The Critical Need to Integrate The Humanities With Deep Technology

Human Oversight of Deep Technology Development Is Playing Catch-up

Systems Similar To Those In Place for Medical Science Are Urgently Required

 

After watching “The Great Hack” on Netflix I am appalled by the absence of any moral compass at Cambridge Analytica, which transformed Big Data into a political weapon. Other disturbing examples are Uber’s former corporate culture and Facebook’s collusion with CA in abusing our privacy. These cases are prima facie evidence of the crucial need and the opportunity to integrate the Humanities and ethics with deep technology development. I began my career as a Humanities graduate at Intel Corporation working closely with Ivy League MBA’s and senior engineers. We shared our knowledge and learned together to enable the company to excel. The best companies are those grounded in an appreciation of human values, companies that seek out Humanities graduates with a passion for technology to balance out their teams.

After watching “The Great Hack” on Netflix I am appalled by the absence of any moral compass at Cambridge Analytica, which transformed Big Data into a political weapon. Other disturbing examples are Uber’s former corporate culture and Facebook’s collusion with CA in abusing our privacy. These cases are prima facie evidence of the crucial need and the opportunity to integrate the Humanities and ethics with deep technology development. I began my career as a Humanities graduate at Intel Corporation working closely with Ivy League MBA’s and senior engineers. We shared our knowledge and learned together to enable the company to excel. The best companies are those grounded in an appreciation of human values, companies that seek out Humanities graduates with a passion for technology to balance out their teams.

 

Uber And The False Hopes Of A Sharing Economy

Regulating Ride-Sharing: New York May Be The Model For The Future

Writing On The Wall: London and Vancouver Moving In A Similar Direction

At its inception, Uber touted itself as a shining example of the “sharing economy” described by Jeremy Rifkin, in this now famous book, The Third Industrial Revolution. As time has passed the reality has been radically at odds with a sharing economy.  Among the many issues that have emerged has been the legacy of Uber’s ugly corporate culture, secret apps used to confound regulators, and to intimidate journalists, a Justice Department investigation of illegal practices, including 200 Uber employees conspiring together to attack Lyft’s operations. The proverbial chickens have come home to roost, as municipalities around the world have begun to regain control of transportation policy within their jurisdictions, and the inflated valuations of these unicorns begin to deflate.

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READ MORE: Wharton Newsletter: Regulating Ride-Sharing: New York May Be The Model For The Future

From the Wharton Newsletter/Podcast, August 14, 2018

The largest market for Uber, Lyft and other ride-hailing app companies — New York City — last week had its first successful attempt at regulating the growth of the nascent industry. On Wednesday, the New York City Council passed a series of bills, notably one that places a one-year moratorium on the issue of new for-hire vehicle (FHV) licenses. Other bills establish minimum wage levels for ride-hailing service drivers; require FHVs to submit data on ridership with penalties for failure to do so; and create driver-assistance centers to provide counseling services.

New York City had little option to act, especially after a similar move by Mayor Bill de Blasio fell apart following intense lobbying by Uber. Increasing road congestion by cars was the biggest contributing factor to the passage of the bill capping new licenses, corroborated by a decline in subway ridership. The number of FHVs in the city had grown from 65,000 in 2015 to about 130,000 currently. Uber is the biggest gainer, as shown by its almost hockey-stick growth in ridership.

New York City took the right steps to regulate the FHV industry, according to Wharton professor of operations, information and decisions Senthil Veeraraghavan. “This is the right way to go,” he said. “This is a great experiment that we’re [witnessing].”

“They had to do something,” noted Wharton management professor John R. Kimberly. “This is part of an obviously much deeper story … and the timing seems to be right.”

The move to ensure that drivers receive a minimum pay of $15 an hour after they cover expenses is also significant, said James Parrott, director of economic and fiscal policies at the New School’s Center for New York City Affairs. He had worked on an extensive study for the city’s Taxi and Limousine Commission that looked at the ride-hailing sector and its growth, and in particular its impact on driver earnings.

Kimberly, Veeraraghavan and Parrott discussed the implications of the legislative actions governing New York City’s for-hire vehicle industry on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

“This is the right way to go. This is a great experiment that we’re [witnessing].”–Senthil Veeraraghavan

Incentive to Improve

The establishment of a minimum pay for drivers is an important incentive for ride-hailing app companies to increase the utilization of drivers’ time, said Parrott. Drivers currently have a passenger in the car for only about 36 minutes of every hour, which means they don’t have a paying passenger for 42% of their time, he added.

Up to now, Uber’s business model has been “to flood the streets with cars,” since the firm gets a commission based on every fare, Parrott said. “There’s been no incentive for them to better utilize the drivers’ capital,” he added. “Keep in mind; this is an industry where the capital investment in the rolling stock – the cars – is entirely put up by the drivers. The pay standard gives them an incentive by allowing them to pay a little bit less if they make better utilization of the drivers’ time.”

The city will use the year ahead to study congestion levels in the city and find ways to redress that, including through congestion pricing mechanisms. Last week’s actions took a step in that direction with a surcharge on cabs below 96^th Street ($2 per ride for medallion trips and $2.75 for ride-hailing app cabs). It will also allow the city to monitor how the pay standard works out, and how the ride-hailing app companies make better utilization of drivers’ time, Parrott said.

“Even if you increase utilization by 10 percentage points – from 58% to 68% – you would only increase average wait times across the city about 20 to 30 seconds,” said Parrott, citing his study’s findings. “We sense that most people can live with that.”

According to Parrott, the number of Uber trips in the city increased 100% in 2016 and 70% in 2017. Going forward, he said that figure could probably grow another 40% over the next year, “even without any additional cars on the street – just from increased efficiency.” Those increased efficiencies could come from a variety of quarters, including urging part-time drivers to go full-time and recruiting some of the drivers from the non-app services, such as the traditional livery car segment that has no minimum pay standards.

“Uber and the drivers are on both sides of the story,” noted Veeraraghavan. Riders want low waiting times, which can be achieved with more vehicles. But drivers want fewer drivers, because that would allow them to get better pricing, he said.

“Granted it might have been done a lot sooner, but it seems to me that at least in the city of New York there’s a real, serious effort to get their arms around the problem.”–John Kimberly

Worsening Congestion

Parrott said New York City had first started talking about capping Uber and Lyft cars in 2015, drawing “heavy pushback” from the ride-hailing industry at that point. Between then and now, the number of trips using ride-hailing apps has skyrocketed to 600,000 a day, which is more than five times the level in 2015, he noted. A 2016 study by the mayor’s office proposed several remedial measures including those to reduce congestion, improve air quality, protect drivers’ interests and enhance passenger experiences.

Parrott said that while the city bears some responsibility for not acting sooner on the unbridled growth of the FHV industry, it faced a different climate when it attempted that in mid-2015. Uber at the time controlled 90% of the market in the city as opposed to 66% now, he pointed out. Suicides by six cab driversalso highlighted the “economic crisis” and changed public opinion in favor of the changes, he said.

“Theoretically speaking, there’s always a gap between what firms will want to optimize and what society wants to optimize,” said Veeraraghavan. “And it’s hard for individuals to see what’s optimal for this society.” However, as city residents have begun seeing the impact of the FHV industry’s growth — including on public transportation ridership numbers — they now have had a better understanding. “So we have a redo from 2015 to 2017 … and we’re seeing better support for this.”

“Granted, it might have been done a lot sooner, but it seems to me that at least in the city of New York there’s a real, serious effort to get their arms around the problem and to figure out how to solve it,” said Kimberly.

