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DREW EVANS/THE WALL STREET JOURNAL
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PERSONAL JOURNAL | A8
DJIA 17721.25 À 0.94%
What’s
News
Business & Finance
B ig multinationals
would have to publish
details of profits and tax
bills generated in tax havens
under an EU proposal. A1
 The IMF warned that a
British exit from the EU
risks severely damaging the
global economy, adding its
voice to the debate. A1
 Oil-producing nations
meet this week to discuss an
output freeze that investors
hope will curb the oversup-
ply pressuring prices. B7
 J.P. Morgan is in talks to
move its trading systems to
an Internet-based cloud-
computing service main-
tained by startup Cloud9. B7
 Big shipping alliances
are vying for regulatory
approval of new tie-ups,
industry executives say. B1
 Spotify’s founders said
the company could leave
Sweden unless the business
environment improves. B1
 Mercedes is poised to
reclaim the top spot among
premium car brands after
trailing Audi and BMW. B2
 Boeing has opened talks
to sell planes to Iran in the
wake of the West’s lifting of
sanctions in January. B6
World-Wide
 Belgian authorities are
looking for a rucksack
worn by an alleged terror-
ist in the Brussels subway
attack out of fear that it
contains explosives. A3
 The EU executive asked
the bloc to decide on how
to respond to a refusal by
the U.S. and Canada to of-
fer visa-free travel. A4
 The EU gave Greece two
weeks to come up with plans
to improve protection of the
bloc’s external border. A3
 A German rail worker
was arrested for negligent
homicide and other charges
in a deadly train crash. A4
 The U.S. and India agreed
to let their militaries use
each other’s bases for re-
plenishment and repair. A5
 The Afghan Taliban de-
clared the start of their
spring offensive against Ka-
bul and its foreign allies. A5
 Italy’s lower house voted
to revamp the constitution
to curb Senate power after
an opposition walkout. A4
 U.S. House Speaker Ryan
ruled himself out of conten-
tion for the 2016 GOP presi-
dential nomination. A7
Inside
JOURNAL REPORT
ECO:NOMICS B4
Creating
environmental
capital
CONTENTS
Arts & Ent............... A9
Business & Energy. B4-5
Business & Tech. B1-6
Crossword................. A9
Heard on Street. B12
Markets Digest.. B10
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s Copyright 2016 Dow Jones &
Company. All Rights Reserved
WEDNESDAY, APRIL 13, 2016 ~ VOL. XXXIV NO. 51
S&P 500 2061.72 À 0.97% NIKKEI 15928.79 À 1.13%
An Underground Tribute to the First Man in Space
GEODAKYAN ARTYOM/TASS/ZUMA PRESS
OVER THE MOON: A space-themed train on the Moscow Metro honored the 55th anniversary of Yuri Gagarin’s historic flight on Tuesday.
Oil Loans Pose Headache
Vast borrowing by
energy companies
weighs on big banks as
earnings season arrives
BY RACHEL LOUISE ENSIGN
The $147 billion question
for banks: Will energy compa-
nies max out their credit
lines?
When big banks announce
earnings starting Wednesday,
the spotlight will be on vast
CHINA’S NEW SECURITY CHALLENGE:
ANGRY MOM-AND-POP INVESTORS
BY CHUIN-WEI YAP
XINXIANG, China—One Monday
last month, Yang Baoyu joined about
200 people in front of the city of-
fices here for a familiar ritual, wav-
ing protest banners and demanding
help from the government to recoup
their lost investments.
As with many of the other dem-
onstrators, the engineer, 45 years
old, had been coming to protest
nearly every week since he lost his
The Man Behind the Masks
Of the National Hockey League
i i
How a Swedish artist raised the bar
for creative design of goalie helmets
BY TOM PERROTTA
When Ben Bishop, the
goalie for the Tampa Bay
Lightning, received his new
mask last year, he had a
thought. The mask had a
splotch of glow-in-the-dark
paint on it, about the size of a
quarter. Mr. Bishop liked it. A
lot. So he called David Gun-
Money & Inv.... B7-12 narsson, the National Hockey
Opinion.............. A10-11
Property Report.. B11
League’s mask maestro, with a
Technology............... B3 question.
“I asked if we could make
U.S. News.................. A7
Weather..................... A9
World News........ A2-5
the whole thing glow,” Mr.
Bishop said. “That was the
first one in the league like
that.”
Painted masks have a long
history in the NHL. Gerry
Cheevers, who drew black
stitches on his white fiberglass
faceplate, is known as the first
player to doctor his mask, in
the 1960s. Ken Dryden’s mask
looked like a bull's-eye with
Montreal’s colors. Ed Belfour’s
Andrew Browne
Beijing Upstages
Washington
CHINA’S WORLD | A2
WSJ.com EUROPE EDITION
STOXX 600 334.64 À 0.53% OIL 42.17 À 4.48% GOLD 1259.40 À 0.21% EURO 1.1390 g 0.17% DLR ¥108.56 À 0.57%
EU Wants
Firms to
Open Up
On Taxes
BY NATALIA DROZDIAK
BRUSSELS—Large multina-
tionals operating in the Euro-
pean Union will have to pub-
lish details of profits and tax
bills generated in countries
considered to be tax havens,
the bloc’s executive arm said
on Tuesday, as it toughened
proposals for fighting tax
avoidance following the “Pan-
ama Papers” leak.
The European Commission
already had been working on
plans to open up to the public
reports by thousands of com-
panies on profits reaped and
taxes paid in individual EU
countries—an unprecedented
move for a major jurisdiction.
But the EU reworked its
proposals in recent days to re-
quire more exhaustive report-
ing of companies’ operations
in tax havens after newspa-
pers world-wide uncovered
thousands of offshore ac-
counts—allegedly held by of-
ficials, executives and celebri-
ties—via documents leaked
from the Panamanian law firm
energy loans that most inves- types of loans. Those commit- to the sector are still a head- Mossack Fonseca & Co.
tors didn’t know much about ments are expected to trickle ache for banks at that price. “By adopting this proposal,
until recently. down to bank earnings and Banks in recent months Europe is demonstrating its
These unfunded loans have saddle firms with more energy have set aside billions of dol- leadership in the fight against
been promised to energy com- exposure just as they are try- lars to cover potential losses tax avoidance,” said Valdis
panies, which haven’t yet ing to pare it back. tied to energy companies, a Dombrovskis, vice president of
tapped the money. Many banks “Let’s not sugarcoat it. This trend likely to continue as the European Commission in
historically haven’t disclosed is not necessarily a loan a more loans go bad. charge of euro and social dia-
these loans, but began doing bank wants to make at this Fitch Ratings Inc. is ex- logue.
so recently following the ex- point,” said Glenn Schorr, a pected to release a report this The proposals show how
tended slide in oil and gas bank analyst at Evercore ISI. week saying that nearly 60% the commission is accelerating
prices. Oil prices have risen in re- of unrated and below-invest- efforts to snuff out large-scale
In the first quarter, a hand- cent weeks, with the U.S. ment-grade energy companies corporate tax avoidance amid
ful of energy borrowers an- benchmark settling a $42.17 a are likely to have loans labeled pressure from the public. A
nounced more than $3 billion barrel on Tuesday, but ana- as “classified,” or in danger of previous proposal requiring
of drawdowns against these lysts say the unfunded loans Please see LOANS page A2 Please see TAXES page A2
nest egg of about $37,000 to a com- ment’s assurance” during better ming to the ancient former capital
pany named Henan Tengfei Invest- times, he says, “no one would have of Xi’an. Crowds gathered outside
ment Wealth Management, which dared to believe Tengfei.” the securities regulator’s Beijing of-
collapsed in 2014. Small investors, angry over lost fices after equity markets collapsed
City officials emerged and prom- savings, are emerging as a new se- last summer. Others have demon-
ised to resolve the investors’ con- curity threat to Chinese authorities, strated over their losses from finan-
cerns, Mr. Yang says. Then about who are watching warily as inves- cial products linked to insurance,
600 police officers descended and tors around the country hit the trusts and metal trading.
herded them off the plaza, shoving streets in protest and picket govern- These indignant investors add to
several protesters into police cars. ment offices to demand their money unrest among a broader swath of
To Mr. Yang, the parley was a re- back. Chinese who are openly challenging
minder of what he considers an offi- Protests have flared from Shang- authorities, including migrant work-
cial betrayal. “Without the govern- hai to the southwestern hub of Kun- Please see INVEST page A6
Merkel
Faces
i Quandary
On Turkey
DIFFICULT SPOT: An
mask had an eagle; Curtis Jo-
off-color joke by a
comedian has set off
a minor political
seph, nicknamed CuJo, wore a crisis for German
mask with a rabid dog in- Chancellor Angela
spired by the Stephen King Merkel, left. Turkey
novel of the same name. has demanded that
NURPHOTO/ZUMA PRESS
In today’s NHL, pretty much Germany permit an
every goalie has a custom
mask, except the details,
investigation into the
comedian for a crude
themes, and colors are wilder
and more intricate than ever.
poem about Turkish
President Recep
That’s because of Mr. Gunnars- Tayyip Erdogan. A3
son, a 39-year-old self-taught
artist who lives in Sweden. He
estimates that he has painted
masks for half of the teams in
the league (he has worked for
goalies on all but three of this
IMF Warns of Wide Pain if U.K. Leaves EU
year’s playoff teams). Mr. Gun- BY JASON DOUGLAS on Tuesday listed the possibil- trading relationships” in the
narsson painted his first NHL ity of Britain leaving the EU as world economy, the IMF said,
mask 15 years ago for Johan LONDON—The International one of seven major risks to the in its quarterly world eco-
Hedberg, a fellow Swede nick- Monetary Fund said that a global economy in the year nomic outlook.
named Moose. He now hires British exit from the European ahead, alongside worries over It said uncertainty about
helpers to sand and prep Union risks severely damaging the health of the Chinese econ- the outcome of the June 23
masks, which allows him to the global economy, adding its omy and turbulence in finan- referendum is already weigh-
paint at least eight hours a voice to an intense debate cial markets. ing on the U.K. economy,
day, he said. ahead of the country’s June Such a vote “could do se- prompting it to cut its U.K.
“During my 20 years I have referendum on the question. vere regional and global dam- growth forecast for this year
Please see MASK page A6 The Washington-based fund age by disrupting established Please see IMF page A2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, April 13, 2016
China’s ‘Great Wall of Sand’ Upstages U.S.
CHINA’S WORLD
ANDREW BROWNE
SHANGHAI—Armed only
with a set of revolving teeth,
the Tian Jing Hao, Asia’s
largest dredger, has pulled
off a stunning naval upset.
Under the noses of the
U.S. Seventh Fleet, this Chi-
nese vessel led a civilian ar-
mada that built almost 3,000
acres of land atop sub-
merged reefs in the Spratly
Islands, altering a strategic
balance that has held since
the great na-
val battles of
World War II
established
U.S. primacy
in the west-
ern Pacific.
The construction began
shortly after the Philippines
challenged China’s territorial
claims in the South China
Sea by filing a case at a
United Nations-backed tribu-
nal in The Hague in January
2014. Now, on the eve of a
verdict, China has achieved
its objective: a new geogra-
phy in the world’s busiest
commercial waterway where
China’s claims overlap with
those of five neighbors.
However the five judges
decide the case, China has
permanently altered facts on
the ground in its favor.
LOANS
Continued from page A1
default under regulatory
guidelines. “It’s grim,” said
Sharon Bonelli, senior director
of leveraged finance at Fitch.
Banks often use a com-
pany’s proven energy reserves
as collateral for loans and typ-
ically reset the value of these
reserves twice a year, usually
in spring and fall.
The draws made so far
were done ahead of the spring
redetermination process, in
which banks are expected to
cut the credit lines of energy
firms by an average of more
than 30%, according to a sur-
vey from law firm Haynes &
Boone LLP.
Ms. Bonelli and other ana-
lysts say bank loans are in-
creasingly vital lifelines for
energy companies, because
other funding sources have
dried up.
The $147 billion in un-
funded loans have been dis-
closed by 10 of the largest U.S.
banks, according to fourth-
quarter data from Barclays
PLC. The four largest U.S.
banks—J.P. Morgan Chase &
Co., Bank of America Corp.,
Citigroup Inc. and Wells Fargo
& Co.—pledged the majority of
this amount.
Smaller U.S. lenders and
large international banks have
made billions more of these
loans.
IMF
Continued from page A1
to 1.9% from 2.2%.
“A British exit from the Eu-
ropean Union could pose major
challenges for both the United
Kingdom and the rest of Eu-
rope,” the IMF said.
The fund said that negotia-
tions on postexit arrangements
would likely be protracted, “re-
sulting in an extended period
of heightened uncertainty that
could weigh heavily on confi-
dence and investment, all the
while increasing financial mar-
ket volatility.”
For Europe, so-called Brexit
would likely disrupt trade and
financial activity, reducing the
benefits that flow from the
continent’s economic coopera-
tion and integration, according
to the fund.
“It’s obvious that there’s a
lot of uncertainty at the mo-
ment about what will happen
in June that it is weighing on
confidence and investment in
the U.K.,” IMF chief economist
Maurice Obstfeld said at a
news conference in Washing-
ton.
Prime Minister David Cam-
eron, who is using economic
security as a key part of his
campaign to persuade Britons
The seven Spratly out-
crops on which it has built
runways, docks, radar and
other facilities give China
the ability to project new
force in its contest with the
U.S. for regional mastery.
Possession, after all, is
nine-tenths of the law. And
China’s island-building may
not have ended. The Penta-
gon fears dredgers might be
planning fresh construction
on Scarborough Shoal, which
would give the People’s Lib-
eration Army a jumping-off
point just 140 miles from
Manila. It’s bracing, too, for
China to declare an Air De-
fense Identification Zone
over the entire South China
Sea, which China could en-
force from artificial islands.
China has pledged to ignore
the tribunal’s findings.
China’s land reclamation
won’t change the legal case
in The Hague; semi-sub-
merged reefs don’t become
islands even if you build on
them. Nevertheless, slow-
moving Chinese dredgers
have outmaneuvered the
world’s most powerful navy.
China’s political leaders cal-
culated, correctly, that
America wouldn’t risk war
over a bunch of uninhabited
rocks and reefs to stop them.
Y
et what the U.S. Pa-
cific Fleet commander,
Admiral Harry Harris
Jr., has termed China’s
“Great Wall of Sand” has
raised the risk of future con-
flicts.
A regional arms race is
under way. China’s smaller
“With oil at $60, it’s not
that big of a deal. With oil at
$40, it becomes more of a
source of concern,” Barclays
analyst Jason Goldberg said of
the unfunded loans. “Will
companies draw down in diffi-
cult times?”
Lenders routinely offer
these commercial lines of
credit to industrial companies.
But the energy loans, often
promised before prices started
their steep decline, face a
unique set of pressures.
James Dimon, J.P. Morgan’s
chief executive, said in Febru-
ary that the unfunded loans
are “the most unpredictable
part of our assumptions”
about the bank’s energy expo-
sure.
Mr. Dimon also said he isn’t
expecting a large percentage
of the unfunded money to get
drawn because most of those
promised loans went to invest-
ment-grade companies that he
thinks are unlikely to need ac-
cess to additional cash.
Banks hold reserves against
unfunded loans in addition to
reserves for loans that have
been taken out.
A mounting number of
troubled energy firms have
tapped their unfunded loans.
Denver-based oil-and-gas
firm Bonanza Creek Energy
Inc., for instance, said in
March that it drew $209 mil-
lion from its credit facility
from a group of banks led by
Cleveland-based KeyCorp. Bo-
nanza Creek’s chief executive
to vote to remain in the EU,
seized on the IMF’s interven-
tion. Most polls suggest a nar-
row lead for staying in the
bloc.
“The IMF is right—leaving
the EU would pose major risks
for the UK economy. We are
stronger, safer and better off
in the European Union,” Mr.
Cameron said on his Twitter
account.
Treasury chief George Os-
borne, a close ally of Mr. Cam-
eron who also champions EU
membership, said the IMF’s
warning underscores the high
A placard at the Leave.EU campaign headquarters in London.
WORLD NEWS
The crowning achievement of China’s Spratlys dredging: a lighthouse on Subi Reef that opened last week.
neighbors feel bullied and
threatened by what has be-
come the sharp end of Bei-
jing’s diplomacy: powerful
cutters attached to the
dredgers that have un-
leashed environmental dev-
astation, hacking to bits
pristine coral and threaten-
ing marine life.
Moreover, China’s moves
to balloon specks of coral
into military-capable plat-
forms have helped spawn
new networks aimed at
blunting Chinese advances.
On Tuesday, China re-
sponded angrily to a declara-
tion by foreign ministers of
Drilling a Deeper Hole
Banks have more than $140 billion in unfunded loans
to energy companies.
$0 billion 10
Citigroup FUNDED
Bank of America
J.P. Morgan
Wells Fargo
Morgan Stanley
Goldman Sachs
SunTrust
Comerica
Regions
KeyCorp
Source: Barclays
said in a news release that the
move was “a risk management
decision” and praised its
“committed and supportive
commercial bank syndicate.” A
KeyCorp spokesman declined
to comment.
Tidewater Inc., which pro-
vides vessels to the offshore
drilling industry, said in March
it took out the maximum $600
million from its credit facility
led by Bank of America. The
firm’s chief executive cited
“the uncertainty surrounding
the future direction in oil and
gas prices,” in a news release
announcing the withdrawal. A
Bank of America spokesman
declined to comment.
stakes.
“The IMF has given us the
clearest independent warning of
the taste of bad things to come
if Britain leaves the EU,” he
said. The Treasury is due to
publish its own assessment of
the costs and benefits of EU
membership soon.
The fund’s conclusions on
the potential perils of “Brexit”
echo those of the Bank of Eng-
land and many private-sector
economists.
But proponents of Britain
leaving the EU, including London
Mayor Boris Johnson and sev-
the Group of Seven urging a
halt to “intimidating, coer-
cive or provocative actions”
in the South China Sea and
East China Sea.
In another sign of how
Chinese assertiveness is
bringing together old adver-
saries, this week two Japa-
nese warships and a subma-
rine are visiting the
Philippines naval base of
Subic Bay, as thousands of
American, Australian and
Philippine forces conduct
drills.
The so-called cutter suc-
tion dredgers—the debris
they create is vacuumed up
20 30 40 50 60
UNFUNDED
THE WALL STREET JOURNAL.
To stem such withdrawals,
some banks have negotiated
what are known as anti-cash-
hoarding provisions when en-
ergy firms have asked for
amendments to their loans in
recent months.
These clauses require the
companies to use extra cash to
repay the balance on their
credit lines in exchange, ac-
cording to regulatory filings.
But for distressed firms
facing bankruptcy that can
contractually do so, “you’d se-
riously have to consider a
game plan to draw down,” said
Ian Peck, head of the bank-
ruptcy practice at Haynes &
Boone.
eral ministers in Mr. Cameron’s
government, challenge the pro-
EU camp’s economic claims.
They argue that quitting the
EU would unshackle the U.K.
from burdensome regulation
and costs and leave it free to
sign its own trade deals with
faster-growing parts of the
world. They also say leaving the
bloc would give Britain greater
control over immigration and
restore the sovereignty of Par-
liament in U.K. affairs.
Matthew Elliott, chief exec-
utive of Vote Leave, which
campaigns in favor of exit, said
the IMF’s forecasts show the
U.K. economy is “robust,” de-
spite the downgrade. He said
“the biggest risk to the U.K.’s
economy and security is re-
maining in an unreformed EU,”
which he said is incapable of
dealing with challenges such
as the continuing eurozone
debt crisis and surging migra-
tion.
Nigel Farage, who leads the
anti-EU UK Independence
CHRIS RATCLIFFE/BLOOMBERG NEWS
Party, said the IMF’s predic-
tions can’t be trusted. “The
IMF was wrong when it sup-
ported the euro, wrong when it
failed to predict the global re-
cession and is wrong now it is
trying to scare the British peo-
ple,” he said.
—Ian Talley
contributed to this article.
THE WALL STREET JOURNAL.
islands in “freedom-of-navi-
gation” exercises.
These sail-by missions,
however, won’t stop the
rapid militarization of a sea
that carries $5 trillion in
global commerce each year.
China has recently posi-
tioned surface-to-air missile
batteries on the Paracels, an-
other set of South China Sea
islands. Beijing, in turn, ac-
cuses the U.S. of militarizing
the region with its patrols.
M
eanwhile, the Tian
Jing Hao dredger
(its name translates
as “Heavenly Whale”) and its
XING GUANGLI/XINHUA/ZUMA PRESS
sister ships are moving on.
The reclamation work in
the Spratlys was merely the
first phase of an epic con-
struction spree that has be-
come Chinese President Xi
Jinping’s signature initiative:
the Maritime Silk Road proj-
ect to build a string of ports
and industrial zones from
East Asia to Europe via Af-
underwater and showered rica and the Middle East.
onto the reefs through long This, it seems, is how
pipes—have created a di- China intends to reshape the
lemma for U.S. President Ba- “Pacific Century”—one gi-
rack Obama. gantic shovel from the sea-
Confronting China in the bed at a time.
Spratlys by, for instance, try- This month, Chinese state
ing to chase away dredgers media announced a cere-
and their naval protection mony to mark the crowning
not only risks war but could achievement of the Spratlys
derail cooperation with Bei- dredging exercise: a 55-
jing on crucial issues like cli- meter lighthouse on Subi
mate change or North Korea. Reef.
White House caution, At night, its lantern will
though, has left U.S. naval cast a beam of light 22 nau-
commanders frustrated. Be- tical miles across a vast
latedly, they’ve got the polit- stretch of water that Beijing,
ical go-ahead to sail war- increasingly, looks upon as a
ships close to the man-made Chinese lake.
TAXES Several large companies,
including McDonald’s Corp.
and IKEA, have questioned
plans to make the reports
Continued from page A1 public, claiming that disclos-
national tax authorities to ing such commercially sensi-
share corporate reports on tive information would place
profits and taxes was ap- them at a disadvantage com-
proved by EU finance minis- pared with rivals operating
ters only last month. elsewhere.
“The Panama Papers hasn’t “We believe that these pro-
changed our agenda, but it has posals, by making the EU a
strengthened our determina- lone front-runner in terms of
tion to make sure that taxes public disclosure, risk under-
are paid where profit is gener- mining our attractiveness as a
ated,” Jonathan Hill, the EU’s location for investment, par-
financial chief, said at a news ticularly from overseas,” said
conference. Markus Beyrer, head of Busi-
Under the plan, compa- nessEurope, an advocacy
nies operating in the group that represents compa-
EU whose annual revenue ex- nies including Alphabet Inc.’s
ceeds €750 million ($856 mil- Google and Comcast Corp.’s
lion) would have to publish NBCUniversal.
the reports, which would in- Transparency campaigners
clude such operations details said the additional proposals
as the number of employees don’t go far enough. “This
and nature of activities in dif- proposal cannot be called pub-
ferent tax jurisdictions. That lic country-by-country report-
information would be made ing, if it does not include most
available on a company’s web- of the world,” said Elena
site for at least five years. Gaita, a corporate transpar-
The EU is still drawing up ency policy officer at Trans-
its list of non-EU countries parency International, the
that don’t meet international global anticorruption group.
standards for good governance Mr. Hill said the commis-
in taxation. For non-EU coun- sion decided against requiring
tries whose tax rules are global country-by-country re-
deemed in line with the stan- porting because of concerns
dards, companies would only that companies in other juris-
have to publish an aggregate dictions could get their hands
figure of profits in all those on important business data
countries. they could use to their com-
The EU has been cracking petitive advantage. Some non-
down on companies trying to EU governments also may see
dodge taxes following revela- information that could lead
tions in 2014 that many multi- them to double-tax European
national businesses struck businesses, he said.
sweetheart deals in countries
such as Luxembourg that al-
lowed them to pay little tax in
the bloc. Corporate tax avoid-
The commission’s proposal
must be approved by EU gov-
ernments before it becomes
law, a process that could take
ance costs the bloc’s member months.
states between €50 billion and
€70 billion a year in lost tax THE WALL STREET JOURNAL.
revenues, according to the EU. Europe Edition ISSN 0921-99
“Our proposal to increase The News Building, 1 London Bridge Street,
London, SE1 9GF
transparency will help make
companies more accountable,” Thorold Barker, Editor, Europe
Bruce Orwall, Senior Editor, Europe
Mr. Hill said. Cicely K. Dyson, News Editor, Europe
Margaret de Streel, International Editions Editor
Darren Everson, Deputy International Editor
CORRECTIONS  Joseph C. Sternberg, Editorial Page Editor
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THE WALL STREET JOURNAL. Wednesday, April 13, 2016 | A3

