Binance names new CEO after taking $4.3B in penalties
Gabrielle Saulsbery
Wed, November 22, 2023
Industry Dive
Richard Teng was named CEO at Binance on Tuesday afternoon after founder Changpeng Zhao stepped down as chief executive to plead guilty to failing to maintain an effective anti-money laundering program in violation of the Bank Secrecy Act.
Zhao, who agreed to pay $50 million in fines during Tuesday’s court hearing in Seattle, tweeted afterward that stepping down was “not easy” but was “the right thing to do.”
“I made mistakes, and I must take responsibility,” Zhao wrote. “This is best for our community, for Binance, and for myself.”
Teng joined the company as Singapore CEO in 2021 and has since climbed its ranks, serving most recently as global head of regional markets. Over the previous 30 years, he spent time as the CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market, as chief regulatory officer of the Singapore Exchange, and as director of corporate finance in the Monetary Authority of Singapore, according to his LinkedIn profile.
“Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has,” Zhao tweeted. “[Teng] will navigate the company through its next period of growth. He will ensure Binance delivers on our next phase of security, transparency, compliance, and growth.”
Teng tweeted that his focus will be on regaining user confidence in the financial strength, security and safety of the company; working with regulators on rules that foster both innovation and consumer protections; and working with others to drive the adoption of Web3 — a term used to describe the next iteration of the internet, built using blockchain technology.
“The trust placed on us by our 150 [million] users and thousands of employees is a responsibility that I take seriously and hold dear,” he tweeted. “I have accepted this role so that we can continue to meet and exceed the expectations of stakeholders while achieving our core mission, the freedom of money.”
The penalty
Tuesday’s settlement, however, will ensure that Teng faces more hurdles in his job than Zhao did. Binance will pay $4.3 billion to the Justice Department, the Treasury Department, the Commodity Futures Trading Commission and the Office of Foreign Assets Control to resolve violations related to the BSA, the International Emergency Economic Powers Act and the exchange’s failure to register as a money transmitting business.
FinCEN, which will receive $3.4 billion of the penalty, has imposed a five-year monitorship of Binance in which the Treasury Department “will retain access to books, records, and systems” of the company.
If Binance fails to live up to the obligations of the settlement, it will be subject to a $150 million suspended penalty, the Treasury Department said.
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” Tessa M. Gorman, acting U.S. Attorney for the Western District of Washington, said in a statement. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine — transactions for which Binance profited with significant fees.”
Binance failed to file suspicious activity reports with FinCEN on more than 100,000 transactions that went on to fund terrorist organizations, ransomware, child sexual exploitation material, frauds and scams, the Treasury Department said.
As part of the settlement, Binance must exit the U.S. entirely. Binance.US, however, is a registered money services business and is not affected by Binance's exit, an official clarified to CoinDesk.
For his guilty plea, Zhao faces up to 18 months in prison, though prosecutors are considering asking for a stiffer penalty, The New York Times reported. A court filing shows that he paid $175 million personal recognizance bond, and placed $15 million in a separate trust account that he will forfeit if he violates terms of his bail.
A sentencing hearing is scheduled for Feb. 23, 2024.
Outflows
Despite reassurances from Zhao and Teng, outflows from Binance surpassed $1 billion between Tuesday morning and early Wednesday, according to blockchain analysis firm Nansen.
The exchange has had multiple previous billion-dollar-loss days, including on the day former FTX CEO Sam Bankman-Fried was arrested in the Bahamas following the collapse of his own crypto exchange, and the day Binance was sued by the SEC in June.
Zhao, without mentioning his guilty plea, tweeted that he plans to “take a break” now that he’s not CEO of the world’s largest crypto exchange, and that he will probably “do some passive investing” in several types of tech startups.
“I can’t see myself being a CEO driving a startup again. I am content being an one-shot (lucky) entrepreneur. Should there be listeners, I may be open to being a coach/mentor to a small number of upcoming entrepreneurs, privately. If for nothing else, I can at least tell them what not to do,” he wrote. “On that note, I am proud to point out that in our resolutions with the U.S. agencies they: do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation.”
In response to a request for comment, a Binance spokesperson directed Banking Dive to a blog posted by the company Tuesday:
“While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance. However, when Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming, and it should have. Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way. Today, Binance takes responsibility for this past chapter. Over the past two years, we have worked hard to restructure our organization and personnel and upgrade our systems. We have new leadership in place with deep compliance experience and impressive backgrounds ranging from top traditional financial institutions and leading tech companies, to law enforcement and major corporate entities. It is through this process that we have become a stronger, safer, and even more secure platform for our users.”
Binance Announcement: Reaching Resolution With U.S. Regulators
New Binance CEO Teng’s First Job Is to Avert Customer Exodus
Suvashree Ghosh, Anna Irrera and Ben Bartenstein
Wed, November 22, 2023
(Bloomberg) -- Mollify 150 million potentially jittery users, placate belligerent US regulators and keep high-profile founder Changpeng Zhao onside. These are just some of the tasks for crypto exchange Binance’s new head Richard Teng.
Teng, 53, succeeded Zhao as the chief executive of the world’s largest crypto exchange after the company and Zhao pleaded guilty to US anti-money laundering and sanctions violations. Zhao, Binance’s founder, stepped down as CEO as part of a sweeping deal to resolve the Department of Justice probe.
Binance will pay $4.3 billion in penalties — one of the largest such agreements in US history — while Zhao will pay a $50 million fine. He faces up to 10 years in prison but is expected to get no more than 18 months under a plea deal.
Taken together, the events are a breathtaking rebuke of crypto’s linchpin exchange and land Teng with arguably the hardest job in the digital-asset sector. He has to rebuild trust in Binance, stem a slide in market share and field ongoing regulatory investigations around the world, including a Securities & Exchange Commission lawsuit that wasn’t part of Tuesday’s settlement.
Work to Do
“There’s a lot of work to be done in radically re-imagining the operating and governance model for Binance, to ensure it can operate in a way that is — and is also seen to be — aggressively pro-compliance, as well as open to incorporating highest standards of good governance and risk management,” said Yesha Yadav, a law professor at Vanderbilt University who specializes in financial regulation.
In the past 24 hours, customers pulled a net $1.3 billion from the Binance platform, according to data from DefiLlama. That’s lower than past daily outflows of as much as $4 billion during times of stress. Binance has $67 billion worth of exchange assets, according to DefiLlama.
BNB, the native token of Binance, dropped about 3% to $231 as of 12:17 p.m. in New York on Wednesday, extending a near 6% slump from Tuesday. BNB is the fourth-largest crypto coin with a market value of $36 billion, according to CoinGecko, and is often viewed as an arbiter of sentiment toward Binance.
Under the plea agreement, an independent compliance monitor will scrutinize Binance for three years and the company must submit reports to the US government. That’s a perilous backdrop if Teng fails to eradicate the kind of violations for which Binance was just faulted, such as allowing transactions by militant groups like Hamas.
Reassuring Customers
In a post on X, Teng said that he’ll focus on reassuring Binance’s 150 million users about its “strength, security and safety” and collaborate with regulators “to uphold high standards globally.” He added that he would work with partners to drive growth and adoption of web3 — a catch-all term referring to a vision of the internet built around crypto and its underlying blockchain technology.
Teng, a civil servant-turned-crypto executive, was the frontrunner to take over as CEO as regulatory scrutiny of Binance and Zhao intensified across key jurisdictions. Zhao in late May appointed him head of non-US regional markets.
In Teng’s favor is decades-long experience as a senior regulator, including at the Monetary Authority of Singapore as well as the city-state’s SGX stock exchange. He was also chief executive of the regulator at Abu Dhabi’s international financial free zone. Teng joined Binance in August 2021 as Singapore CEO.
Teng “has a respected regulatory background,” said Hirander Misra, chairman and chief executive officer of market infrastructure company GMEX Group. “That said, he is swimming against the tide. A culture of regulatory compliance is very hard to instill in an organization that has evolved in an industry with a lack of regulations. It’s a bit like the poacher trying to turn gamekeeper.”
Recent Exits
Among the issues for Teng is a string of exits by senior Binance staffers in recent months, some of whom had been helping to navigate the regulatory crisis surrounding the company. The departures included counter-terrorism executive Jennifer Hicks, head of product Mayur Kamat, senior vice president of compliance Steven Christie, APAC head Leon Foong and chief strategy officer Patrick Hillman.
“To ensure a bright future, I intend to use everything I’ve learned over the past three decades of financial services and regulatory experience to guide our remarkable, innovative, and committed team,” Teng said in the post on X.
Zhao, who is often referred to by his initials CZ, is prohibited from involvement in managing or operating Binance under his plea agreement. But in a post on X, he indicated he is still willing to offer guidance to Teng.
“As a shareholder and former CEO with historical knowledge of our company, I will remain available to the team to consult as needed, consistent with the framework set out in our US agency resolutions,” Zhao said. He added that he planned to take some time off before looking for startup investment opportunities and exploring crypto’s decentralized-finance sector.
‘Herculean’ Task
Another Binance founder with major clout at the company is Yi He, Zhao’s partner in business and life. The two have children together.
“The question still remains in terms of who is pulling the strings,” said GMEX’s Misra. “I hope for his sake he is given the autonomy to effect serious change to address the Herculean task in front of him,” he added, referring to Teng.
Teng takes on the challenge of retaining customer confidence in Binance amid a partial recovery in digital-asset markets from a damaging 2022 rout that contributed to the blowup of rivals such Sam Bankman-Fried’s FTX. While Binance remains the key platform for crypto spot and derivatives trading, its dominance has declined amid regulatory clampdowns that sapped confidence.
Binance exploded onto the crypto scene in 2017 and saw its market share surge to more than 60% worldwide after the fall of FTX in November 2022. Since then, its combined market share for spot crypto and derivatives has declined to less than 44% this month, according to researcher CCData.
“This criminal and civil resolution allows Binance to potentially start a new chapter,” said Alex Zerden, a former US Treasury official whose firm Capitol Peak Strategies advises crypto businesses. “However, the company will be under rigorous monitorships for the next several years and must show genuine and material changes in behavior to avoid further enforcement actions by the US government.”