Congestion in New York City has worsened in recent years with not just the influx of cabs, but also other vehicles “providing instant service for a variety of needs that people believe they have,” including delivery vehicles, said Kimberly. “The density of tourists on the sidewalks is so great it spills over into the street – that slows down traffic and makes it hard for cars,” he added. The option of levying congestion pricing is being seriously considered also at the state headquarters in Albany, he noted.

At the same time, “the growth of FHVs has meant that there’s much better transportation access in the outer boroughs, so the city doesn’t want to diminish that newly available service,” said Kimberly. “And yet the city also has a great interest in making sure that the drivers are able to remain economically viable to meet their expenses and to earn a decent living.” Higher wages would also enable drivers to work fewer than the 10-12 hours a day they now put in, he added, and that would have safety benefits as well.

“If they can show that they have stability and regulatory certainty in their largest market in the U.S., that will give investors a lot more certainty….”–James Parrott

Congestion pricing will also help fund investments in maintaining and upgrading the city’s aging subway and public bus system, Parrott said. The decline in mass transit ridership is not just because of the growth of the FHV industry, he noted; commuters are turning away because of “under-investment and under attention to adequately maintaining the mass transit system.”

Uber’s Leadership Challenge

The changes also highlight a “leadership challenge” for Uber, said Kimberly. “They have hundreds of markets around the globe, and each market has its own political configuration, and its own way of doing business,” he noted. “When you think about the challenges of operating an enterprise like Uber on a global basis with all the local idiosyncrasies that need to be taken into account both economically and politically, it’s a really interesting [problem].”

Uber, which is currently valued at about $62 billion, is said to be preparing for an initial public offering of its stock next year. “If they can show that they have stability and regulatory certainty in their largest market in the U.S., that will give investors a lot more certainty about the potential prospects for the company,” said Parrott.

Uber’s impact on employment is also large, Parrott noted. Uber drivers are not legally considered employees, but if they were to be treated as full-time equivalent (FTE) employees, Uber would be the largest private-sector employer in New York City, with about 35,000 FTEs, he said. “[Ride sharing] has become a huge enterprise in New York City, and it and it’s not what people usually think of as gig work where you are doing this to supplement other income. We found that 80% of the drivers bought their cars mainly for the purpose of providing transportation services, and two thirds of the drivers are full-time drivers.”

Parrott noted that both Uber and Lyft embraced the pay standard proposal. But Kimberly thought they had little option in the matter. “I don’t think it’s by accident that they’re embracing the pay standard,” he said. “Left to their own devices, they probably would not have done that. But there’s been so much social criticism – and valid criticism – of their models that they’ve really had no choice.”

Harvey Weinstein Hired Israeli ex-Mossad Agent to Intimidate Women Accusers And Journalists

Weinstein Hired Israeli Ex-Mossad Agent to Intimidate Rose MacGowan And Other Accusers

In an extraordinary revelation today by Ronan Farrow, son of Woody Allen and the writer for The New Yorker who broke this story, it was revealed that Harvey Weinstein hired a female Israeli ex-Mossad agent via a private firm, Black Cube, and who used false identities and secret recording devices to intimidate Rose MacGowan and other female accusers of Harvey Weinstein.  Mr. Farrow appeared tonight on PBS Newshour in an interview by Judy Woodruff to detail his investigative findings. This has also now been reported by the Washington Post and other journals.

Chilling tale of Harvey Weinstein’s spies shows Ronan Farrow’s reporting chops — and compassion

Journalist Ronan Farrow at the White House Correspondents’ Association dinner in 2015. (Jonathan Ernst/Reuters)

By Margaret Sullivan Media Columnist November 7 at 2:44 PM

Over the past several weeks, I’ve heard endless variations of this question: “Why did it take so long for Harvey Weinstein to be revealed as a sexual predator?”With the publication Monday night of a remarkable story by Ronan Farrow in the New Yorker, there is less reason to speculate.In breathtaking detail, Farrow shows just how far the Hollywood mogul was willing to go to shut down the allegations of his sexual abuse over many decades.Farrow reports how Weinstein used a network of lawyers and spies — including former Mossad agents working undercover — to track women and reporters. It was a desperate, aggressive and, thankfully, failed effort.“It’s ‘Gaslight’ meets ‘Spotlight’ meets ‘All the President’s Men,’ ” was Hollywood writer Jake Fogelnest’s assessment of Farrow’s latest story.

Growing list of women allege sexual harassment, assault against Harvey Weinstein

Paz de la Huerta is among the many women accusing movie producer Harvey Weinstein of sexual harassment, assault or rape. Other accusers include Lupita Nyong’o, Gwyneth Paltrow and Cara Delevingne. (Nicki DeMarco/The Washington Post)

David Remnick, editor of the New Yorker, told me that the 29-year-old Farrow has the qualities he looks for in an investigative reporter — including relentless drive, or what he termed “obsession in the best sense.”

And, Remnick said, Farrow offers a rare quality: “Huge compassion, sympathy and patience” with those whose stories he wanted to tell. On occasions when he observed Farrow interacting with accusers, Remnick said, “it was really quite moving.”

Farrow’s reporting makes it clearer than ever how much credit must go not only to the women who came forward, willing to have their names used, but also to the New York Times, as well as the New Yorker, for withstanding the heat. The Times’s Jodi Kantor and Megan Twohey broke their history-making story Oct. 5; Farrow’s initial report in the New Yorker plowed new ground Oct. 10.

In this latest piece, Farrow, through access to a wide array of documents and many interviews, described Weinstein’s agents of intimidation.

“Two private investigators . . . using false identities, met with the actress Rose McGowan, who eventually publicly accused Weinstein of rape, to extract information from her. One of the investigators pretended to be a women’s rights advocate and secretly recorded at least four meetings with McGowan,” Farrow wrote.

The same operative, using a different identity and suggesting that she had information on Weinstein, met twice with a journalist to find out which women were talking to the press.

Later, Weinstein sicced his lawyers on news organizations, trying to prevent publication of negative stories. The role of prominent lawyer David Boies, who worked for Weinstein while repeatedly serving as outside counsel to the Times, is an unsavory subplot

 An explosive New York Times story has revealed sexual harassment allegations against famed producer Harvey Weinstein. (Nicki DeMarco/The Washington Post)

Farrow’s road to this triumphant moment hasn’t been smooth. He started the reporting while working for NBC, but the network claims it didn’t believe the story was solid enough. He took it to the New Yorker, where he developed it further.

It’s obvious now that NBC passed up not only a story that would be a blockbuster but also one that had a crucial social purpose. (Nor is it the first time that the network has pulled its punches. It was The Washington Post that last year revealed the now-infamous “Access Hollywood” tape on which Donald Trump bragged about groping women, scooping NBC on its own material.)

Farrow, a Yale Law School graduate, and former MSNBC host, has his own family history with alleged sexual assault.

Along with his mother, actress Mia Farrow, he has supported his older sister Dylan in her accusations against their father, director Woody Allen. She says she recalls her father’s frequent inappropriate touching and, at age 7, an instance of molestation.

Allen has vehemently denied the charges, and in 1993, a Connecticut prosecutor decided not to bring charges, though reportedly acknowledging that there may have been “probable cause” to do so. Allen has been married for many years to a sibling of Ronan’s and Dylan’s, Soon-Yi Previn.

These days, Ronan Farrow regrets advising Dylan to keep quiet.

“I was for many years one of the people around a victim of sexual assault, saying, ‘Why bother coming forward more? What will it achieve? It’s just going to bring shame and trouble, and he’s a powerful guy,’ ” Farrow told Stephen Colbert last week.

On Tuesday, I asked Farrow by phone how much his family background had motivated this new reporting.

There’s “no factual link between the two,” he said, but indirectly, his family experience “was integral” to making sure that his reporting was deep and meticulous.