WORLD NEWS
EU Imposes Border
Deadline on Greece
BY VALENTINA POP
BRUSSELS—The European
Commission gave Greece two
weeks to come up with con-
crete plans to improve protec-
tion of the European Union’s
external border, keeping up
the pressure on Athens over
the migrant crisis even as the
numbers coming into the bloc
have fallen.
STEPHANIE LECOCQ/EUROPEAN PRESSPHOTO AGENCY
introduced on travelers from
Greece in September.
“The commission confirms
that it will be prepared for
this eventuality and would act
without delay,” the commis-
sion said in a report Tuesday.
In the 10-page document,
the commission finds that
while Greece has made some
progress since its first warn-
ing in November it has still

If the EU executive finds failed to submit concrete time-

that the government has failed
to file an adequate plan and
implement it by May 12, it will
extend existing border checks
on travelers from Greece until
at least mid-November, help-
ing ensure that migrants
trapped there can’t travel far-
ther into the bloc.
Such a move would
heighten uncertainty about
the survival of Europe’s trea-
Belgian police conducted a raid on Tuesday in the Belgian neighborhood of Uccle, where they detained three people for questioning. sured Schengen agreement,
which allows travelers to cross
lines and cost estimates and to
name the authorities responsi-
ble for various requirements.
In December, interior min-
isters from a number of EU
countries, including Austria,
warned that Greece could be
suspended from the Schengen
system if it didn’t improve its
controls.
Under the EU-Turkey deal,
Greece must focus on return-
ing people and stop issuing
temporary stay permits to mi-

Hunt Is on for Attacker’s Bag

Police fear backpack say is Mr. Krayem wearing the
backpack shortly before the
contains explosives; attack while talking with Mr.
Two more charged in Bakraoui.
“We are indeed still looking
Brussels bombings for the bag [Osama] is seen
wearing in the footage,” the
BY NATALIA DROZDIAK spokesman said.
AND LAURENCE NORMAN U.S. and European officials
say they remain concerned
BRUSSELS—Belgian author- about follow-up attacks by
ities are looking for the ruck- other groups in a potentially
sack worn by the man accused sprawling terror network. Bel-
of being the second terrorist gian Prime Minister Charles
in last month’s Brussels sub- Michel pledged over the week-
way attack out of fear that it end that Belgian authorities
contains explosives, a spokes- would remain alert despite the
man for federal prosecutors recent arrests in the Brussels
said. terror probe. Belgium’s official
The search for the missing threat level remains one notch
rucksack highlights concerns off the maximum, meaning
in Belgium that, despite a that authorities consider the
spate of arrests in recent days, threat level real but not immi-
the group behind the March nent.
22 attacks in the capital con- Mr. Krayem was arrested
tinues to pose a direct threat. Friday along with long-sought
Asked whether the bag carried terror suspect Mohamed
explosives, the spokesman said Abrini, who authorities say
“we are still trying to deter- confessed to being the third
mine that.” attacker at the Brussels Air-
Authorities accuse Osama port and has links to the No-
Krayem, a Swedish-born man vember Paris attacks. Mr.
arrested Friday and charged Abrini was charged with com-
with terrorists murders over mitting terrorist murders in
the weekend, of helping sui- both attacks.
Belgian prosecutors have
said they now believe the per-
petrators of the Brussels
bombings had originally
planned another attack in
France but shifted plans as
they felt the investigation
closing in on them.
Among the sites that inves-
tigators suspect were possible
targets were La Defense, the
business district outside Paris,
a conservative Catholic
church, and this summer’s Eu-
ropean soccer championships
in France, a French police offi-
cer said.
Like several members of the
network known to have
planned and participated in
the Brussels and Paris attacks,
Mr. Krayem is suspected of
having posed as a migrant, us-
ing a fake passport in the
name of Naïm al Hamed, to
cross back into Europe, ac-
cording to European security
officials. Belgian prosecutors
said Friday that he had been
picked up in Germany on Oct.
3 by Salah Abdeslam, the ac-
cused Paris attacker captured
last month, and driven to Bel-
gium.
Prosecutors said Saturday
two new suspects charged
Tuesday as Smail F., born in
1984, and Ibrahim F., born in
1988. They were charged them
with participation in a terror-
ist group, terrorist murders
and attempts at terrorist mur-
ders as an author or accom-
plice.
The two men are linked to
the renting of a residence in
the Brussels district of Etter-
beek that police searched last
week. Authorities say it was
possibly a safe house used by
terrorists in the run-up to the
Brussels attacks.
A U.S. official said Belgians
have been focused on identify-
ing and searching potential
safe houses for the terrorists
in an attempt to both find
members of the network and
head off potential follow-up
attacks.
Police also raided a house
in the Brussels district of Uc-
cle on Tuesday as part of their
investigation into the Paris at-
tacks, detaining the three peo-
ple and bringing them in for
questioning, the prosecutors
said.
A judge will decide Wednes-
day whether to keep the peo-
many European borders with-
out a passport.
Austria, Germany and oth-
ers have introduced border
controls in an attempt to stem
the tide of migrants. The im-
position of border controls
created a domino effect in the
Balkans that trapped thou-
sands of people who managed
to get into Greece by crossing
the Aegean.
The closure of the route
into Europe and a landmark
deal with Turkey to take back
all migrants arriving in Greece
have significantly reduced the
numbers coming into the bloc,
but EU diplomats say it is still
unlikely that Austria and some
of its neighbors will lift con-
trols in coming months.
Under current rules, pass-
port checks within the Schen-
gen area can’t be extended be-
yond May 12 unless the
commission finds a country is
failing to guard the bloc’s ex-
ternal border. The checks were
grants that have allowed them
to travel onto the mainland
and then farther north, the
commission says.
The commission also wants
urgent action by Greece to set
up joint patrols with the EU
border force Frontex on its
northern border with non-EU
member Macedonia, where vi-
olence has erupted in recent
days as thousands of migrants
attempted to cross the border.
Austrian police on Tuesday
said they were preparing to
reintroduce border checks on
the Italian border, because
they expect a new influx after
the route through the Balkans
was cut off.
A European Commission
spokeswoman said the execu-
tive was “very concerned”
about Austria’s plans because
the crossing “is essential for
the freedom of movement
within the European Union.”
—Zeke Turner in Berlin
contributed to this article.
ALEXANDROS AVRAMIDIS/REUTERS

cide bomber Khalid el- On Tuesday, Belgian prose- they believed Mr. Krayem, who ple under detention. They gave
Bakraoui set off a deadly blast cutors said they charged two is believed to have gone to no further information about
at Maelbeek station just over more suspects in connection Syria in early 2015, was also the people involved.
an hour after another bombing to the Brussels attacks and the man who purchased the —Laurence Norman
at Brussels Airport. Subway had detained three others for luggage used in the airport at- in Brussels
surveillance video caught an questioning over the Paris at- tacks. and Inti Landauro in Paris
image of the man authorities tacks in November. Prosecutors identified the contributed to this article.

A Joke Sparks Dilemma for Merkel

Macedonian police guarding the country’s border with Greece.

BY ANTON TROIANOVSKI Terror Threat Weighs

BERLIN—German Chancel-
lor Angela Merkel’s scramble
to stop the flow of migrants to
Heavily on Britain
Europe is so precarious that BY ALEXIS FLYNN to inflict an “enormous and
an off-color joke by a late- AND JENNY GROSS spectacular” terrorist atrocity
night comedian has managed in the U.K., potentially carried
to touch off a minor political LONDON—A trip to the out by people trained to a
crisis. U.K. last summer by a suspect paramilitary level, whereas
In Berlin this week, top arrested in the Brussels and previously the plots they had
diplomats and aides to Ms. Paris attacks, Mohamed seen had focused on more
KAY NIETFELD/EUROPEAN PRESSPHOTO AGENCY

Merkel are huddling to plot a Abrini, served as a reminder lone-wolf style attacks.
response to Turkey’s demand about the degree to which the The U.K.’s threat alert is
that Germany green light a U.K. is vulnerable to similar now at “severe,” meaning an
criminal investigation of the terrorist atrocities. attack is highly likely. The
comedian, Jan Böhmermann, With Islamic State’s external only higher ranking is “criti-
for reciting a crude poem on operations unit explicitly tar- cal,” which means an attack is
air about Turkish President geting Britain for aiding the expected imminently.
Recep Tayyip Erdogan. Mean- U.S.-led coalition against the One advantage the U.K.
while in the Aegean Sea, mi- extremists in Syria and Iraq, has, experts say, is its long
grant crossings from Turkey officials privately say it is a history of monitoring extrem-
to Greece have slowed to a matter of when, not if, terror- ists and prioritizing threats,
trickle—an early sign that Ms. ists get through. Senior British dating back to the bombing
Merkel’s hard-fought deal on Angela Merkel, here in Berlin on Tuesday, said she will decide on Turkey’s request in the next few days. security officials also note the campaign in England by Irish
migration with Mr. Erdogan is continuing threat from al republican extremists.
having an impact. utes on the books, a legacy of in the migrant crisis. If she turned from Greece to Turkey. Qaeda against the West. Another difference is pro-
The confluence of events il- when emperors and monarchs says no, she will damage her Turkish officials haven’t But the U.K.’s long experi- curing automatic and other
lustrates the tricky position of ruled much of continent. But relationship with Mr. Erdo- said publicly that a failure to ence in dealing with terrorist firearms in the U.K. is much
the European Union’s most the laws are so obscure that gan—the man German offi- prosecute Mr. Böhmermann threats and relatively restric- harder than in Belgium or
powerful politician and her domestic media and comedi- cials see as the key to avoid- would derail the deal on mi- tive gun laws, among other France. The U.K. also has
dependence on Mr. Erdogan. ans ridicule foreign politicians ing a repeat of last year’s grants. But they have sent sig- factors, provide some protec- stricter border controls be-
In an unusual bit of official with little thought. wave of one million migrants nals that media ridicule of Mr. tion, officials and other ex- cause it is outside Europe’s
media criticism, Ms. Merkel’s In Germany, the law had trekking to Germany. “She can Erdogan in Germany is dam- perts say. Schengen free-travel zone.
spokesman declared last week been most prominently in- really only lose, no matter aging the relationship be- Mr. Abrini, who was ar-
that the chancellor found Mr. voked by the shah of Iran in what she does,” said Oskar tween Ankara and Berlin. rested in Brussels last week,
Böhmermann’s poem to be the 1960s. A court ordered Niedermayer, a political scien- But in Germany, pressure is visited Birmingham, Man-
“deliberately offensive.” two employees of a Cologne tist at the Free University of building on Ms. Merkel to be chester and London during a
Under a rarely invoked Ger- newspaper to pay a fine for Berlin. tougher in pushing back roughly weeklong trip in June
man law that prohibits insults publishing a cartoon in 1964 Just last month, the Euro- against Turkey’s intervention. and July, according to people
of foreign leaders, Germany’s ridiculing the monarch, ac- pean Union sealed a deal that Ms. Merkel said Germany’s familiar with the matter, as
government is required to de- cording to German news re- the chancellor brokered with constitutional protection of previously reported. They
cide whether to allow an in- ports at the time. Three years, Turkey in which the country freedom of speech would be said authorities believe Mr.
vestigation if one is demanded later the shah threatened but agreed to take back all mi- upheld no matter what—and Abrini, who they suspect had
by the insulted government—a decided against invoking it grants who arrived on Greek that the Böhmermann affair recently been to Syria, may
feature that differentiates the again after, on a 1967 German islands after March 20. In re- had no bearing on the migrant have been scoping out possi-
HANNAH MCKAY/ZUMA PRESS

law from other German stat- visit, he was greeted with a turn, the EU promised to dou- crisis. “These basic values ap- ble attack targets.
utes and sets Ms. Merkel up poster reading “Persia—a con- ble its assistance for Syrian ply regardless of any political The U.K.’s most senior
for the conundrum she now centration camp.” refugees in Turkey to €6 bil- problem that we discuss with counterterrorism police offi-
faces. Turkey said Monday it If Ms. Merkel permits the lion ($6.8 billion) by the end one another,” she said. “That cer, Mark Rowley, said last
was formally seeking a probe. investigation, she is likely to of 2018 and to voluntarily take includes the issue of the refu- month that officials had dis-
A handful of European face a firestorm of domestic in one Syrian refugee in Tur- gees.” cerned a shift in Islamic
countries, such as Poland and criticism for selling out free key for each Syrian who —Emre Peker in Istanbul State’s tactics.
Switzerland, have similar stat- speech at home to get her way crossed illegally and was re- contributed to this article. He said the group wanted Patrolling the London subway.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Wednesday, April 13, 2016 HK JP KO ML SI IN UK FR MN PR THE WALL STREET JOURNAL.

WORLD NEWS

EU Seeks Response
On U.S. Visa Rules
BY LAURENCE NORMAN
BRUSSELS—The European
Commission has asked govern-
ments and European Union
lawmakers to state by July 12
what action the bloc should
take in response to the refusal
by the U.S. and Canada to of-
fer visa-free travel to some
European Union citizens.
EU officials said Tuesday’s
move by the EU’s executive
leaves the decision in the hands
of the key decision makers in
the bloc.
It also means that if the bloc
decides to suspend its U.S. and
Canadian visa-waiver program,
SVEN HOPPE/AGENCE FRANCE-PRESSE/GETTY IMAGES
commission will not take re-
sponsibility or blame for what
has to be member states’ and
[a] European Parliament deci-
sion,” the official said. “It’s un-
imaginable to think the com-
mission could by itself decide
to suspend visas for the U.S.”
The issue was discussed on
Tuesday by the college of
commissioners, the politicians
who run the EU’s executive.
European Commissioner for
Home Affairs Dimitris Avram-
opoulos said whatever is de-
cided “full visa reciprocity will
stay high on the agenda of our
bilateral relations with these
countries.”

that step may not take effect
until early 2017.
The U.S. has no visa waiver
for five of the EU’s 28 coun-
tries—Poland, Cyprus, Roma-
nia, Bulgaria and Croatia—the
first two of which joined the
bloc more than a decade ago.
Canada has no visa waiver for
Romania and Bulgaria.
U.S. officials have said these
countries don’t meet the legal
standards required for visa
waivers.
Firefighters stood in front of wreaths laid at the site of a train accident near Bad Aibling, southern Germany, in February. Under EU rules, the com-
mission needs to launch a le-
In April 2014, the commis-
sion formally reported that
citizens of Poland, Romania,
Bulgaria, Croatia and Cyprus
The U.S. requires
visas for visitors
from five of the bloc’s
28 member states.
were still required to apply for
visas when traveling to the
U.S. This notification triggered

German Dispatcher Is Held

Authorities say deadly side the other and more than
80 passengers injured.
train crash occurred as The crash came as a shock
rail employee played in Germany, where such inci-
dents are rare and the trans-
game on smartphone portation system carries a
reputation for safety. Yet
BY ZEKE TURNER while the nation’s rail network
is covered by an emergency-
BERLIN—A train dispatcher braking system that protects
who was overseeing the trains that miss their signals,
stretch of track where two the crash showed such a sys-
trains collided head-on in Feb- tem could still fail in the event
ruary, leaving 11 dead, was of a serious human error.
playing with his smartphone On the morning of the acci-
until just before the crash, in- dent, the dispatcher, an em-
vestigators said on Tuesday as ployee of Deutsche Bahn’s in-
they announced his arrest. frastructure unit, turned on
The high-speed crash be- his smartphone, opened an on-
tween two commuter trains line game and played actively
traveling along a one-way sec- until just before the collision,
tion of track in the Bavarian the public prosecutor in the
town of Bad Aibling left the nearby city of Traunstein
cars of one train wedged in- said on Tuesday.
“It must be assumed, on the
basis of the tight timeline,
that the defendant was thus
distracted from managing the
traffic of trains at the inter-
section,” Prosecutor Wolfgang
Giese said.
After allowing two trains to
hurtle toward each other on
the single set of rails, the dis-
patcher pressed the wrong
button while trying to send an
emergency call out to the driv-
ers.
Playing with the phone led
to not just “a moment of fail-
ure” but “a breach of duty
with substantially grave con-
sequences.”
On Monday, a court in the
city of Rosenheim ordered the
man to be held in police cus-
tody until his trial. The dis-
patcher, who was first ques-
tioned in February, faces
charges of negligent homicide,
negligent injury and danger-
ous intervention in rail traffic,
authorities said.
The man, who police have
described as 39 years old and
married, with years of experi-
ence on the job, was ar-
rested on Tuesday, whereupon
he confessed to playing the
game on his phone but denied
that he was distracted, author-
ities said.
Under German privacy laws,
defendants’ names aren’t pub-
lished in the preliminary
stages of criminal investiga-
tions.
Separate investigations into
the crash from the public
prosecutor and Germany’s
Federal Railway Agency con-
tinue.
gal procedure to suspend its
visa-waiver programs for
other countries. Once that le-
gal procedure is launched, the
parliament and member states
have four months to raise ob-
jections.
They can request an addi-
tional two months delay at the
end of that period.
The Commission has some
wiggle room however on
whether to launch the legal
procedure.
It can avoid taking the deci-
sion if it fears suspending the
visa-waiver programs would
have a significant negative im-
pact on the bloc’s external re-
lations.
One EU official said the
commission would decide
whether to start the legal pro-
cedure only after member
states and EU lawmakers have
weighed in, meaning it may
happen after July 12. That
means even if they go ahead,
the decision could be delayed
a further six months.
“With this communication,
a two-year window for the
commission to examine the
problem, the deadline for
which passed on Tuesday.
U.S. officials said last week
that Washington has main-
tained “an open dialogue with
EU officials” on the issue but
that the five EU countries in
question “haven’t met the re-
quirements for the U.S. visa-
waiver program.”
While the EU has long been
pushing Washington for recip-
rocal visa rights for all its citi-
zens, there is growing debate
within the U.S. over its visa
waivers for foreign nationals.
The recent terror attack in San
Bernardino, Calif., sparked
fresh calls for tighter controls
on who can enter the country.
In January, the U.S. imple-
mented changes to prevent
foreign nationals who have
traveled to Iran, Iraq, Sudan
or Syria from entering the
country without a visa. It also
denied automatic visa waivers
for foreigners who have dual
Iranian, Iraqi, Sudanese and

Panel Votes to Impeach Brazil Leader

we make clear this political Syrian citizenship.

BY PAULO TREVISANI
AND LUCIANA MAGALHAES
Italy Advances Bill
BRASÍLIA—A congressional
impeachment committee voted
To Overhaul Its Senate
late Monday to recommend a BY GIADA ZAMPANO Under the new bill, the re-
Senate trial for President formed Senate would have 100
Dilma Rousseff on charges of ROME—The lower house of members, down from 315, and
manipulating public finances, Parliament approved a bill to they would no longer be di-
in a raucous session that sets revamp the Italian constitution rectly elected. Ninety-five
ANDRESSA ANHOLETE/AGENCE FRANCE-PRESSE/GETTY IMAGES

up a decision this weekend by after a walkout Tuesday by the members would be chosen by
the entire lower house of con- opposition, advancing a plan regional councilors and may-
gress. to simplify lawmaking to ors and the other five would
Following the tumultuous which Prime Minister Matteo be nominated by the president.
day-long meeting punctuated Renzi has staked his political The new Senate would re-
by shouts of “Dilma out!” and future. tain its veto on some constitu-
“No coup!” from rival factions, The proposed overhaul— tional matters, but its ability
the 65-member panel voted which had been before law- to veto ordinary legislation
38-27 to approve a committee makers for more than two would be sharply reduced—a
report recommending im- years amid strong resistance— change aimed at simplifying
peachment. would sharply reduce the pow- the long and tortuous lawmak-
The process now moves to ers of the upper house, the ing process in Italy.
the full Chamber of Deputies Senate, and cut the number of The Senate also would no
for a critical vote scheduled senators by two-thirds. longer be able to participate in
for Sunday. If two-thirds, or It now faces a referendum, confidence votes in the gov-
342, of the chamber’s 513 fed- planned for October. Mr. Renzi, ernment.
eral deputies support im- Supporters of President Dilma Rousseff demonstrated in Brasília before the impeachment vote. who has repeatedly described The previous system, set up
peachment, the case will move the constitutional overhaul as after World War II to hinder
to the Senate for a trial. had come out publicly for im- ocratic Movement Party re- an effort by an ethics panel to his flagship program, has said the rise of another fascist gov-
Ms. Rousseff is accused of peachment, according to local cently split with the ruling co- remove him from his post. he is ready to resign if voters ernment, attributed the same
using loans from state banks newspaper O Estado de S. alition and now supports “This process of impeach- reject it. powers to both chambers.
to plug a budget hole in viola- Paulo, a figure that has risen impeachment. ment is born of original sin, “This is a historic moment The opposition complained
tion of Brazil’s financial ac- quickly in recent days. Mean- Some of Ms. Rousseff’s sup- which was the use of it by the for Italy,” Mr. Renzi said after about the transparency of the
countability laws. She has de- while, the tally of deputies on porters viewed Mr. Temer’s re- house speaker as revenge,” Mr. the vote, speaking during a process,.
nied wrongdoing. the record as opposing im- cording as an intentional leak Cardozo said. visit to Iran. “I am very happy The new constitutional ar-
In São Paulo, a hotbed of peachment—120—has risen aimed at swaying lawmakers Brazilians have grown more because Italy used to be the chitecture is tied to another of
anti-Rousseff sentiment, resi- only slightly. and undermining the presi- conflicted in recent weeks least stable country in Europe. Mr. Renzi’s overhauls, the new
dents blew vuvuzelas and Reinforcing the sense that dent. “Michel Temer should about an impeachment process Now it is the most stable.” electoral system that intro-
drivers honked horns follow- time is running out for Ms. respect the office and not that has become embroiled in The bill was approved 361-7 duces a two-round voting sys-
ing Monday’s vote. In Rio de Rousseff, Brazilian media on work as a coup monger,” said partisan mudslinging and ac- in an almost half-empty cham- tem for the lower house. Its
Janeiro, thousands of pro-gov- Monday circulated a recording Deputy Ivan Valente of the So- cusations of dirty tricks. A ber of 630 seats. Opposition main purpose is also to give
ernment supporters rallied in of her potential successor, cialism and Liberty Party, who survey published Sunday by parties—the antiestablishment elected governments more sta-
defense of Ms. Rousseff, some Vice President Michel Temer, has come out publicly against polling firm Datafolha showed 5 Star Movement and the anti- bility and the chance to sur-
carrying signs denouncing im- rehearsing a speech in prepa- impeachment. that most Brazilians surveyed immigration Northern League— vive a full five-year term, as
peachment as a coup d’etat. ration to take power. A Speaking in defense of Ms. would like to see both Ms. left in protest and didn’t partic- has rarely happened in Italy’s
Monday’s vote against Ms. spokesman for Mr. Temer con- Rousseff at Monday’s commit- Rousseff and Mr. Temer leave ipate in the voting. modern history.
Rousseff was expected. The firmed the authenticity of the tee meeting, Solicitor General office and the country to hold
chamber’s activities are heav- audio, which he said was re- José Eduardo Cardozo said the new elections.
ily influenced by her political leased by accident. allegations of slippery book- A sign of the country’s po-
nemesis, House Speaker Ed- If Ms. Rousseff is tried by keeping against the president larization was on clear display
uardo Cunha, who has been the Senate, she would be weren’t substantiated. He in the country’s capital, where
pushing hard for the presi- forced to step aside temporar- blamed Mr. Cunha for opening special security measures are
dent’s ouster. But the wider- ily for a trial that could last a the process against Ms. Rouss- already being taken in prepa-
than-expected margin of de- maximum of 180 days. Mr. Te- eff to distract from his own le- ration for Sunday’s vote. A
feat—government insiders had mer would become interim gal woes. high metal fence has been in-
expected to garner as many 31 president during that time, Mr. Cunha has been charged stalled on the long mall lead-
votes, rather than 27—bodes and is in line to serve out the with pocketing at least $5 mil- ing to Congress to separate
ill for Ms. Rousseff heading remainder of her term if she is lion in bribes as part of a the pro-and-anti impeachment
into Sunday’s crucial lower- ultimately removed from of- sprawling corruption scandal crowds that are expected to
house vote. fice. But a Supreme Court linked to Brazil’s state oil com- show up in large numbers to
Pressure is rising on mem- judge on April 5 ruled that pany, allegations he has de- pressure lawmakers. Riot po-
bers of Brazil’s lower house to Congress must open impeach- nied. Mr. Cunha opened the lice will be on hand to deter
declare whether they support ment proceedings against Mr. impeachment proceedings conflicts.
REUTERS

or oppose impeachment head- Temer based on the same alle- against the president in De- —Rogerio Jelmayer
ing into Sunday’s showdown. gations, which he has denied. cember shortly after her rul- and Jeffrey T. Lewis
By late Monday, 298 deputies Mr. Temer’s Brazilian Dem- ing Workers’ Party supported contributed to this article. Prime Minister Renzi with Iran’s president on Tuesday in Tehran.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Wednesday, April 13, 2016 | A5

