The week in GRC: DoJ launching antitrust review of big tech firms, and sanctions enforcement fines increase
– CNN reported that credit reporting agency Equifax reached a deal to pay up to $700 million to state and federal regulators to settle investigations arising from a data breach that exposed the personal information of almost 150 million people.
The Federal Trade Commission (FTC) said Equifax will pay at least $300 million and as much as $425 million to compensate affected people with credit monitoring services. The amount of the settlement could change depending on the number of claims still to be filed by consumers. Equifax will also pay $275 million in civil penalties and other compensation to 48 states, Washington, Puerto Rico and the Consumer Financial Protection Bureau.
Equifax did not respond to a request for comment. According to the FTC’s proposed settlements, the company neither admits nor denies any of the allegations.
– The Financial Times said JPMorgan Chase launched a data analytics tool designed to predict how activist investors will influence other company shareholders. A record $1.1 trillion in US corporate takeovers during the first half of the year means activist investors are at the top of board agendas.
JPMorgan believes its method can generate more useful insights than can be gained from analyzing factors such as how much cash a company holds or how activists have behaved previously. ‘If all the focus of the company is on this very vocal and very loud shareholder… we think that is the wrong way to deal with it,’ Anu Aiyengar, JPMorgan’s head of North American M&A, said. ‘Instead we’re saying, Let’s look at who are all of your shareholders, what can we learn about them and how they have acted in the context of these activists and how that will inform our strategy with respect to long-term shareholders.’
– According to Reuters, Latin America-focused oil exploration company Amerisur Resources rejected overtures from French rival Maurel & Prom (M&P), saying Maurel’s possible £210 million ($263 million) offer undervalued it. ‘Following the approach from M&P concerning its possible offer and the receipt of other interest in the company, the board concluded that the M&P possible offer materially undervalued the company and was not at a level, nor in a form, that merited further consideration,’ Amerisur said.
‘M&P sees considerable benefit to shareholders from a combination and believes the enlarged group would offer significant value upside for both Amerisur’s and M&P’s shareholders,’ the French company said in a statement.
– The Wall Street Journal reported that AutoNation, the largest US car dealership chain, promoted CFO Cheryl Miller to the role of CEO just months after hiring an industry outsider as its leader. Carl Liebert, who the company said plans to stay on for 30 days to help with the transition, became CEO in March this year. He succeeded Mike Jackson, who led the company for two decades.
‘It was a risk that we took with Carl in that he was entirely new to automotive retail,’ said Jackson, who is now the company’s executive chair. ‘We came to the conclusion that it was not a good fit. Automotive retail is a unique industry, and it’s either something you can get your head around or it’s like a foreign language.’
Jackson said the decision to replace Liebert was mutual. Liebert could not be reached for comment. At the time of his hiring, AutoNation said the company’s two largest investors supported the board’s decision to hire an industry outsider.
– The SEC announced a half-million-dollar award to an overseas whistleblower whose reporting helped the agency bring a successful enforcement action. ‘With recent actions, more than $2 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received by whistleblowers’ said Jane Norberg, chief of the SEC’s office of the whistleblower. ‘This represents the direct and important role that whistleblowers, like the overseas whistleblower being awarded today, have in enforcement actions and the protection of investors.’
– The FT said Bank of America and UBS have reshuffled their investment banking teams in a push into the market for fund-raising and advisory work on behalf of private companies, as businesses delay going public and fees from IPOs come under pressure. Both banks have this month created new teams focused on capital-raising and advice to privately owned businesses, according to memos seen by the FT. The moves reflect how early introductions to such companies have become increasingly important as banks look to generate revenues from advising on IPOs and M&A.
– CNN reported that the US Department of Justice (DoJ) is launching a formal antitrust review of the largest US tech companies. The review appears to be broad in scope and could cover conduct by numerous firms. Although Amazon, Apple, Facebook and Google were not named by the DoJ on Tuesday, the agency indicated it will look into areas where those companies are dominant.
‘The department’s review will consider the widespread concerns that consumers, businesses and entrepreneurs have expressed about search, social media and some retail services online,’ the DoJ said. ‘The department’s antitrust division is conferring with and seeking information from the public, including industry participants who have direct insight into competition in online platforms, as well as others.’
Amazon and Apple didn’t immediately respond to requests for comment. Facebook declined to comment, and Google also declined to comment but referred to testimony company executives delivered before Congress this month.