“I have been part of a family where we’ve had to grapple with the complex cost-benefit analysis” of making public accusations, he said.

For a long time, he told me, “I said it was better to move forward — don’t let this cast a shadow.”

But as his sister decided to take her accusations against Allen public in 2014, “I realized I was wrong. I realized the healing value of the truth.”

No matter what the motivation behind Farrow’s reporting, it is deeply impressive.

The wonder about exposing Weinstein should no longer be why it took so long. The wonder is that — under this kind of immense pressure — the revelations happened at all.

 

OECD Apparently Believes Global Tax Evasion Is A Legacy Issue: A Pigs Will Fly Moment

Tax avoidance is allegedly a ‘legacy issue,’ OECD’s Angel Gurria says

• Gurria was Speaking at the Confederation of British Industry (CBI) conference in London
• He said governments were working hard to stop tax avoidance and evasion
• U.K. Prime Minister Theresa May said her government is continuing to work against tax evasion

Published 12 Hours Ago CNBC.com

Photographer | Collection | Getty Images

Amid another leak of documents revealing large-scale international tax avoidance, the secretary-general of the Organisation for Economic Co-operation and Development (OECD) said Monday that tax avoidance was fast becoming a thing of the past.

“When we’re talking about the ‘Panama Papers’ or ‘Paradise Papers’we’re talking about a legacy that is fast disappearing,” Angel Gurria said.

Speaking at the Confederation of British Industry (CBI) conference in London, Gurria said governments were working hard to stop tax avoidance and evasion.

“When we talk about ‘Double Irish’ or ‘Double Dutch’ (tax avoidance schemes) we’re talking about structures which are no longer there,” she said, adding: “This will not be repeated because of the work you and your governments and the OECD have done in the last few years.”

“There is quite literally no place to hide,” he said, noting that 50 countries had implemented automatic information exchanges regarding tax and that more nations were planning to do the same.

Gurria’s comments come after a leak of millions of documents revealing large-scale tax avoidance by high-profile individuals and companies via offshore financial services companies. The latest tax avoidance leak has been dubbed the “Paradise Papers” and comes after a similar leak in 2016 called the “Panama Papers” that showed how a Panamanian law firm allegedly helped its clients to avoid taxes by using offshore tax havens.

Speaking at the same business conference on Monday, U.K. Prime Minister Theresa May said that her government had continued the work against tax evasion that her predecessor David Cameron had begun.

“He started this work, not only in the U.K. economy but on an international stage. So we have seen more revenues coming into HMRC (the U.K.’s tax-collecting department) over the last few years, with £160 billion extra since 2010,” she said.

More work was being done to ensure “greater transparency” in the U.K.’s dependencies and British overseas territories, May said, and HMRC was already able to access more information about so-called “shell” companies.

“We want people to pay the tax that is due,” she said. That sentiment was echoed by the leader of the opposition Labour party, Jeremy Corbyn, who said that society was “undermined” by anyone that did not pay the tax they owed.

Uber is Enron Deja Vu: Culture Trumps Strategy

A Silicon Valley Tragedy

Remember Enron’s “Smartest Guys in the Room?”

An early photo of Uber’s management team

Why did Uber spin so wildly out of control?

For over a  year now I have blogged here about the red flags flying about Travis Kalanick and Uber. Many investigative articles have been published over this time, in the New York Times and other publications, which have raised disturbing questions about Uber, Kalanick and some members of his team. The Board of Directors has finally taken action but it feels like its a day late and a dollar short.  Why did it take so long?  I have bluntly used the epithet that “Uber is Trump,” but now on reflection, it is more apt to describe Uber as Enron the sequel, and “deja vu all over again.” Remember the audio of two Enron electricity traders laughing about “screwing grandma?” That is Uber.

Culture Trumps Strategy

So as the current management adage says, culture trumps strategy.  This is not simply about the bad behavior of a few individuals and that eliminating them will solve Uber’s problems. The aggressive, confrontational business strategy is itself an integral and inextricable part of the problem. Some have said that Uber has a good business model and deserves to succeed.  I dispute that.  Jeremy Rifkin’s Third Industrial Revolution describes his vision for a new sharing economy.  The book has been read by world leaders and praised for its insights into a bright new evolving economy.  Uber and other companies like it have morphed the sharing economy into something ugly.

Uber morphed the sharing economy into “the gig economy,” epitomized by jobs without security or benefits, and the now viral video of Kalanick berating an Uber driver who was going bankrupt. SFGate also exposed the Uber operating strategy of psychologically manipulating drivers to work more hours than intended. The central principle of Kalanick’s business strategy is what he euphemistically describes as “principled confrontation.” Uber enters a market without following any existing rules or regulations, simultaneously entering into negotiations with municipalities which are typified by stalling tactics from Uber, and no intention to conclude an agreement. Uber’s goal is to take over the market by force, making any agreements with municipalities unnecessary. While pursuing its strong-arm goal, Uber has used a software tool, Greyball, to evade law enforcement. Uber is now under criminal investigation for the use of Greyball. Even the notion that Uber somehow improves traffic congestion has been debunked by a Northwestern University study commissioned by the San Francisco Transportation Authority which found that ride sharing has a heavy negative impact on San Francisco’s traffic congestion. See www.sfcta.org/TNCsToday

Uber is also facing a major lawsuit from Google for expropriating Google driverless car technology by hiring one of Google’s engineers. Uber has now fired the engineer in question, but the firing itself may be a circumstantial admission that its intent was to steal Google IP.  In another case, nearly 200 Uber employees were encouraged to use fake ID, burner phones and credit cards to sabotage Lyft, by booking and then quickly canceling more than 5000 rides with Lyft. Then there is the matter of what can now only be described as pervasive sexual harassment within Uber. Adding to all of these issues, local communities have begun to resist Uber much more aggressively. In one example, a protest movement in Oakland is opposing Uber’s plan to open offices in Oakland. There are other examples dotted around the World. Finally, there is the unresolved matter of the status of Uber’s drivers as “independent contractors or employees” which is nearing a final decision in California state and federal courts.

Clearly, Uber’s business strategy is driven by its ugly corporate culture. Stepping back to consider the complete picture, Uber’s business strategy looks to me like a house of cards.

Uber’s Leadership Conundrum

Those who know me and my blogs here know that I am a student of Harvard Business School professor John Kotter and his philosophy of leadership with humility at its core.  Uber presents a leadership conundrum for me. I was interested to hear BackChannel journalist Jessi Hempel express the same point tonight on PBS Newshour.  Uber obviously urgently needs to change its culture, yet without the wild aggressive culture defined by Kalanick, the question remains whether Uber can survive? It is not clear to me that humility could turn the Uber cultural battleship. There have also been a number of business articles suggesting that changing a corporate culture is far more challenging than changing a corporate strategy. So I am left to ponder Peter Drucker’s Four Quadrants of Managerial Behavior, and Quadrant Four’s “high task, low relationship” model for Uber. I learned this in Intel’s M Series management courses years ago. The course used the case study of the film “12 O’Clock High,” a demoralized B-17 bomber unit as its example. Gregory Peck arrives as the new unit commander and begins by “kicking ass and taking names.”  A similar case would be George Patton’s arrival in North Africa to take command of a demoralized tank unit.  My sense at the moment is the only best hope is that somehow an interim leader at Uber will have the latitude to take whatever actions he deems necessary to right the ship.  Such a solution seems doubtful at the moment.