WORLD NEWS

U.S. Gains Access to Indian Military Bases

BY NIHARIKA MANDHANA stressed the importance of
“safeguarding maritime secu-
NEW DELHI—U.S. and In- rity and ensuring freedom of
dian officials agreed in princi- navigation and over flight
ple to a deal that would allow throughout the region, includ-
the two countries’ armed ing in the South China Sea.”
forces to use each other’s Earlier on his three-day In-
bases for replenishment and dia visit—his second in less
repair, a sign of deepening de- than a year—Mr. Carter toured
fense ties as Washington and an Indian aircraft carrier.
New Delhi grapple with a Messrs. Carter and Parrikar
more-assertive China. also visited the USS Blue
Concluding such a logistics- Ridge, the flagship of the U.S.
exchange pact would be a ma- Seventh Fleet, which was mak-
jor step, after more than a de- ing a port call in the western
cade of delays amid Indian state of Goa.
concerns that it could be In addition to the logistics
pulled into U.S. military opera- agreement, Washington has
tions or lose the strategic au- been pushing India to sign one
tonomy that has been a pillar for the transfer of advanced
of its policy of nonalignment communication equipment and
in foreign affairs. another allowing digital map-
An agreement is to be ping. India is concerned about
AGENCE FRANCE-PRESSE/GETTY IMAGES

signed “in the coming how much access these deals

months,” India’s defense min- would give the U.S.
ister, Manohar Parrikar, The U.S. sees a militarily
pledged on Tuesday after talks and economically strong India
with his visiting American as a counterbalance to China
counterpart, Ash Carter. and an important market for
The U.S. has sought closer its military equipment.
military cooperation with Mr. Modi has sought Ameri-
Asian nations as China’s rise can cooperation in his efforts
shifts the regional power bal- to rev up the country’s de-
ance. Mr. Carter was due to U.S. Defense Secretary Ash Carter, at front left, tours an Indian aircraft carrier at Karwar Naval Base in Karnataka during his visit. fense manufacturing industry,
travel next to the Philippines, and the two sides are negoti-
where U.S. forces are to be de- U.S. warships in the past after New Delhi’s nuclear- presence in the Indian Ocean. The U.S., India and Japan ating ways to co-produce
ployed and have access to mil- have had access to some In- weapons tests in 1998 and India and China have a long, will conduct joint naval exer- weapons.
itary bases close to disputed dian facilities, but without an American defense assistance disputed border in the Himala- cises this year in the northern U.S. officials in recent
territory in the South China agreement in place, access has to rival neighbor Pakistan, in- yas and fought a war in 1962. waters of the Philippine Sea, months have prodded India to
Sea. involved time-consuming pro- cluding a recent U.S. decision Since coming to power two an area close to the East and play a larger role in maintain-
An Indian navy officer said cesses. “There is no ammuni- to sell F-16 jet fighters to Is- years ago, Indian Prime Minis- South China Seas, where Bei- ing regional security, hinting
the country’s deal with the tion involved, no combat oper- lamabad, have sowed deep dis- ter Narendra Modi has jing is locked in standoffs with at possible U.S.-India joint pa-
U.S. would be limited to logis- ations,” the Indian officer said. trust of the U.S. in the Indian strengthened strategic and de- its neighbors and Washington trols or freedom-of-navigation
tics requirements, such as “We are not talking about po- security establishment. fense ties with the U.S., while over maritime territorial dis- operations in the Indo-Pacific
food and fuel, and repairs, as sitioning men in each other’s But New Delhi has grown avoiding steps that could pro- putes. region. India, however, has in-
U.S. vessels and forces cross countries.” concerned over China’s rising voke a major reaction from In a joint statement signed dicated a deep wariness about
the Indian Ocean. U.S. sanctions against India military ambitions and its Beijing. Tuesday, India and the U.S. any type of joint patrolling.

Australia Leader Taliban

Resume
To Press China on
ARMED FORCES OF THE PHILIPPINES/EUROPEAN PRESSPHOTO AGENCY

Afghan
Regional ‘Reset’ Fighting
BY ROB TAYLOR China very well for a Western BY MARGHERITA STANCATI
leader,” said Hugh White, a
CANBERRA, Australia— strategic analyst at the Aus- DUBAI—The Taliban in Af-
Prime Minister Malcolm Turn- tralian National University. ghanistan declared the start of
bull travels to China this week “But the question is will they their fighting season on Tues-
at a time of tense relations be- be listening, as this is a coun- day, vowing to take control of
tween Beijing and many of its try with a very strong strate- more territory and launch
neighbors over its increasingly gic agenda and a very clear large-scale attacks against the
assertive actions in the South sense of where it’s going.” Kabul government and its for-
China Sea. The visit comes as a United eign allies, including the U.S.
Mr. Turnbull plans to warn Nations-backed tribunal in The The Taliban’s announce-
Chinese leaders in a meeting Hague prepares to hand down ment of their spring offensive
in Beijing on Friday that their its decision in a dispute An aerial view of Chinese construction work at Johnson Reef, in the disputed Spratly Islands. occurs days after U.S. Secre-
forceful posture in the region launched by the Philippines tary of State John Kerry vis-
risks harming China’s interna- over China’s land-reclamation wasn’t aware of any plans by heading to Beijing. ports of Australian agricul- ited the capital Kabul to reaf-
tional ties and its economy, efforts in the South China Sea, Mr. Turnbull to discuss the Chinese investment in Aus- tural goods and services. firm U.S. support for the
people familiar with plans for where several countries have South China Sea, saying “some tralia soared 33% in 2015 from Shared business interests, government led by President
the visit said. overlapping maritime claims. people need not to over-worry a year earlier to US$11 billion, however, are unlikely to sway Ashraf Ghani.
The Australian leader, in his Many observers expect the themselves over nothing.” a new report from KPMG and China’s leaders on its strategic The proclamation has be-
first visit to China since be- court to rule China’s Spratly Mr. Turnbull’s pressure on the University of Sydney said priorities, Mr. White said. come an annual rite for the Is-
coming prime minister in Sep- activities violate the U.N. Con- China will be accompanied by this week, most notably in the “What is happening in the lamist movement and usually
tember, will urge President Xi vention on the Law of the Sea. efforts to deepen ties with commercial-property and agri- South China Sea is very much heralds an increase in vio-
Jinping and Premier Li Keq- Beijing has said it won’t be Australia’s biggest trade part- culture sectors. part of the whole Xi Jinping lence. The declaration coin-
iang to reset relations with bound by the decision. ner and investor. The Austra- With an Australian election China dream, where China is cides with the onset of spring,
neighbors that have been In the past, China has said lian leader, who has extensive due as soon as July and a stut- pushing its challenge to the when snow melts and moun-
strained by Beijing’s construc- it has “indisputable sover- business experience in China tering domestic economy, Mr. U.S. over who is going to lead tain passes open, enabling the
tion of artificial islands in dis- eignty” over all South China as a former investment banker Turnbull hopes to tap fresh Asia,” he said. “The sight of group’s fighters to move more
puted waters and what West- Sea islands and their sur- and entrepreneur, plans to growth opportunities through 1,000 Australian businessmen freely in many parts of the
ern nations say is its rounding waters. On Tuesday, lead a delegation of 1,000 Aus- a free-trade pact that eases is not going to put him off.” country.
deployment of weapons. a Chinese foreign ministry tralian business leaders to Chinese investment access to —Eva Dou in Beijing It will be the first offensive
“Mr. Turnbull understands spokesman suggested he Shanghai on Thursday before Australia while boosting ex- contributed to this article. since last summer’s disclosure
that Taliban founder and spiri-
tual leader Mullah Mohammad
inflation is heading back to 2% Omar had died two years ear-
World before they consider nudging up
borrowing costs.
lier. In their statement on
Tuesday, the Islamist move-
Watch Separate data suggested that
broader inflationary pressures in
ment said they had named the
current fighting season “Oper-
the U.K. remain low, with prices ation Omari” in their late
charged by companies at the leader’s honor.
factory gate falling 0.9% on the “With the advent of spring
year in March. Raw material it is again time for us to renew
SYRIA costs fell 6.5%, the ONS said. our jihadist determination and
—Jason Douglas operations,” it added, saying
Two Die in Russian fresh military operations
Helicopter Crash NIGERIA would “employ all means at
Russia’s Defense Ministry our disposal to bog the enemy
said that one of its helicopters
Army Massacred down in a war of attrition.”
EUROPEAN PRESSPHOTO AGENCY

