudlow added that the Chinese president’s openness to the deal was a sign of further cooperation on multiple issues, including corporate mergers. Xi’s reported comment could embolden some potential acquirers in the semiconductor space to explore transactions, corporate dealmakers said.

“Although that acquisition cannot be resuscitated, Xi’s comment reveals in plain sight that Chinese antitrust policy is inherently politicized,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in a blog post.

FILE PHOTO: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake

Qualcomm shares closed up 1.5 percent at $59.14 in New York on Monday, while NXP shares ended up 2.75 percent at $85.67.

Qualcomm and NXP did not lobby for the Trump administration to bring up the abandoned deal in its meeting with Xi and other Chinese officials on the sidelines of the G20 summit in Buenos Aires on Saturday, which was dominated by negotiations over trade tariffs, according to sources close to the companies.

The two companies were surprised to see that the terminated deal resurfaced as an issue, the sources added, requesting anonymity to discuss confidential deliberations. Qualcomm was given just an hour’s notice by the Trump administration about Xi’s comment on the NXP deal, and its inclusion in the White House statement, according to two of the sources.

The Trump administration had unsuccessfully lobbied the Chinese government earlier this year to give its blessing to the deal.

China’s foreign ministry declined to comment on Qualcomm during a regular media briefing on Monday.

Qualcomm had sought to purchase NXP because of its market position as a dominant supplier to the automotive market, as car makers add more chips to vehicles each year. Qualcomm is now focused on developing its own chips for the automotive market, according to one of the sources.

Qualcomm had to pay NXP a $2 billion fee to terminate the deal. To appease its shareholders, Qualcomm has also embarked on a $30 billion stock repurchase plan to return to them most of the money that would have been used for the NXP deal. It has spent more than $20 billion in share buybacks in the last 12 months. NXP has also announced its own $5 billion share buyback program.

DEALS ABANDONED

Several deals by semiconductor companies were put on ice after the Qualcomm/NXP deal fell through, simply because they had a footprint in China and required regulatory approval there. Now, chip companies may be more optimistic about their regulatory chances in China.

One example could be Xilinx Inc (XLNX.O), a U.S. provider of chips used in communications network gear and consumer electronics that has a big presence in China. Xilinx is currently vying to acquire Israeli chip maker Mellanox Technologies Ltd (MLNX.O) after it decided to run an auction to sell itself, according to people familiar with the matter. A successful acquisition of Mellanox could prove an important test of China’s appetite to approve such deals. A representative for Xilinx declined to comment. Mellanox did not immediately respond to requests for comment.

A more near-term test being watched by dealmakers is KLA-Tencor Corp (KLAC.O) pending acquisition of fellow semiconductor equipment maker, Israel’s Orbotech Ltd (ORBK.O). The $3.4 billion deal, announced in March, is still awaiting Chinese regulatory approval. KLA-Tencor’s CEO said on the company’s last earnings call that he expects the deal to close by year end.

Thus far, other high-profile mergers and acquisitions involving U.S. companies in other sectors have received Chinese approval. Last month, China approved United Technologies Corp’s (UTX.N) $30 billion purchase of aircraft parts maker Rockwell Collins Inc and Walt Disney Co’s (DIS.N) $71.3 billion deal to buy most of Twenty-First Century Fox’s (FOXA.O) entertainment assets.

Acquisitions of U.S. companies by Chinese companies, on the other hand, have been few and far between in the last year, after the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes deals for potential national security risks, shot down more of these deals, such as Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International Inc (MGI.O). U.S. lawmakers also passed reforms earlier this year that increased CFIUS’ scrutiny of deals.

Reporting by Liana B. Baker in New York and Kanishka Singh in Bengaluru; Aditional reporting by Greg Roumeliotis in New York, Michael Martina in Beijing and Jeff Mason in Washington, D.C.; editing by Diane Craft

You Can't Build a Multi-Million Dollar Brand Without an Unbiased Focus Group. Here's Why

I recently spent a Saturday binge listening to podcasts on iTunes, and came across a presentation featuring Bethenny Frankel. She said, “everyone today has a brand,” in a humorous tone. With the host laughing uncontrollably, it became quite clear that there was a bit of truth to her joke. 

Although Frankel has created a multi-million dollar brand as the founder of Skinny Girl, it was more than a “stroke of luck.” Frankel was on a quest to fill a void in the market by creating low-calorie margarita’s that targeted women, without compromising taste. She strategically tapped into the right target market and focus group to launch one of the most successful spirit brands, with multiple, successful brand extensions.

Connecting your vision to the right audience, while filling a need or void in the market requires a strategic connection with your target market. However, hopeful and ambitious entrepreneurs, who would like to have the Bethenny Frankel level of success, skip the most important step in the process – creating focus group. 

I understand that you have a great idea and believe you are about to disrupt the market with your product or service, however, there is a high price to pay for high-performing leaders who ignore the importance of connecting with their ideal audience prior to launching. More importantly, it is important to see if all of the brand extensions and upsells connect with your target market as well. 

I participated in my first focus group in 2010 after experiencing a plateau in client acquisition in my private consultancy. The 11 person group, led by a leading brand expert, immediately provided valuable feedback about the top two reasons my team reached a level of stagnation that was difficult to forecast without their unbiased insight. We made immediate changes and sales doubled within a year. 

Before you debate it, here are three questions you must ask yourself as a founder before taking your product to market. 

Why a focus group?

Your friends, family and followers are not your customers. They cannot help you leverage profitable, sustainable opportunities and partnerships that will grow your company. 

A focus group is a collective of opinions from your ideal target market, who will provide valuable insights about your products and services, while allowing you to understand how the brand mission for your company connects with their needs. 

During the process of creating and building a multi-million dollar brand, you must create a focus group for all of your brand and product extensions to learn about necessity, utility and ways to create upsells that work.

When should you host a focus group?

At the moment you are ready to take your idea to market. Do not miss this step! It will become especially important if you decide to onboard investors, VC’s and/or co-founders. The feedback is invaluable to ensure that you will launch directly to your intended customer and avoid the “one size fits all” model of ambitious creatives and entrepreneurs. 

How can you create a focus group?

Remember, these are the unbiased opinions of your end-user. As much as you may want to ask your tribe on social media for their input, it will not work. It is time for you to partner with a qualitative research and marketing company to moderate your group and collect all of the data about your product/services.

Once you make the necessary improvements, the research group will reconnect with the prospects for further follow up. You want a focus group to provide feedback about the business model itself, pricing, utility, as well as the brand. Avoid generic questions such as, “would you buy this product?” Be very specific about the objective(s) of the incubator.