Business Ethics Missing in Action

This morning on NPR’s Morning Edition, Nina Kim interviewed the Director of the Markulla Center for Applied Ethics at Santa Clara University, Kirk Hansen. The Center is named for early Intel and Apple executive, Mike Markkula. Mr. Hansen said that “Uber will undoubtedly become one of the most important business case studies” to emerge from Silicon Valley. Hansen went on to point out that founders of startups are often not capable of taking the company to a mature large company, and that it may be necessary to remove or reassign the founder. In the case of Uber, this is impossible because Kalanick and his founder group have the majority of shares.  This contrasts with most startups legal framework, where the investors or Board may hold the right to remove the founder in specific circumstances.

The Smartest Guys in the Room

As a grey-haired Silicon Valley alumni, I am personally offended and outraged by what has happened at Uber. I am deeply ashamed. Over the years I have worked for some well-known SV companies, startups, VC firms, and my own consultancy. I have personal knowledge of things that happened that were not kosher, and I have been present in situations where the ethics were not the best, but nothing in my Silicon Valley experience rises to the level of Uber. Something has gone wildly out of control since my time with how we conduct ourselves in business, and it is now tarnishing the history and reputation of fifty years of Silicon Valley achievements. From my own personal experience working at one wildly successful company years ago, and after rewatching the Enron documentary video,  “The Smartest Guys in the Room,” the answer is simple: too much money.

 

Source: Uber CEO Kalanick likely to take leave, SVP Michael out: source | Reuters

TECHNOLOGY NEWS | Mon Jun 12, 2017 | 4:22pm ED

By Heather Somerville and Joseph Menn | SAN FRANCISCO | Reuters

Uber Technologies Inc [UBER.UL] Chief Executive Travis Kalanick is likely to take a leave of absence from the troubled ride-hailing company, but no final decision has yet been made, according to a source familiar with the outcome of a Sunday board meeting.

Emil Michael, senior vice president, and a close Kalanick ally has left the company, the source said.

At the Sunday meeting, the company’s board adopted a series of recommendations from the law firm of former U.S Attorney General Eric Holder following a sprawling, multi-month investigation into Uber’s culture and practices, according to a board representative.

Uber will tell employees about the recommendations on Tuesday, said the representative, who declined to be identified.

The company is also adding a new independent director, Nestle executive, and Alibaba board member Wan Ling Martello, a company spokesman said.

Holder and his law firm were retained by Uber in February to investigate company practices after former Uber engineer Susan Fowler published a blog post detailing what she described as sexual harassment and a lack of a suitable response by senior managers.

The recommendations in Holder’s firm’s report place greater controls on spending, human resources and other areas where executives led by Kalanick have had a surprising amount of autonomy for a company with more than 12,000 employees, sources familiar with the matter said.

Kalanick and two allies on the board have voting control of the company. Kalanick’s forceful personality and enormous success with Uber to date, as well as his super-voting shares, have won him broad deference in the boardroom, according to the people familiar with the deliberations.

Uber CEO Travis Kalanick speaks to students during an interaction at the Indian Institute of Technology (IIT) campus in Mumbai, India, January 19, 2016. REUTERS/Danish Siddiqui/File photo

Any decision to take a leave of absence will ultimately be Kalanick’s, one source said.

The world’s most valuable venture-backed private company has found itself at a crossroads as its rough-and-tumble approach to local regulations and handling employees and drivers has led to a series of problems.

It is facing a criminal probe by the U.S. Department of Justice over its use of a software tool that helped its drivers evade local transportation regulators, sources have told Reuters.

Last week, Uber said it fired 20 staff after another law firm looked into 215 cases encompassing complaints of sexual harassment, discrimination, unprofessional behavior, bullying and other employee claims.

SILICON VALLEY SHOCK

Even a temporary departure by Kalanick would be a shock for the Silicon Valley startup world, where company founders in recent years have enjoyed more autonomy and often become synonymous with their firms.

Uber’s image, culture, and practices have been largely defined by Kalanick’s brash approach, company insiders and investors previously told Reuters.

Uber board member Arianna Huffington said in March that Kalanick needed to change his leadership style from that of a “scrappy entrepreneur” to be more like a “leader of a major global company.” The board has been looking for a chief operating officer to help Kalanick run the company since March.

The debate over Kalanick’s future comes as he is also facing a personal trauma: His mother died last month in a boating accident, in which his father was also badly injured.

Michael, described by employees as Kalanick’s closest deputy, has been a recurring flashpoint for controversy at the company.

He once discussed hiring private investigators to probe the personal lives of reporters writing stories faulting the company. Kalanick disavowed and publicly criticized the comments.

Michael will be replaced as the company’s top business development executive by David Richter, currently an Uber vice president, the company spokesman said.

Alongside Uber’s management crisis, its self-driving car program is in jeopardy after a lawsuit from Alphabet Inc alleging trade secrets theft, and the company has suffered an exodus of top executives.

One Uber investor called the board’s decisions on Sunday a step in the right direction, giving Uber an “opportunity to reboot.”

British Columbia: The ‘Wild West’ of Canadian Political Cash – NYTimes.com

British Columbia has no limits on political donations, leading critics to say the provincial government has become a lucrative business dominated by special interests.

Source: British Columbia: The ‘Wild West’ of Canadian Political Cash – NYTimes.com

By DAN LEVIN

THE NEW YORK TIMES

JANUARY 13, 2017

VANCOUVER, British Columbia — As the premier of British Columbia, Christy Clark is on the public payroll, pulling down a salary of 195,000 Canadian dollars in taxpayer money. But if that were not enough, she also gets an annual stipend of up to 50,000 Canadian dollars — nearly $40,000 — from her party, financed by political contributions.

Personal enrichment from the handouts of wealthy donors, some of whom have paid tens of thousands of dollars to meet with her at private party fund-raisers? No conflict of interest here, according to a pair of rulings last year by the province’s conflict-of-interest commissioner — whose son works for Ms. Clark.

“B.C. is the wild west,” said Duff Conacher, a founder of Democracy Watch, a Canadian civic organization that has petitioned the Supreme Court of British Columbia to void the commissioner’s decision. The group argues that there is a “reasonable apprehension of bias” because the commissioner’s son is a deputy minister in Ms. Clark’s cabinet. The court heard arguments in the case on Friday.

Ethics in politics is a hot topic right now in Ottawa. Prime Minister Justin Trudeau has faced criticism for attending exclusive fund-raisers, and other Canadian provinces are tightening the reins on political contributions. Against that backdrop, the case in British Columbia stands out for the unabashedly cozy relationship between private interests and government officials in the province, a political state of affairs that will be tested at the ballot box in May.

Unlike many other provinces in Canada, British Columbia has no limits on political donations. Wealthy individuals, corporations, unions and even foreigners are allowed to donate large amounts to political parties there. Critics of the premier and her party, the conservative British Columbia Liberal Party, say the provincial government has been transformed into a lucrative business, dominated by special interests that trade donations for political favors, undermining Canada’s reputation for functional, consensus-driven democracy.

“What it says to people is money talks and votes don’t,” said Dermod Travis, the executive director of IntegrityBC, a nonpartisan political watchdog group based in Victoria, the provincial capital. “When anyone anywhere in the world can donate as much as they want to the system, you have an even bigger threat to the system.”

Much of what is considered business as usual in British Columbia is illegal elsewhere in Canada. The federal government bars unions, corporations and foreigners from donating to candidates for federal office, and donations by individual citizens are limited to 1,525 Canadian dollars, about $1,150, a year. Those limits were imposed after a fund-raising scandal in the 1990s.

Provincial ethics rules are a patchwork of restrictions and loopholes. Corporate and union donations are banned in Nova Scotia, Manitoba, Alberta and, since Jan. 1, in Ontario. Ontario provincial officials, their staff members and party leaders are also barred from attending fund-raisers. Quebec goes even further, limiting party donations to 100 Canadian dollars, roughly $76 a year, and only by individual citizens.