crashed in the early morning on Shiites, Probe Finds A spokesman for the Af-
Tuesday around the city of A special investigation by a ghan Defense Ministry said
Homs, killing both servicemen on state government in northern the Taliban offensive would
board, the Russian news agency Nigeria found that the country’s fail and Afghan forces were
Interfax reported. army killed 347 Shiites during a launching a counteroffensive,
A statement from the minis- clash in December, highlighting dubbed “Operation Shafaq.”
try said that the crash of the deepening animosity between “They won't succeed, and
Mi-28 attack helicopter hadn’t the Shiites and soldiers in a na- we will bring peace to our
been a result of gunfire, and A Lebanese soldier stands watch near a burning car in the southern port city of Sidon, Lebanon. tion already dealing with Isla- people,” said the spokesman,
that the bodies of both service- Fathi Zeidan, a Palestinian security official, was killed by an explosive device planted inside the car mist insurgency Boko Haram. Mohammad Radmanish.
men had been found and deliv- A report by the Kaduna state The start of the fighting
ered to Russia’s air base in UKRAINE Mr. Groysman pledged to UNITED KINGDOM government, released late Mon- season follows a year of falter-
Hmeimim, according to Interfax. continue pursuing closer ties day, found that the army fired at ing efforts to restart direct
“According to the report from
New Government with the West and to make
Inflation Rises, but followers of Sheik Ibrahim peace talks between the Tali-
the crash site, there was no fir- Close to Formation good on the government’s prom- Stays Below Target Zakzaky, a leading cleric for the ban and Mr. Ghani’s national-
ing at the helicopter,” the minis- Ukrainian party leaders were ises to combat corruption and Annual inflation in the U.K. small number of Nigerian Mus- unity government. A four-
try said. close to forming a new govern- bureaucracy in the former Soviet accelerated in March to its high- lims who are Shiites, as opposed country group made up of
The cause of the crash was ment Tuesday, though continued republic. est level in more than a year, to Sunni. Afghanistan, the U.S., China
being investigated, it added. wrangling over cabinet posts A new coalition would allow but still remained well below the Mr. Zakzaky’s members took and Pakistan has held meet-
Russian President Vladimir made it unclear whether parlia- Ukraine to avoid snap elections Bank of England’s 2% target. over a highway, blocking a mili- ings since January in an at-
Putin last month unexpectedly ment would move to a final and help quell growing worries Consumer prices rose 0.5% on tary convoy, the report said. tempt to restart negotiations.
announced the beginning of the vote. that political instability could im- the year in March, up from 0.3% They also attacked police with In their statement on Tues-
withdrawal of Russian forces, Volodymyr Groysman, peril a $17.5 billion bailout from in February, the Office for Na- jerry cans rigged as throwable day, the Taliban hinted at their
but the Kremlin said Russia speaker of parliament and a the International Monetary Fund. tional Statistics said Tuesday, explosives, it added. possible participation in talks,
would continue to maintain a close ally of President Petro Po- But a new government led by the fastest rate of inflation since The military has said that it saying that along with the
military presence in Syria. Rus- roshenko, announced his bid to Mr. Groysman could also raise December 2014. was responding in self-defense spring offensive it would seek
sian aircraft have continued to become prime minister soon af- concerns about Mr. Poroshenko’s Central-bank officials led by to the protesters; they “refused to “open a dialogue with our
fly missions in support of Syrian ter the current premier, Arseniy growing power in Ukraine, ob- Gov. Mark Carney have signaled all entreaties to disperse,” a countrymen in the enemy
government forces. Yatsenyuk, said Sunday he was servers said. they want to see faster wage statement in December said. ranks” to establish a cohesive
—Thomas Grove resigning. —Laura Mills growth and other evidence that —Gbenga Akingbule Islamic government.
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A6 | Wednesday, April 13, 2016
INVEST
Continued from page A1
ers, coal miners and demobi-
lized soldiers angered by job
losses. A common thread: Pro-
testers are convinced govern-
ment officials and the ruling
Communist Party encouraged
their investment of money and
labor in ways that helped
build modern China, and now
they feel betrayed.
“Since the People’s Republic
of China was established in
1949, the Communist Party has
always been something that
the people viewed as trust-
worthy,” says retired army Lt.
Col. Guo Bojin, 72, who says
he lost about $120,000 to
Tengfei and believes the gov-
ernment condoned the busi-
ness. “Who can you trust, if
you can’t trust the govern-
ment?”
China’s Ministry of Public
Security, the China Banking
Regulatory Commission and
Xinxiang city officials didn’t
respond to inquiries. Xinxi-
ang’s government has said it is
“going through the legal pro-
cess” in dealing with Tengfei,
whose chairman and some
other staff are in government
custody and couldn’t be
reached to comment.
Tengfei was typical of a
new class of investment com-
pany that drew in millions of
Chinese small investors. These
companies—part of China’s
“shadow banking” industry, a
broad term for a range of
loosely regulated lenders—
touted what are called
“wealth-management prod-
ucts” in China, usually repack-
aged corporate debt, and of-
fered annual returns of
sometimes 18% or more.
The products became
widely popular after China’s
property market began to cool
around 2012. The outstanding
balance in wealth-manage-
ment products was 18.4 tril-
lion yuan ($2.8 trillion) at the
end of the first half of 2015,
according to Moody’s Inves-
tors Service—about the size of
the U.S. money-market-fund
industry.
As economic growth fal-
tered, corporations defaulted
on loans at the core of these
products. Some firms offering
the products failed, leaving in-
vestors in the lurch.
The government hasn’t pro-
vided a count of the losses to
investors. A Wall Street Jour-
nal tally of cases reported
over the past year shows at
least $24.3 billion owed to 1.6
million investors in wealth-
management products, about
$15,000 each on average.
Tengfei collapsed with about
$400 million owed to 37,000
investors, about $10,800 each
on average.
Stamp of approval
Many small investors the
Journal interviewed say they
hadn’t understood the nature
of their investments. They
considered it a government
stamp of approval that state
media ran advertisements by
Tengfei and other such compa-
nies, and that government of-
ficials attended some of the
companies’ public gatherings.
MASK
Continued from page A1
never, never had problems
with my creativity or ideas,”
he said. “It just comes like wa-
ter.”
His output stuns fellow
painters.
“He’s the lion of the group,
we’re all just like the cubs,”
said Paintzoo Studios’ Franny
Drummond, a Pennsylvania-
based painter whose zombie
mask is worn by Flyers goalie
Steve Mason. (Mr. Drummond
also paints motorcycle hel-
mets.) “People are going, ‘He
can’t paint that many masks in
a week, it’s impossible.’ ”
Mr. Gunnarsson’s masks
start with a conversation, then
a sketch, then a full-color
drawing for goalies to review.
He paints mostly with an air-
brush—a paint gun connected
to an air compressor—but
sometimes relies more on a
sketch pen, like he did for Buf-
falo Sabres goalie Robin Leh-
ner, whose mask is a tribute to
a Swedish death metal band.
Mr. Gunnarsson has one
crucial painting companion:
movies, mostly action and sci-
fi flicks like “Independence
Day,” “Ghostbusters,” “Back to
the Future,” and “Jurassic
Park.”
“I have some favorites that
I have watched 20 or 30
Investors say they have re-
sorted to protests because
government officials haven’t
helped recoup losses. Inves-
tors have coordinated multi-
city protests via instant-mes-
saging groups. In Xinxiang,
investors say electronic word-
of-mouth can quickly trans-
form a quiet gathering of a
few score people into a near-
riot of a thousand.
Through the second half of
last year, hundreds staged pro-
tests in southern China over
$6.6 billion of failed invest-
ment products sold by Fanya
Metal Exchange, which ceased
operations and is under inves-
tigation by the local govern-
ment. Calls to Fanya went to
an automated system that ap-
peared untended.
In October, investors pro-
tested at the offices of asset-
management firm Global
Wealth Investment (Beijing)
Co., blaming it for loans it ex-
tended to companies in
China’s ailing rust belt that
later soured. Global Wealth
didn’t respond to inquiries.
When some 200 investors,
many of them retirees, pro-
tested outside financial-ser-
vices giant Ping An Insurance
Group Co.’s Beijing headquar-
ters in October, more than 100
police were on the scene. Offi-
cers ordered the crowd to dis-
perse as protesters, some in
white bandannas, a Chinese
symbol of death, chanted ac-
cusations the company had
sold them wealth-management
products that soured.
Ping An said in response to
queries that it didn’t issue
such products, although it ac-
knowledged some staff had il-
legally sold or recommended
“unauthorized products.” It
said it would help investors
seek restitution. Investors say
it hasn’t done so. Beijing po-
lice didn’t respond to inqui-
ries.
The central government has
tried to tighten regulation of
these wealth-management
firms, and police have stepped
in to shut down some and ar-
rest their executives. The na-
tional banking regulator, ad-
dressing online-lending and
wealth-management concerns,
in December vowed to
“cleanse the market.”
As small investors
in China watch their
nest eggs dwindle,
some are protesting.
Authorities have also
sought to forestall protests,
say investors, who contend
they have been followed and
threatened by police, and
sometimes beaten and de-
tained. Police and public-secu-
rity officials have told some
journalists not to report on
the collapsed lenders.
Investors in one of the
highest-profile failures, of In-
ternet-based Ezubo Ltd. last
year, say they believe police
infiltrated their online groups
to monitor protest plans.
Ezubo offered investments
in a related finance-leasing
business, promising returns up
to 15%. Prosecutors have
called it a Ponzi scheme that
defrauded 900,000 investors
Clockwise from top left, New York Rangers goalie Henrik Lundqvist, the Anaheim Ducks’ Frederik
Andersen and the Tampa Bay Lightning’s Ben Bishop sport masks designed by David Gunnarsson.
times,” he said. Because of
this, many of his masks have
movie characters or scenes,
like “The Shining” mask of
Vancouver goaltender Richard
Bachman (whose name is the
same as a pen name used by
Mr. King, the book’s author).
The glowing, circuit-like
FROM PAGE ONE
Protesters at Ping An in October held signs saying: ‘Ping An cheats! Ping An, return the money!’
Losing Credit
As China's economic growth slowed, so did growth in credit and loosely regulated ‘shadow banking,’
helping lead to corporate defaults that, along with falling stock markets, hurt small investors' nest eggs.
China’s credit growth vs. GDP
growth
25% Credit growth
Nominal GDP
20
15
10
5 10
0 0
2011 ’12 ’13 ’14 ’15
Sources: Wind Information, People's Bank of China (credit); National Bureau of Statistics (GDP);
Moody’s Investors Service (shadow banking); FactSet (index)
of more than $7.6 billion.
Ezubo’s senior executives are
in custody and couldn’t be
reached to comment.
In at least five cities where
Ezubo operated, investors say
they gathered for protests to
find police already massed in
superior numbers. In Decem-
ber, dozens protested at China
Central Television’s Beijing
headquarters, watched by po-
lice who arrived earlier.
Wang Xinling, a 60-year-old
retired shoemaker, says when
she couldn’t determine
whether she would recoup her
Ezubo investment of about
$4,600, she joined the protests
at CCTV, which had carried
Ezubo advertisements. “All we
are getting now is ridicule and
indifference,” she says. “No
one is helping us.”
Tengfei’s troubles
People such as Mr. Yang
and Mr. Guo, who lost their
funds when Tengfei collapsed,
were among small investors
whose collective assets helped
to finance China’s boom, in
their case, in Xinxiang. A mi-
crocosm of China’s debt-fueled
rise, Xinxiang grew from a
small market town into a bus-
tling city of six million with an
Audi dealership and big-box
stores.
Tengfei, as a nonbank
lender in the city, started out
guaranteeing loans for local
businesses that found it other-
lines in Mr. Bishop’s Lightning
mask were inspired by the
movie “Tron,” a Gunnarsson fa-
vorite. For Frederik Andersen
of the Anaheim Ducks, Mr.
Gunnarsson painted Lego fig-
ures, a nod to the most famous
export from Andersen’s native
Denmark. His Ghostbusters-
Shadow-banking growth
50%
4Q 2015
40
30
20
2011 ’12 ’13 ’14
wise hard to get bank credit.
When Beijing moved to rein in
the galloping economy in 2011,
credit became scarcer. Tengfei
rebranded itself as a wealth-
management company and be-
gan marketing to small inves-
tors.
Tengfei plowed funds it
raised into loans to a network
of about 42 local companies,
lending at annual rates of 33%
to 40%, versus about 8% at
commercial banks. Within that
network, companies also lent
to one another and acted as
mutual guarantors for bank
loans, government documents
show.
The small investors’ funds
do appear to have helped sus-
tain the local economy. Henan
Huanyu Power Source Co., a
maker of rechargeable batter-
ies in Xinxiang’s ramshackle
industrial fringe, in 2013 saw
sputtering overseas demand
hurt cash flow, employees say.
Huanyu turned to Tengfei for
help repaying 30 million yuan
in bank loans, company docu-
ments show. Tengfei’s funds
helped Huanyu hang on, one of
the employees says, until a
large South Korean order
eased cash flow.
Piao’an Group, a medical-
equipment supplier in the net-
work, received funds from
Tengfei after it began to expe-
rience what government docu-
ments call a “capital crisis.”
Huanyu and Piao’an didn’t re-
spond to inquiries.
themed mask was perfect for
Cam Talbot when he played for
the New York Rangers, but
then Mr. Talbot was traded to
the Edmonton Oilers and Mr.
Gunnarsson had to tweak it.
The mask now has a heavy
dose of the ectoplasm ghost
Slimer, except he’s orange to
Shanghai Composite, weekly
closes
6000
Tuesday
2.9% 3023.65
5000
4000
3000
2000
1000
0
’15 2011 ’12 ’13 ’14
THE WALL STREET JOURNAL.
For Cao Guojun, 42, Teng-
fei represented the promise
of moving into the urban
middle class. Mr. Cao became
a Tengfei salesman in early
2013 after moving with his
wife and son to Xinxiang,
where they hoped to buy an
apartment near good schools.
He secured 1.3 million yuan,
or about $200,000, from in-
vestors for Tengfei’s prod-
ucts, mostly from friends and
family including his wife and
mother.
Every year, local govern-
ment officials—as in most Chi-
nese cities, Communist Party
members—attended Tengfei’s
anniversary celebrations, Mr.
Cao says, where “they would
stand and wave to the crowd
when introduced.”
“The most important thing
was to see that the govern-
ment supported it,” he says.
“You would think, if anything
happened, the government
would still support the busi-
ness.”
Mr. Cao and other investors
didn’t know that Tengfei was
struggling with souring debt
and that its lending among its
tight group of companies had
begun unraveling.
Tengfei stepped up its mar-
keting to attract more funds,
and its sales force prowled the
streets in 2013 and 2014. Mr.
Guo, the retired army man, in-
vested multiple times during
those years after learning of
Tengfei from a saleswoman he
match Edmonton’s colors.
“Cam showed me pictures
of Bill Murray signing the
mask, also Dan Aykroyd, the
whole team,” Mr. Gunnarsson
said. “I almost fainted.”
Henrik Lundqvist’s current
mask, named “Rangers Razors
Unleashed,” includes the
Statue of Liberty and sharp
ANDY MARLIN/NHLI VIA GETTY IMAGES; NHLI/GETTY IMAGES; ASSOCIATED PRESS
silver spikes seemingly cut
from her crown. Mr. Gunnars-
son has made dozens of masks
for Mr. Lundqvist, including
several for his MSG show The
Mask, which auctioned off
masks for charity.
“Lundqvist, he likes clean
designs with strong contrasts
and a lot of glitter,” Mr. Gun-
narsson said. “He likes when
it’s bling-bling.”
Goalie masks are not always
symbolic of a goalie’s psyche.
Take Mr. Dryden’s famous Ca-
nadiens mask with its pattern
of blue, white and red circles,
like a target. Mr. Dryden didn’t
ask for a target, or intend for
others to see the mask as a
target. He wanted a mask with
concentric C’s—for Cana-
diens—in the team’s colors.
There was no deeper meaning.
“I heard from people later,
saying that they felt kind of
sorry for me that I was wear-
ing a target,” Mr. Dryden said.
“They assumed that was my
expression of irony, ‘Well, if I
am a target, then why
wouldn’t I dress like one to
make it that much clearer?’ ”
THE WALL STREET JOURNAL.
met sitting on a curbside stool
while on his way to his local
market.
“They would take me to
classes on weekends,” Mr. Guo
says, where Tengfei represen-
tatives plied prospects with
snacks and gifts while urging
them to invest to “support lo-
cal business.”
Spooked investors
Eventually, news that simi-
lar firms elsewhere in China
were collapsing spooked Teng-
fei investors, who lined up at
the company in November
2014 demanding it return their
money.
Tengfei announced it
couldn’t repay. A day later, it
closed its offices. One Tengfei
salesman committed suicide.
The city has said it is investi-
CHUIN-WEI YAP
gating Tengfei for “exceeding
its business remit” and “ille-
gally soliciting funds from the
public.”
When investors couldn’t get
answers from Tengfei or the
city about restitution, some,
including Messrs. Yang, Cao
and Guo, marched in protest,
some of them attempting to
block the local rail line to Bei-
jing. Some stripped Tengfei’s
offices, carrying away comput-
ers and chairs; the three men
say they weren’t among the
looters.
Tengfei investors have been
staging protests ever since,
demanding government resti-
tution. Mr. Yang, who intended
his $37,000 for his twins’ edu-
cation, says police called him
almost daily on his cellphone
for five months to check on
his movements after they
briefly detained him at an in-
’15 vestor protest.
Investors have a pact to
meet every Monday outside
the Xinxiang city offices, and
Mr. Yang says he attends sev-
eral times a month. The March
episode was typical, he says.
Before police moved in, city
officials “told us they would
give us an answer a week
later.”
The next week, a lower-
ranking city official came out
to meet them, he says. Other
officials were too busy, the
emissary said, adding that
“city leaders are paying great
attention to the Tengfei issue.”
“It was all nonsense,” Mr.
Yang says. “They were only
trying to buy time.”
Mr. Cao says police repeat-
edly came to his home to
question his role in protests.
They once took him to a police
station, where, he says, offi-
cers told him: “This money,
just think of it as bad luck.”
Caught up in protests, po-
lice pressure and their lost
funds, Mr. Cao says he and his
wife grew estranged and di-
vorced. He moved to his par-
ents’ farmhouse with their son
and makes about $300 a
month as a deliveryman for a
milk-powder distributor.
He rides his scooter home
after dark, dreading running
into anyone who invested in
Tengfei.
“I got tricked, and I took
everybody down with me,” he
says. “We used to be fine folk
in our hometown. Now we are
nothing.”
—Kersten Zhang
contributed to this article.
The goalie mask has
changed goaltending in ways
that early goalies couldn’t
have imagined. Mr. Dryden’s
mask offered mediocre protec-
tion: A hard-hit puck, he said,
would often smash the mask
against his cheek and open up
a gash. He perfected the
stand-up style, with his head
held above the crossbar so
fewer pucks hit him in the
face. Masks evolved. They now
include cages, padding and
custom fits. Stand-up goal-
tending is long gone, replaced
by the superior butterfly tech-
niques.
“You have a whole let less
to shoot for because of the
evolution that began with the
perfect mask,” Mr. Dryden
said. “You’ve got a feeling that
this is really your mask, that
it’s made for you. It’s part of
your face.”
The goalie mask has no par-
allel in other sports, whose
gear and helmets conform to
team logos and color schemes.
(College football teams some-
times have helmet stickers,
which Mr. Dryden dismissed as
a poor comparison. “They look
extremely cluttered.”) But Mr.
Bishop, the Lightning goalie,
expects one sport will soon
follow in the footsteps of
hockey: baseball.
“I’m waiting for the day
that MLB catchers will do it,
because I have a feeling that
they might,” he said.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Trump, Clinton Look Strong in New York
Poll shows candidates
with big leads after
recent setbacks as
state’s primaries loom
BY PATRICK O’CONNOR
Donald Trump and Hillary
Clinton hold double-digit leads
in New York and are poised to
regain their footing in their
home state’s primaries next
Tuesday, a new Wall Street
Journal/NBC News/Marist poll
has found.
On the Republican side, Mr.
Trump holds a 33-point lead
over his closest rival, Ohio Gov.
John Kasich, 54% to 21%, while
Texas Sen. Ted Cruz trails both,
as the top pick of 18% of likely
Republican primary voters.
Mrs. Clinton maintains a 14-
point lead in the Democratic
contest, outpacing Vermont
Sen. Bernie Sanders 55% to
41% among likely Democratic
primary voters. The former
secretary of state’s lead is
built on strength among
women, African-Americans and
Democrats age 45 and older.
The survey results will be
welcome news to the two
front-runners, who have both
lost ground in recent weeks.
CHIP SOMODEVILLA/GETTY IMAGES
House Speaker Paul Ryan on Tuesday made it clear he wouldn’t be the GOP nominee if convention delegates sought another option.
Ryan Again Rules Out a 2016 Bid
BY KRISTINA PETERSON
House Speaker Paul Ryan
made another effort Tuesday
to douse speculation that he
could become the Republican
Party’s presidential nominee
this year.
Speaking to reporters at the
Republican National Committee
headquarters Tuesday after-
noon, the Wisconsin lawmaker
definitively ruled himself out of
contention.
“I do not want, nor will I ac-
cept, the nomination,” he said.
“I am not going to be the
party’s nominee for president.”
Mr. Ryan has repeatedly said
he doesn’t want to be chosen
his party’s nominee at a poten-
tially chaotic contested Repub-
lican National Convention in
Cleveland this July.
With prospects mounting
that none of the current three
U.S.
Watch
NORTH CAROLINA
Governor to Seek
Changes to New Law
Republican Gov. Pat McCrory
said Tuesday that he will seek
to roll back some provisions of a
new state law that limits anti-
discrimination protections for
lesbians, gays and transgender
people, in an attempt to “affirm
and improve” the state’s com-
mitment to equality after weeks
of protest.
But Mr. McCrory said he was
standing by a “common sense”
provision of the law requiring
transgender people to use the
public bathroom corresponding to
the sex on their birth certificates.
Mr. McCrory issued an execu-
Mr. Trump is looking to bounce
back from a decisive loss in
last week’s Wisconsin primary,
while Mrs. Clinton has lost
eight of the last nine Demo-
cratic contests.
“Right now, the front-run-
ners look like they will erase
recent setbacks and add sig-
nificantly to their delegate
margins,” said Lee Miringoff,
director of the Marist College
Institute for Public Opinion,
which conducted the survey.
Mrs. Clinton and Mr. Trump
remain the clear leaders in
their parties’ nominating con-
tests. Mrs. Clinton has a par-
ticularly strong advantage be-
cause of her support from her
party’s so-called superdele-
gates, the elected officials and
other party leaders who have a
say in determining the presi-
dential nominee.
Mr. Trump is in a tougher
spot because he is in a race to
collect the 1,237 delegates re-
quired to clinch the nomina-
tion before the party gathers
in Cleveland to determine the
nominee. He has so far won
743. A big win in New York
would help him reset his cam-
paign narrative, after he sur-
rendered delegates to the Cruz
camp at a string of recent
state party conventions.
presidential candidates may ar-
rive at the convention with the
1,237 delegates needed to
clinch the nomination, Republi-
can lawmakers and other party
insiders have said Mr. Ryan is
among the most likely choices
if delegates try to coalesce
around someone else.
Mr. Ryan, the party’s 2012
vice-presidential nominee, is
seen as battle-tested by the
last election and one of the
party’s most effective messen-
gers.
“If it does go to a candidate
who is not in the race, I say
Paul would be probably the
main choice right now,” Rep.
Peter King (R., N.Y.) said in a
recent interview. “He’s been
through a national campaign. If
we are going to go that route,
he would be the best choice.”
Mr. Ryan said last month
that he hoped to be “Switzer-
tive order that sought to unwind
and clarify aspects of a law he
signed March 23. He affirmed
the ability of private businesses
and local government entities to
establish their own antidiscrimi-
nation policies for their employ-
ees and expanded state equal-
employment policy to include
sexual orientation.
“I know these actions will not
totally satisfy everyone,” Mr. Mc-
Crory said in a video statement.
“But the vast majority of our cit-
izens want common-sense solu-
tions to complex issues.”
Earlier Tuesday, Germany’s
Deutsche Bank AG said it was
pulling the plug on plans to add
250 new jobs outside Raleigh, in
protest of the new law. PayPal
Holdings Inc. previously scrapped
plans for a new, 400-employee
expansion in Charlotte, the
state’s biggest city, and officials
from more than 100 other com-
panies, including Apple Inc., have
also objected to the law.
Mr. McCrory said he would
ask the Legislature this month
U.S. NEWS
Home Comforts
After recent stumbles, Donald Trump and Hillary Clinton look to be
on track to regain momentum in the April 19 primaries in New York.
N.Y. GOP primary voters
Presidential preference
Trump 54%
Kasich 21
Cruz 18
Who should be nominee if
Mr. Trump has the most
delegates but not enough to
be nominated on first ballot?
Trump 64%
Other 28
Source: WSJ/NBC News/Marist telephone polls conducted April 6–10 of 259 likely Republican
and 557 likely Democratic primary voters; margins of error: +/-6.1 and 4.2 pct. pts., respectively
On Monday, Mr. Trump,
prompted by the result of the
Colorado contest in which Mr.
Cruz won all 34 delegates, com-
plained that the GOP delegate-
selection process, which differs
from one state to the next, was
established by party bigwigs to
prevent political outsiders like
him from winning the nomina-
tion. “The system is rigged, it’s
crooked,” he said on Fox News.
Mr. Trump leads his two re-
maining rivals by at least a two-
land” and serve in a neutral
role at the convention, of
which he is expected to be the
chairman.
If no candidate wins 1,237
delegates during the prima-
ries, caucuses and conventions
in the states and territories,
the task of choosing a nomi-
nee would fall to the conven-
tion delegates. Most are bound
by their state results on the
first ballot when the RNC
meets in July in Cleveland, but
rules allow almost all of them
to vote for the candidate of
their choice on subsequent
ballots.
“I am not going to be the
nominee,” Mr. Ryan said in an
interview with a Wisconsin ra-
dio show earlier Tuesday
morning. “I don’t want to be
the nominee. If I wanted to be
the nominee for president, I
would have run for president.”
to adopt legislation reinstating
the right to sue in state court
for discrimination. The new law
prevented people from pursuing
state-court claims of wrongful
termination on the grounds of
discrimination for things like age,
gender or religion.
—Valerie Bauerlein
and Jon Kamp
FEDERAL RESERVE
Two Regional Banks
Wanted to Raise Rate
Two of the Federal Reserve’s
12 regional reserve banks
wanted to raise the interest rate
on discount-window loans ahead
of the central bank’s March pol-
icy meeting, up from zero in
January, according to minutes
published Tuesday.
The primary credit rate, the
interest rate on short-term loans
offered to generally healthy
banks through the Fed’s discount
window, has been 1% since Dec.
17. The regional Fed banks of
Richmond and Kansas City
N.Y. Democratic primary voters
Presidential preference
Clinton 55%
Sanders 41
Will not support the other
Democratic candidate if
their candidate loses
Clinton 15%
supporters
Sanders
supporters 30
THE WALL STREET JOURNAL.
to-one count among just about
every demographic group in the
New York electorate, among
them women, college graduates
and primary voters who prac-
tice a religion—three groups
with which he often struggles.
New York will award 95 Re-
publican delegates. A candi-
date can win all of the dele-
gates from any given
congressional district if he
eclipses the 50% mark.
Mr. Cruz entered the New
Mr. Ryan first said in Janu-
ary 2015 that he wouldn’t run
for president this year. But he
had also ruled out serving as
House speaker when former
Speaker John Boehner an-
nounced his retirement, before
ultimately agreeing to take on
the job.
Mr. Ryan’s refusal to step
into the race this summer
leaves Republicans with no
easily identifiable alternative
to GOP front-runner Donald
Trump or his chief rival, Sen.
Ted Cruz of Texas, who has
proven adept at courting the
delegates who could be key in
determining a nominee in
Cleveland.
“Paul Ryan was the white
knight hope of the GOP; now
the party is left with the black
swan choice of Ted Cruz or
Donald Trump,” said Demo-
cratic pollster Peter Hart.
wanted to lift the rate to 1.25%
in March “in light of continued
improvements in labor market
conditions and expectations that
inflation would rise toward the
Federal Reserve’s 2 percent ob-
jective over the medium term,”
the minutes said.
The other 10 banks, along
with the Fed’s five board mem-
bers, prevailed in their prefer-
ence to hold the rate steady.
Shifts in sentiment on the
discount rate sometimes reflect
changes in Fed officials’ views
on the path of short-term inter-
est rates in general.
The Fed’s policy committee
decided at its March 16 meeting
to also leave unchanged its
benchmark federal-funds rate
between 0.25% and 0.50%. Kan-
sas City Fed President Esther
George dissented, saying she fa-
vored raising the range by a
quarter-percentage point. Rich-
mond Fed President Jeffrey
Lacker isn’t a voting member of
the committee this year.
—Nell Henderson
Wednesday, April 13, 2016 | A7
York contest riding high after
his win in Wisconsin. But he is
struggling to get a foothold in
New York, a difficulty attri-
buted in part to his attack on
what he called Mr. Trump’s
“New York values” earlier in
the primary cycle. The senator
defended those remarks last
week, telling reporters he was
referring to the “values of lib-
eral Democratic politicians.”
Mr. Cruz spent Monday on
the West coast, attending cam-
paign events in California, the
last stop on the primary calen-
dar where the remaining con-
tenders will fight over the
state’s 172 delegates. Mr.
Trump can’t wrap up the nom-
ination before California and
four other states vote June 7.
In the latest poll, New York
Republicans were also asked
about the biggest question
hanging over the GOP contest:
What should happen if no can-
didate enters the convention
this summer with a majority of
delegates, the threshold for
clinching the nomination.
A large majority—64%—
thinks Mr. Trump should win the
nomination if he has the most
delegates, even if he falls short
of a majority, the poll found.
If Mr. Trump doesn’t win
the nomination, most primary
Court Hears Appeal
Of Terror Award
BY NICOLE HONG
The American families who
were victims of terrorist at-
tacks in Israel in the early
2000s shouldn’t have been al-
lowed to bring a lawsuit in the
U.S. against the Palestinian
Authority and Palestine Liber-
ation Organization, lawyers
for the groups told an appeals
court Tuesday.
The Palestinian groups’
lawyers are appealing a mul-
timillion-dollar award won by
10 families in Manhattan fed-
eral court early last year. Af-
ter a seven-week trial, jurors
found the PLO and Palestin-
ian Authority liable for sup-
porting six terrorist attacks
in Israel between 2002 and
2004 and ordered the groups
to pay the families $218.5
million, an amount that was
automatically tripled to
$655.5 million under a U.S.
antiterrorism law.
Tuesday’s appeal in the
Second U.S. Circuit Court of
Appeals in Manhattan fo-
cused on whether the fami-
lies’ lawsuit, which was filed
in 2004, should have been al-
lowed to proceed in the U.S.
Mitchell Berger, a partner
at Squire Patton Boggs who is
representing the Palestinian
groups, said the U.S. doesn’t
have jurisdiction in this case,
arguing that although the at-
tacks overseas killed and in-
jured Americans, they were
directed at Israel, not the U.S.
He said the Palestinian
groups weren’t waging a
“global terror campaign
against the U.S.”
The families brought the
lawsuit under the Anti-Terror-
ism Act, which allows Ameri-
can citizens who are victims of
terrorist attacks overseas to
sue in U.S. federal court.
U.S. Circuit Judge Christo-
pher Droney asked Mr. Berger:
“How is the [Anti-Terrorism
Act] ever enforced…when your
only option here is to go to
Ramallah [in the West Bank]?”
Mr. Berger responded that
victims could sue in the U.S.
if they can show “specific ju-
risdiction” exists, meaning
the overseas attack was ex-
An attack at Hebrew University in Jerusalem in 2002 became
part of a lawsuit won by American families in a U.S. court.
voters also said they would op-
pose any effort to crown some-
one who didn’t run for presi-
dent this year, throwing cold
water on speculation that
party leaders should nominate
House Speaker Paul Ryan (R.,
Wis.) or some other Republi-
can who sidestepped the pri-
mary. Some 59% said the nomi-
nee should be someone who
ran in the primaries, while 32%
said it would be acceptable to
have a nominee who didn’t.
The Democratic primary in
New York is showing voting
patterns familiar from prior
contests, with independents,
liberals and younger voters lin-
ing up behind Mr. Sanders, and
Mrs. Clinton dominating among
self-described Democrats and
other traditional constituencies.
Mrs. Clinton was twice elected
to represent New York in the
U.S. Senate. The two Demo-
cratic candidates are fighting
over 247 delegates in New York.
The Journal/NBC News/
Marist survey of New York,
conducted April 6-10, included
259 likely Republican primary
voters and 557 likely Demo-
cratic primary voters. The
margin of error is plus or mi-
nus 6.1 percentage points
among GOP voters and 4.2
points among Democrats.
pressly aimed at the U.S.,
which he said wasn’t the
case.
The attacks at issue in-
cluded suicide bombings and
other attacks in Jerusalem,
which left 33 dead and more
than 400 injured.
“The brunt of the injury
has to be committed against
the United States,” Mr. Berger
said.
Kent Yalowitz, a partner at
Arnold & Porter LLP who is
representing the victims and
their families, said there was
“extensive evidence” that the
intent of the attacks was to
intimidate the U.S. govern-
ment and influence U.S. pol-
icy, pointing to Palestinian
propaganda around the at-
tacks that said “a divine blow
will be dealt soon to the U.S.
and Israel.”
A lawyer for the
Palestinian groups
said the U.S. doesn’t
have jurisdiction.
The judges appeared to
grapple with how U.S. jurisdic-
tion applies to entities like the
Palestinian Authority and PLO,
which aren’t individuals or
companies and aren’t recog-
nized by the U.S. as part of a
sovereign nation. The Palestin-
ian Authority is the govern-
ment of Palestinians in the
West Bank and the Gaza Strip,
and the PLO is the Palestin-
ians’ political representative.
Much of the oral argu-
ments Tuesday waded into
the technical aspects of gen-
eral versus specific jurisdic-
tion, as defined by recent Su-
preme Court precedents.
Since the families filed the
lawsuit, lawyers for the Pal-
estinian organizations have
tried to dismiss the case on
jurisdictional grounds nine
times. On Tuesday, Mr. Berger
also pointed to three similar
cases in Washington, D.C.,
federal court, that were dis-
missed because the court
couldn’t find jurisdiction in
the U.S.
DAVID GUTTENFELDER/ASSOCIATED PRESS
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Wednesday, April 13, 2016 THE WALL STREET JOURNAL.