--With assistance from Yueqi Yang and Sidhartha Shukla.
Bloomberg Businessweek
Thursday, November 23, 2023
CRIMINAL CAPITALI$M COVER UP
Rio Tinto Pays Fine to End SEC Probe Into Mozambique Coal Deal
Thomas Biesheuvel
Wed, November 22, 2023
(Bloomberg) -- Rio Tinto Group agreed to pay a $28 million fine to settle a six-year investigation by the US Securities and Exchange Commission into its disastrous acquisition of a coal mining business in 2011.
The company said it would pay the penalty without admitting or denying the charges against it. Rio will also retain an independent consultant to advise on its impairment and discourse policies.
The SEC filed fraud charges against London-based Rio and two executives in 2017, claiming they inflated the value of Mozambique coal assets acquired in 2011 for $3.7 billion. The unit was sold for $50 million in 2014 following impairments of about $2.9 billion in 2013 and $470 million a year later.
The SEC alleged that Rio executives had sought to hide the setbacks and their impact on the true value of the assets from the company’s board of directors, audit committee and investors.
Former Rio Chief Executive Officer Tom Albanese also reached a settlement with the SEC and will pay a $50,000 penalty, without admitting to or denying the allegations, the company said Wednesday.
Thomas Biesheuvel
Wed, November 22, 2023
(Bloomberg) -- Rio Tinto Group agreed to pay a $28 million fine to settle a six-year investigation by the US Securities and Exchange Commission into its disastrous acquisition of a coal mining business in 2011.
The company said it would pay the penalty without admitting or denying the charges against it. Rio will also retain an independent consultant to advise on its impairment and discourse policies.
The SEC filed fraud charges against London-based Rio and two executives in 2017, claiming they inflated the value of Mozambique coal assets acquired in 2011 for $3.7 billion. The unit was sold for $50 million in 2014 following impairments of about $2.9 billion in 2013 and $470 million a year later.
The SEC alleged that Rio executives had sought to hide the setbacks and their impact on the true value of the assets from the company’s board of directors, audit committee and investors.
Former Rio Chief Executive Officer Tom Albanese also reached a settlement with the SEC and will pay a $50,000 penalty, without admitting to or denying the allegations, the company said Wednesday.
GREEN CAPITALI$M
Kinterra Capital's debut $565M fund to support mining for battery metals
Rebecca Bellan
Tue, November 21, 2023
Kinterra Capital, a Canadian private equity firm, has closed its $565 million debut fund dedicated to securing critical mineral assets for battery development. The influx of private capital comes amid increasing government incentives into the sourcing and production of battery materials in North America.
Kinterra's oversubscribed round will target asset-level investments in North America, Western Europe and Australia over the next eight to 10 years, according to the company. That means investments into lithium mines, operations to uncover cobalt, nickel and graphite, battery manufacturing plants, energy storage solutions, raw materials processing plants and other technology needed to extract, process and recycle critical battery minerals.
Kinterra says its fund has already invested "substantial capital" in a number of assets with "a robust near term pipeline." Specifically, the firm has invested in Canon Resources, an owner and operator of two nickel development projects in Western Australia; another nickel processing plant in Quebec; and White Pine North, a large copper development project in the U.S.
“The structural underinvestment in critical minerals over the past decade has resulted in severely discounted valuations for excellent assets and created a massive need for capital investment, as countries transition to more sustainable energy sources,” said Cheryl Brandon, co-founder and co-managing partner at Kinterra, in a statement.
“Kinterra addresses that need by bringing the right combination of active management, financial resources, deep sector knowledge and cross-functional technical expertise required to identify and develop assets across the value chain,” Brandon continued.
Asset-level investments give investors more direct control over specific projects or assets, but that also leaves them open to more risk. Kinterrra says its in-house team includes metallurgists, chemical engineers, geologists, permitting and sustainability experts and mining engineers to ensure the firm is making smart investments.
The firm intends to work with leading automotive OEMs, battery manufacturers and other offtake partners in "highly structured transactions that provide long-term solutions to EV supply chain challenges," according to Kamal Toor, co-founder and co-managing partner at Kinterra.
"Our investments will enable the complete 'mine to battery' solutions that OEMs require to meet their electrification objectives," Toor said in a statement. He noted that Kinterra hopes to help the West’s generational energy transition by: 1) securing key critical mineral supply to meet expanding demand; 2) ensure that supply comes from diversified sources in stable jurisdictions; and 3) is done in a socially responsible fashion.
“Our strategy is supported by strong secular tailwinds, including robust and fundamental downstream demand, global net-zero efforts, and strategic government initiatives that support the repatriation of materials supply chains,” continued Toor.
Government incentives across the U.S., Canada and the European Union have spurred more private investment into an industry that is increasingly becoming more regionalized.
President Joe Biden's Inflation Reduction Act, signed into law August 16, 2022, requires that the majority of the value of battery components be produced or assembled in North America in 2024 to qualify for half of the legislation's EV tax credit, or $3,750. To get the remaining half, battery makers will have to source most of the value of critical materials from the U.S. or a free trade agreement country. In addition to spurring up domestic industry, the stipulations in the bill are designed to reduce reliance on China to supply and manufacture lithium-ion batteries.
Canada has also agreed to spend billions to support the transition to electric vehicles and energy. Over the summer, the government provided up to $15 billion CAD to automaker Stellantis and battery maker LGES to build an EV battery plant in Ontario. Canada is also supplying billions to boost critical materials mining in the country.
The EU Green Deal Industrial Plan also sets targets for the region to mine 10% of the critical raw materials it consumes, with recycling adding another 15%. The bloc also intends to increase processing to 40% of its needs by 2030.
In order to meet the goals set out by governments around the world, there will need to be a drastic scale up in mining and exploration projects. According to McKinsey, investments in mining, refining and smelting will need to increase by $3 trillion to $4 trillion by 2030 to "bridge the great raw material disconnect."
Kinterra Capital's debut $565M fund to support mining for battery metals
Rebecca Bellan
Tue, November 21, 2023
Kinterra Capital, a Canadian private equity firm, has closed its $565 million debut fund dedicated to securing critical mineral assets for battery development. The influx of private capital comes amid increasing government incentives into the sourcing and production of battery materials in North America.
Kinterra's oversubscribed round will target asset-level investments in North America, Western Europe and Australia over the next eight to 10 years, according to the company. That means investments into lithium mines, operations to uncover cobalt, nickel and graphite, battery manufacturing plants, energy storage solutions, raw materials processing plants and other technology needed to extract, process and recycle critical battery minerals.
Kinterra says its fund has already invested "substantial capital" in a number of assets with "a robust near term pipeline." Specifically, the firm has invested in Canon Resources, an owner and operator of two nickel development projects in Western Australia; another nickel processing plant in Quebec; and White Pine North, a large copper development project in the U.S.
“The structural underinvestment in critical minerals over the past decade has resulted in severely discounted valuations for excellent assets and created a massive need for capital investment, as countries transition to more sustainable energy sources,” said Cheryl Brandon, co-founder and co-managing partner at Kinterra, in a statement.
“Kinterra addresses that need by bringing the right combination of active management, financial resources, deep sector knowledge and cross-functional technical expertise required to identify and develop assets across the value chain,” Brandon continued.
Asset-level investments give investors more direct control over specific projects or assets, but that also leaves them open to more risk. Kinterrra says its in-house team includes metallurgists, chemical engineers, geologists, permitting and sustainability experts and mining engineers to ensure the firm is making smart investments.
Tracking the EV battery factory construction boom across North America
The firm intends to work with leading automotive OEMs, battery manufacturers and other offtake partners in "highly structured transactions that provide long-term solutions to EV supply chain challenges," according to Kamal Toor, co-founder and co-managing partner at Kinterra.
"Our investments will enable the complete 'mine to battery' solutions that OEMs require to meet their electrification objectives," Toor said in a statement. He noted that Kinterra hopes to help the West’s generational energy transition by: 1) securing key critical mineral supply to meet expanding demand; 2) ensure that supply comes from diversified sources in stable jurisdictions; and 3) is done in a socially responsible fashion.
“Our strategy is supported by strong secular tailwinds, including robust and fundamental downstream demand, global net-zero efforts, and strategic government initiatives that support the repatriation of materials supply chains,” continued Toor.
Government incentives across the U.S., Canada and the European Union have spurred more private investment into an industry that is increasingly becoming more regionalized.
President Joe Biden's Inflation Reduction Act, signed into law August 16, 2022, requires that the majority of the value of battery components be produced or assembled in North America in 2024 to qualify for half of the legislation's EV tax credit, or $3,750. To get the remaining half, battery makers will have to source most of the value of critical materials from the U.S. or a free trade agreement country. In addition to spurring up domestic industry, the stipulations in the bill are designed to reduce reliance on China to supply and manufacture lithium-ion batteries.
Canada has also agreed to spend billions to support the transition to electric vehicles and energy. Over the summer, the government provided up to $15 billion CAD to automaker Stellantis and battery maker LGES to build an EV battery plant in Ontario. Canada is also supplying billions to boost critical materials mining in the country.
The EU Green Deal Industrial Plan also sets targets for the region to mine 10% of the critical raw materials it consumes, with recycling adding another 15%. The bloc also intends to increase processing to 40% of its needs by 2030.
In order to meet the goals set out by governments around the world, there will need to be a drastic scale up in mining and exploration projects. According to McKinsey, investments in mining, refining and smelting will need to increase by $3 trillion to $4 trillion by 2030 to "bridge the great raw material disconnect."
Meloni, UBS, Jefferies Pull Off Stealth $1 Billion Bank Sale
Sonia Sirletti, Chiara Albanese and Alessandra Migliaccio
Wed, November 22, 2023
(Bloomberg) -- It took just a few hours for Prime Minister Giorgia Meloni to kick off the sale of a $1 billion stake in Banca Monte Paschi di Siena SpA which had been years in the works.
Soon after a ratings decision by Moody’s Investors Service on Friday capped a series of such assessments, her government jumped on an expected boost in market sentiment to green light the sale of the stake in the world’s oldest bank, according to people familiar with the matter.