British Columbia is not the only province to refuse to impose such tight limits, but democracy advocates say the large amounts of money flowing there are a particular cause for concern.

Critics say that big donors to Ms. Clark’s party often appear to have benefited financially from their political generosity. These include banks, Chinese real estate developers, and companies like Imperial Metals, the owner of a mine tailings pond that spilled billions of gallons of toxic debris in 2014, and was then permitted to operate an even larger mine. Imperial Metals did not respond to a request for comment.

On Thursday, Ms. Clark’s government approved the Kinder Morgan Trans Mountain oil pipeline project, after opposing the proposal at hearings last January. Political donation records show that Kinder Morgan and other oil industry supporters of the project had donated more than 718,000 Canadian dollars, about $546,000, to the BC Liberal party through March 2016.

Some pooled donations have ended up in the pockets of the premier, following a longstanding practice by her political party. Ms. Clark has received more than 277,000 Canadian dollars, or $210,000, from the BC Liberal Party since 2011, according to Canadian news media reports. No other party in British Columbia pays its leader a stipend, and only one other Canadian premier, in Saskatchewan, receives such funds; the practice has largely vanished elsewhere as the provinces have tightened their political finance rules.

Ms. Clark’s office declined to answer specific questions about her conduct and her relationship with the conflict-of-interest commissioner and his son. Instead, British Columbia’s minister of justice, Suzanne Anton, who is also its attorney general, sent a statement saying that the province’s standards “should give the public confidence in the electoral system.”

In an email, the B.C. Liberal Party said its leader’s stipend was a longstanding tradition that previous conflict-of-interest commissioners had found acceptable.

Last April, Ms. Clark’s stipend was challenged by David Eby, a member of the provincial legislative assembly from the B.C. New Democratic Party. He filed complaints with the conflict-of-interest commissioner about the stipend and about Ms. Clark’s attendance at fund-raisers where donors paid thousands of dollars to meet with her privately.

“In practice, it means that if you’re part of a coterie of high-net-worth donors, your private interests get priority over what’s best for the province,” Mr. Eby said.

In nine years as British Columbia’s conflict of interest commissioner, Paul Fraser said he has never found any government official to be in violation of the province’s Conflict of Interest Act. Mr. Fraser has donated to Ms. Clark’s political party, and so has his son, John Paul Fraser, who worked on Ms. Clark’s election campaign and now serves in her cabinet as the deputy minister for government communications and public engagement.

The elder Mr. Fraser ruled in May that his son’s boss did not violate the act by accepting tens of thousands of dollars from her party while attending exclusive party fund-raisers, despite the law prohibiting actions by officials that may create even the “reasonable perception” that they might be affected by private interests.

Democracy Watch asked the provincial Supreme Court in October to overturn the ruling, arguing that the commissioner should have recused himself, as he did in a 2012 case against Ms. Clark.

In a telephone interview, Mr. Fraser rejected accusations of bias over his son’s job. “The issue, I guess, is, should people’s children and their career aspirations trump other considerations,” he said. He added that his 2012 recusal was a special case, because his son had been in business with the premier’s ex-husband.

Mr. Fraser’s lawyers have tried to get the case dismissed by arguing that the commissioner’s opinions are immune to judicial review.

Canada’s Open Door to Tax Fraud, Money Laundering

 

The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering

Transparency International warns against country becoming a ‘haven for corrupt capital.’

Source: The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering | The Tyee

Canada can avoid becoming a desirable destination for dubious global lucre if it acts soon.

How many shell companies exist in Canada? How many legal trusts? Who are the beneficial owners protected by such unnecessary veils of secrecy? No one knows because in most cases there is no legal requirement to disclose actual ownership even to regulators. In fact, more information is required to get a library card than to set up a company in most jurisdictions in Canada.

What we do know is that Canada ranks near the bottom among our OECD partners in terms of corporate disclosure requirements to fight money laundering and tax evasion. A recent report from Transparency International detailed the dismal situation and why our country has become a haven for dubious offshore property speculation.

“The Canadian government must take immediate steps to require all companies and trusts in the country to identify their beneficial owners to ensure Canada does not become a haven for corrupt capital,” warns Transparency International Canada executive director Alesia Nahirny.

Canada is one of the few developed countries that does not require the identities of company directors to be verified or any information on shareholders. In most provinces, it is legal to use “nominee” directors or shareholders without disclosing that they are acting on someone else’s behalf.

A nominee is essentially a sock puppet — the proverbial student or homemaker often listed as the title owner of some of Canada’s most expensive homes. Why would someone list a multi-million dollar property in someone else’s name? Some plausible reasons include to avoid taxes or to launder money. This practice remains completely and inexplicably legal in most parts of our painfully polite country.

Lawyers can also act as nominee directors, offering their clients an additional level of secrecy under solicitor-client privilege unavailable in most other countries. A ruling from the Supreme Court of Canada in 2015 exempted lawyers and their firms from important parts of the Proceeds of Crime and Terrorist Financing Act, further widening the yawning loopholes in our laws meant to fight money laundering. According to an international oversight body, the Financial Action Task Force of which Canada is a member, “the legal profession in Canada is especially vulnerable to misuse.”

Toronto lawyer Simon Rosenfeld was secretly taped in 2002 during a meeting in a Miami bar with an undercover RCMP officer, who was posing as a member of a Columbian drug cartel needing money-laundering services. According to the officer’s testimony, after exchanging a token dollar to cement solicitor-client secrecy, Rosenfeld bragged that moving illegal funds through Canada was “20 times” easier than the U.S., where arrest and convictions are much more likely. He described the Canadian enforcement regime as “la la land” and said that five other lawyers in Vancouver laundered $200,000 per month through trust accounts for a seven per cent commission.

The transcript of this conversation did not endear Rosenfeld to the jury during his prosecution and he was sentenced to three years in jail. He appealed the conviction and the higher court judge increased his sentence to five years. This rare successful enforcement provides some fleeting schadenfreude, but Rosenfeld’s seasoned and sad assessment of “la la land” continues to ring true.

Legal black boxes

Millions of legal trusts are estimated to exist in Canada, but there is no way of knowing since there is no requirement for them to be registered or file any record of their existence — again an outlier among other countries. They are supposed to file information on assets and trustees with the Canada Revenue Agency but only a small fraction actually do.

A trust is the consummate legal black box. Considered a mere private contract under Canadian law, trusts do not need to keep records on beneficial owners, let alone file such documents with the federal government. Trustees can conduct transactions without disclosing their role as go-betweens, making it difficult or impossible for financial institutions to comply with money laundering regulations. To our international embarrassment, the Financial Action Task Force found in 2016 that Canada was less than fully compliant in 29 out of 40 anti-money laundering measures and “non-compliant” regarding transparency and beneficial ownership of such legal arrangements.

Vancouver, Let’s Stand Up to Moneyed Interests of Real Estate

READ MORE

Real estate in Vancouver and Toronto is where the rubber really hits the road on these national regulatory failings. Transparency International looked at the title documents for the 100 most expensive homes in the Lower Mainland and unsurprisingly found a sampling of all these methods to conceal the beneficial owners. Twenty-nine properties were held by Canadian or offshore shell companies, 11 were owned by nominees with no obvious source of income, six more were held by trusts. In total, 49 of these luxury estates collectively worth more than $1 billion had opaque ownership.

Canada’s lax legal oversight coupled with a decades-long public policy effort to incentivize wealthy citizenship has turned Vancouver into a global hedge city. Like London, New York, and San Francisco, Vancouver’s luxury properties have become a favored place to stash cash for the world’s wealthiest.