PERSONAL JOURNAL

Don’t Ignore LinkedIn Any Longer

The social network lacks wouldn’t do that. says the bug will be fixed this
The suggestions have been bet- week.
polish but it should be part ter since I customized my feed. To I’ve started interacting with my
of your repertoire even if do that, tap the three dots in the network the way I would on Face-
top right corner of a post, select book, posting status updates and
you aren’t job hunting Improve Your Experience, then links to articles. The thoughtful
pick the topics that interest you LinkedIn comments are a refresh-
BY JOANNA STERN most. You’ll begin to see more top- ing change from what I get on the
ical trending news articles—some snarkier avenues of the Internet.
At Social Media High, Facebook from online outlets and others
is the all-star quarterback, Twitter written specifically for LinkedIn. Get a New Job
is the school paper’s editor in chief It doesn’t matter whether you
and Snapchat is the mysterious Get a Stronger Network are actively searching for the job
Harley-riding transfer student. For a decade, I’ve been using of a lifetime or you plan to stay at
That makes LinkedIn the nerd who LinkedIn wrong. I always thought your current one until you retire.
skips prom for the mathlympics. the best way to get rid of the little Your LinkedIn profile is often one
Yet, like in every great John red pending invites was to accept of the first things to pop up in
Hughes movie, the underdog actu- all. That’s actually the worst thing Google search results. Eighty-seven
ally belongs in the in-crowd. you can do. percent of recruiters use the ser-
Admit it. Your most frequent Since everyone I accepted could vice, according to the 2015 Re-
interaction with the world’s un- message me, my inbox was full of cruiter Nation Survey.
coolest network is junk. No, attorney in Indonesia, I Ms. Ipri, my LinkedIn coach,
deleting those don’t need representation. says to think of your profile as less
“Join my net- So I spent an hour culling my of a résumé and more of a cover
work” emails. Customize your LinkedIn feed with different news sources, above. LinkedIn’s contacts by clicking on LinkedIn’s letter. The most important part is
You’re not alone: iOS and Android apps, below, are an improvement from its cluttered website. hidden Remove Connection button. the summary field. “This needs to
61% of LinkedIn (You can find it in the app by go- describe you to everyone, includ-
users only visit the site no more ing to the contact’s page and se- ing the people who would be hir-
than every few weeks, according to lecting the three dots in the upper ing,” she says. Say what you do in
Pew Research Center. right corner.) It’s just business— a creative and smart manner. Pro-
I was the same, avoiding and they won’t be notified. files with a summary receive seven
LinkedIn’s baffling design and in- If you want them to remain as times the views that ones without
cessant nagging. But a few weeks connections, you can opt to re- it get, according to LinkedIn. Pro-
ago, when I decided to give it a move updates from them in your files with photos performed 14
real varsity tryout, I realized feed by unfollowing them. If you times better, LinkedIn says.
LinkedIn deserves a place on my want to maintain a LinkedIn Rolo-
phone’s home screen. I now check dex of thousands, one seasoned
it a couple of times a week to find user suggested tagging contacts
Use it right and you’ll
get ideas on how to
DREW EVANS/THE WALL STREET JOURNAL (2)

out what’s happening in my indus- with keywords. Unfortunately, this

try. Use it right and you’ll get feature is only available on the
ideas on how to improve your website.
improve your business
business, find new leads—and “You should keep it to people in and find new leads.
maybe land a job you didn’t even your industry who you think could
know you wanted. be of assistance, and to people you
What’s changed? LinkedIn has know and have done work with be- LinkedIn looks at who endorses
drastically improved its iOS and fore,” says Victoria Ipri, an inde- you and then uses those connec-
Android apps over the past few pendent LinkedIn consultant, who tions to help others find you. The
months, with even more iPhone teaches private classes and webi- endorsement tool is in need of a
app changes arriving just this nars on how to use the social net- lot of work, but if you figure out
week. With some tricks and assis- work. how to use it, endorse a colleague.
tance from LinkedIn pros, I’ve been When you’re reaching out to Scratch their back, maybe they’ll
able to zero in on the most impor- vites to people when I had thought cleaning. someone, explain your intentions. scratch yours.
tant features within the over- I was accepting theirs. I’ve spent Sure, you’ll find more advanced Your best move is to swap the ge- I took the above steps and
whelming service. Don’t get me hours trying to figure out why it features on the Web, but the app neric “Please join my network” added some extras, including an
wrong: Parts of it are still inexcus- says I have 97 new messages when has what you need most, including email for a note saying why you’d honors and awards field. Accord-
ably terrible. But what other social I clearly don’t. profile editing, messaging and con- like to connect. Two wrinkles: You ing to a widget on the website, my
network allows you to connect The company is aware of these tact management. have to do a new one for every profile is “All-Star” strength.
with people in a professional way? issues and is hard at work on im- Using the app’s personalized person, and in the app you have to Make LinkedIn a staple of your
provements, says Julie Inouye, feed of job advice and industry go to your potential contact’s pro- social-media routine. Use it cor-
Get Better at Your Current Job LinkedIn’s senior director of mem- news is a must. Knowing that I’m a file page to find it. (Tap the three rectly and you’ll find it more re-
Regardless of how you plan to ber marketing and communica- tech writer who is connected to dots and select Personalize Invite.) warding than scrolling through all
use LinkedIn, I have one piece of tions. many people in the media industry, At the time of publishing this arti- the puppies, babies and vacations
unvarying advice: Avoid the clut- If the website is an overflowing LinkedIn placed a story on Apple’s cle, the personalized invites sent on Facebook. It’s always that un-
tered website. The design is so un- attic, the iOS or Android apps are News efforts at the top of my feed from the mobile app weren't ap- cool high schooler who goes on to
intuitive, I’ve mistakenly sent in- what remains after a good spring the other morning. Facebook pearing to recipients. LinkedIn greatness.

Prepare to Meet the Physical Demands of Hula

BY JEN MURPHY

Years of dancing have chiseled

Carrington Manaola Yap’s physique
down to 2% body fat. But none of
that training, he says, compares
with his workouts during the past
year as choreographer for a group
competing in Hawaii’s annual hula
competition, the Merrie Monarch
Festival, held March 27 to April 2
on the Big Island, in Hilo.
Mr. Yap’s family, the Lims, are
synonymous in Hawaii with the in-
ADAM PALUMBO/VISION HORSE MEDIA (2)

digenous story-
WHAT’S YOUR telling dance and
WORKOUT? music tradition.
His mother, Nani
Lim Yap, is an ac-
claimed hula teacher who had her
son dancing at age 3. Last year, she
founded her own hula school,
Hālau Manaola, and asked her son, Carrington Manaola Yap has
now 29, to be the choreographer of choreographed an entry in the Merrie
the team it sent to the 2016 Merrie Monarch Festival hula competition.
Monarch competition.
“Hula isn’t just dancing,” ex- tition for the title of Miss Aloha with 35 minutes on the stair the water,” says Mr. Yap, who is 3:30, he’ll have another 6 ounces of
plains Mr. Yap, who has competed Hula, where contestants perform in climber. “Cardio is done at a slow the stroker. “The stroker is the chicken and another cup of vegeta-
at the festival for years. His day ancient and modern styles. and steady pace,” he says. “If we hardest position, because you set bles. Dinner, at 8 p.m., is 6 ounces
job is designing a Honolulu-based Mr. Yap’s group earned second were sprinting or pounding on our the pace for the whole canoe,” he of chicken and a half-cup of greens.
line of home accessories and place for their ancient dance per- joints, we’d break down the muscle says. The activity helps him as a His final meal, at 9:30, is 6 ounces
women’s fashion called Manaola formance, which, inspired by the we’ve worked so hard to build.” choreographer. “It is all about tim- of fish and a half-cup of greens.
Hawaii. “It’s a way of life. It’s how traditions of the Big Island’s Then he performs three sets of five ing,” he says. “If my timing is off,
we pass down stories from genera- Waipi’o Valley, examined stories of to six heavy-lifting exercises. the whole boat is off.”
tion to generation.” gods such as Makaukiu, a shark- In the morning and sometimes Gear & Cost
As choreographer, Mr. Yap god who posed in human form in in the afternoon, Mr. Yap does a Some of the judging at Merrie
spends nearly twice as much time the ocean. For the modern cate- short core workout, playing a two- The Diet Monarch is for costumes, which
dancing as he did as a performer. gory, the group danced to to three-minute song and doing Mr. Yap eats seven meals a day. must be handmade. “Nothing can
“You have to do the moves over “Ho’onanea,” a classic love song by different sets of crunches without At 6:30 a.m., he eats a half-cup of be bought,” Mr. Yap says. “Textiles
and over to develop the dance,” he the famed World War II-era per- a break until the song ends. steel-cut oatmeal and 12 egg must be dyed, and stamps must be
says. “As the leader, your dancers former Lena Machado. The group’s Once a week, Mr. Yap joins a whites. At 8 a.m., he has 6 ounces hand-carved to make designs on
look to you and mimic your form combined scores earned them third group for open-water paddling in a of chicken and a cup of vegetables. our skirts.” Men dance in a pa’u, a
and rhythm.” place overall. seven-man canoe. He goes out at He has a protein shake at 10, and traditional pleated skirt, or a malo,
Dance groups train year-round 5:30 a.m. and again at 5:30 p.m. for by 1 p.m. is ready for lunch, 6 a loincloth. Often, the dancers
for Merrie Monarch, often five to a total of 13 miles. “Paddling is like ounces of fish with a cup of vege- wear leis around necks, wrists and
six hours a day. “Girls in our group The Workout running with your hands through table and 4 ounces of potatoes. At ankles and dance with bare feet.
have passed out on many occasions Wednesdays, Saturdays and
because the level of intensity,” Mr. Sundays, Mr. Yap flies from his
Yap says. In the lead-up to the
competition, dancers prepare phys-
home on Oahu to the Big Island to
train from four to six hours with a
Lords of the Dance | Why these dancers are star athletes
ically and mentally by practicing group of 60 dancers. They start Hula dancers are considered some most developed muscle from running muscles are also strong from the side
kapu, or restriction, which often with a 10K run, then a 45-minute of Hawaii’s top athletes. “The athleti- and jumping, but in hula dancers the to side movements. Ms. Brennan said
includes periods of fasting. “We’ve warm-up consisting of plyometric cism that is required in hula, particu- lateralis is strongest. It is so strong if you look at most female hula danc-
had women lose up to 40 pounds exercises like burpees and walking larly the more traditional style, which that when dancers stand up straight ers their stomachs look soft.
while training,” he says. lunges, a series of crunches and is faster and louder, rivals any other their toes point out like a ballerina.” “They don’t have six-pack abs, but
The Merrie Monarch competi- jumping jacks, then Pilates and sport,” says Bianca Brennan, a per- The hip-shaking motion hula danc- if you touch their stomach it would
tion features kahiko, or ancient yoga stretches. The rest of the ses- sonal trainer who works with the ers are known for begins in the toes feel rock solid,” she says. “Dancers de-
dance, and auana, the hula tradi- sion is dedicated to practice of the dancers in the hula school, Hālau and feet and moves up through the velop the transverse abdominis, the
tion’s modern form. Each group chanting and dance moves. Manaola on the Big Island. quads to the hips and lower back. most inner part of the abdominal
has seven minutes to perform a On the days he stays on Oahu, Ms. Brennan says hula dancers “Dancers have incredibly strong muscles,” she says. On top of the
dance; judges consider costumes, Mr. Yap works with a personal squat with knees bent 20 to 90 de- feet. The normal person probably physical strength, they need endur-
music, chanting, the dancers’ phys- trainer to build physique. “It’s not grees, for as long as an hour’s time in can’t separate their five toes,” she ance to chant. “Imagine if your spin in-
ical appearance and, most impor- quite bodybuilding because I don’t practice. “The quadriceps are com- says. “In hula, our dancers can do structor asked you to pause midclass
tant, the story the dance conveys. want huge muscles,” Mr. Yap says. posed of four muscles,” she says. “In monkey-type grips with just their pin- and start singing loud enough to fill
There also is an individual compe- The 90-minute sessions start most athletes, the medialis is the kie toes.” She says the lower back the room,” she says. —Jen Murphy
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Wednesday, April 13, 2016 | A9

ARTS & ENTERTAINMENT

A Forgotten Founder
REVIEW trademark muted hues is punctuated by a
more realistic taboret (with the highlighted
PETER PLAGENS tops of an open drawer and cabinet door
lending a third dimension), on which sits a
conventionally modeled apple. On the upper
Helen Lundeberg: right, a door opens to a dot of a moon hover-
A Retrospective ing in the nocturnal sky. The left-hand third
Laguna Art Museum, Through May 30 of the picture contains the dark silhouette of
a canvas on an easel in front of which—a
master touch!—appears Lundeberg’s tilted
Laguna Beach, Calif. head as she enters the room. The painting
THE ART of the Southern California painter exudes the whole pleasurable loneliness of
Helen Lundeberg (1908-1999) is nothing if being an artist.
not clear, and she was nothing if not clear
about it: “My aim, realized or not,” she said
in 1942, “is to calculate, and reconsider, ev- Looking at a leader of
ery element in a painting with regard to its
function in the whole organization. That, I Post-Surrealism, which
believe, is the classic attitude.” That per- advocated rational connections
spective—removed and measured, but never
cold or stingy—is continuously visible in among a painting’s elements.
what is, surprisingly, the first comprehen-
sive survey (it includes 60-plus works) of
this underrated and, in some quarters,
barely known artist.
Along with Lorser Feitelson—first her Although Lundeberg never quite enjoyed
teacher, then her married lover, and finally the career her work deserved, her path from
her husband—she founded a style widely tyro to virtuoso was hardly one of continuous
known as “Post-Surrealism.” It differed from neglect. As exhibition curator Ilene Susan
its European predecessor in not being ex- Fort writes, Lundeberg’s “public career was
plicitly immersed in dreams and general on the rise during the 1950s” and her “finest
weirdness. Post-Surrealism advocated ratio- and most productive period” occurred in the
nal connections among a painting’s ele- 1960s.
ments, and hoped they would lead a viewer Some claim that Lundeberg was excluded
to discover deeper meanings. from “Four Abstract Classicists,” the 1959
SMITHSONIAN AMERICAN ART MUSEUM

In a 1934 manifesto, Lundeberg didn’t show at the Los Angeles County Museum
mince words. After opining that Surrealist that put the city’s modern art world on the
giants Giorgio de Chirico, Salvador Dalí and national map, because she was a woman.
Max Ernst were “of no historical value,” Lun- (The four men exhibited were Karl Benjamin,
deberg proclaimed, “In [Post-Surrealism] Frederick Hammersley, John McLaughlin and
alone do we find an aesthetic which departs Feitelson.) Ms. Fort contends, however, that
from the principles of the decorative graphic Lundeberg simply “felt that her painting did
arts to found a unique order, an integrity of not fit the parameters [critic/curator Jules]
subject matter and pictorial structure un- Langsner established for the exhibition.”
precedented in the history of art.” Some of her paintings, beginning in the
While almost no work of art could ever ‘Double Portrait of the Artist in Time’ (1935), by Helen Lundeberg. mid-1960s—such as “Wild Planet” (1965) and
live up to those words, “Double Portrait of “Untitled (Soft Planet)” (1969)—wax treacly
the Artist in Time” (1935) nicely manifests “real” than the adult)—are revealed by the Greenwich Village at the age of 18, and stud- with interior-decorator pastels, and Lunde-
Post-Surrealism’s aesthetic philosophy. In picture’s clear and rational construction. ied in Europe before relocating to Los Ange- berg’s switch from oil to more convenient
the center foreground sits the artist as a 3- Lundeberg’s family moved from Chicago les. (Eventually, he’d host “Feitelson on Art” water-based acrylic is not entirely a blessing.
or 4-year-old child, next to a table and a to Pasadena, Calif., in 1912. After graduating on NBC TV from 1956 to 1963.) Nevertheless, Lundeberg’s art as a whole
clock. The child’s shadow falls back onto the in 1930 from what is now Pasadena Commu- Whatever Feitelson’s influence, Lundeberg possesses all three legs of the tripod on
floor and then climbs up a wall, where it be- nity College, she decided to take some art was a superb painter from the beginning. The which most good art rests: It’s good-looking,
comes an adult’s. Its head and shoulders classes at the Stickney Memorial School of paintings at Laguna trace her path from the it gives us something to think about, and it
nearly coincide with the image of a woman Fine Art, where she met Feitelson, who in- mysterious figuration embodied in “Double conveys the personality of the artist. With
in a small copy of Lundeberg’s own painting, spired her to pursue a career in art. A de- Portrait,” through hard-edged semiabstrac- this retrospective, the Laguna Art Museum
“Artist, Flowers, and Hemispheres” from cade older than Lundeberg, Feitelson was so- tion (doorways, arches, roads in the desert), has performed an important service to the
1934. The deeper meanings of “Double Por- phisticated and experienced. He’d seen the and then close to full-bore formalism. history of American art.
trait”—the delicateness of life and the para- bellwether Armory Show in New York in My favorite is “Studio – Night” (1958). A
dox of memory (the child is much more 1913, had maintained his own studio in simplified, flat-shape interior in Lundeberg’s Mr Plagens is an artist and writer in N.Y.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
-15 1 2 3 4 5 6 7 8 9 10 11 12 62 Daisy’s cousin 26 Used car,
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24 25 26 27 28 co-star
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35 29 30 31 32 33 34 slightly
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Paris 35 36 37
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Budapest
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Cold
38 39 40 41 42 animal
5 Calf cry
Milan h
Bucharest Stationary 43 44 45 36 Shoulder woe
6 Nos. on office
46 47 48 phone lists 39 Color whose
Showers name is French
Rome t b
Istanbul 49 50 51 52 53 54 55 7 Arguing for “mole”
d idd
Madrid Rain
8 Low-calorie 41 Trident, e.g.
56 57
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58 59 60 9 Look
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Tunis Snow 44 Piper rival
61 62 63 10 With fewer
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b induced
Ice BOOK REVIEW | By Natalia Shore 11 Elroy’s canine
46 Walk heavily
pal
Global Forecasts City
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Tomorrow
Hi Lo W City
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Tomorrow
Hi Lo W
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12 Work periods 47 Sweet rye
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Geneva 13 5 r 17 9 c Ottawa 7 -4 c 11 -1 s
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Today Tomorrow Hong Kong 27 25 t 28 24 c Phoenix 29 17 s 30 15 s 50 Fare
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Baltimore 15 2 s 17 3 s Las Vegas 27 15 s 25 12 pc Salt Lake City 21 10 t 12 5 sh 14 Pointer from a 35 Banana 56 One might be
61-Across Annie Wilkes 54 Act the shark
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Berlin 16 6 sh 13 6 r Los Angeles 22 12 pc 22 12 pc San Juan 29 23 sh 28 22 pc specimens
16 Group that benefits 25 Capitol Reef
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Boston 10 3 s 10 3 s Melbourne 19 11 pc 24 13 pc Sao Paulo 29 20 pc 31 21 pc
see red? 59 Potential
Brussels 16 7 c 16 9 c Mexico City 30 14 pc 29 12 pc Seattle 15 7 c 16 8 sh 37 Fruit sampler? Previous Puzzle’s Solution
Buenos Aires 22 15 r 23 19 s Miami 30 22 s 29 22 pc Seoul 18 8 r 19 6 pc 19 Prepare to flower girls H O T S T U D S W H E A T
Cairo 25 17 pc 28 18 s Milan 20 10 t 24 9 s Shanghai 26 15 pc 27 14 pc explode 38 Bar order A B E O H G E E A I S L E
Calgary 14 1 pc 11 1 c Minneapolis 19 9 s 21 9 pc Singapore 33 27 t 33 27 t 60 With 5-Across, R E X WO L F WH I S T L E
20 Team in black 40 Kazakhstan M Y T H R I T U A L S
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S A E A G A T E G U S T O
W I N D S H I E L DW I P E R
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Detroit 9 0 pc 14 3 s New Delhi 39 23 pc 41 26 pc Tokyo 19 15 c 20 15 r S T E E L S R E S L O T S
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presidential 43 Liquitex four longest S Y R WH O S L Y
Heliopolis Palace product Across answers S O A N D S O L O P S
Dublin 11 5 pc 10 4 pc New York City 14 6 s 16 6 s Vancouver 13 5 sh 14 6 c WA T E RWH E E L S M I T
Edinburgh 9 4 sh 9 3 pc Omaha 23 8 s 24 10 s Washington, D.C. 16 5 s 18 6 s I L I A D E L E V E I C Y
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 14 7 sh 17 8 pc Orlando 30 19 pc 30 18 t Zurich 14 6 t 16 6 c G E N T S R I S E N T A X

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Wednesday, April 13, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK

Trump’s Delegate Whine

A
s the prospect of a contested Republican The Trump campaign’s delegate-counting
presidential convention increases, so blunders show the downside of running a one-
does the brawling over delegates—and man show from a Boeing 757. Mr. Trump fa-
the whining from the losers. If mously disdained the trap-
someone decides to run for Scalia’s lesson for pings of conventional
U.S. President, is it too much campaigns, banking on mass
to ask that he or his campaign
candidates who gripe rallies and free media. That

AFP/GETTY IMAGES
managers understand the about party nominating has worked well in primaries,
nominating rules? especially open primaries
“The system is rigged, it’s
rules: Get over it. when Democrats and inde-
crooked,” Donald Trump said pendents can vote for GOP
Monday on Fox News, with his candidates. Noam Chomsky, second from left, speaks to Hezbollah leader Sheikh Nabil Qaouq,
usual understatement, after Ted Cruz won 34 But Mr. Trump hasn’t taken the time to un- right, at the former Israeli jail in Khiam, southern Lebanon, on May 13, 2006.
GOP delegates in Colorado while Mr. Trump was derstand how the GOP’s state parties work, and
shut out. “The people out there are going crazy, he’s now paying the price as delegates are cho-
in the Denver area and Colorado itself, and they’re sen. The New Yorker has admitted his mistake
going absolutely crazy because they weren’t by hiring Paul Manafort, a GOP Beltway fixer, to
Islam and the Radical West
given a vote. This was given by politicians. It’s a focus on delegate selection and maybe manage Years ago I had a chat mander Qassim Ar-Reimy in which he
crooked deal.” The truth is that he lost due to his the campaign. It’s hard to know who’s doing with three young Mus- asks whether “meddling in our affairs
own campaign’s ineptitude. what in the Trump Circus with all the leaks lim men as we waited and installing whomever tyrant agents
The state politicians in Colorado did exactly about in-fighting since his loss in Wisconsin. in a Heathrow airport and lackeys you want who kill and op-
what they are entitled to do under Republican i i i lounge to board a flight press [is] forgivable?”
Party rules: set up a process that allocates dele- The larger point is that none of this is un- to Islamabad. I was go- “Leave us with our religion, land and
ing to Pakistan to re- nations and mind your own internal af-
gates to candidates in any way a state party sees democratic or dishonest. A political party ex- GLOBAL
port on the fallout from fairs,” the commander—now Emir—
fit. Most state parties nowadays hold primary ists to nominate candidates to run for election VIEW
a devastating earth- writes. “Save your economy, look after
or caucus elections, but some do so with a hy- with the goal of winning. Political parties are By Bret
quake in Kashmir. They your concerns, for it is better than
brid system that can seem convoluted but private entities independent of government Stephens
were going there to do what you currently are.”
makes sense if the goal is to build a party of vol- and can set up the nominating process any way what they vaguely de- This isn’t the language of Islam, with
unteers from the ground up. they want. Candidates are obliged to follow scribed as “charitable work.” They its impressive tradition of conquest. It’s
Colorado awarded delegates through a caucus party rules, not vice versa. dressed in white shalwar kameez, wore the language of the progressive left, of
process that began with precinct meetings and This principle has been legally endorsed by their beards in salafist style and spoke what Jeane Kirkpatrick at the 1984 Re-
moved to congressional district and state GOP no less than the U.S. Supreme Court in a 2008 in south London accents. publican convention called the “Blame
conventions. The attendees at those conventions opinion by the late, great Justice Antonin Sca- I tried to steer the conversation to the America First” crowd. It fits the left’s
then voted to elect the delegates to the national lia, as our friends at the New York Sun re- earthquake. They wanted to talk about view of the West as the perennial sin-
politics. Had I seen Michael Moore’s ner and the rest of the world as its per-
convention, and Mr. Cruz won 30 delegates that minded us on Monday. A reform-minded judge,
“Fahrenheit 9/11”? I avoided furnishing petual victim. It is the language of turn-
will be pledged to him on the first ballot. An- Margarita Lopez-Torres, sued after she was de- an opinion about a film they plainly re- ing the page on a decade of war, of
other four are free agents but say they prefer Mr. nied a Democratic nomination to run for the vered. The unvarnished truth about focusing on nation building at home.
Cruz. Three others are state party leaders who New York Supreme Court. Amerika—from an American. Authority
are free to vote as they please. Justice Scalia rejected her claim for a unani- and authenticity rolled into one.
None of this was “crooked.” Mr. Trump is mous Court, writing in New York State Board I think of that exchange whenever The political orthodoxy
claiming the process was rigged because the of Elections v. Lopez Torres that, “A political the subject of Islamist radicalization of the left is the
Colorado GOP cancelled its usual straw poll held party has a First Amendment right to limit its comes up. There’s a great deal of liter-
on Super Tuesday (March 15 this year). But the membership as it wishes, and to choose a can- ature about how young Muslim men— gateway drug to jihad.
state party made that decision last August be- didate-selection process that will in its view often born in the West to middle-class
cause such a poll would have been binding under produce the nominee who best represents its and not particularly religious house-
holds—get turned on to jihad. Think of It strikes us as radical only because
new national GOP rules, and the Colorado party political platform.” He added that “party con-
Mohammed Emwazi, the University of it comes from the pen of a terrorist. If
wanted its delegates to be free to support the ventions, with their attendant ‘smoke-filled Westminster graduate later known as it had appeared as an op-ed in the
candidate they liked in what was then a crowded rooms’ and domination by party leaders, have Jihadi John. Or Maj. Nidal Malik Guardian, it would elicit nodding ap-
field. The decision wasn’t aimed at Mr. Trump. long been an accepted manner of selecting Hasan, of Fort Hood infamy. Or Najim proval from many readers, a dismissive
Mr. Cruz cleaned up in Colorado because his party candidates.” Laachraoui, who studied electrical en- shrug from others, but no big whoop
campaign was paying attention to the process. All of this is worth keeping in mind if the gineering at the prestigious Catholic either way.
Whatever one thinks of the Texan’s appeal as a GOP does find itself at the first contested con- University of Louvain before blowing In the early 1990s my former colum-
candidate, his campaign is organized and fo- vention since 1976. It’s democracy at work, and himself up last month in Brussels. Or nist colleague Thomas Frank came up
cused on winning the required 1,237 delegate the candidates who want to be President Boston’s Tsarnaev brothers and San with the clever phrase “commodifica-
majority. This speaks well of his ability to lead should spend more timing learning the rules Bernardino’s Syed Farook. tion of dissent” to explain how capital-
It’s a long list. And in many cases ism turned all kinds of countercultural
a complex organization. and less kvetching on TV.
investigators are able to identify an beliefs and radical ideas into just an-
agent of radicalization. Maj. Hasan other product in a box, to be sold and