Over the weekend, the government decided to act on a plan discussed with its advisers UBS Group AG and Jefferies for a quick disposal of a stake in Paschi. Among the factors behind the move was an improving spread between 10-year Italian and German bonds, a key measure of risk in the region, said the people who asked not to be named on a confidential issue.
Successive governments have long tried to find a way to sell a controlling stake in Paschi. The bank was first bailed out in 2009 after it was hit by souring loans and derivatives deals that backfired. In the following decade, it struggled to deliver consistent profit, given limited room for maneuver under terms set by the European Union.
The transaction allows the government to immediately cut Italy’s debt mountain by €920 million ($1 billion) and came just hours ahead of assessments by the European Commission, the EU’s executive, on national budgets for 2024.
An official briefed on the matter said a key condition for kicking off the sale was Italy’s latest budget and its financial management. Representatives for UBS and Jefferies declined to comment.
The finance ministry offered a 20% stake on Monday evening, after the market close. Demand turned out to be five times the size of that offer, prompting the government to boost the stake to 25%, the people said. Italy sold 314.9 million shares for €2.92 a piece, with a 5% discount on Monday’s closing price.
Following Monday’s sale, Italy has shrunk its stake in Paschi from 64% to 39%, which could pave the way for creating a third Italian banking group, as planned by Meloni. A smaller state holding could facilitate an M&A deal.
The EU allowed Italy to nationalize Paschi, based in Siena in Tuscany, in 2017 on condition it be re-privatized with an initial deadline set for 2021. Meloni’s predecessor Mario Draghi asked the EU to extend a deadline to sell the state’s controlling stake to the middle of 2024.
A turnaround under Chief Executive Officer Luigi Lovaglio, after years of restructuring, has turned the bank into an asset and not a burden.
Earlier this month, Paschi shares hit their record high since a €2.5 billion capital increase completed a year ago. Shares closed at €3.17 on Nov. 16, marking an increase of about 60% compared to the offer price of €2. The share sale was part of Lovaglio’s turnaround plan.
Bloomberg Businessweek
Sonia Sirletti, Chiara Albanese and Alessandra Migliaccio
Wed, November 22, 2023
(Bloomberg) -- It took just a few hours for Prime Minister Giorgia Meloni to kick off the sale of a $1 billion stake in Banca Monte Paschi di Siena SpA which had been years in the works.
Soon after a ratings decision by Moody’s Investors Service on Friday capped a series of such assessments, her government jumped on an expected boost in market sentiment to green light the sale of the stake in the world’s oldest bank, according to people familiar with the matter.
Over the weekend, the government decided to act on a plan discussed with its advisers UBS Group AG and Jefferies for a quick disposal of a stake in Paschi. Among the factors behind the move was an improving spread between 10-year Italian and German bonds, a key measure of risk in the region, said the people who asked not to be named on a confidential issue.
Successive governments have long tried to find a way to sell a controlling stake in Paschi. The bank was first bailed out in 2009 after it was hit by souring loans and derivatives deals that backfired. In the following decade, it struggled to deliver consistent profit, given limited room for maneuver under terms set by the European Union.
The transaction allows the government to immediately cut Italy’s debt mountain by €920 million ($1 billion) and came just hours ahead of assessments by the European Commission, the EU’s executive, on national budgets for 2024.
An official briefed on the matter said a key condition for kicking off the sale was Italy’s latest budget and its financial management. Representatives for UBS and Jefferies declined to comment.
The finance ministry offered a 20% stake on Monday evening, after the market close. Demand turned out to be five times the size of that offer, prompting the government to boost the stake to 25%, the people said. Italy sold 314.9 million shares for €2.92 a piece, with a 5% discount on Monday’s closing price.
Following Monday’s sale, Italy has shrunk its stake in Paschi from 64% to 39%, which could pave the way for creating a third Italian banking group, as planned by Meloni. A smaller state holding could facilitate an M&A deal.
The EU allowed Italy to nationalize Paschi, based in Siena in Tuscany, in 2017 on condition it be re-privatized with an initial deadline set for 2021. Meloni’s predecessor Mario Draghi asked the EU to extend a deadline to sell the state’s controlling stake to the middle of 2024.
A turnaround under Chief Executive Officer Luigi Lovaglio, after years of restructuring, has turned the bank into an asset and not a burden.
Earlier this month, Paschi shares hit their record high since a €2.5 billion capital increase completed a year ago. Shares closed at €3.17 on Nov. 16, marking an increase of about 60% compared to the offer price of €2. The share sale was part of Lovaglio’s turnaround plan.
Bloomberg Businessweek
Bruised Cruise shifts gears in scaled-down robotaxi comeback plan
Kirsten Korosec
Wed, November 22, 2023
Image Credits: Darrell Etherington / Getty
Cruise executives are taking a measured business approach that preserves cash and improves safety culture in an attempt to put GM's troubled autonomous vehicle subsidiary on the right path.
The first steps in this rebuilding plan, which includes pausing production on its Origin robotaxi, were laid out in an internal email sent to employees by Mo Elshenawy, who was executive vice president of engineering at Cruise and ascended into the president role after co-founder and CEO Kyle Vogt resigned.
For now, this strategy includes more "realistic" plans, according to Elshenawy. That means focusing on its current robotaxi platform the Chevy Bolt AV instead of the custom-built Origin shuttle that GM started producing earlier this year. GM recently temporarily paused production of Origin. This latest email notes that while development of the Origin program will continue, the vehicle will not be produced in 2024. The company also is reviewing its layoff plans and will provide an update in several weeks.
While Elshenawy didn't provide a timeline for when Cruise would restart operations, he did say the company would relaunch in just one city at first. That's a departure from the aggressive multi-city launch strategy Cruise and GM had been focused on in 2023.
“As we work to rebuild trust with regulators and communities, we’ve made the decision to focus on the Bolt-based Cruise AVs in the near term with a longer term strategy around the Origin," the company wrote in an emailed statement in response to the internal email. “Once we have taken steps to improve our safety culture and rebuild trust, our strategy is to re-launch in one city and prove our performance there, before expanding.”
The internal email also provided some clarification surrounding its employee share-selling program, which was recently suspended for the fourth quarter. Vogt had reversed this wildly unpopular decision over the weekend, but employees were still waiting for more information. The email sent Wednesday said employees who own the restricted stock units that settled from the beginning of year to October would be eligible for a new tender offer to help with tax qualifications.
The internal email comes three days since Vogt abruptly resigned and about a month after the California Department of Motor Vehicles suspended Cruise’s permits to operate self-driving vehicles on public roads after an October 2 incident that saw a pedestrian — who had been initially hit by a human-driven car and landed in the path of a Cruise robotaxi — run over and dragged 20 feet by the AV. A video, which TechCrunch viewed a day after the incident, showed the robotaxi braking aggressively and coming to a stop over the woman. The DMV’s order of suspension stated that Cruise withheld about seven seconds of video footage, which showed the robotaxi then attempting to pull over and subsequently dragging the woman 20 feet.
Cruise, which had already faced increasing opposition from city officials in San Francisco, soon found itself hamstrung by investigations and pressure to stop operations. Without commercial permits to operate in San Francisco and an internal decision to pause its driverless fleets in other states, the company laid off contract workers, further deepening the malaise.
Kirsten Korosec
Wed, November 22, 2023
Image Credits: Darrell Etherington / Getty
Cruise executives are taking a measured business approach that preserves cash and improves safety culture in an attempt to put GM's troubled autonomous vehicle subsidiary on the right path.
The first steps in this rebuilding plan, which includes pausing production on its Origin robotaxi, were laid out in an internal email sent to employees by Mo Elshenawy, who was executive vice president of engineering at Cruise and ascended into the president role after co-founder and CEO Kyle Vogt resigned.
For now, this strategy includes more "realistic" plans, according to Elshenawy. That means focusing on its current robotaxi platform the Chevy Bolt AV instead of the custom-built Origin shuttle that GM started producing earlier this year. GM recently temporarily paused production of Origin. This latest email notes that while development of the Origin program will continue, the vehicle will not be produced in 2024. The company also is reviewing its layoff plans and will provide an update in several weeks.
While Elshenawy didn't provide a timeline for when Cruise would restart operations, he did say the company would relaunch in just one city at first. That's a departure from the aggressive multi-city launch strategy Cruise and GM had been focused on in 2023.
“As we work to rebuild trust with regulators and communities, we’ve made the decision to focus on the Bolt-based Cruise AVs in the near term with a longer term strategy around the Origin," the company wrote in an emailed statement in response to the internal email. “Once we have taken steps to improve our safety culture and rebuild trust, our strategy is to re-launch in one city and prove our performance there, before expanding.”
The internal email also provided some clarification surrounding its employee share-selling program, which was recently suspended for the fourth quarter. Vogt had reversed this wildly unpopular decision over the weekend, but employees were still waiting for more information. The email sent Wednesday said employees who own the restricted stock units that settled from the beginning of year to October would be eligible for a new tender offer to help with tax qualifications.
The internal email comes three days since Vogt abruptly resigned and about a month after the California Department of Motor Vehicles suspended Cruise’s permits to operate self-driving vehicles on public roads after an October 2 incident that saw a pedestrian — who had been initially hit by a human-driven car and landed in the path of a Cruise robotaxi — run over and dragged 20 feet by the AV. A video, which TechCrunch viewed a day after the incident, showed the robotaxi braking aggressively and coming to a stop over the woman. The DMV’s order of suspension stated that Cruise withheld about seven seconds of video footage, which showed the robotaxi then attempting to pull over and subsequently dragging the woman 20 feet.
Cruise, which had already faced increasing opposition from city officials in San Francisco, soon found itself hamstrung by investigations and pressure to stop operations. Without commercial permits to operate in San Francisco and an internal decision to pause its driverless fleets in other states, the company laid off contract workers, further deepening the malaise.
GM's Cruise plans small relaunch of driverless robotaxis
Samrhitha A and David Shepardson
Wed, November 22, 2023
(Reuters) -General Motors' robotaxi unit Cruise is planning to re-launch in one unspecified city before expanding to others, just weeks after California barred its self-driving vehicles from public roads following an accident last month.