According to professor David Ley at the University of British Columbia, Canada effectively sold Canadian citizenships to rich offshore investors through the now-cancelled Business Immigration Program. Ley described the scheme during a lecture last September, detailing how up to 200,000 of the world’s wealthiest may have arrived in the Lower Mainland as a result of these public policy efforts, inflating property values and contributing to our current housing woes.

According to Ley, Canada’s BIP was heavily oversubscribed because Canada was selling citizenships for far below the international market rate compared to other countries with similar citizenship-for-sale incentive programs. In the U.S., candidates had to invest $1,000,000 and employ up to 10 Americans before being granted citizenship. In Canada, investors only had to loan provincial governments $800,000 to be paid back in full after five years. This come-and-get-it attitude towards passports and global capital seems sadly similar to other national assets such as natural resources, but I digress.

Besides ballooning our housing prices, was there a net economic benefit to this citizenship fire sale? According to Ley, the federal immigration database showed that “of all immigration streams to Canada, the Business Immigration Program led to the lowest declared incomes, lower even than refugees.” This was in part because wealthy offshore investors are so skillful at avoiding taxation coupled with a shocking lack of enforcement from the CRA.

Defending against dubious lucre

What can Canada do to clean up this mess and avoid becoming an even more desirable destination for dubious global lucre? A low-cost first step would be to require all Canadian companies and trusts to declare beneficial owners and publish this information on a public searchable registry. The United Kingdom brought in such a system in 2016 to improve in law enforcement and tax collection, which will more than cover the cost of implementation.

Transparency International has several other practical suggestions that are also supported by the banking sector and law enforcement:

• Beneficial ownership should be listed on all land title documents, ideally retroactively.
• Corporate registries should have the resources and requirement to accurately identify directors and shareholders
• The federal government should require all sectors — including real estate agents — to identify beneficial owners before transactions are conducted.

Besides money launderers, tax evaders and criminals, who could possibly oppose these sensible and long overdue reforms? Is the Trudeau government going to act quickly to plug these gapping holes and bring our country in line with the global fight against illicit capital? The recent cash-for-access events with wealthy offshore investors provide a telling opportunity to see on whose behalf Trudeau is acting. The whole country is watching.

Nortel executives continue drawing bonuses years after bankruptcy – Ottawa

 

 

Former Nortel workers who are still owed money say they’re frustrated that executives with the now defunct company are still drawing retention bonuses, eight years after the company started bankruptcy proceedings.

Source: Nortel executives continue drawing bonuses years after bankruptcy – Ottawa – CBC News

Mysterious Chinese Firm On Real Estate Spending Spree A Cautionary Tale For Canada

A mysterious Chinese company, Anbang Insurance Group has attracted the attention of The New York Times, The Wall Street Journal, Forbes, Fortune Magazine, and government authorities in the United States and other countries.  The cause of the scrutiny has been Anbang’s sudden involvement in a number of massive multi-billion dollar real estate investments around the World. Formed in 2004, Anbang apparently holds assets worth at least $295 Billion, but a months-long investigation by the New York Times has revealed an extremely opaque structure, empty offices, obscure shareholders, and extensive political connections to the Chinese elite. Wu Xiaohui, Anbang’s Chairman, is married to Deng Xiaoping’s granddaughter  and involved with at least two others with family connections to the People’s Liberation Army. Both Wu and his wife, Zhuo Ran have disappeared from Anbang’s list of shareholders after the New York Times investigation began. Anbang has all the earmarks of a Panama Papers situation: Chinese money laundering, corruption at the highest levels, and mysterious shell companies. Analysis of Anbang and its operations is a cautionary tale for Canadian authorities fretting over foreign real-estate buyers and skyrocketing real-estate prices.

Last Spring, as B.C. Premier Christy Clark was preparing to announce new regulations to stem the flood of non-resident residential real-estate buyers, she simultaneously flew to China on a trade mission with a group of B.C. commercial real estate moguls, apparently to reassure the Chinese that B.C. was still interested in Chinese commercial real-estate investment. But by the time Clark made her trip to China, questions about the Anbang Insurance Group’s ownership had already been flying in the U.S. financial press for over two years. Whether it may have been more prudent for Clark to defer promoting Chinese commercial real estate investment in Vancouver, only time will tell. What does appear clear is that China is demonstrating a much more aggressive, arrogant and even hostile tone in its relations with both Canada and the United States. This is evidenced by this week’s G20 Summit in Hangzhou, beginning with the deliberate snubbing of Barak Obama on arrival in China, and a number of other incidents, including Trudeau’s inability to achieve an agreement with China on canola oil. Canada needs to be smarter about how it deals with these new realities.

Anbang Insurance Group Corporate Headquarters, Beijing 

The dingy fourth floor of this building in Beijing houses two companies that control assets of Anbang Insurance Group worth more than $15 billion.

Wu Xiaohui, Chairman of Anbang Insurance Group

Reblogged from The New York Times

A Chinese Mystery: Who Owns a Firm on a Global Shopping Spree?

Owners of Anbang, a Chinese insurer behind a wave of multibillion-dollar deals, include relatives and friends of its politically connected chairman.

By MICHAEL FORSYTHE and JONATHAN ANSFIELDSEPT. 1, 2016

Pingyang County’s verdant hills still hint at a long-lost China. Rice paddies and villages surround its bustling towns, and in the fields, farmers wade into the mud to plant seedlings as they have for thousands of years.

It is an odd place to find the people behind a Chinese corporate powerhouse that is turning heads on Wall Street with a global takeover binge. Yet the area is home to a tiny group of just such people — small-time merchants and villagers who happen to control multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties.

American regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others.

The questions add to the mystery surrounding a company that seemed to come out of nowhere, surprising deal makers with offers to pay more than $30 billion for assets around the world.

Anbang’s shopping spree is part of an outflow of money from China that has reshaped global markets but has often been shrouded in secrecy, sometimes by prominent Chinese looking to shift their wealth abroad without attracting attention at home. That poses a problem for international regulators trying to identify the buyers behind major acquisitions and to assess the riskiness of these deals.

The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies. But according to dozens of interviews and a review of thousands of pages of Anbang filings by The New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui, Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.

In many ways, Anbang and Mr. Wu appear to be archetypal products of China’s mix of freewheeling capitalism and Communist Party dominance, a formula that has fueled nearly four decades of untrammeled growth.

Anbang got its start as an auto insurance company in 2004 in the eastern Chinese city of Ningbo. For years it was only a minor player. But it took off as it became more aggressive with its finances, buying stakes in Chinese banks and bringing in money by selling high-risk, high-yield investment funds to ordinary Chinese.

Mr. Wu, 49, a former car salesman and low-level antismuggling official, led Anbang through this transformation and is now known as one of China’s most successful businessmen. He wears tailored suits and polished loafers,hobnobs with the likes of Stephen A. Schwarzman of Blackstone, and sometimes holds court at Harvard.

But he does not appear in Anbang’s filings as an owner.

It is common in China for the wealthy to have their shares in companies held in others’ names. Known in Chinese as baishoutao, or white gloves, these people are often trusted relatives or acquaintances. Many defend the practice as a way to protect their privacy in a nation where riches can be a political liability. But others say white gloves can be used to hide ill-gotten gains and thwart corruption investigators.

On the fourth floor of this shabby building in Beijing is an office that is home to two companies with a total stake of more than $15 billion in assets of one of China’s biggest financial conglomerates: the Anbang Insurance Group. CreditGilles Sabrie for The New York Times

Anbang did not respond when asked if Mr. Wu was a shareholder and declined to answer questions about its owners.