Bernie Sees Panama Red corresponded with extremist cleric An-

war al-Awlaki. Laachraoui seems to
distributed through the usual channels.
“Fahrenheit 9/11” might have been a

W
hen you’re a protectionist hammer,
everything looks like a free-trade
agreement to pound. So it shouldn’t
surprise that Bernie Sanders is using the disclo-
sures in the Panama Papers to assail the 2011
U.S.-Panama trade accord for making secret
bank accounts possible. As usual, the Vermont
socialist has it backward.
“What the Panamanian free-trade agreement
did is enable large corporations and the wealthi-
est people—not just in this country but around
the world—to participate in massive tax-avoid-
ance schemes,” Mr. Sanders said in Philadelphia
Thursday. But there is no evidence to support his
claim, and the opposite seems to be true.
U.S. tax law requires confidentiality regard-
ing requests that the U.S. might make of foreign
governments. But what we do know is that U.S.
negotiators made the signing of a separate bilat-
eral tax agreement with Panama a condition for
signing the larger trade deal. It was ratified by
Panama ahead of the trade deal.
This tax accord is known as a tax information
exchange agreement, and it essentially obliges
the two governments to share tax information,
a practice that helps track down tax evaders. As
the Obama Treasury puts it, these agreements
“increase transparency between the U.S. and fi-
nancial centers around the world.”
By the way, U.S. goods exports to Panama in-
creased from 2012 to 2014, though last year
they fell below the 2011 total in part due to a
slowdown in Panama’s economy. The deal also
gives U.S. businesses access to Panama’s $20.6
billion market in services. All of which is to say
that the Panama free-trade deal is a net benefit
for the U.S. even if it doesn’t fit Bernie’s politi-
cal narrative.
have come under the spell of a Molen-
beek preacher named Khalid Zerkani.
The Tsarnaevs took their bomb-build-
ing tips from “Inspire,” an online Eng-
lish-language magazine published by al
Qaeda’s branch in Yemen.
But the influence of the Awlakis of
the world can’t fully account for the
mind-set of these jihadists. They are
also sons of the West—educated in the
schools of multiculturalism, reared on
the works of Noam Chomsky and per-
haps Frantz Fanon, consumers of a
news diet heavy with reports of per-
fidy by American or British or Israeli
soldiers. If Islamism is their ideologi-
cal drug of choice, the political ortho-
doxies of the modern left are their
gateway to it.
Take the most recent issue of In-
spire. Mixed in with step-by-step pho-
tos on how to build a timed hand gre-
nade and an analysis of the Charlie
political revelation or even a call to
arms for some impressionable young
Muslims from Tower Hamlets, but to
Hollywood it was $222.5 million of box
office gold. That made it a winner in
the marketplace of ideas, and who can
quarrel with that?
The commodification of dissent may
have the effect of blunting the impact
of all kinds of extreme notions. But it
can dull us to their extremism, leaving
us astonished when someone turns no-
tion into action. The catharsis of vio-
lence seems like an interesting idea in
the pages of “The Wretched of the
Earth.” In practice, it’s scores of young
men and women gunned down in a
Paris concert hall.
We’ve become lazy in our thinking
about Islam and the West. Whether
the Islam practiced by al Qaeda or Is-
lamic State is “radical” or merely tra-
ditional isn’t the question. It’s

Britain’s Muslim Problem Hebdo massacre, there’s a long article

on the oppression of blacks in Amer-
whether the West can recognize that
the moral nihilism of today’s Jihadi

A
ica, starting with the killing of Fergu- Johns is the logical outgrowth of the
t least 800 British Muslims have left the bers of British Muslims are physically and ideo- son’s Michael Brown. The Spring 2013 moral relativism that is the default re-
country to wage jihad with Islamic logically segregated, and want to stay that way. issue contains a “message to the ligion of today’s West.
State. Another 600 were caught trying Intermarriage rates are extremely low, and one American nation” from al Qaeda Com- Write bstephens@wsj.com
to join the group. If that isn’t of five ICM respondents never
warning enough about the fail- A new survey shows visits a non-Muslim home. LETTERS TO THE EDITOR
ure of Britain’s three million an alarming failure to petuate Many Muslim leaders per-
Muslims to assimilate, a new this segregation, and
survey of British-Muslim atti- assimilate in the U.K. the authorities too often have Redistricting, Originalists and Democracy
tudes should be. helped them—for instance, by Regarding your editorial “Justice the critical basis for representation,
The survey of 1,081 adult allowing concerns about polit- Ginsburg Goes Originalist” (April 6): not merely the number of eligible
Muslims, conducted by the research firm ICM ical correctness to dictate the level of police In deferring to the state in the Texas voters, goes back to an older concep-
using face-to-face interviews, will be featured presence in majority-Muslim neighborhoods reapportionment case, the U.S. Su- tion, the doctrine of virtual repre-
in a documentary on Britain’s Channel 4 on and the enforcement of British laws. That was preme Court got the decision right. sentation, in which those nominally
Wednesday. The Times of London has pub- the case in Rotherham, where the police and But the incoherence of the concurring unable to cast a vote nevertheless
lished some of the findings, and they make other municipal authorities for years ignored dicta spells more trouble. The Court had their interests represented in
botched the issue of legislative appor- the legislature.
alarming reading. or played down widespread allegations that
tionment in Baker v. Carr (1962) This was a concept that the found-
Thirty-one percent of respondents believe that Muslim men were “grooming” underage girls when it tiptoed by the “justiciabilty” ers rejected at the time of the revo-
a British Muslim man should be permitted to for sexual exploitation. issue, thereby asserting power it spe- lution because it seemed to sanctify
marry more than one woman. Fifty-two percent Prosecutors also resisted investigating alle- cifically didn’t have. oligarchy. But it acquires a new and
believe homosexuality should be illegal. Twenty- gations of political corruption in a heavily Through jurisprudence by a jingle bolder life under modern democratic
three percent support replacing British law in Muslim East London neighborhood, where the (one man, one vote) instead of wise conditions. The Constitution is a liv-
some areas of Britain with Shariah law, the sys- former mayor last year was ousted by an elec- statecraft, the justices then destroyed ing document and not a mere fossil.
tem of Muslim jurisprudence. Under its strictest tion judge in part for having cooperated with the historic role of state senates to be ALBION M. URDANK
versions, a woman’s testimony and parental in- local imams to exercise “undue spiritual influ- “the saucer in which we pour hot leg- Los Angeles
heritance rights are legally worth half of a man’s, ence” over voters. islative coffee to cool” as described by
and adultery is punishable by stoning. The poll is sparking discussion about a “state any number of commentators. Histori- My state doesn’t tolerate sanctu-
cally, a state’s “lower” house, based on ary cities or counties as California,
More than a third of Muslims think Jews have within a state.” The government has belatedly
population, focused on the opportuni- Illinois and Colorado do. So our state
too much power in Britain, compared with 9% wised up to the danger, cracking down on Mus- ties of the future while the more insu- gets disenfranchised on congressio-
of the general population. Meanwhile, 7% of re- lim efforts to segregate public schools in cities lar senates stored up the hard-earned nal representation through this dis-
spondents support the establishment of an Is- like Birmingham. Prime Minister David Cameron lessons of the past. Legislation that parate impact every 10 years. Tell
lamic state, and 4% sympathize with the idea of proposes to make English-language proficiency survived such a balanced review was the honorable justice this process
committing terrorism “as a form of political pro- a visa requirement, in particular so that the esti- likely to be better law. should be left to the states—as per
test.” Those last two figures seem small, until mated 190,000 Muslim women who speak little The Baker v. Carr ruling not only the Constitution.
you consider that they could total some 100,000 or no English can’t be prevented by their hus- destroyed the deliberative value of TIM DOLAN
to 200,000 British Muslims. bands from participating more fully in British senates, it disenfranchised rural vot- St. Peters, Mo.
Some Muslim organizations dispute the re- life. The results are also encouraging fresh calls ers throughout the country and
brought disaster to most state fiscs.
sults. The pollsters concentrated on communi- to stop the flow of overseas funding for radical, Letters intended for publication should
Great politics, lousy statecraft. be addressed to: The Editor, 1211 Avenue
ties where 20% of the population is Muslim. segregationist preachers. LARRY STIRLING of the Americas, New York, NY 10036,
These are some of Britain’s poorest neighbor- This survey shows how tardy such measures Superior Court Judge (Ret.) or emailed to wsj.ltrs@wsj.com. Please
hoods, critics argue, and the pollsters were more are, and also how little Britain can afford further San Diego include your city and state. All letters
likely to interview the country’s least-integrated delay. The longer it persists, the greater the are subject to editing, and unpublished
Muslims, skewing the results. threat Britain’s Muslim cultural isolation will Justice Ruth Bader Ginsburg’s letters can be neither acknowledged nor
returned.
That doesn’t change the fact that large num- pose to Britain’s liberal civilization. view that the population at large is
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
A New Weapon for America’s Pay-Equity Police
By Diana Furchtgott-Roth
F
eminists in America had some-
thing new to celebrate on April
12 this year. That’s the date
they have dubbed “Equal Pay Day,”
when they claim that women’s earn-
ings have finally caught up to men’s
earnings from the year before. Each
April activists hold demonstrations
and call on Congress to pass the
misguided Paycheck Fairness Act.
The legislation would, among
other things, require the Equal
Employment Opportunity Commis-
sion to collect wage data from
firms “by the sex, race, and na-
tional origin of employees.” First
proposed in 1997, the bill has no
Be prepared to report on
employees by 14 gender,
race or ethnicity groups,
within 12 pay bands.
chance of passage. So now Presi-
dent Obama is doing an end run
around Congress to give the
feminists what they want.
The EEOC is manipulating the
obscure Paperwork Reduction Act
for its exact opposite purpose. Right
now employers are annually required
to complete a form, called an EEO-1,
with 140 data points. The commis-
sion’s plan is to change the form,
beginning next year, to encompass
3,360 data points. Public comments
on the new form were due April 1,
and the EEOC is expected to issue its
final decision this summer, pending
approval from the Office of Manage-
ment and Budget.
Are Marines combat
troops?
In Barack
Obama’s world, the
answer is apparently
not—not even when
they are on the
MAIN
ground exchanging
STREET
fire with the enemy.
By William
McGurn
This is the fiction
supported by Hillary
Clinton and largely
unchallenged by any of the three Re-
publican candidates for president.
A recent headline in the Marine
Corps Times summed it up this way:
“Marines in Iraq technically not in
combat but still getting some.”
Welcome to Mr. Obama’s hidden
war.
Forty-five years ago this month,
in testimony before the Senate For-
eign Relations Committee, a young
war vet named John Kerry com-
plained that the whitewashing of
the reality of American involvement
in Vietnam meant that each day
“someone has to give up his life so
that the United States doesn’t have
to admit something that the entire
world already knows, so that we
By Danny Heitman
T
he arrival of April has brought
another observance of Na-
tional Poetry Month, which
celebrates a literary form that many
of us were happy to leave behind af-
ter college.
In my own university days some
three decades ago, I was frog-
marched through John Keats and
Samuel Taylor Coleridge, Wallace
Stevens and T.S. Eliot, Marianne
Moore and William Carlos Williams,
liking the experience not at all.
As a journalism major, I favored
the frankness and simplicity of the
declarative sentence, which is how
we built newspaper stories that
plainly said what they meant. With
their sly evasions and mysterious
metaphors, poets sounded detached
from the center of things. I
couldn’t wait to start my career
and be rid of them.
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This would put an enormous com-
pliance burden on businesses. Com-
panies with 100 or more workers
would be required to report on em-
ployees by 14 different gender/race/
ethnicity groups, within 12 pay bands
and 10 occupational categories.
The companies will also have to
report the number of hours worked
per employee—even for salaried
staff, whose hours now are not nor-
mally tracked. Firms with multiple
locations will have to complete
such forms for each branch with
more than 50 employees, meaning
an establishment with 10 offices
could find itself juggling 33,600
data points.
Companies with between 50 and
99 workers would retain the current
form, and those with fewer than 50
would be exempt. This gives small
firms yet another reason—along
with ObamaCare and the Family and
Medical Leave Act—not to grow.
The EEOC’s proposed measure of
wages, W-2 earnings, includes over-
time pay, tuition reimbursements
and benefits. But because those
extras boost some workers’ in-
comes more than others, they
muddy the data for anyone trying
to tease out the effect of any al-
leged discrimination.
The National Research Council, in
a 2012 report on compensation, rec-
ommended using base-pay rates cal-
culated from the Labor Department’s
Occupational Employment Survey.
But the EEOC disregarded this rec-
ommendation because it considered
the W-2 figure to be a more com-
plete record of compensation.
The occupational categories are
too wide to suggest, to say nothing
of prove, discrimination. One cate-
gory, “professionals,” includes art-
President Obama’s Hidden War in Iraq
don’t have to admit a mistake.”
Today, as secretary of state, Mr.
Kerry travels about the world ratio-
nalizing an Iraq policy designed to
keep President Obama from having
to admit his mistake: that he has
only made worse a war he claimed
to have ended. The entire world
knows this too.
In an interview aired Sunday on
Fox News, President Obama declared
that his “number one priority right
now” is defeating Islamic State. But
how does the man who sees himself
as the guy who gets America out of
its wars deal with the contradiction?
Part of the answer seems to be
fudging the troop numbers. Offi-
cially U.S. troop levels in Iraq and
Afghanistan are capped at 3,870 and
9,800 respectively. But after a Ma-
rine in northern Iraq—Staff Sgt.
Louis F. Cardin—was killed in an
ISIS rocket attack, the Pentagon
was forced to admit there are as
many as 5,000 U.S. troops in Iraq.
Only then did Americans learn that
men such as Staff Sgt. Cardin are
not included in the official troop
count because they were rotated in
on a temporary basis.
An Ode to Bankston, My Gruff, Poetic Boss
Diploma in hand, I took my first
daily-newspaper job—discovering,
much to my surprise, that I hadn’t es-
caped poetry. My city editor, Bill
Bankston, would spontaneously recite
reams of verse from memory, an odd
feat for a man who often appeared to
forget everything else.
In many other ways, he was an
unlikely champion of poetry. Gruff
and unpretentious, Bankston pre-
ferred to be called by his last name,
even by his family and friends—a
form of address that seemed better
suited to the kind of newsroom in
which scribes still wore press cards
tucked in fedoras and hid whiskey in
their desks.
Bankston’s recall of poetry was a
throwback in itself—an echo of his
grade-school days in the shadow of
the Great Depression, when children
routinely memorized verse as a
form of both literary and moral in-
struction. In this way, poetry had
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
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Paul Meller, Chief Technology Officer;
Mark Musgrave, Chief People Officer;
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Almar Latour, Publisher; Kenneth Breen,
Commercial; Edwin A. Finn, Jr., Barron’s;
Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
OPINION
ists, computer programmers, design-
ers, dietitians, editors, engineers,
lawyers, librarians, scientists,
nurses, physicians, surgeons and
teachers. Companies can await an
avalanche of lawsuits and investiga-
tions if their female “professionals”
are paid less than their male “pro-
fessionals”—even if the former are
dietitians and the latter are com-
puter programmers.
That’s the real story. In the
EEOC’s hearings on March 16, pro-
ponents of the updated form em-
phasized how it will help investiga-
tors find new targets. Emily Martin
of the National Women’s Law Cen-
ter called the new form “a critical
tool for focusing investigatory re-
sources to identify pay discrimina-
Mrs. Clinton has her own version
of the charade. “I will not send
American combat troops to Iraq or
Syria,” she has declared in more
than one primary debate. Instead,
she says, “we will continue to use
Special Forces.”
The White House
pretends the Marines
fighting Islamic State
aren’t really there.
It’s pure hooey, of course. For one
thing, it is based on the ridiculous
idea that special ops forces are also
not combat troops. Which is part of
the larger Obama fable that ISIS can
be knocked off with only a handful
of American fighters.
So we are left with a war in which
the president continues to tell us
more about what our troops won’t do
than what they will, even as he sends
more of them back to Iraq. In the
Fort Worth Star-Telegram, columnist
Cynthia Allen notes how ironic it
stitched itself into his DNA, a pres-
ence so casual that Bankston didn’t
openly ponder it.
Although I grew to love poetry, he
and I never deeply discussed it, and
he would have thought of National
Poetry Month as beside the point,
akin to National Brush Your Teeth
Month or National Grammar Month.
Learning poetry, as he saw it, was
part of being a reasonably educated
person, as basic as knowing long di-
vision, conjugation or the three
branches of government.
Poems spilled out of him unex-
pectedly and without ceremony, in a
gesture that I later understood as an
attempt to share a lesson. A favorite
was a snippet from John Greenleaf
Whittier: “For all sad words of
tongue or pen, / The saddest are
these: ‘It might have been!’ ” It was
invoked to calm young reporters
fretting about scoops missed, or
stories that had somehow fallen
short of the mark.
Bankston also liked “Ozymandias,”
the Percy Bysshe Shelley poem about
a shattered monument to a long-ago
king: “Nothing beside remains. Round
the decay / Of that colossal Wreck,
boundless and bare / The lone and
Notable & Quotable: The Panama Papers
From economist Tyler Cowen’s
“Was it wrong to hack and leak the
Panama Papers?” for the website
Marginal Revolution, April 9:
Let’s say a group of criminal de-
fense lawyers kept a database of
their confidential conversations with
their clients. That would include cli-
ents charged with murder, robbery,
DUI, drug abuse, and so on. In turn,
a hacker would break into that data-
base and post the information from
those conversations on Wikileaks. Of
Wednesday, April 13, 2016 | A11
ISTOCK
tion within equivalent jobs.”
The commission could use data
from the form to justify “random”
checks on firms and accuse them of
underpaying, just as the Internal
Revenue Service does “random” au-
dits. Or the EEOC and the Labor
Department could try to regulate
wages for occupations in which
women predominate—say, if the gov-
ernment decides that secretaries or
nurses are underpaid.
The EEOC says that completing
the form would take each company
only eight hours the first year and
6.6 hours thereafter. On that basis,
the commission estimates that the
annual burden nationally would be
$10 million. These estimates are
preposterously low. The EEOC as-
would be if the cumulative effect of
Mr. Obama’s increasing deployments
would be “the kind of long-term sta-
bilizing force in Iraq that he so
vehemently opposed.”
Meanwhile, the chairman of the
House Armed Services Committee,
Texas Rep. Mac Thornberry, con-
firms that Congress has no real idea
of how many U.S. troops are in fact
in Iraq. Unfortunately, he says, there
is “a political reluctance to speak
forthrightly on what’s at stake and
what is required” to defeat ISIS—
and he senses “some of that reluc-
tance in both parties.”
It’s a good point. Take Donald
Trump, who entered the race touting
his opposition to President Bush’s
invasion of Iraq and fretting about
anything that might get us “bogged
down” there. More recently Mr.
Trump suggested that, if the gener-
als were right, he might have to send
as many as 30,000 troops to defeat
ISIS. Later he denied saying he
would send them.
Ted Cruz has declared that “we
need to put whatever ground power
is needed.” But the Texas senator
has also called for making the sands
level sands stretch far away.” The
words came in handy in explaining
the transience of political power, a
frequent newsroom topic.
One day last year, while he was
visiting the newspaper after his re-
Poems spilled out of him
without ceremony, each
verse a lesson in how to
live—and die—with grace.
tirement, I heard Bankston reciting
verse to no one in particular: “I have
a rendezvous with Death / At some
disputed barricade, / When Spring
comes back with rustling shade . . .
And I to my pledged word am true, /
I shall not fail that rendezvous.”
I thought nothing of it until a day
not long afterward, when Bankston
checked into a hospital and did not
return. He died last November at the
age of 81. Hearing the news, I traced
the lines he’d quoted to a poem by
Alan Seeger, a World War I warrior
who seemed to accept his own death
with equanimity.
course a lot of those conversations
would appear to be incriminating be-
cause—let’s face it—most of the peo-
ple who require defense attorneys on
criminal charges are in fact guilty.
When asked why the hack was com-
mitted, the hacker would say “Most
of those people are guilty. I want to
make sure they do not escape pun-
ishment.”
How many of us would approve of
that behavior? Keep in mind the
hacker is spreading the information
not only to prosecutors but to the
sumes that 60,886 firms will file,
when the number of firms with 100
or more workers was 101,642 in
2012. These firms had 1.6 million
locations, many of which would
have to complete their own forms.
The U.S. Chamber of Commerce cal-
culates more realistically that the
cost of compliance would be at least
$693 million annually.
Another problem: Firms’ pay
data could reach competitors. The
EEOC proposal doesn’t address how
it will secure the information, and
government data on federal con-
tractors, such as Boeing, is available
through a Freedom of Information
Act request. A rival—say, Lockheed
Martin—will be able to ask to see
Boeing’s extended EEO-1 informa-
tion. Boeing could claim that its
wage data constitutes a trade se-
cret, but at best it will have to pay
attorneys to walk through a lengthy
appeals process.
When the Obama administration
decides to collect countless thou-
sands of new data points, it has a
purpose in mind. Not much imagi-
nation is required to see that the
plan here is to give Washington new
powers to police the workforce.
Let’s hope the Office of Manage-
ment and Budget will refuse to ap-
prove the new form. Do you want
the leaders of “Equal Pay Day” dem-
onstrations to be running your busi-
ness next year?
Ms. Furchtgott-Roth, formerly the
chief economist of the Labor Depart-
ment, directs Economics21 at the
Manhattan Institute. She is the au-
thor of “Women’s Figures: An Illus-
trated Guide to the Economic Prog-
ress of Women in America”
(American Enterprise Institute, 2012).
glow around ISIS, feeding the im-
pression we can do most of it with
air power. As for John Kasich,
though he’s been the most forthright
about putting “boots on the ground,”
he offers few details.
In Congress, general after general
has testified that more troops are
likely to be needed to defeat ISIS.
What these men have not yet recog-
nized is that their commander in
chief’s main priority is not victory
over ISIS. It’s to do nothing that
would jolt the American people into
recognizing what Staff Sgt. Cardin’s
death exposed: Americans are still
fighting and dying in Iraq.
In 1971, a much younger John
Kerry complained to Congress about
the phony distinction between
ground troops and helicopter crews
in Vietnam, and an American people
who “accepted a differentiation fed
them by the administration.”
How fitting that Mr. Kerry, who
recently returned from Baghdad,
now serves as secretary of state for
an administration feeding us the
whopper that Marines fighting ISIS
in Iraq are not combat troops.
Write to McGurn@wsj.com.
“My father liked to use poems to
teach me things, and this was one of
his favorites,” Bankston’s daughter
told mourners at the funeral before
reading aloud Rudyard Kipling’s pop-
ular “If”: “If you can keep your head
when all about you / Are losing
theirs and blaming it on you, / If you
can trust yourself when all men
doubt you, / But make allowance for
their doubting too . . .”
Kipling goes on to affirm the
power of personal choice, which is
something worth remembering in a
culture that no longer places poetry
at its heart. If poetry isn’t popular
anymore, that doesn’t mean I can’t
choose to enjoy it.
So I’ve fetched my old college an-
thologies from the shelf this month,
along with more recent acquisitions:
the works of Elizabeth Bishop, Ted
Kooser, Connie Wanek. I’ll read a
few poems each night and perhaps
commit a few to memory—search-
ing, as my old friend once did, for
the vision of a good life, and maybe
what lies beyond.
Mr. Heitman, a columnist for the
Advocate newspaper in Louisiana, is
an essayist for Phi Kappa Phi Forum.
entire world, and outside of any pro-
cess sanctioned by the rule of law.
The hacker is not backed by the
serving of any criminal charges or
judge-served warrants.
Yet somehow many of us approve
when the victims are wealthy and
higher status, as is the case with the
Panama Papers. Furthermore most of
those individuals probably did noth-
ing illegal, but rather they were try-
ing to minimize their tax burden
through (mostly) legal shell corpora-
tions.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Wednesday, April 13, 2016 THE WALL STREET JOURNAL.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
BUSINESS & TECH.
AFP/GETTY IMAGES
© 2016 Dow Jones & Company. All Rights Reserved.
Shipping Alliances Gather Speed
QILAI SHEN/BLOOMBERG NEWS
A CMA CGM container ship in Guangzhou, China, earlier this year.
Burberry Battles Slowdown at High End
Fashion brand looks
to Japan for growth;
critics ask whether
CEO is overloaded
BY SAABIRA CHAUDHURI
LONDON—When Burberry
Group PLC opened a new flag-
ship store in Tokyo last fall,
guests from the luxury label’s
U.K. home included London
Mayor Boris Johnson and a
complement of artisans who
talked up the work behind Bur-
berry’s products and provided
on-the-spot monogramming.
The splashy event high-
lighted two of Burberry Chief
Executive Christopher Bailey’s
top priorities: burnishing Bur-
berry’s brand and reigniting its
stalled growth engine in Asia.
Wooing spenders in Japan,
the world’s second-largest lux-
ury-goods market after the
U.S., is increasingly important
for Burberry. Growth has
slumped in large markets such
as Greater China and the U.S.,
piling pressure on Mr. Bailey
to find new drivers. The com-
pany’s shares fell 27% last
year, their steepest annual de-
cline since 2008.
“There needs to be some re-
sponse to market conditions,
and we haven’t seen that yet,”
said Liberum analyst Tom Gad-
sby. “I hope they will come out
with a strategic business plan,
but at the moment it’s not a
growth business.”
Mr. Bailey, who turns 45
years old next month, was Bur-
berry’s longtime creative chief
when he added the role of CEO
after Angela Ahrendts’s depar-
ture for Apple Inc. in May
2014. The soft-spoken York-
shireman took the helm just as
Burberry was steering into
rough waters.
The company enjoyed
strong growth in China after
buying out its local licensee’s
50 stores in 2010, closing most
of the acquired locations and
opening new ones in desirable
areas. It now has 65 stores in
mainland China. It also thrived
in Hong Kong, where it has 14
full-scale stores.
That heavy presence turned
into a burden for Burberry
when currency gyrations and
political unrest started to slow
luxury sales in China and Hong
Kong.
The situation came to a
head in the second half of last
year: Burberry’s comparable
Nestlé Seeks Growth in Medical Foods Rocket’s Results May
Aging appetites
Percent of the global population
aged 60 years and older.
20%
15
12%
10
5 ergy protein bars that people
0
2015 ’20 ’30
Source: World Population Prospects 2015
revision (UN Population Division)
THE WALL STREET JOURNAL.
Mercedes-Benz Beats Rivals
Car maker poised to reclaim top spot of luxury brands BUSINESS | B2
ANDREW PARSONS/I-IMAGES/ZUMA PRESS
London Mayor Boris Johnson tried on a scarf at a Burberry store opening in Shinjuku, Japan, last year.
retail sales swung to a 4% de-
cline in the quarter ended Sep-
tember, from 6% growth in the
prior quarter. Bernstein ana-
lysts expect Burberry to report
a 1% decline in same-store
sales for the fourth quarter
when the company gives its
sales update on Thursday.
Relative to peers such as
LVMH Moët Hennessy Louis
Vuitton SE and Prada SpA,
Burberry is underrepresented
in Europe and Japan, which
have seen an strong influx of
Chinese shoppers. Burberry
gets just 2% of its revenue
from Japan, compared with an
average of 10% for the broader
luxury sector, according to Li-
berum.
Mr. Bailey aims to change
that. Last year, Burberry took
control of its brand in Japan
by ending a local licensing
agreement, in line with a strat-
egy Ms. Ahrendts had laid out.
Still, critics worry Mr. Bai-
ley will struggle to align the
brand there with Burberry’s
upmarket global approach, as
the licensee had focused on
BY JOHN REVILL
LAUSANNE, Switzerland—
In a corner of a technical re-
22%
search university campus in
Lausanne, Nestlé SA scientists
are untangling genetic profiles
to develop medical foods—one
of the company’s big hopes for
sales growth.
These aren’t the high-en-
buy over the counter before a
workout. Instead, the Swiss
food company is tapping into
’40 ’50 an estimated $15 billion mar-
ket for prescription-based
powders and drinks intended
to meet specific nutritional re-
THE WALL STREET JOURNAL.
BY COSTAS PARIS
LONDON—Some of the
world’s biggest ocean shipping
alliances could be much bigger
by month’s end, as top con-
tainer operators vie for regu-
latory approvals of new tie-
ups, industry executives said
on Tuesday.
The changes come as Chi-
nese majors China Ocean
Shipping Co., or Cosco, and
China Shipping Group Co. are
trying to get their recently
completed merger approved
by European Union and U.S.
regulators. The Chinese watch-
cheaper clothes, skewed to-
ward younger shoppers.
“It was more like an upper-
class H&M,” said a former To-
kyo-based senior Burberry ex-
ecutive, referring to Hennes &
Mauritz AB’s fast-fashion
chain.
Securing space to expand
beyond its current six stand-
alone Japanese stores will be
another challenge. As global
luxury brands poured money
into the country, prime rents
in Tokyo climbed 48% between
the end of 2012 and the end of
2015, according to real-estate
services firm CBRE.
Burberry declined to com-
ment or to make Mr. Bailey
available for this article.
Elsewhere in Asia, Burberry
has been renegotiating rents in
hard-hit Hong Kong, along
with reducing store space and
adjusting its product assort-
ment. The company has reiter-
ated its commitment to main-
land China as well.
At Burberry, Mr. Bailey has
pushed through £25 million in
cost cuts since June, in part by
quirements to treat diseases.
For Nestlé, it is a market
with big potential, amid an ag-
ing global population, as the
company navigates tougher
times in its traditional pack-
aged-food market. Sales of fro-
zen pizza and ice cream have
struggled. It has missed its
sales-growth target of 5% to
6% three years running.
On Thursday, the company
is expected by analysts to re-
port sluggish sales growth for
the start of 2016.
“For a long time, nutrition
has been seen as a sort of
pseudoscience,” said Ed
Baetge, head of Nestlé’s Insti-
dog already has given a
thumbs-up to the merger.
France’s CMA CGM SA also
is seeking regulatory approv-
als by all three regulators for
its $2.4 billion acquisition of
Singapore’s Neptune Orient
Lines Ltd., announced in De-
cember.
“Chances are that the alli-
ances you see today will
change significantly over the
next two weeks,” said William
Doyle, a commissioner at the
U.S. watchdog, the Federal
Maritime Commission.
“The alliances have in fact
changed already because of
reducing the staff through at-
trition and cutting travel bud-
gets. The company’s lower per-
formance has trimmed
executive bonuses.
Last year, Mr. Bailey simpli-
fied Burberry’s branding,
scrapping the Prorsum, Lon-
don and Brit brands in favor of
a single Burberry label. The
same sentiment led him to
slim down Burberry’s range of
trench coats. His concept of an
in-store “scarf bar,” consoli-
dating scarves in one place
and offering customization
services, has boosted sales of
that key accessory.
The CEO grabbed headlines
in February with his decision
to end monthslong lead times
on Burberry’s runway collec-
tions, making them immedi-
ately available to buy after a
show. The collections make up
just 5% of revenue, but the
move, a first for luxury fash-
ion, reinforced Mr. Bailey’s
reputation for innovation.
Despite these changes, per-
formance has remained weak.
The company in January re-
tute of Health Science, or
NIHS. “For many conditions
like age-related dementia, for
example, there is a major clini-
cal need for new approaches,
and where food can make a
big difference.”
But for skeptics, the sector
is a Wild West with uncertain
benefits.
Unlike dietary supplements,
medical foods are intended for
people with chronic diseases
rather than for healthy people.
They must be used under med-
ical supervision because they
are intended to manage seri-
ous illnesses, like Alzheimer’s.
Please see NESTLÉ page B2
INSIDE:
MONEY &
INVESTING
Possible La Niña
Looms for Farmers
MARKETS| B7
Wednesday, April 13, 2016 | B1
the recent consolidation
among four major carriers,”
Mr. Doyle said. “We are ex-
pecting their proposals for
regulatory approvals.”
The European Commission,
the EU’s regulator, has set
April 29 as its deadline to de-
cide on the merger of CMA
CGM and NOL.
CMA CGM and China Ship-
ping Container Lines, the con-
tainer unit of China Shipping
Group, currently belong to the
Ocean Three alliance along
with Dubai-based United Arab
Shipping Co. The alliance has
Please see SHIPS page B6
Luxury Laggard
Burberry's margins on earnings
before interest and taxes trail
most of its luxury-goods peers.
Burberry
2014 17.5%
2015 15.5%
Hermès
31.5%
31.5%
LVMH*
29.5%
28.3%
Kering*
24.6%
21.7%
Prada
19.8%
15.2%
* Figures for LVMH and Kering exclude
nonluxury divisions
Source: Bernstein Research
THE WALL STREET JOURNAL.
ported flat comparable sales
for the third quarter. HSBC’s
Mr. Belge said Mr. Bailey’s
brand-streamlining efforts and
the runway-collection change
won’t have a meaningful im-
pact on sales or costs, al-
Please see LUXURY page B2
Settle Queries on Profit
BY FRIEDRICH GEIGER
BERLIN—Rocket Internet
SE, Europe’s leading developer
of tech startups, has launched
dozens of new businesses
around the world in recent
years but most remain deep in
the red. When the company re-
ports its annual results on
Thursday, investors and ana-
lysts will be assessing whether
the Berlin-based incubator’s
holdings are finally on the
path to profitability.
Rocket officials say they
are, but questions about
Spotify
Blasts
Sweden
In Letter
BY MATTHIAS VERBERGT
AND CHARLES DUXBURY
STOCKHOLM—It’s not just
music streaming out of Swe-
den’s Spotify AB. So are the
company’s complaints about
doing business in Sweden.
In an open letter published
Tuesday, Daniel Ek and Martin
Lorentzon warned that the
music-streaming company
they founded a decade ago
may turn its back on the Nor-
dic nation unless authorities
take swift action to make the
business environment more
hospitable for technology com-
panies. The letter was ad-
dressed to all Swedish politi-
cians.
The Spotify founders’ main
complaints: A congested hous-
ing market in Stockholm that
makes it hard to lure foreign
talent. An education system in
which the study of handicraft
is compulsory but learning
computer programming isn’t.
A high tax system, especially
when stock options are in-
volved.
This bout of public wailing
is unusual in Sweden, a coun-
try where decisions are typi-
cally made after a long process
of consensus building.
Many European tech
firms are struggling
to spring onto the
global stage.
But the two Spotify found-
ers, who incorporated their
company in tax-friendly Lux-
embourg but maintain opera-
tional headquarters in Stock-
holm, voiced frustrations that
talks with Swedish politicians
over the past few years have
yielded no concrete results.
“If no changes are made, we
will have to consider expand-
ing more in other countries
than in Sweden,” Messrs. Ek
and Lorentzon wrote in Swed-
ish on Medium, an online-
blogging platform.
Mr. Ek is Spotify’s chief ex-
ecutive, while Mr. Lorentzon is
company chairman. Both are
large shareholders in Spotify,
but a company spokeswoman
declined to give more details
on ownership.
The Spotify complaints res-
onate across Europe, a conti-
nent awash in technology com-
panies but desperate to
nurture a global giant that
could rival Facebook Inc.,
Google parent Alphabet Inc.,
Apple Inc. or Amazon Inc.
From Madrid to Paris to
Berlin, European governments
have been trying to create fa-
vorable environments in which
fledgling tech companies can
find the financial and labor re-
sources they need without
crossing the Atlantic Ocean.
The effort has produced a
number of unicorns, the infor-
mal club of companies valued
at $1 billion or more by ven-
ture-capital firms.
Please see SPOTIFY page B3
Rocket’s valuations of some
holdings—and a recent failure
to float portfolio company Hel-
loFresh—have compounded in-
vestor uncertainty about the
company.
The company said on Tues-
day it had sold a 9.1% stake in
Lazada Group SA, an online re-
tailer active in Southeast Asia,
for $137 million to Alibaba
Group Holding Ltd. Rocket
said the sale values its stake in
Lazada before the deal at ap-
proximately 15 times the €18
million ($20.4 million) it had
Please see ROCKET page B3
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, April 13, 2016 * THE WALL STREET JOURNAL.