Cruise last week paused all supervised and manual car trips in the United States while also expanding a safety review of its robotaxis, causing tumult within the company and compelling its CEO Kyle Vogt and chief product officer Daniel Kan to step down.
It is also a setback for an industry dependent on public trust and the cooperation of regulators. Cruise had in recent months touted ambitious plans to expand to more cities, offering fully autonomous taxi rides.
"Once we have taken steps to improve our safety culture and rebuild trust, our strategy is to re-launch in one city and prove our performance there, before expanding," the company said in a statement.
The GM unit said it would focus on the Bolt-based Cruise AVs in the near term with a longer term strategy around the Origin, a multi-passenger vehicle designed without a steering wheel or other controls for operation by a human driver.
It told employees in an email, which was read to Reuters, that it will also cut some jobs, "primarily in non-engineering roles" and would provide more details in mid-December.
A GM spokesman said its finance chief Paul Jacobson would likely address the financial impact on the automaker during a call with analysts scheduled for Nov. 29.
Before Cruise suspended operations, GM CEO Mary Barra had said Cruise and its autonomous vehicle technology could generate $50 billion in revenue by 2030, making the robotaxi business a big piece of her strategy to double revenue to $280 billion.
GM lost more than $700 million at Cruise in the third quarter and more than $8 billion since 2016.
Meanwhile, it now faces higher labor costs under a new United Auto Workers contract, slower-than-expected sales of its electric vehicles and costly new emissions standards from Washington.
GM's troubles have led to a 16% slide in its shares so far this year, compared with a near 19% rise in the broader S&P 500 index.
"Investors will be watching closely to evaluate whether management sees GM's challenges as limited to Cruise or if there is broader discussion about capital allocation across GM's portfolio," Morgan Stanley analyst Adam Jonas wrote in a note Wednesday.
NOT IN SAN FRANCISCO
GM and Cruise did not disclose the city where it would relaunch operations but it is unlikely to be in San Francisco, where the accident took place.
The incident involved another vehicle and ended with one of its self-driving taxis dragging a pedestrian. California authorities have pulled the company's license to operate driverless rides.
Cruise has operations in Phoenix and Austin, where regulators have been more accommodating. Its rival Waymo too has extensive operations in the cities.
As part of its previous expansion plans, Cruise had last year asked the National Highway Traffic Safety Administration (NHTSA) for permission to deploy up to 2,500 self-driving vehicles annually without human controls.
Without government approval, GM cannot deploy the Origin on public roads. The NHTSA said in July it "will issue a decision in the coming weeks" before the accident raised questions about safety.
Cruise also said it would compensate employees for potential tax liability of shares granted by the company. It had last week decided to make a new tender offer to allow them to sell shares, two days after cancelling an earlier offer.
Suspension of the program had sparked backlash from some employees who said they would face heavy tax burdens on the stocks that were vested at a much higher valuation on Oct. 15.
(Reporting by Samrhitha Arunasalam in Bengaluru, David Shepardson in Washington and Joe White in Detroit; Editing by Sayantani Ghosh and Arun Koyyur)
Samrhitha A and David Shepardson
Wed, November 22, 2023
(Reuters) -General Motors' robotaxi unit Cruise is planning to re-launch in one unspecified city before expanding to others, just weeks after California barred its self-driving vehicles from public roads following an accident last month.
Cruise last week paused all supervised and manual car trips in the United States while also expanding a safety review of its robotaxis, causing tumult within the company and compelling its CEO Kyle Vogt and chief product officer Daniel Kan to step down.
It is also a setback for an industry dependent on public trust and the cooperation of regulators. Cruise had in recent months touted ambitious plans to expand to more cities, offering fully autonomous taxi rides.
"Once we have taken steps to improve our safety culture and rebuild trust, our strategy is to re-launch in one city and prove our performance there, before expanding," the company said in a statement.
The GM unit said it would focus on the Bolt-based Cruise AVs in the near term with a longer term strategy around the Origin, a multi-passenger vehicle designed without a steering wheel or other controls for operation by a human driver.
It told employees in an email, which was read to Reuters, that it will also cut some jobs, "primarily in non-engineering roles" and would provide more details in mid-December.
A GM spokesman said its finance chief Paul Jacobson would likely address the financial impact on the automaker during a call with analysts scheduled for Nov. 29.
Before Cruise suspended operations, GM CEO Mary Barra had said Cruise and its autonomous vehicle technology could generate $50 billion in revenue by 2030, making the robotaxi business a big piece of her strategy to double revenue to $280 billion.
GM lost more than $700 million at Cruise in the third quarter and more than $8 billion since 2016.
Meanwhile, it now faces higher labor costs under a new United Auto Workers contract, slower-than-expected sales of its electric vehicles and costly new emissions standards from Washington.
GM's troubles have led to a 16% slide in its shares so far this year, compared with a near 19% rise in the broader S&P 500 index.
"Investors will be watching closely to evaluate whether management sees GM's challenges as limited to Cruise or if there is broader discussion about capital allocation across GM's portfolio," Morgan Stanley analyst Adam Jonas wrote in a note Wednesday.
NOT IN SAN FRANCISCO
GM and Cruise did not disclose the city where it would relaunch operations but it is unlikely to be in San Francisco, where the accident took place.
The incident involved another vehicle and ended with one of its self-driving taxis dragging a pedestrian. California authorities have pulled the company's license to operate driverless rides.
Cruise has operations in Phoenix and Austin, where regulators have been more accommodating. Its rival Waymo too has extensive operations in the cities.
As part of its previous expansion plans, Cruise had last year asked the National Highway Traffic Safety Administration (NHTSA) for permission to deploy up to 2,500 self-driving vehicles annually without human controls.
Without government approval, GM cannot deploy the Origin on public roads. The NHTSA said in July it "will issue a decision in the coming weeks" before the accident raised questions about safety.
Cruise also said it would compensate employees for potential tax liability of shares granted by the company. It had last week decided to make a new tender offer to allow them to sell shares, two days after cancelling an earlier offer.
Suspension of the program had sparked backlash from some employees who said they would face heavy tax burdens on the stocks that were vested at a much higher valuation on Oct. 15.
(Reporting by Samrhitha Arunasalam in Bengaluru, David Shepardson in Washington and Joe White in Detroit; Editing by Sayantani Ghosh and Arun Koyyur)
HAVING TO TELL THEM WHAT TO DO
EU lawmakers back rules forcing Big Tech to tackle child pornographyWHATEVER HAPPENED TO "DO NO EVIL"
Wed, November 22, 2023
A 3D printed logo of Meta Platforms is seen in front of displayed Google logo in this illustration
By Foo Yun Chee
BRUSSELS (Reuters) - EU lawmakers agreed on Wednesday to draft rules requiring Alphabet's Google, Meta and other online services to identify and remove online child pornography, saying that end-to-end encryption would not be affected.
The draft rule on child sexual abuse material (CSAM), proposed by the European Commission last year, has been a bone of contention between advocates of online safety measures and privacy activists worried about surveillance.
The European Union executive came up with the CSAM proposal after the current system of voluntary detection and reporting by companies proved to be insufficient to protect children.
EU lawmakers have to thrash out the final details with member states before the draft can become legislation in a process that may be finalised next year.
The proposed legislation forces messaging services, app stores and internet access providers to report and remove known and new images and videos, as well as cases of grooming.
An EU Centre on Child Sexual Abuse will be set up to act as a hub of expertise and to forward reports to the police.
To avoid mass surveillance, EU lawmakers beefed up detection orders to allow judicial authorities to authorise time-limited orders to find and delete CSAM. These can only be issued if there is reasonable grounds of suspicion of child sexual abuse.
Companies would also be able to choose the technology used to detect such offences, as long as this is subject to an independent, public audit.
The decision by lawmakers to exempt end-to-end encryption from the draft rules drew praise from privacy activists.
"The European Parliament's position removes indiscriminate chat control and allows only for targeted surveillance of specific individuals and groups reasonably suspicious of being linked to child sexual abuse material with a judicial warrant," The European Liberal Youth (LYMEC) said.
(Reporting by Foo Yun Chee; Editing by Alexander Smith)
Wed, November 22, 2023
A 3D printed logo of Meta Platforms is seen in front of displayed Google logo in this illustration
By Foo Yun Chee
BRUSSELS (Reuters) - EU lawmakers agreed on Wednesday to draft rules requiring Alphabet's Google, Meta and other online services to identify and remove online child pornography, saying that end-to-end encryption would not be affected.
The draft rule on child sexual abuse material (CSAM), proposed by the European Commission last year, has been a bone of contention between advocates of online safety measures and privacy activists worried about surveillance.
The European Union executive came up with the CSAM proposal after the current system of voluntary detection and reporting by companies proved to be insufficient to protect children.
EU lawmakers have to thrash out the final details with member states before the draft can become legislation in a process that may be finalised next year.
The proposed legislation forces messaging services, app stores and internet access providers to report and remove known and new images and videos, as well as cases of grooming.
An EU Centre on Child Sexual Abuse will be set up to act as a hub of expertise and to forward reports to the police.
To avoid mass surveillance, EU lawmakers beefed up detection orders to allow judicial authorities to authorise time-limited orders to find and delete CSAM. These can only be issued if there is reasonable grounds of suspicion of child sexual abuse.
Companies would also be able to choose the technology used to detect such offences, as long as this is subject to an independent, public audit.
The decision by lawmakers to exempt end-to-end encryption from the draft rules drew praise from privacy activists.
"The European Parliament's position removes indiscriminate chat control and allows only for targeted surveillance of specific individuals and groups reasonably suspicious of being linked to child sexual abuse material with a judicial warrant," The European Liberal Youth (LYMEC) said.
(Reporting by Foo Yun Chee; Editing by Alexander Smith)
ANTIVAXXER NATION
Vaccine exemption rates are rising among U.S. kindergartners. Here’s why some parents request them for medical reasons.Jamie Davis Smith
Wed, November 22, 2023
Vaccine exemption rates for kindergartners have climbed in 41 states.