The company, a spokesman said, “has multiple shareholders who have made all required disclosures under Chinese law. They are a mix of individual and institutional shareholders who made a commercial decision to invest in the company. Anbang has now grown to be a global company thanks to the support of these long-term shareholders.”

For investors and regulators, white gloves can make it difficult to evaluate the financial health of a Chinese buyer. Ownership may be concentrated in the hands of a few people, posing hidden risks, and companies with government connections could be vulnerable to political shifts or become magnets for corruption.

“It is very important for businesses to know who they are ultimately doing business with, and for investors, what they are investing in,” said Keith Williamson, a managing director in Hong Kong at Alvarez & Marsal, a firm that carries out corporate fraud investigations.

It is not clear whether the shareholders in the Pingyang County region are holding large stakes on behalf of anyone else. But on May 27, Anbangwithdrew its application with New York State to buy an Iowa insurer, Fidelity & Guaranty Life, for $1.6 billion. Regulators had asked about ties between several shareholders with the same family names, said one person briefed on the matter who spoke on the condition of anonymity.

A $6.5 billion deal for a portfolio of hotels that includes the Essex House in New York and several Four Seasons locations is awaiting results from a security review by the American government. In March, Anbang withdrew a $14 billion bid for Starwood, the operator of Sheraton and Westin hotels, in a move that surprised Wall Street.

The company could come under greater scrutiny as it prepares to sell sharesin its life insurance business on the Hong Kong stock exchange next year. Already, at least one major New York-based investment bank has raised concerns about Anbang’s ownership after studying its shareholding structure to evaluate whether to help with its overseas deals, according to two people involved in the matter who asked not to be identified because the process was private. The bank did not participate in Anbang’s deals.

Separately, the Chinese magazine Caixin reported in May that Chinese regulators were examining Anbang’s riskier financial products. It is unclear where that inquiry stands or whether Anbang’s ownership structure is being investigated.

President Xi Jinping has waged a campaign against graft since taking office, and the use of white gloves has recently come under scrutiny. “White gloves are accompanied by power’s black hands,” the Communist Party’s disciplinary watchdog wrote in a report last year.

Questions about Anbang’s owners come as Chinese companies make deals around the world — sometimes representing efforts by China’s powerful to move money out of the country, as the economy slows and the party tightens its grip on everyday life.

Photo

Wu Xiaohui, chairman of Anbang, at a global insurance conference in 2015.CreditBen Asen/International Insurance Society

China has encouraged some capital outflow to improve the performance of its investments and expand its influence. But the subject of the elite moving money overseas is politically sensitive, raising questions about the source of their wealth and their confidence in the Chinese economy.

Luo Yu, the son of a former chief of staff of China’s military, said China’s most politically powerful families had been transferring money out of the country for some time.

“They don’t believe they will hold on to power long enough — sooner or later they would collapse,” said Mr. Luo, a former colonel in the Chinese Army whose younger brother was a business partner with one of Anbang’s founders. “So they transfer their money.”

At its founding in 2004, Anbang had an impressive list of politically connected directors. Records show early Anbang directors included Levin Zhu, son of a former prime minister, and Chen Xiaolu, the son of an army marshal who helped bring Communist rule to China.

Then there was Mr. Wu, who was born Wu Guanghui but was known as Wu Xiaohui from a young age. Relatives said he grew up in a Catholic family; a crucifix sat on his aunt’s dining room table, and she wears a necklace with a portrait of the Virgin Mary.

Mr. Wu married Zhuo Ran, a granddaughter of Deng, the Chinese leader who brought China out of the chaos of the Mao era. Together, Mr. Wu, Ms. Zhuo, Mr. Chen and their relatives owned or ran the companies that controlled Anbang, according to company filings.

Anbang leapt onto the global stage with last year’s purchase of the Waldorf Astoria and its aborted bid for the Starwood chain. By this year, Anbang’s assets had swelled to $295 billion.

It is not clear what prompted Anbang’s sudden interest in overseas assets. But the shift came after a reshuffling of its ownership structure that also led to the injection of more than $7.5 billion into the company.

Company documents filed with Chinese agencies show that the number of firms holding Anbang’s shares jumped to 39, from eight, over six months in 2014. Most of those firms received large injections of funds. At the same time, Anbang’s capital more than quintupled.

Ms. Zhuo disappeared from the ownership records by the end of that year. Many of Mr. Wu’s relatives did as well. Mr. Wu and Mr. Chen had disappeared earlier from the records.

Photo

The Anbang Insurance Group owns the Waldorf Astoria in New York, above, and a portfolio of global names and properties.CreditChang W. Lee/The New York Times

Mr. Zhu, who does not appear to have owned shares, disappeared in paper filings from Anbang’s roster of directors by 2009, though he was listed as a director on online government filings as late as 2014.

Mr. Wu, Mr. Chen and Mr. Zhu did not respond to requests for comment, and Ms. Zhuo could not be reached. In March, Mr. Zhu told Chinese reporters that he was not an Anbang director.

Anbang’s current shareholding firms are not well-known names in China, and some appear to have been set up just to hold Anbang shares. One lists its address as the empty 27th floor of a dusty Beijing office building. Two more list an address at a mail drop above a Beijing post office.

Using corporate filings, The Times compiled a list of nearly 100 people who own shares in the firms and traced about a dozen to Pingyang County or nearby. Reporters visited the area, in China’s eastern Zhejiang Province, and interviewed dozens of residents, including several whose names appeared on the list. They also interviewed an uncle, an aunt and a nephew of Mr. Wu.

The latter two, as well as others in the area, said one name matched that of his sister, Wu Xiaoxia. The family members said several other names matched those of Mr. Wu’s extended kin, including two cousins and others on his mother’s side of the family. Through their various stakes in Anbang shareholding companies, these people control a stake representing more than $17 billion in assets.

Other names matched local acquaintances of Mr. Wu, including Huang Maosheng, a local businessman who confirmed in a brief phone interview that he had a business relationship with Mr. Wu but declined to elaborate.

One village leader and neighbors identified the names of four of Mr. Huang’s relatives — including some whom they described as common workers — from among those on the list. Their Anbang holdings represent about $12 billion in assets.

Another resident, Mei Xiaojing, said two names on the list matched those of her relatives. Asked if she knew Mr. Wu, she said, “Well, yes,” then ended the phone conversation and did not respond to subsequent calls. Through multiple holding companies, those three people have a stake representing about $19 billion in Anbang assets.

As Anbang rose, so did Mr. Wu’s profile. In 2013 Mr. Wu secured a yearlong position as a visiting fellow at the Asia Center of Harvard, joining a growing list of politically connected Chinese billionaires with ties to Harvard.

Ezra F. Vogel, a professor emeritus at Harvard who wrote a biography of Deng, said he met Mr. Wu on several occasions.

“He had this staff of sharp people who were working for him,” Mr. Vogel said. “It seems that they were doing the detail work, and he was the friendly man supplying the connections.”

Apple €13 Billion Tax Bill Really A Fight Over Who Gets the Money: EU or US?

Apple is facing a major corporate crisis as public opinion is focused on corporate greed

Ireland operating like a “rogue state”

Today’s long-expected announcement that the European Union has assessed that Apple owes €13 Billion ($14.5 Billion) in back taxes to Ireland and the EU, is only one part of a much larger story of multinational corporations global tax jurisdiction and tax avoidance, and a looming fight between the EU and US over which one gets the €13 Billion. There is not much disagreement whether Apple actually owes the money. It also reopens the as yet unresolved matter of multinational corporate taxation, most recently exposed by Pfizer’s announcement that it would move its HQ to Ireland to avoid U.S. taxation, which was later blocked by the U.S. government.