INDEX TO BUSINESSES BUSINESS NEWS

These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A
Aabar Investments.....B9
Abercrombie & Fitch...B2
Adobe Systems...........B3
Alibaba Group.............B1
Alibaba Group
Holding....................B12
Alphabet......................B3
A. P. Moller-Maersk ... B6
Apple...........................B3
ASOS.........................B12
Audi.............................B2
B Goldman Sachs Group B9
Bank of America.........B7
Bank of New York
Mellon.......................B8
Berkshire Hathaway.B12
BMW ........................... B2
Boeing ......................... B6
BP................................B2
C Iran Air........................B6
China Ocean Shipping B1
China Shipping Group.B1
Chongqing New Century
Cruise........................B7
Citigroup................B7,B9
CMA CGM....................B1
Coima Res.................B11
Cosmos Group.............B8
D-E
Daimler........................B2
Deutsche Bank............A7
eBay.............................B3
Ecart Services Malaysia
Sdn Bhd .................. B12
Energy Capital
Partners....................B5
Expedia........................B3
Exxon Mobil................B2
F Mercedes-Benz powers past BMW, Audi in global sales
Facebook......................B3
Fanya Metal
Exchange...................A6
Ford Motor..................B4
G vals BMW AG and Audi AG.
Gunvor Group..............B8
Guolian Securities......B9
H Scotts Miracle-Gro ..... B2
Harbin High-Tech
(Group)......................B8
Hines ......................... B11
I-J
Jilin Chengcheng
Group.........................B7
J.P. Morgan Chase......B7
M U-V
Merricks Capital ......... B8
Morgan Stanley..........B5
N-O
Neptune Orient Lines.B1
Nestlé..........................B1
Nomura Holdings........B9
Och-Ziff Capital
Management Group . B7
1Malaysia
Development.............B9
Orient Securities........B9
P-R
Pinterest ................... B11
Precision Castparts .. B12
RCMA Asset
Management.............B8
Rocket Internet...B1,B12
Royal Dutch Shell.......B2
Ryanair Holdings ........ B2
S 400,000
Salesforce ................. B11
Schweizerische
Nationalbank ............ B9
Seres Therapeutics.....B2
Spotify.........................B1
Stripe.........................B11
T also gave its entire fleet a de-
Tesco..........................B12
Trafigura Group...........B8
Twitter ...................... B11
Uber Technologies .... B11
Urban Outfitters.........B2
Volkswagen.................B2
W-Z
Weifang Yaxing
Chemical....................B7
Wells Fargo.................B7
Zenefits.....................B11
Mercedes-Benz Outsells Rivals
BERLIN—Daimler AG’s
Mercedes-Benz, once written
off as a stuffy brand for old
men, is poised to reclaim the
top spot among premium car
brands for the year after a de-
cade of trailing homegrown ri-
Mercedes has made a furi-
ous global sales comeback that
began three years ago with the
relaunch of its flagship S-
Class, short for “Sonderk-
lasse,” or a car that is in a
class of its own. The company
sign makeover and invested
heavily to catch up to Audi
and BMW in China, the world’s
biggest car market by sales.
Through the first three
months this year, Daimler’s ef-
forts have paid off globally.
Mercedes-Benz overtook BMW
to sell 483,487 cars under its
own nameplate so far this
year, with sales rising nearly
13%, twice the growth rate of
its rival. That puts Mercedes-
A Class of Its Own
1Q 2016 sales
500,000 cars
300,000
200,000
100,000
0 0
Note: Mercedes-Benz figures do not include Smart brand. BMW figures do not include MINI
brand. All figures for passenger cars only.
Source: the companies
And we remain on track,” Ola
Källenius, Daimler board mem-
ber in charge of Mercedes-
Benz Cars, said in a statement.
Munich-based BMW, whose
new 7-Series sedan has failed
year-earlier period.
China, long a white space
on the Mercedes-Benz sales
map, has become the com-
Change from 1Q 2015 pany’s biggest growth engine.
12% Mercedes-Benz has doubled
Mercedes the number of its dealerships
10 BMW in China over the past two
Audi years. Its sales grew more
8 than 36% to 106,641 vehicles in
the first three months of this
year.
6
Audi is the long-time leader
in premium cars in China, and
4
BMW was first to bulk up in
China in a bid to catch up. But
2
Audi’s growth in China has
slowed to less than 5%, half of
BMW’s rate.
In the U.S., another major
market for Germany’s big
THE WALL STREET JOURNAL.
three premium brands, Mer-
cedes-Benz and BMW are both
month of sales in March. underperforming Audi, which
“I am confident that we will appears to be shrugging off
see this positive trend con- Volkswagen’s diesel scandal to
tinue through the year,” said report a nearly 5% increase in
Ian Robertson, a BMW execu- U.S. sales compared with a
tive in charge of global sales. 10% decline for BMW and a 3%

INDEX TO PEOPLE Benz in pole position as the

A Fesharaki, Fereidun....B8
al-Fathi, Saadallah......B8
Ansip, Andrus.............B3
Aziz, Riza....................B9
B Govan, James..............B8
Baetge, Ed...................B1
Baros, Vanja................B8
Behar, Greg.................B2
Bentrott, Marty..........B6
Blocher, Christoph......B9
Bonelli, Sharon...........A2
Brune, Michael............B5
Buffett, Warren........B12
C K
Cohen, Michael L........B8
Cook, Tim....................B3
D Källenius, Ola..............B2
Damberg, Mikael ........ B3
E-F
Ek, Daniel....................B1
Fairweather, Carol......B2
race for the 2016 luxury-brand
sales crown continues.
to make a significant dent in
the S-Class’s lead, sold 478,743
BMW brand cars in the first
Audi, the premium car
maker owned by Volkswagen
AG, which is in the throes of
decline for Mercedes-Benz.
“Growth during the first
three months was mainly
McEvoy, Matthew.......B2 “Mercedes-Benz posted the three months of the year, a 6% an emissions-cheating scandal, driven by strong demand in
Frank, Joel...................B8 Montross, Tad...........B12 strongest unit sales in the increase from a year ago. sold 455,750 cars through the Europe and America,” Audi
G P company’s history in March. BMW also posted its best end of March, up 4% from the said in a statement.
Gertler, Dan ................ B8 Peng Jianhu ................ B8
Price, Ashley Sargent.B2
H Q
Holzschuh, Jeffrey R..B5
Husseiny, Mohammed
Badawy Al ................ B9
Qubaisi, Khadem Al....B9
R
Redlich, Adrian ........... B8
Exxon Urged to Reveal Impact of Climate
J Rütimeyer, Marie- BY NICOLE FRIEDMAN related resolutions have never Last week, Chevron recom- achieve the two-degrees Cel-
Jain, Ajit ................... B12 Françoise...................B2 AND BRADLEY OLSON exceeded 35% in votes at the mended a vote against the sius goal, a significant amount
Jiang Bingbing............B8 S annual meetings of Exxon or proposal. The company said it of oil, gas and coal held by
Saade, Rodolphe.........B6 Investors holding more Chevron Corp. already accounts for climate world producers would have
Kimmelman, Douglas . B5 Siemiatkowski, than $5 billion in Exxon Mobil “This isn’t an environmen- risks in its project planning, to remain in the ground.
Ki-moon, Ban..............B4 Sebastian..................B3 Corp. shares are urging the tal issue. This has moved into and that such a disclosure Barclays PLC estimates that
T company to disclose how its the mainstream following the would put it at a competitive in a two-degree scenario, en-
L Tornqvist, Torbjorn.....B8 business would be affected by Paris agreement,” said Anne disadvantage. ergy producers would earn
Lorentzon, Martin.......B1 W the global push to slow warm- Simpson, Calpers’s investment Both Exxon and Chevron $103 trillion in revenue be-
M Weir, Jeremy...............B8 ing atmospheric temperatures. director of global governance. sought to keep the two-degree tween 2014 and 2040, $34 tril-
Mark Fields.................B4 Welsh, Chris................B6 The California Public Em- Nearly 200 countries proposals from reaching their lion lower than in a base-case
ployees’ Retirement System is pledged in Paris in December proxy ballot, telling the U.S. scenario for energy consump-
planning an effort to put its to hold the rise in average Securities and Exchange Com- tion. Some experts say these

LUXURY downgrading his rating on

Burberry to “underperform”
last week.
Mr. Bailey is backed by a
muscle behind climate-related
shareholder proposals for the
first time.
The outreach campaign is
global temperatures to less
than two degrees Celsius
above pre-industrial levels.
Calpers is launching a cam-
mission they are vague and
unnecessary given their other
concerns are overblown. Com-
panies are valued on their ex-
pected production in the next
10 to 15 years, not on their en-
Continued from the prior page strong management team in- expected to test the strength paign to encourage sharehold-
Calpers’s move is a tire portfolio of reserves, said
though a weaker pound is ex- cluding finance chief Carol of climate activism among ers to support proposals urg- test of the strength Nancy Meyer, associate direc-
pected to help. Fairweather—who has been shareholders of the world’s ing Exxon, Chevron and 10 tor for climate strategy at con-
Expectations are mounting with Burberry since 2006—and largest publicly traded oil other energy and mining com-
of climate activism sulting firm IHS.
ahead of the company’s full- Chief of Strategy and New company, whose stock-market panies to examine how much among shareholders. “The whole premise that
year earnings report in May, Business Development Mat- value was $345.55 billion as of of their reserves would have companies are financially risky
with shares up 16% since the thew McEvoy, a former Gold- Monday, according to FactSet. to be left untapped if the two- today because their nonproved
company’s third-quarter sales man Sachs executive who Environmentally minded degree goal were to be disclosures about climate assets may be un-
update in January. Mr. Bailey started at Burberry in 2002. Exxon investors have sought achieved, Ms. Simpson said. risks. Last month, the SEC burned…doesn’t necessarily
has said he would detail plans Still, critics question for decades to use the com- Exxon and Chevron execu- ruled the proposals could go align with how those assets
for improved efficiency and whether the company has sad- pany’s annual meeting, set for tives have had a consistent forward. The resolutions are are valued in the market-
higher revenue. dled Mr. Bailey with too much next month, as a bully pulpit, message for years on the fu- nonbinding. place,” Ms. Meyer said.
Investors also are hungry responsibility through the usually with limited success. ture of oil and gas drilling, More than 30 investors, in- Today’s low energy prices
for signs that Burberry’s con- slowdown. This year, a change in in- saying that economic growth cluding New York City’s pen- are a bigger risk to producers
strained profit margins might “I would think it would be vestor attitude following the in emerging economies such sion funds and Legal & General than potential future regula-
improve for the first time very difficult to be both the December climate talks in as India and China will power Investment Management, have tions, she said.
since fiscal 2013. head designer and running the Paris and an active proxy cam- fossil-fuel demand for many committed to supporting the Bank of England Governor
“Burberry shares have be- company,” said David Herro, a paign could garner far more decades. The companies as Exxon resolution, according to Mark Carney made speeches in
come a ‘show-me story’ on the portfolio manager at Harris votes than in previous con- well as forecasters including Ceres, a non profit that advo- 2014 and 2015 warning that
margin front but improvement Associates, a top-20 Burberry tests, analysts say. the International Energy cates for sustainable business. climate change poses risks to
seems unlikely,” said RBC ana- shareholder. “Those are two Similar proposals passed Agency don’t yet consider the The campaign is part of a investors and insurers. The
lyst Rogerio Fujimori while very different skills.” overwhelmingly last year after low-carbon scenario contem- nascent movement advocating G-20 group of industrial na-
executives at Royal Dutch plated in the Paris agreement for greater understanding of tions asked the Financial Sta-
Shell PLC and BP PLC decided to be a base case, or most climate risks. bility Board in Basel, Switzer-

NESTLÉ who heads Nestlé’s Health Sci-

ence business, which markets
products developed from find-
ings at the institute’s labs.
to embrace them, but climate- likely, outcome.