Making sure vaccines are up to date is par for the course for many kids entering kindergarten. However, according to the Centers for Disease Control and Prevention (CDC), during the 2022-23 school year, the number of exemptions for kindergartners in the U.S. went up to 3%, with exemptions rising in 41 states.
In 10 states, Alaska, Arizona, Hawaii, Idaho, Michigan, Nevada, North Dakota, Oregon, Utah and Wisconsin, the exemption rate exceeded 5%. Among the states that reported exemptions, Idaho had the highest rate of exemptions, with more than 12%.
According to the Journal of Pediatric Pharmacology and Therapeutics, most parents who seek exemptions do so because of religious reasons, personal beliefs or philosophical reasons, safety concerns and a desire for more information from health care providers. Some parents, however, seek exemptions for their children due to medical reasons, which include allergic reactions and other medical conditions that make it unsafe for the children to receive vaccines. According to the CDC, all 50 states and the District of Columbia permit medical exemptions.
Vaccine exemption rates rising due to 'growing misinformation'
Dr. Hector De Leon, a pediatrician with Kaiser Permanente in Colorado, tells Yahoo Life that vaccine exemption rates are rising due to “growing misinformation” and that “the trust barometer between parent and medical institutions seems to have waned.” He notes that while more information is readily available, such information is not always accurate or well-researched. Moreover, De Leon says that some parents don’t believe certain vaccines are necessary because “we haven’t seen a lot of these illnesses for decades.” Nevertheless, he notes that a recent case of polio in the U.S. that resulted in a man becoming paralyzed is “an important reminder of the long-term benefits of vaccinating.”
De Leon says that — given all of the misinformation about vaccines — vaccine hesitancy is understandable. He adds that most pediatricians want parents to understand both the risks of getting a vaccine and the risks of not getting vaccinated. “As medical providers, we’re here to support, provide education and help in shared decision making,” he says. “It’s clear these vaccines save lives, keep children and the community healthy, influence better immune responses and so much more,” De Leon says.
He emphasizes that he is always willing to talk through concerns about vaccines with parents. “We want to hear those questions, continue to build trusting relationships, and ultimately work together to help provide the best care possible for your kids,” he says.
Which vaccines do parents seek exemptions from most often?
There is a spectrum of vaccine refusal among parents who seek vaccine exemptions. Some parents refuse all vaccines for their children while others have concerns about specific vaccines. The measles, mumps and rubella (MMR) vaccine is the most commonly refused routine vaccine for nonmedical reasons, followed by the human papillomavirus virus or HPV vaccine, Dr. Elizabeth Hammershaimb, an infectious disease pediatrician with the University of Maryland Children’s Hospital, tells Yahoo Life. However, she says that seasonal influenza and COVID-19 vaccines have the highest total rates of refusal.
Some children can’t get vaccinated due to medical concerns
Although the majority of parents seeking exemptions do so for religious or philosophical reasons, some children can’t get vaccinated due to medical concerns. “In my practice, parents ask for medical exemptions when children have previously had a reaction to a specific vaccine or are immunocompromised. So it’s a safety question,” De Leon says.
Hammershaimb adds that children with cancer cannot get vaccines while they are undergoing chemotherapy. Similarly, children who have medical conditions that require suppressing their immune systems can’t get vaccinated either, she says. “For medical reasons, the most common vaccines kids can't get are what we call ‘live’ vaccines; these include MMR and chicken pox,” Hammershaimb explains.
Austin Carrigg’s 11-year-old daughter Melanie is one of the kids who can’t get vaccines due to health concerns. Melanie, who has Down syndrome, a primary immunodeficiency and other medical conditions, takes a biologic medication that makes getting live vaccines dangerous. She cannot get the MMR and some other vaccines. Even the vaccines Melanie can get don’t work very well because “her body can't use them to create protection for herself,” Carrigg tells Yahoo Life.
Dr. Jennifer Silver’s child cannot get some vaccines because the child had a severe allergic reaction to the first MMR vaccine. This makes “the standard vaccination schedule a dangerous option,” Silver tells Yahoo Life.
'We’re looking for the rest of the community to vaccinate themselves' to protect patients
Life is difficult for families whose children can’t receive vaccines for medical reasons. “For these kids, we recommend isolating as much as possible. That can be quite difficult and challenging, especially for young children who want to be outside, explore, go to the library, movies, mall and so on,” De Leon says.
Carrigg and Silver have both altered their lives to try to keep their children healthy and safe, but they haven’t been able to protect them entirely. Silver says that “stringent hygiene” and “minimizing public exposure have become daily routines to shield our children from potential health risks,” especially from activities “that might pose a risk of exposure to vaccine-preventable diseases.”
Melanie lives in “lockdown,” Silver says. Despite being so careful, she has had COVID-19 and RSV twice. Carrigg says that spending “countless sleepless nights watching your child gasp for air from conditions that could be prevented is heartbreaking.” Melanie has been out of school for over a year while she receives immunoglobulin therapy that may provide her with enough immune system protection to enable her to return to school safely.
“We’re looking for the rest of the community to vaccinate themselves to not only protect themselves,” but also children who cannot get vaccinated as well, De Leon says. Hammershaimb points out that “some of these diseases have real, long-term complications that a lot of parents don't realize.” The more people who are vaccinated, the more “rings of protection” there will be around these children, she explains.
Carrigg says that she believes people have the right to refuse vaccinations. However, she says, “I'd urge anyone considering declining vaccination to think about my little girl and the life she could have if true herd immunity were achieved.”
Media Matters chair won’t back down about anti-Semitism on X: ‘As evidenced by Elon Musk’s own conduct, the rot seems to go all the way to the top’
Christiaan Hetzner
Tue, November 21, 2023
Media Matters for America, a nonprofit watchdog best known for targeting Fox News, disputed Elon Musk’s claims in a lawsuit that it used a bad-faith campaign to maliciously scare away major advertisers from X, and reserves the right to countersue the tycoon.
Speaking to Fortune, the organization’s chairman and president refuted Musk's allegations that MMFA manipulated and gamed the platform’s algorithm to manufacture a set of results showing that X was unsafe for brands by featuring its ads next to neo-Nazi content. In response, IBM led a wave of prominent advertiser defections and the White House issued a rare, full-throated criticism of Musk's conduct.
“We didn’t cherry-pick our data,” Angelo Carusone said in an interview, claiming any search of the hashtag #WhiteNationalism on X would yield similar results. “The filters they say they have are not working the way they say they should.”
Now the MMFA chair is weighing up his legal options in response, including whether to fight back against Musk's team of lawyers. Carusone, who calls the lawsuit filed on Monday "frivolous," said his organization would reserve all legal options to defend itself. He said this could include potentially countersuing Musk for attempting to shut down protected speech, in what’s known in legal terms as an anti-SLAPP lawsuit.
X is not the only social media site to feature unsafe content, Carusone readily concedes, but it is the outlier when it comes to lacking some of the very basic guardrails for content moderation.
“Elon Musk has gutted the brand safety division; it doesn’t exist in any functional way," he said. "Yes, these kinds of things pop up all over the place, but other platforms have mechanisms and internal controls to respond to them,” he said. “Whereas X, on the other hand, not only doesn’t have those controls, but as evidenced by Elon Musk’s own conduct, the rot seems to go all the way to the top.”
By its own account, MMFA is not an impartial watchdog, stating its mission is to monitor, analyze, and correct “conservative misinformation in the U.S. media.” This puts it in a similar category as pressure groups like CAMERA and HonestReporting, which also parse media coverage from the vantage point of a particular agenda.
Nonetheless, Musk reached straight for hyperbole on Monday by calling MMFA “pure evil.” He pledged to file not just any lawsuit but a “thermonuclear” one at that after the nonprofit’s report prompted an exodus of advertisers.
Notable departures included heavy hitters like Apple—one of the biggest customers of X—as well as other blue-chips such as Sony, Warner Bros. Discovery, and Paramount. Tellingly, X CEO Linda Yaccarino couldn’t even stop her own previous employer, NBCUniversal, from pulling its spots despite her decade-plus ties to the Comcast subsidiary.
Inconsistent policies on free speech
This critical report, not the first from MMFA regarding X, proved so combustible precisely because Musk had sympathized just one day earlier with what many felt was a bigoted post accusing Jews of hating white people and perpetuating the Great Replacement theory, which alleges ethnic minorities are actively conspiring to marginalize America’s dominant white population.
Since this theory played a key role in the deadly mass shootings of Jews in a Pittsburgh synagogue and Blacks in a Buffalo supermarket, even the White House felt it necessary to censure Musk for his ill-advised endorsement.
In a likely move designed to squash any further speculation that Musk may harbor latent anti-Semitic tendencies, the X owner declared on Friday the pro-Palestinian call for “decolonization” in connection with Israel’s ongoing siege of Gaza to be tantamount to a call for genocide punishable with a ban.
“He’s not really a free-speech person. If he was, his position on this would have been a lot more consistent,” Carusone argued. “I think he was trying to insulate himself from criticism by doing something performative.”
This arbitrary tendency to make up policy on the fly is part of the reason why advertisers are rightly so skittish, per the MMFA chairman. When asked about Musk's unilateral ruling during Pride Month that calling anyone “cis” on X could be construed as a slur punishable with a suspension, Carusone agreed that it was no accident: "What I do know is that he’s engaged in malicious cruelty for no reason at all against people that clearly have a lot less power than him."
Carusone instead accuses Musk of intentionally draping his increasingly conservative worldview with high-minded principles, like a defense of the First Amendment, to avoid any consequences.
'Frivolous' lawsuit filed in a Musk-friendly jurisdiction
On Monday, Musk filed the lawsuit against MMFA in U.S. District Court in Texas, seeking unspecified damages and specifically demanding a trial by jury in the deeply red jurisdiction.
The legal strategy is somewhat unconventional, however. X operates out of San Francisco and is legally incorporated in Nevada, so one might expect the lawsuit to be filed in either of those two states.