In 1991, Apple struck a tax deal with Ireland that was aboveboard and legal. The Irish government provided Apple with a “comfort letter” that said the company would pay very low rates of tax if it based its European operations in Ireland. In the 25 years since that time, Apple has created thousands of jobs in Ireland. By 2015, it had 5,000 employees in the country. Another 1,000 jobs are planned for the headquarters in the Irish city of Cork. This year, Apple will open its site near the town of Athenry, with another 200 jobs in the making.The result of the deal between Apple and Ireland, intended or not, was pretty clear: Give us low taxes, and we will give you jobs.

The problem with this is that Ireland has become a focal point for global corporate tax evasion by numerous foreign corporations. Ireland has suffered through a cycle of boom and bust, culminating in the 2008 global financial meltdown, which left Ireland’s economy in shambles. The upshot is that since that time, Ireland has become the poster child for tax evasion schemes, which has led to numerous EU investigations of Ireland’s tax laws. Ironically, it also led KPMG Canada to establish its own similar scheme in The Isle of Man, now under investigation by the CRA.

The bottom line is that this could not be happening at a worse time for Apple. The company is very likely facing a major corporate black-eye, at a time when public opinion is focused on corporate greed, income inequality and the decline of the middle class.

The opening salvo in a much larger global issue

“U.S. companies are the grand-masters of tax avoidance. I see it (U.S. objections to the EU ruling) as the United States digging in its heels, that it is protecting its corporate champions when in fact it’s claim jumping on what is really European income,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.

Margrethe Vestager, European Union Commissioner on Competition

The EU charges against Apple:

• Apple’s effective European tax rate was 1% on sales of 16 billion euros or more per year.
• It sank as low as 0.005% in 2014.
• Apple created a head office that did not exist: “This ‘head office’ had no operating capacity to handle and manage the distribution business, or any other substantive business for that matter … The ‘head office’ did not have any employees or own premises.”
• The pact deprived other European countries of billions of euros in unpaid taxes.

 

Reblogged from The New York Times:

Apple Must Pay Billions for Tax Breaks in Ireland, E.U. Orders

By JAMES KANTER and MARK SCOTTAUG. 30, 2016

Europe’s antitrust enforcer ordered Ireland to collect billions in back taxes from Apple, a move that will ramp up trans-Atlantic tensions over what global companies pay in the countries where they do business.

The decision, part of a broader crackdown on tax avoidance by the European Union commissioner for competition, slammed Ireland for providing illegal incentives that allowed Apple to cut its tax bill in the region to virtually nothing some years. The clawback of taxes — 13 billion euros, or about $14.5 billion, plus interest — is a record penalty by the union for such activities.

The ruling adds to a strained relationship between the United States and the European Union over who has the right to regulate tax payments by some of the world’s largest companies.

The European Commission, under the leadership of Margrethe Vestager, the competition chief, has aggressively sought to stamp out sweetheart tax deals that countries strike with multinational companies. Along with Apple, the campaign has also ensnared Starbucks in the Netherlands, Amazon in Luxembourg and Anheuser-Busch InBev in Belgium.

But American officials have warned that the commission is overstepping its power given that taxes are typically left to national governments to oversee and that European officials should not retroactively issue penalties in past tax rulings. They also emphasized that such cases undermine continuing efforts to overhaul global policies and create measures to curtail tax avoidance.

“U.S. companies are the grandmasters of tax avoidance,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.

“Nevertheless, because of the nature of U.S. politics,” he said, the Apple case “will be framed by the U.S. as Europe overreaching and discriminating against ‘our team.’ ”

Since early this year, Ms. Vestager and Jacob J. Lew, the United States Treasury secretary, and their teams have met regularly to discuss Europe’s state-aid tax investigations. Mr. Lew visited Brussels in July to put forward the American perspective.

 

EUROPE By E.B.S. VIA ASSOCIATED PRESS 1:01

Apple to Pay $14.5 Billion in Back Taxes

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Apple to Pay $14.5 Billion in Back Taxes

On Tuesday, Europe’s antitrust enforcer ordered Ireland to claw back billions from Apple over illegal tax breaks.

By E.B.S. VIA ASSOCIATED PRESS on Publish DateAugust 30, 2016.Photo by Andrew Testa for The New York Times. Watch in Times Video »

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Just last week, the Treasury Department released a report criticizing any efforts to claw back taxes from American companies. The document repeatedly claimed that the European Commission did not have the right to undertake the clawbacks and that they could harm America’s efforts to collect taxes from domestic companies with vast international operations.

“That outcome is deeply troubling as it would effectively constitute a transfer of revenue to the E.U. from the U.S. government and its taxpayers,” Robert B. Stack, a senior Treasury official, said in the report.

The European Commission denies these claims, saying that it is relying on a history of using state-aid rules related to corporate tax issues. The Brussels-based agency also says that it has the right to act when certain companies are provided with an unfair advantage — either through tax breaks or other incentives — and that Apple’s operations are based in Ireland, therefore falling under its jurisdiction.

“No rules have been changed — not one rule,” Ms. Vestager said at a news conference in Brussels on Tuesday. “This is a question of paying unpaid taxes.”

In the Apple case, the antitrust commission said that the deals with Ireland allowed the company to allocate profits from two Irish subsidiaries to a “head office,” but that it could not have generated such profits since it had few operations and little distribution or substantive business.

By doing so, the commission said that Apple could effectively lower its tax rate on European profit to just 0.005 percent in 2014. Ms. Vestager said at a news conference on Tuesday that amounted to roughly €50 for every €1 million in Apple’s European profit.

“The so-called head office had no employees, no premises, no real activities,” Ms. Vestager said.

Apple defends its tax practices, saying it follows the law and pays all of its taxes.

“The commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money,” the company said in a statement. “It will have a profound and harmful effect on investment and job creation in Europe.”

Ireland has broadly faced scrutiny for its tax strategies to attract large multinationals.

Its corporate tax rate, at 12.5 percent, is one of the lowest in the developed world. Other incentives and breaks allow companies to cut their bill even further. While it is phasing out some of the more contentious loopholes, Ireland just introduced a new break for revenues on intellectual property, a potentially huge benefit to large technology companies with troves of patents.

How Europe Is Going After Apple, Google and Other U.S. Tech Giants

The biggest American tech companies face intensifying scrutiny by European regulators, with — pressure that could potentially curb their sizable profits in the region and affect how they operate around the world.

The United States has a complicated view on Apple’s dealings in Ireland. The European inquiry was spurred in 2013 when a United States Senate committee said that Apple had negotiated a special corporate tax rate of 2 percent or less in Ireland.

The Treasury has also taken steps to curtail so-called inversions, in which an American company buys an overseas counterpart and shifts its headquarters overseas to lower its taxes. Ireland, with its low corporate tax rate, has been an especially big beneficiary of such deals, which helpedplump up the country’s economy last year.

Ireland stands by its approach to taxes, saying it did not give preferential treatment to Apple or other companies. The country’s Finance Ministry, in a statement, said that the commission’s decision would undermine continuing global tax overhaul and create uncertainty for business in Europe.

The finance minister, Michael Noonan, said he would move to appeal the Apple decision, adding it was “necessary to defend the integrity of our tax system.”

“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for substantive investment,” he said.

Apple also said it would look to overturn the decision, although any appeals process could take years.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” the company said in a statement.

The commission said the amount due in Ireland could be lowered if the American authorities decided that Apple should have paid more tax in the United States.

The commission also said that other countries in the European Union could take a share of the money if Apple conducted more taxable business in those nations than the company had previously declared. That could reduce the amount Ireland collects and give additional revenue to other countries.

Apple is also expected to have to pay interest on the €13 billion, but the commission did not disclose how much that would be.