– Facebook agreed to pay a record $5 billion fine and to better police its data privacy practices to settle a federal investigation, the WSJ reported. Under the settlement, Facebook founder and CEO Mark Zuckerberg must certify that the company is in compliance with new privacy strictures and could be subject to civil and criminal penalties for false certifications.
The settlement with the FTC requires the creation of a new committee of Facebook’s board to monitor the company’s privacy practices. Legal experts said they couldn’t recall previous FTC privacy settlements imposing such a requirement. Facebook general counsel Colin Stretch said the agreement ‘will mark a sharper turn toward privacy, on a scale different from anything we’ve done in the past.’
Separately, the SEC announced a settlement with Facebook – including a $100 million fine – over claims it misled investors about the misuse of customer data. Facebook neither admitted nor denied the SEC claims. The company said it shares the agency’s view that it be ‘transparent with our investors about the material risks we face, and we have already updated our disclosures and controls in this area.’
– CNN reported that there are no longer any companies on the S&P 500 with an all-male board after Copart, an online auto auction website, named Diane Morefield, CFO of real estate investment trust CyrusOne, as a director. The company also appointed Stephen Fisher, former chief technology officer for eBay, to its board.
Until recently, TripAdvisor was the other S&P 500 company that didn’t have any female directors, according to S&P Global Market Intelligence. But the company appointed two women to its board in March.
More attention has been given to the composition of boards amid calls for greater gender equity in the workplace and an increased sense of urgency for change following the #MeToo movement, a recent report from Heidrick & Struggles found.
– According to Reuters, ISS urged Occidental Petroleum shareholders to ask management to let them weigh in on board and governance issues as the company buys rival Anadarko Petroleum. The request came a week after the takeover’s biggest critic, Carl Icahn, laid out plans to revamp Occidental’s board.
ISS issued a research note recommending that shareholders provide consent for the request to fix a record date, which would determine which shareholders would be able to have a say on possibly electing dissident directors. The note says ISS is not backing Icahn’s nominees or planned changes.
Occidental said it disagreed with ISS’ recommendation that shareholders should take the first step and request the fixing of a record date for the consent solicitation and only later focus on whether the Icahn Group’s proposals would harm or further shareholder interests.
‘The board of directors has unanimously determined that fixing a record date for the Icahn Group’s planned consent solicitation and the proposals the Icahn Group intends to ask shareholders to act on are NOT in the best interests of Occidental or our shareholders,’ the company said in a statement.
– Fines levied by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) have hit a decade high at a time when the Trump administration is increasingly using sanctions as a foreign policy tool, the WSJ said. Roughly $1.3 billion in total penalties have been issued by OFAC this year. The year-to-date total, from 18 settlements, is already more than 17 times the total issued in all of 2018, when there were seven settlements.
‘It speaks more to the fact that we had a lot of cases this year that were ripe and ready to be issued,’ said Sigal Mandelker, Treasury undersecretary for terrorism and financial intelligence. This year’s enforcement actions reflect a broadening range and the diversity of sanctions programs being enforced, said Gibson Dunn & Crutcher partner Adam Smith.
– CNN reported that four of the world’s largest car manufacturers – Ford, Honda, Volkswagen and BMW – are planning to make more fuel-efficient vehicles for the US market, despite the Trump administration’s plans to roll back regulations. The companies have reached a deal with air quality regulators in California, promising to provide fleets of cars that average 50 miles per gallon by model year 2026, and they vowed to stick to that standard in all 50 states.
The move will put the four companies on track to comply with tougher emissions rules even as the Trump administration works to roll back policies put in place under former president Barack Obama. Regulatory pressures around the world, including in Europe and China, are pushing carmakers to produce electric vehicles.
– According to Reuters, the European Investment Bank (EIB) has proposed an end to lending for fossil fuel-reliant energy projects by the end of 2020. The bank said it would phase out support for energy projects that were ‘reliant on fossil fuels: oil and gas production, infrastructure primarily dedicated to natural gas, power generation or heat based on fossil fuels.’
The EIB board, which is made up mostly of EU finance ministers, is expected to discuss the proposal at a meeting in September, although a final decision could take longer. ‘This long-term transition (to greener energy sources) is profound. Solidarity is required to ensure that potentially vulnerable groups or regions are supported,’ the EIB proposal document said.