Yet Musk sought out a state that coincidentally happens to be home to the headquarters of both Tesla and SpaceX, justifying the choice by arguing the campaign also affected companies and users located in the Republican-run Lone Star State, although that argument could apply to virtually any jurisdiction in the country.
On Monday, Musk also reposted a statement from Texas attorney general Ken Paxton saying his taxpayer-funded office would launch a criminal investigation into MMFA. Paxton himself is a controversial figure, impeached but not removed by the Texas legislature in September following 16 counts of bribery and corruption.
“At the same time that Elon Musk is calling himself a free-speech champion, he’s egging on state attorney generals to prosecute me. That is saying to the government you should punish someone for something you don’t like,” countered Carusone.
Neither Elon Musk nor X responded to a request from Fortune for comment.
The MMFA chairman vowed that his nonprofit would not in any way back down or be cowed by Musk’s legal threats, and would continue advocating for greater brand security irrespective of the civil lawsuit.
“He can scapegoat one research piece all he wants,” he said, “but fundamentally the problem is with him and X, not with us.”
This story was originally featured on Fortune.com
List of Media, Tech Advertisers Quitting X Over Elon Musk's Antisemitic Comment
Nhari Djan
Tue, November 21, 2023
Major media and tech CEOs are taking a stance against Elon Musk after he endorsed an antisemitic post on X, formerly Twitter, and the platform placed some of their ads next to antisemitic content. The Walt Disney Company, Lionsgate and Warner Bros. Discovery are among companies that have suspended advertising on X after its owner’s latest antic.
Musk faced backlash from industry peers and investors about his comment, where he responded “you have said the actual truth” to a user’s post claiming Jewish communities are “pushing hatred” against white people. Dustin Moskovitz, a Facebook cofounder and the CEO of productivity software maker Asana, called for Musk to resign from all of his companies.
Major advertisers’ pullout could jeopardize X’s already struggling revenue streams. Musk has complained publicly about the company’s declining ad business since he bought it in October 2022. Many industry observers believe this is the main reason Musk in June brought on Linda Yaccarino, the former chief of global ad sales at NBCUniversal, to lead X.
In Musk’s grievances about advertising, he has blamed and filed suits against anti-hate groups such as the Anti-Defamation League and the Center for Countering Digital Hate for discouraging companies from advertising on X. Most recently, he threatened to sue Media Matters for America, a liberal watchdog organization that monitors media companies for issues like misinformation, after it reported last week it found ads from companies like Apple (AAPL), Oracle, Xfinity and IBM alongside pro-Nazi content. Apple and IBM have halted ad spending on X.
Here is a running list of every major media and tech company that has paused ad spending on X:
The Walt Disney (DIS) Company
Warner Bros. Discovery (WBD)
Lionsgate
Apple
IBM
Comcast (CMCSA) (the parent company of NBCUniversal, Yaccarino’s former employer)
Paramount (PARA) Global
Sony Pictures
The Internet and Television Association
Christiaan Hetzner
Tue, November 21, 2023
Media Matters for America, a nonprofit watchdog best known for targeting Fox News, disputed Elon Musk’s claims in a lawsuit that it used a bad-faith campaign to maliciously scare away major advertisers from X, and reserves the right to countersue the tycoon.
Speaking to Fortune, the organization’s chairman and president refuted Musk's allegations that MMFA manipulated and gamed the platform’s algorithm to manufacture a set of results showing that X was unsafe for brands by featuring its ads next to neo-Nazi content. In response, IBM led a wave of prominent advertiser defections and the White House issued a rare, full-throated criticism of Musk's conduct.
“We didn’t cherry-pick our data,” Angelo Carusone said in an interview, claiming any search of the hashtag #WhiteNationalism on X would yield similar results. “The filters they say they have are not working the way they say they should.”
Now the MMFA chair is weighing up his legal options in response, including whether to fight back against Musk's team of lawyers. Carusone, who calls the lawsuit filed on Monday "frivolous," said his organization would reserve all legal options to defend itself. He said this could include potentially countersuing Musk for attempting to shut down protected speech, in what’s known in legal terms as an anti-SLAPP lawsuit.
X is not the only social media site to feature unsafe content, Carusone readily concedes, but it is the outlier when it comes to lacking some of the very basic guardrails for content moderation.
“Elon Musk has gutted the brand safety division; it doesn’t exist in any functional way," he said. "Yes, these kinds of things pop up all over the place, but other platforms have mechanisms and internal controls to respond to them,” he said. “Whereas X, on the other hand, not only doesn’t have those controls, but as evidenced by Elon Musk’s own conduct, the rot seems to go all the way to the top.”
By its own account, MMFA is not an impartial watchdog, stating its mission is to monitor, analyze, and correct “conservative misinformation in the U.S. media.” This puts it in a similar category as pressure groups like CAMERA and HonestReporting, which also parse media coverage from the vantage point of a particular agenda.
Nonetheless, Musk reached straight for hyperbole on Monday by calling MMFA “pure evil.” He pledged to file not just any lawsuit but a “thermonuclear” one at that after the nonprofit’s report prompted an exodus of advertisers.
Notable departures included heavy hitters like Apple—one of the biggest customers of X—as well as other blue-chips such as Sony, Warner Bros. Discovery, and Paramount. Tellingly, X CEO Linda Yaccarino couldn’t even stop her own previous employer, NBCUniversal, from pulling its spots despite her decade-plus ties to the Comcast subsidiary.
Inconsistent policies on free speech
This critical report, not the first from MMFA regarding X, proved so combustible precisely because Musk had sympathized just one day earlier with what many felt was a bigoted post accusing Jews of hating white people and perpetuating the Great Replacement theory, which alleges ethnic minorities are actively conspiring to marginalize America’s dominant white population.
Since this theory played a key role in the deadly mass shootings of Jews in a Pittsburgh synagogue and Blacks in a Buffalo supermarket, even the White House felt it necessary to censure Musk for his ill-advised endorsement.
In a likely move designed to squash any further speculation that Musk may harbor latent anti-Semitic tendencies, the X owner declared on Friday the pro-Palestinian call for “decolonization” in connection with Israel’s ongoing siege of Gaza to be tantamount to a call for genocide punishable with a ban.
“He’s not really a free-speech person. If he was, his position on this would have been a lot more consistent,” Carusone argued. “I think he was trying to insulate himself from criticism by doing something performative.”
This arbitrary tendency to make up policy on the fly is part of the reason why advertisers are rightly so skittish, per the MMFA chairman. When asked about Musk's unilateral ruling during Pride Month that calling anyone “cis” on X could be construed as a slur punishable with a suspension, Carusone agreed that it was no accident: "What I do know is that he’s engaged in malicious cruelty for no reason at all against people that clearly have a lot less power than him."
Carusone instead accuses Musk of intentionally draping his increasingly conservative worldview with high-minded principles, like a defense of the First Amendment, to avoid any consequences.
'Frivolous' lawsuit filed in a Musk-friendly jurisdiction
On Monday, Musk filed the lawsuit against MMFA in U.S. District Court in Texas, seeking unspecified damages and specifically demanding a trial by jury in the deeply red jurisdiction.
The legal strategy is somewhat unconventional, however. X operates out of San Francisco and is legally incorporated in Nevada, so one might expect the lawsuit to be filed in either of those two states.
Yet Musk sought out a state that coincidentally happens to be home to the headquarters of both Tesla and SpaceX, justifying the choice by arguing the campaign also affected companies and users located in the Republican-run Lone Star State, although that argument could apply to virtually any jurisdiction in the country.
On Monday, Musk also reposted a statement from Texas attorney general Ken Paxton saying his taxpayer-funded office would launch a criminal investigation into MMFA. Paxton himself is a controversial figure, impeached but not removed by the Texas legislature in September following 16 counts of bribery and corruption.
“At the same time that Elon Musk is calling himself a free-speech champion, he’s egging on state attorney generals to prosecute me. That is saying to the government you should punish someone for something you don’t like,” countered Carusone.
Neither Elon Musk nor X responded to a request from Fortune for comment.
The MMFA chairman vowed that his nonprofit would not in any way back down or be cowed by Musk’s legal threats, and would continue advocating for greater brand security irrespective of the civil lawsuit.
“He can scapegoat one research piece all he wants,” he said, “but fundamentally the problem is with him and X, not with us.”
This story was originally featured on Fortune.com
List of Media, Tech Advertisers Quitting X Over Elon Musk's Antisemitic Comment
Nhari Djan
Tue, November 21, 2023
Major media and tech CEOs are taking a stance against Elon Musk after he endorsed an antisemitic post on X, formerly Twitter, and the platform placed some of their ads next to antisemitic content. The Walt Disney Company, Lionsgate and Warner Bros. Discovery are among companies that have suspended advertising on X after its owner’s latest antic.
Musk faced backlash from industry peers and investors about his comment, where he responded “you have said the actual truth” to a user’s post claiming Jewish communities are “pushing hatred” against white people. Dustin Moskovitz, a Facebook cofounder and the CEO of productivity software maker Asana, called for Musk to resign from all of his companies.
Major advertisers’ pullout could jeopardize X’s already struggling revenue streams. Musk has complained publicly about the company’s declining ad business since he bought it in October 2022. Many industry observers believe this is the main reason Musk in June brought on Linda Yaccarino, the former chief of global ad sales at NBCUniversal, to lead X.
In Musk’s grievances about advertising, he has blamed and filed suits against anti-hate groups such as the Anti-Defamation League and the Center for Countering Digital Hate for discouraging companies from advertising on X. Most recently, he threatened to sue Media Matters for America, a liberal watchdog organization that monitors media companies for issues like misinformation, after it reported last week it found ads from companies like Apple (AAPL), Oracle, Xfinity and IBM alongside pro-Nazi content. Apple and IBM have halted ad spending on X.
Here is a running list of every major media and tech company that has paused ad spending on X:
The Walt Disney (DIS) Company
Warner Bros. Discovery (WBD)
Lionsgate
Apple
IBM
Comcast (CMCSA) (the parent company of NBCUniversal, Yaccarino’s former employer)
Paramount (PARA) Global
Sony Pictures
The Internet and Television Association
Ubisoft has suspended advertising on Elon Musk's X
It's the latest company to pull its ads following Media Matters' report showing ads next to antisemitic content.
Mariella Moon
·Contributing Reporter
Wed, November 22, 2023
Ubisoft is the latest company to join what seems to be a growing list of advertisers pulling their campaigns from Elon Musk's X, formerly known as Twitter. The company has confirmed to PCGamer and Axios that it has paused advertising on the website, possibly making it the first video game publisher to do so. While Ubisoft didn't elaborate on its reasoning behind the decision, X's advertisers have been suspending their advertising activities on the social network after Musk supported an antisemitic tweet and Media Matters published a research showing brands' advertisements next to Nazi content.
IBM, Apple, Disney, Paramount, Warner Bros, Sony and Comcast have all paused their advertising on X. Lionsgate pulled its ads, as well, specifically citing Musk's tweet as the cause. Axios says Ubisoft's Assassin's Creed Nexus VR ad campaign was still showing up for X users as recently as Monday morning, and it's unclear if it stopped advertising on the social network before or after Linda Yaccarino published a statement calling Media Matters' report "misleading and manipulated."
X's CEO issued a call for users and advertisers to "stand with X," claiming that "not a single authentic user on [the website] saw IBM's, Comcast's, or Oracle's ads next to the content in Media Matters’' article." Shortly after that, X officially filed a lawsuit against the media watchdog, accusing it of "knowingly and maliciously manufactur[ing] side-by-side images depicting advertisers' posts on X Corp.'s social media platform beside Neo-Nazi and white national fringe content."
In its complaint, X explained that Media Matters had to create the right conditions, which included following accounts that post fringe Neo-Nazi and white nationalist content, in order to see ads right next to antisemitic posts.
Media Matters called the lawsuit "frivolous" and an attempt to "bully X's critics into silence" in a statement sent to Engadget. The organization also told us that it "stands behind its reporting and looks forward to winning in court."
Paris Hilton's media company joins brands pulling ads from X
Kate Gibson
Wed, November 22, 2023
Paris Hilton's entertainment company is suspending an advertising campaign on X, according to CNN, expanding the list of companies fleeing the social platform after billionaire Elon Musk's recent tweet endorsing an antisemitic conspiracy theory.
The move by 11:11 Media to distance itself from X, formerly known as Twitter, comes only a month after the companies announced an exclusive partnership that would include live video and commerce. X CEO Linda Yaccarino in October welcomed Hilton to the "@X family," tweeting: "The queen of pop culture, music, business and TV is #Sliving on X."
CBS MoneyWatch could not immediately reach anyone at Hilton's company for comment. Bruce Gersh, 11:11's president and chief operating officer, told CNN on Tuesday that the company "made the decision to immediately pull the campaign from the platform."
The advertiser exodus from X gathered steam last week after Musk, the company's billionaire owner, last week called an antisemitic post on his social media platform "the actual truth." Other major advertisers have suspended their marketing campaigns on the site in recent days, including Apple, Disney, IBM and Lionsgate, with some pointing to a report by Media Matters detailing a rise in antisemitism on X.
Apple, IBM and Oracle are among the companies that have had their ads appear next to Nazi-themed content on X, Media Matters said in its report. X has since filed a lawsuit against the liberal advocacy group, accusing Media Matters of misrepresenting its findings in an effort to destroy the company.
The White House denounced Musk for repeating "the hideous lie behind the most fatal act of antisemitism in American history," and President Biden then posted for the first time on X rival Threads.
The uproar is not the first at X, which had already lost advertisers concerned about their brands showing up on the platform next to controversial content. Musk hired Yaccarino, a former NBC executive, to sell big brands on the idea of returning to X.
According to research firm Similarweb, as of September global web traffic to Twitter.com was down 14% from a year ago, while traffic to the ads.twitter.com portal for advertisers was down 16.5%.
It's the latest company to pull its ads following Media Matters' report showing ads next to antisemitic content.
Mariella Moon
·Contributing Reporter
Wed, November 22, 2023
Ubisoft is the latest company to join what seems to be a growing list of advertisers pulling their campaigns from Elon Musk's X, formerly known as Twitter. The company has confirmed to PCGamer and Axios that it has paused advertising on the website, possibly making it the first video game publisher to do so. While Ubisoft didn't elaborate on its reasoning behind the decision, X's advertisers have been suspending their advertising activities on the social network after Musk supported an antisemitic tweet and Media Matters published a research showing brands' advertisements next to Nazi content.
IBM, Apple, Disney, Paramount, Warner Bros, Sony and Comcast have all paused their advertising on X. Lionsgate pulled its ads, as well, specifically citing Musk's tweet as the cause. Axios says Ubisoft's Assassin's Creed Nexus VR ad campaign was still showing up for X users as recently as Monday morning, and it's unclear if it stopped advertising on the social network before or after Linda Yaccarino published a statement calling Media Matters' report "misleading and manipulated."
X's CEO issued a call for users and advertisers to "stand with X," claiming that "not a single authentic user on [the website] saw IBM's, Comcast's, or Oracle's ads next to the content in Media Matters’' article." Shortly after that, X officially filed a lawsuit against the media watchdog, accusing it of "knowingly and maliciously manufactur[ing] side-by-side images depicting advertisers' posts on X Corp.'s social media platform beside Neo-Nazi and white national fringe content."
In its complaint, X explained that Media Matters had to create the right conditions, which included following accounts that post fringe Neo-Nazi and white nationalist content, in order to see ads right next to antisemitic posts.
Media Matters called the lawsuit "frivolous" and an attempt to "bully X's critics into silence" in a statement sent to Engadget. The organization also told us that it "stands behind its reporting and looks forward to winning in court."
Paris Hilton's media company joins brands pulling ads from X
Kate Gibson
Wed, November 22, 2023
Paris Hilton's entertainment company is suspending an advertising campaign on X, according to CNN, expanding the list of companies fleeing the social platform after billionaire Elon Musk's recent tweet endorsing an antisemitic conspiracy theory.
The move by 11:11 Media to distance itself from X, formerly known as Twitter, comes only a month after the companies announced an exclusive partnership that would include live video and commerce. X CEO Linda Yaccarino in October welcomed Hilton to the "@X family," tweeting: "The queen of pop culture, music, business and TV is #Sliving on X."
CBS MoneyWatch could not immediately reach anyone at Hilton's company for comment. Bruce Gersh, 11:11's president and chief operating officer, told CNN on Tuesday that the company "made the decision to immediately pull the campaign from the platform."
The advertiser exodus from X gathered steam last week after Musk, the company's billionaire owner, last week called an antisemitic post on his social media platform "the actual truth." Other major advertisers have suspended their marketing campaigns on the site in recent days, including Apple, Disney, IBM and Lionsgate, with some pointing to a report by Media Matters detailing a rise in antisemitism on X.
Apple, IBM and Oracle are among the companies that have had their ads appear next to Nazi-themed content on X, Media Matters said in its report. X has since filed a lawsuit against the liberal advocacy group, accusing Media Matters of misrepresenting its findings in an effort to destroy the company.
The White House denounced Musk for repeating "the hideous lie behind the most fatal act of antisemitism in American history," and President Biden then posted for the first time on X rival Threads.
The uproar is not the first at X, which had already lost advertisers concerned about their brands showing up on the platform next to controversial content. Musk hired Yaccarino, a former NBC executive, to sell big brands on the idea of returning to X.
According to research firm Similarweb, as of September global web traffic to Twitter.com was down 14% from a year ago, while traffic to the ads.twitter.com portal for advertisers was down 16.5%.
NRG Energy Replaces CEO in Activist Investor–Influenced Shuffle
Sonal Patel
Wed, November 22, 2023
NRG Energy has appointed the chair of its board of directors, Dr. Lawrence Coben, as its interim president and CEO and appointed four new independent directors to its board, signaling a major leadership reshuffle partly influenced by activist investor firm Elliott Investment Management.
The Houston-headquartered energy giant on Nov. 20 said Mauricio Gutierrez, NRG’s long-time and influential president and CEO, “has departed the Company and resigned from the Board.” The company’s board “has initiated a search to identify a permanent CEO and retained a leading search firm to assist with this process,” it said.
NRG also announced that, pursuant to a “cooperation agreement” with Elliott, it would add four new independent directors to its board. These include Marwan Fawaz, a former executive at Google, Alphabet, Nest, and Motorola Home; Kevin Howell, who served as COO of Dynegy Inc. and Regional President of NRG Texas; Alex Pourbaix, the executive chair and former CEO of Cenovus Energy; and Marcie Zlotnik, who co-founded and led StarTex Power as COO and Chair.
The new directors “were identified as part of NRG’s previously announced Board refreshment process and in collaboration with Elliott,” NRG said. With the appointments, NRG’s board now comprises 13 directors, 12 of whom are independent.
Finally, NRG said it would also “conduct a comprehensive review of its operations and cost structure to identify additional opportunities to become more efficient and further enhance capital return to shareholders,” it said. “The review will be undertaken with a continued commitment to reliability in the markets NRG serves and with the support of external advisors.”
Pressure from an Activist Investor
The changes follow repeated calls by utility investor and hedge fund Elliott for a new CEO and “enhancements” to the board of directors. Elliott in May notified NRG it had spent $1 billion and claimed to hold a 13% “economic interest” (through stock and derivatives) in NRG. In a letter sent to NRG’s board, the firm suggested the company had “meaningfully underperformed due to a number of operational and strategic missteps.” Among the missteps the firm outlined is NRG’s $2.8 billion purchase earlier this year of Vivint Home, a “smart-home” platform.
Vivint’s acquisition, as POWER has reported in-depth, marked a step change for the historically generation-focused competitive energy provider—which was once the nation’s largest independent power producer. But it was designed as a strategic effort to shape the company’s future market standing as electrification gains pace and the residential sector adopts smart and connected devices. According to Elliott, however, the acquisition, “measured by the one-week market reaction following its announcement, was the single worst deal in the power and utilities sector in the past decade.”
Elliott has notably said its recent intervention echoes activism in 2017 when it recommended NRG rein in its focus on its core merchant power and retail electricity business. The effort culminated in the company’s “Transformation Plan,” reinvigorating the company’s financial initiatives, including $1.065 billion of total cost and margin improvement, $2.5 billion to $4.0 billion of asset divestitures, and $13 billion of debt reduction, the firm has claimed. During that time, NRG relinquished GenOn’s 15.4-GW fleet—nearly a third of its fleet—to its creditors and unloaded a 3.4-GW renewable asset portfolio in NRG Yield.
In June, Elliott once again called for a new leader, shifting blame directly on CEO Gutierrez, who it claimed had "lost the confidence of the core investor base." The board "lacks the will to make the right decision for the company," it said. In response, NRG Board of Directors Chair Coben in a statement said the board fully supported Gutierrez, the company’s management team, and the company’s strategy “to drive substantial, sustainable shareholder value.”
But in July, Elliott asked the Federal Energy Regulatory Commission (FERC) for permission to buy up to 20% of NRG’s stock. The firm’s power play raised concerns from consumer advocacy group Public Citizen, which in August called on FERC to investigate Elliott’s proposed acquisition, suggesting that Elliott's relationship with coal supplier Peabody Energy raised anti-competitive concerns. Public Citizen has urged FERC to require more details of all derivative contracts it used to acquire NRG’s “economic interest” as well as clarify what role its executives will play on NRG’s board.
NRG Reaches Cooperation Agreement with Elliott
Under Elliott’s cooperation agreement with NRG reached on Monday, NRG’s board will have a maximum of 13 directors until NRG’s 2024 annual meeting, and then reduce it to 11 directors afterward. This size adjustment is conditioned on a new CEO's appointment or by Dec. 31, 2024. If any new director appointed under the agreement cannot serve or leaves before the end of the Cooperation Period—which is slated with conditions to end in November 2024—NRG and Elliott will jointly select a replacement, provided Elliott still owns at least 1% of NRG's outstanding common stock.
On Monday, Elliott appeared to laud NRG’s abrupt reshuffle. “We invested in NRG because we believed that a renewed focus on best-in-class operations and returns-driven capital allocation would strengthen NRG and enable it to deliver significant upside for shareholders,” said Elliott Partner John Pike and Portfolio Manager Bobby Xu in a statement. “The changes announced today, including the addition of four new Board members with strong operational backgrounds, represent a key milestone toward this end. We look forward to continuing our dialogue with the Company as it works to execute on this opportunity.”
Coben, who has served as NRG’s board of directors chair since 2017 and has been a member of the company’s board since 2003, thanked Guitierrez “for his contributions in helping to build NRG’s solid foundation as we prepare for the next generation of leadership.”
The new directors, Coben suggested, will bring “complementary experience as proven operators in the energy industry and in leading growing innovative home technology companies with iconic brands. Their expertise will help ensure we capture the value we create by offering a smarter, cleaner and more digitally enhanced energy ecosystem. We welcome them to the Board,” he said.
—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).
CRIMINAL CAPITALI$M
U.S. egg producers conspired to fix prices from 2004 to 2008, a federal jury ruled
ISABELLA VOLMERT
Wed, November 22, 2023
FILE - Chickens stand in their cage at the Rose Acre Farms, Monday, Nov. 16, 2009, near Stuart, Iowa. An Illinois jury ruled Tuesday, Nov. 21, 2023, that several major egg producers, including Rose Acre Farms, conspired to limit the U.S.'s supply of eggs in order to raise prices in a lawsuit first filed 12 years ago. (AP Photo/Charlie Neibergall, File) (ASSOCIATED PRESS)
INDIANAPOLIS (AP) — An Illinois jury ruled this week that several major egg producers conspired to limit the U.S.'s supply of eggs in order to raise prices in a case stemming from a federal lawsuit originally filed 12 years ago.
Several large food manufacturing companies including Kraft Foods Global, Inc. and The Kellogg Company alleged in the lawsuit originally filed in 2011 that producers used various means to limit the U.S. domestic supply of eggs to increase the prices of eggs and egg products during the 2000s. The time frame of the conspiracy was an issue throughout the case; jurors ultimately determined damages occurred between 2004-2008.
A jury unanimously delivered its verdict Tuesday in the Northern District of Illinois and damages will be decided in a trial scheduled for next week.
The suppliers include the family company of an Indiana egg farmer running for the U.S. Senate in the state.
Attorneys for the four egg suppliers named in the lawsuit did not immediately return phone messages on Wednesday. Court documents show the defendants denied the claims.
The jury found that the egg suppliers exported eggs to reduce the overall supply in the domestic market, as well as limiting the number of chickens through means including cage space, early slaughter and flock reduction, court documents say.
“We are incredibly pleased by the jury’s decision to hold egg producers Cal-Maine Foods and Rose Acre Farms accountable alongside United Egg Producers and United States Egg Marketers for conspiring to inflate the price of eggs,” Brandon Fox, an attorney representing the food manufacturers, said in a statement. “For the first time, the defendants have been held liable for their antitrust violations. We are now going to turn our attention to the damages phase.”
Court documents say the jury found the food manufacturers suffered injury in the timeframe of 2004 to 2008. Jurors were specifically told not to consider more recent egg pricing during their deliberations.
Other food manufacturers joining as plaintiffs in the lawsuit against the egg producers are General Mills, Inc. and Nestle USA, Inc. The jury found the egg suppliers who participated in the conspiracy were Cal-Maine Foods, Inc., United Egg Producers, Inc., United States Egg Marketers, Inc. and Rose Acre Farms, Inc., a southern Indiana-based company previously chaired by John Rust.
Rust, who is running for Indiana’s U.S. Senate seat in 2024, declined to comment Wednesday citing the ongoing litigation. Rose Acre Farms identifies itself as the second-largest egg producer in the U.S.
Rust is currently suing Indiana’s Secretary of State over a contested state law that could prevent his name from getting on the primary ballot as a Republican. According to the law, a candidate must vote in two primaries with the party they are affiliated with or the county party chair must approve their candidacy. Rust has argued the law is unconstitutional and vague.
The egg farmer faces an uphill battle for the GOP nomination: opponent U.S. Rep. Jim Banks has received the endorsement of the Indiana Republican Party and former President Donald Trump. The seat is currently held by Republican Mike Braun, who is instead running for governor next year.
“Today’s verdict proves John Rust isn’t just a conman pretending to be a Republican, he is a crook who exploits working class Hoosiers across Indiana for his own financial gain,” Banks said in a written statement. “While Indiana families struggle to put food on the table, he’s making it even harder to do that."
U.S. egg producers conspired to fix prices from 2004 to 2008, a federal jury ruled
ISABELLA VOLMERT
Wed, November 22, 2023
FILE - Chickens stand in their cage at the Rose Acre Farms, Monday, Nov. 16, 2009, near Stuart, Iowa. An Illinois jury ruled Tuesday, Nov. 21, 2023, that several major egg producers, including Rose Acre Farms, conspired to limit the U.S.'s supply of eggs in order to raise prices in a lawsuit first filed 12 years ago. (AP Photo/Charlie Neibergall, File) (ASSOCIATED PRESS)
INDIANAPOLIS (AP) — An Illinois jury ruled this week that several major egg producers conspired to limit the U.S.'s supply of eggs in order to raise prices in a case stemming from a federal lawsuit originally filed 12 years ago.
Several large food manufacturing companies including Kraft Foods Global, Inc. and The Kellogg Company alleged in the lawsuit originally filed in 2011 that producers used various means to limit the U.S. domestic supply of eggs to increase the prices of eggs and egg products during the 2000s. The time frame of the conspiracy was an issue throughout the case; jurors ultimately determined damages occurred between 2004-2008.
A jury unanimously delivered its verdict Tuesday in the Northern District of Illinois and damages will be decided in a trial scheduled for next week.
The suppliers include the family company of an Indiana egg farmer running for the U.S. Senate in the state.
Attorneys for the four egg suppliers named in the lawsuit did not immediately return phone messages on Wednesday. Court documents show the defendants denied the claims.
The jury found that the egg suppliers exported eggs to reduce the overall supply in the domestic market, as well as limiting the number of chickens through means including cage space, early slaughter and flock reduction, court documents say.
“We are incredibly pleased by the jury’s decision to hold egg producers Cal-Maine Foods and Rose Acre Farms accountable alongside United Egg Producers and United States Egg Marketers for conspiring to inflate the price of eggs,” Brandon Fox, an attorney representing the food manufacturers, said in a statement. “For the first time, the defendants have been held liable for their antitrust violations. We are now going to turn our attention to the damages phase.”
Court documents say the jury found the food manufacturers suffered injury in the timeframe of 2004 to 2008. Jurors were specifically told not to consider more recent egg pricing during their deliberations.
Other food manufacturers joining as plaintiffs in the lawsuit against the egg producers are General Mills, Inc. and Nestle USA, Inc. The jury found the egg suppliers who participated in the conspiracy were Cal-Maine Foods, Inc., United Egg Producers, Inc., United States Egg Marketers, Inc. and Rose Acre Farms, Inc., a southern Indiana-based company previously chaired by John Rust.
Rust, who is running for Indiana’s U.S. Senate seat in 2024, declined to comment Wednesday citing the ongoing litigation. Rose Acre Farms identifies itself as the second-largest egg producer in the U.S.
Rust is currently suing Indiana’s Secretary of State over a contested state law that could prevent his name from getting on the primary ballot as a Republican. According to the law, a candidate must vote in two primaries with the party they are affiliated with or the county party chair must approve their candidacy. Rust has argued the law is unconstitutional and vague.
The egg farmer faces an uphill battle for the GOP nomination: opponent U.S. Rep. Jim Banks has received the endorsement of the Indiana Republican Party and former President Donald Trump. The seat is currently held by Republican Mike Braun, who is instead running for governor next year.
“Today’s verdict proves John Rust isn’t just a conman pretending to be a Republican, he is a crook who exploits working class Hoosiers across Indiana for his own financial gain,” Banks said in a written statement. “While Indiana families struggle to put food on the table, he’s making it even harder to do that."
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