2014 introduced a bundled busi-

The central idea is that to

workers, investors and custom-

land, to examine the issue.

ucts and that the Ortho brand

Continued from the prior page
The products have active
Analysts are generally up-
beat about the potential of
Business ness class ticket, which includes
access to fast-track security. The
ers in light of the huge costs
from the emissions-cheating
aims to eliminate the use of neo-
nicotinoid ingredients imidaclo-
ingredients derived from food
products or dietary ingredi-
Nestlé’s health business, which
also includes nutritional sup- Watch combined fare has been so suc-
cessful that the airline is adding
scandal, according to two people
familiar with the situation.
prid, clothianidin and dinotefuran
by 2017.
ents that are generally recog- plements and foods for people a similar package for leisure trav- Volkswagen’s top executives “This decision comes after
nized as safe by the U.S. Food after surgery, saying it grew elers, said Kenny Jacobs, the air- are remunerated through a com- careful consideration regarding
and Drug Administration. faster than the rest of the line’s chief marketing officer. bination of fixed salary, a vari- the range of possible threats to
In a basement of the Nestlé company’s operations in 2015 Europe’s largest budget airline able bonus based on their per- honey bees and other pollina-
institute’s four-story office to post sales of around 2 bil- RYANAIR embarked on the makeover after sonal performance and another tors,” said Tim Martin, general
building in Lausanne near lion Swiss francs ($2.1 billion). a pair of profit warnings in 2013 variable bonus that is based on manager of the Ortho brand. He
Lake Geneva, machines costing Nestlé aims to increase that
Budget Carrier Offers raised investor concerns that ri- the longer-term performance of noted that the U.S. government
nearly $1 million each analyze amount to 10 billion francs in Product Upgrades vals were winning clients turned the company. is still evaluating the overall ef-
human DNA to develop per- the next few years. Ryanair Holdings PLC on off by Ryanair’s brash customer —William Boston fect of neonics on bees and
sonalized programs for condi- But there are concerns Tuesday said it is introducing a approach. other pollinators.
tions like epilepsy and intesti- about the time needed to fresh round of product upgrades —Robert Wall SCOTTS —Tess Stynes
nal disorders that are tailored bring such products to market to boost sales. A new ticket
to specific genetic profiles. and the hefty research costs. class for leisure travelers, which VOLKSWAGEN
Bee-Harming Chemical ABERCROMBIE & FITCH
Armed with this knowledge, Although medical foods includes a checked bag, is among
Board to Discuss Will Be Dropped Creative Marketing
the scientists will develop don’t need premarket review the changes. Scotts Miracle-Gro Co. plans
medical foods containing natu- and approvals like drugs, they Chief Executive Michael Giving Up Bonuses to move away from using a class Director Is Named
ral compounds extracted from must be based on what Nestlé O’Leary said the measures in the Volkswagen AG’s executive of insecticides called neonicoti- Abercrombie & Fitch Co. on
foodstuffs like tomatoes, cof- calls “sound medical and nu- airline’s revamp program, which board was expected Tuesday to noids in its Ortho brand lawn and Tuesday named J. Crew veteran
fee and grapes. tritional principles,” and the began in 2014, represents “a fun- discuss voluntarily giving up a garden products amid concerns Ashley Sargent Price creative
Set up five years ago, the FDA subjects them to moni- damental change” to Ryanair’s portion of their bonuses for 2015 about how the chemicals affect marketing director as the retailer
institute is halfway through its toring. business and has “transformed our amid growing pressure from bees vital to U.S. agriculture. aims to reinvent itself after its
$500 million budget, which Not all experts are con- relationship with our customers.” shareholders and labor leaders. The Ohio-based company said formula for attracting teens with
runs to 2021, although it has vinced. “While it’s clear that Historically, Ryanair charged The company’s top executives that earlier this spring it ex- logo-emblazoned shirts and sex-
projects that extend beyond what we eat and drink has a passengers for a ticket and each are being urged to make a panded its offerings of non-neo- tinged marketing faltered.
then. And Nestlé has been on a substantial effect on our amenity separately. The airline in strong show of solidarity with nicotinoids based garden prod- Ms. Price will oversee market-
U. S.-focused acquisition health, there is currently in- ing for Abercrombie & Fitch, Ab-
spree. sufficient evidence document- ercrombie Kids and Hollister Co.,
Earlier this year the com- ing that these foods provide a as well as the company’s internal
pany signed a deal to help U.S. medically relevant effect,” said photo studio.
biotech company Seres Thera- Ben Locwin, a scientist who Abercrombie has been updat-
peutics Inc. develop products works with the American As- ing its merchandise and making
aimed at restoring bacterio- sociation of Pharmaceutical its stores easier to shop in after
logical balance in the digestive Scientists. former CEO Mike Jeffries alien-
system. It also bought a stake Many products may have a ated customers by trying to
in Pronutria Biosciences Inc., a placebo effect with consumers make the brands too exclusive.
Cambridge, Mass., startup de- “thinking” they benefited Gone are the shirtless models
veloping amino acid-based when they hadn’t, he said, and overtly sexual advertising.
products to treat muscle loss. calling medical foods the Instead, store employees are en-
Demographic trends seem “Wild West” of the industry couraged to interact with cus-
LUKE MACGREGOR/BLOOMBERG NEWS

to support these investments. with many new entrants. tomers and have more flexibility
The proportion of people over Dr. Philip Gerber, a special- on where to place products de-
60—a key group for medical ist in clinical nutrition at pending on what is selling well.
foods—is forecast by the University Hospital Zurich, has During the past decade, Ms.
World Health Organization to used medical foods more in Price led creative teams at J.
rise to 22% globally by 2050 the past few years, but needs Crew, crewcuts and Madewell.
from 12% at present. more data. “I am not sure we Previously, she held strategic cre-
“We want to have a signifi- will see a huge exploding ative roles at Anthropologie, Ann
cant impact on the company’s market here; these products Taylor Loft, Gap and Urban Out-
overall profitability over the have to prove how effective fitters.
long term,” said Greg Behar, they are.” Ryanair is offering a new ticket class for leisure travelers, which includes a checked bag. —Anne Steele
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Facebook Adds Muscle to Messenger App
BY DEEPA SEETHARAMAN
Facebook Inc. said Tuesday
that it is working with more
than two dozen companies as
it doubles down on turning its
Messenger app into a hub for
shopping, news and entertain-
ment.
At its yearly F8 conference
in San Francisco, Facebook
showed developers how to
build so-called chatbots in the
app to field customer-service
questions, give weather up-
dates and help people order
goods—all without a person
on the other end of the con-
versation.
Facebook has more than 25
partners using chatbots, in-
cluding delivery companies
such as 1-800-Flowers.com
Inc. and media companies
such as The Wall Street Jour-
nal and CNN. No money is
changing hands as part of the
partnership deals.
This is the second consecu-
Tech Firms Show Equal Pay Streaming Throws Lifeline
BY GEORGIA WELLS
Facebook Inc. and Micro-
soft Corp., two of the technol-
ogy companies pressed by an
investment firm for more pay
transparency, disclosed that
they pay their male and female
employees equally.
The companies released the
information ahead of Tuesday’s
Equal Pay Day, which symbol-
izes how far into the new year
women must work to earn what
men earned in the previous
year.
Facebook and Microsoft are
among nine major tech compa-
nies, including Amazon.com
Inc. and Apple Inc., that have
faced pressure from Arjuna
Capital, a boutique investment
firm based near Boston. The
firm, which is a unit of invest-
ment firm Baldwin Brothers
Inc., filed shareholder propos-
als at each of the companies
starting in late 2014 asking
them to close the gender-wage
gap and release salary data.
“If tech companies want to
attract and retain the best tal-
ent and are going to move
women into leadership roles
that will make the companies
more competitive, they need to
pay men and women the same,
and they need to be transpar-
ent about how they are doing
that,” said Natasha Lamb, a
partner at Arjuna Capital.
Calls for more transparency
about the gender-pay gap in
Silicon Valley are an offshoot
of the tech industry’s diver-
sity problem. The industry has
been making a public effort to
ROCKET
Continued from page B1
invested in Lazada. Rocket re-
tains a stake of 8.8% in Lazada.
Founded in 2007, Rocket
fosters tech startups in areas
such as retailing, food delivery
and travel booking. Many of its
holdings are growing robustly
but burn through cash.
Combined adjusted losses
before interest, tax, deprecia-
tion and amortization for nine
of Rocket’s main companies—
its so-called “proven win-
ners”—totaled around €750
tive year that Facebook has
highlighted Messenger at F8,
reflecting Chief Executive
Mark Zuckerberg’s belief that
messaging apps will play a
central role at the company
over the next five years.
Last year, Facebook began
testing ways for businesses to
reach users over the chat app.
Customers can track orders
from Zulily Inc. or guests at
Hyatt Hotels Corp. can ask for
towels, for example.
Many companies that use
messaging apps rely on people
to field the questions, and us-
ers expect prompt replies.
Chatbots could help expand
the number of businesses that
can interact with Messenger’s
900 million users.
“We’ve tried commerce,
transportation and more re-
cently air travel, and now has
come the time for us to scale
those experiences,” said David
Marcus, vice president of Mes-
senger.
include more women and mi-
norities in its workforce.
In a way, the gender-wage
gap is an easier problem to
solve than a lack of diversity.
Customer-relationship software
company Salesforce.com Inc.
spent $3 million in 2015 raising
the salaries of some women
and a few men to reach pay
parity, even though there
wasn’t a big discrepancy, an ex-
ecutive said last year.
Though Facebook, Microsoft
and others say they have no
gender-wage gap, a new survey
shows that it exists in the tech
7%
The gap in salaries between
men and women software
engineers at large companies.
industry. The gap in salaries
between male and female soft-
ware engineers at major corpo-
rations is 7%, according to a
study of 3,000 employers and
15,000 job seekers conducted
by career marketplace startup
Hired Inc. Younger companies
at the “seed” stage have a
smaller gender-wage
gap—4%—among software en-
gineers, the study says.
For its initiative to close the
gender-pay gap, Arjuna focused
on tech firms because diversity
among employees has been
shown to increase innovation
within a company, Ms. Lamb
said. Arjuna’s tactic of filing
shareholder proposals is paying
off: Four of the companies it
Question of Values
Rocket Internet and Swedish investor Kinnevik both
own stakes in several startups but their valuations of
those companies differ widely.
Valuation in
Company billions by:
Global Fashion Group
Lazada
Home24
Westwing
Linio
TECHNOLOGY
Chief Executive Mark Zuckerberg expects messaging apps to play a key role in Facebook’s future.
Facebook said the new
tools, which are available to
all developers, will let compa-
nies quickly exchange not just
texts but richer messages with
approached—Apple, Microsoft,
Amazon.com Inc. and Intel
Corp.—have disclosed pay data,
and Expedia Inc. has said it
would in October.
Two others—Facebook and
Google parent Alphabet Inc.—
have said they pay men and
women the same, but haven’t
released data. EBay Inc. and
Adobe Systems Inc. haven’t re-
leased any information, though
Arjuna said it was in discus-
sions with Adobe.
Intel was the first to release
numbers. In February, the semi-
conductor maker said it had
reached 100% gender-pay par-
ity across its U.S. workforce.
Last month, Apple Chief Ex-
ecutive Tim Cook said at the
company’s shareholder meeting
that women’s pay was 99.6% of
men’s, and minorities’ pay was
99.7% of white employees’.
Also in March, Amazon said
it found women’s compensation
in 2015 was 99.9% of men’s in
equivalent jobs, and minorities
make 100.1% of what white
workers earn. Facebook and
Microsoft both said they have
been reviewing data about how
much their employees are paid
for a number of years, but ha-
ven’t discussed it publicly be-
fore.
Microsoft said in a blog post
its female employees earn 99.8
cents for every dollar earned by
men at the same job title and
level.
eBay didn’t respond to a re-
quest for comment; Google and
Facebook declined to comment
on the coming shareholder
votes.
Rocket Internet* Kinnevik†
€3.06
€1.71
€1.00
€0.63
€0.94
€0.51
€0.48
€0.25
€0.42
€0.18
images or clickable call-to-ac-
tion buttons, such as “read
this story” or “buy this item.”
Messenger helps 1-800-
Flowers reach younger people,
To Recorded-Music Industry
BY HANNAH KARP
Subscription streaming ser-
vices pumped up the recorded-
music industry’s revenue last
year, but music consumption
on free, legal sites grew faster,
threatening the industry’s fu-
ture growth, according to the
International Federation of the
Phonographic Industry’s an-
nual report.
Global revenue from re-
corded music grew 3.2% to $15
billion in 2015, the first signifi-
cant rise after two decades of
declines or negligible gains.
The uptick owed largely to a
45% increase in streaming rev-
enue, which now amounts to
$2.9 billion and makes up
nearly half of the world’s digi-
tal-music revenue. Digital-mu-
sic revenue for the first time
outweighed the revenue from
sales of physical products such
SPOTIFY
Continued from page B1
But many European compa-
nies are struggling to spring
onto the global stage.
“At the moment, we lack the
scale to compete with other
ecosystems like China or the
U.S.,” Andrus Ansip, the Euro-
pean Union’s digital chief, said
in a recent speech.
Sweden has been one of Eu-
rope’s most prolific grounds
for technology startups,
thrusting Spotify as well as
Klarna AB, a payments com-
pany, into the unicorn family.
Spotify provides music-
streaming services and com-
petes with the likes of Apple.
About 850 of its 2,000 employ-
ees are based in Stockholm.
Many of Sweden’s tech
ADVERTISEMENT
Legal Notices

Wednesday, April 13, 2016 | B3
@wsjd | wsjd.com
it was quicker for customers
to order flowers through the
Messenger app than over the
1-800-Flowers app, he said.
Chatbots aren’t new. Still,
companies are wary about let-
ting software handle more
complex customer interac-
tions, even if the technology is
getting better at mimicking
human conversation. Micro-
soft Corp. recently shut down
a public chatbot it called Tay
MICHAEL SHORT/BLOOMBERG NEWS
after users taught it to spew
offensive posts.
Mr. Marcus acknowledged
that episode makes Messen-
ger’s task harder but said
there are differences, includ-
ing the fact that Messenger
conversations are private.
Facebook owns two of the
largest messaging apps, Mes-
senger and WhatsApp. Both
said Chris McCann, the com- apps are testing ways to let
pany’s president. “Our most businesses communicate with
engaged customers utilize our consenting users, a move that
app—the newer customers paves the way for both to gen-
don’t,” he said. In some cases, erate revenue.
as CDs, which continued to de- and grew 88% in the U.K., the
cline. report said.
Despite the growth, the “The market-distorting
IFPI’s report highlighted the value gap must be resolved if
industry’s concern about the music is to thrive in the long
widening “value gap” between term,” the report said. The
the volume of music consumed problem has a “serious im-
on free, “user-upload” services pact” on subscription services,
such as Alphabet Inc.’s You- limiting their ability to draw
Tube, and the amount of reve- paying customers, it said.
nue that they generate for the In a statement, YouTube
industry. said that to date its parent
An estimated 900 million company “has paid out over $3
nonpaying music consumers billion to the music industry—
on these legal sites resulted in and that number is growing
revenue of $634 million last significantly year on year.”
year for the global recorded- “Only about 20% of people
music industry, or 4% of global are historically willing to pay
revenue. The world’s 68 mil- for music. YouTube is helping
lion paying music subscrib- artists and labels monetize the
ers—up from 41 million sub- remaining 80% that weren’t
scribers in 2014—generated previously monetized. The
about $2 billion. The number global advertising market is
of on-demand streams on ad- worth $200 billion. This is a
supported free sites roughly tremendous opportunity,” You-
doubled last year in the U.S., Tube said.
startups have fallen into the rental apartments annually un-
hands of U.S. companies that til 2020, according to a govern-
boast stronger financial fire- ment statement. On stock op-
power. King Digital Entertain- tions, which are subject to
ment PLC, the maker of Candy income tax and payroll taxes in
Crush games, was purchased Sweden, Mr. Damberg said the
by Activision Blizzard Inc. for issue was under consultation.
nearly $6 billion in November. Klarna, which has offices
Mikael Damberg, Sweden’s world-wide, including in Lon-
Minister for Enterprise, said don and New York, echoed
he agreed with the Spotify Spotify’s complaints.
founders’ complaints over the “Preferably we would like to
property market. “They are hire more people in Stock-
spot on: The biggest growth holm,” said Klarna CEO Sebas-
problem of Stockholm today is tian Siemiatkowski. “But the
the housing situation,” he said taxation and housing issues
in a phone interview. are pushing that decision to
Due to strict housing regu- another place.”
lations, there aren’t many Spurred by very low inter-
apartments available for rent, est rates and an economy
and the prices for apartments growing at close to 4% a year,
to buy are high and rising. apartment prices in central
The government has a plan Stockholm rose 17% in 2015
to provide 3.2 billion kronor and 10% in 2014, according to
($394.4 million) a year to sup- price-tracking company Svensk
port the construction of 15,000 Maklarstatistik AB.
PUBLIC NOTICES
 

 
 
 


 
   
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quirements and it provides in-
formation about financing
rounds for its holdings.
The company’s bind is evi-
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vestment AB Kinnevik, one of
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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, April 13, 2016
Carbon Compact
Ban Ki-moon on enforcing the Paris Agreement
‘Everybody knows which
country is doing what and
how much they are doing.’
One of the biggest events of
the past year in energy and en-
vironmental policy was the
Paris climate talks. More coun-
tries than ever have pledged
significant carbon cuts. Yet in
many people’s views, those
pledges fall far short of what a
lot of scientists say is necessary.
United Nations Secretary-
General Ban Ki-moon sat down
No Sign of Unanimity
Attitudes toward climate change differ markedly by region around
the world
Percentage* saying climate change is a very serious problem
Latin America
Africa
Europe
Asia/Pacific
U.S.
Middle East
China 18%
* Regional medians, except for U.S. and China
Source: Pew Research Center's Spring 2015 Global Attitudes Survey of 45,435 adults
in 40 countries, conducted in person and by telephone, March 25 to May 27, 2015
Ford’s Road Map To the Future
Chief Executive Mark Fields gets ready for driverless cars
The auto industry has been
undergoing a remarkable
transformation—and it’s only
the beginning.
Energy prices and a tough
regulatory environment are
complicating product plan-
ning. Electric motors and au-
tonomous driving systems may
redefine how people move
around.
To get a glimpse of how car
makers are navigating this un-
certain environment, The Wall
Street Journal’s Gerard Baker
spoke with Ford Motor Co.
Chief Executive Mark Fields.
Here are edited excerpts of
their discussion.
ECO:NOMICS VIDEOS
To watch videos
WSJ
.COM
of speakers at
ECO:nomics 2016,
go to WSJ.com/
EnergyReport
The Wall Street Journal thanks the sponsors of
ECO:nomics 2016 for their generous support.
For more information please visit
ECOnomics.wsj.com
JOURNAL REPORT | BUSINESS & ENERGY
with Kimberley Strassel, a
member of The Wall Street
Journal editorial board, to dis-
cuss the future of climate di-
plomacy. Edited excerpts of
their discussion follow.
Paris and after
MS. STRASSEL: The U.N. was
not actually there doing the
negotiations in Paris, but you
74%
61%
54%
45%
45%
38%
THE WALL STREET JOURNAL.
Tough terrain
MR. BAKER: We’re seeing an
extraordinary transformation
of the auto market. We’re talk-
ing about electrification and
autonomous driving. And
we’re seeing companies like
Google and possibly Apple get-
ting into the business. You’re
seeing car sharing. Tell us how
you are preparing.
MR. FIELDS: We’re going to dis-
rupt ourselves. We have this
core business of designing, de-
veloping, manufacturing, mar-
keting and servicing and fi-
nancing great cars, utilities
and trucks. But also we see
these emerging opportunities
around what we call smart
mobility. We want to lead in
specific areas around autono-
mous vehicles, around the
connected car as it becomes
part of the Internet of things,
around mobility, ride sharing,
car sharing, around data and
analytics and how we can an-
ECO:NOMICS
© 2016 Dow Jones & Company, Inc. All rights reserved. 3C8405
not binding. But every five
years, this will be monitored
and reviewed, and in 2018, the
parties will gather to review
what happened from 2015 un-
til 2018. From then on, every
five years there will be moni-
toring and reporting. This is
mandatory. And there is much,
much more possibility that
member states will have an
opportunity to verify which
country has done how much.
This is an obligatory clause.
MS. STRASSEL: But for China,
maybe it was a little bit easier
to agree to its targets; its
economy has slowed, its de-
mand for energy has slowed.
But in five years, let’s say that
has changed and the amount
of carbon emissions have gone
up and they’re not hitting the
GENESIS PHOTOS/DOW JONES (2)
targets. What does the U.N. do
about it?
MR. BAN: Every member of the
Paris Agreement will have an
interest to abide by their agree-
ment. These are very strict
peer reviews. Every year there’s
a UNFCCC meeting [U.N.
Framework Convention on Cli-
got called in at the last minute mate Change] to review all this.
to make a few countries fall in But every five years, there
line. would be four-month review-
MR. BAN: I am very grateful to and-reporting sessions, and
President Obama and Presi- therefore, for their own na-
dent Xi Jinping for their lead- tional economy and the world
ership and strong commit- economy, every country has an
ment. Basically, it was the U.S. interest to keep their promise.
and China who really helped
[make] this Paris agreement MS. STRASSEL: So a shaming
possible. These are the two mechanism?
largest emitters of the world: MR. BAN: Yes. We are not go-
China and U.S. They agreed ing to shame, but everybody
that there should be an agree- knows which country is doing
ment, and we worked and what and how much they are
reached out to many coun- doing. Everybody has an inter-
tries. [It] was very positive. est to fully comply.
MS. STRASSEL: Some would MS. STRASSEL: The U.N. has its
say there is no enforcement Green Climate Fund, with a
mechanism to make any of goal of I think $100 billion by
this happen. What do you say 2020. But the India environ-
to critics who say this is more ment minister said that if you
of a feel-good agreement than want developing countries to
a consequential way of reduc- get on board, industrialized
ing carbon? countries owed trillions. Do
MR. BAN: This is an interna- you think industrialized coun-
tional agreement; thus, it’s tries are willing to do that?
obligatory. It’s not that all the And how important is that
clauses, all the articles, are piece to making this happen?
obligatory. But core elements MR. BAN: The initial promise by
are. the OECD countries and big de-
For example, the national veloped countries was to pro-
targets, Intended Nationally vide $100 billion by 2020. Un-
Determined Contributions, are fortunately, the firm
ticipate customers’ needs. tired by the time I get to bed,
MR. BAKER: What are you do- because I love what I do. But
ing to prepare for an age when clearly, we take our competi-
a huge amount of car mobility tors very seriously. When you
may be done through sharing? look at the level of competi-
MR. FIELDS: You could say tion we have from traditional
there would be less vehicles and nontraditional competi-
sold, but we’re changing our tors, we’re embracing that.
business model to look at this
as vehicle miles traveled. And MR. BAKER: But he does seem
when you look at it that way, to have something of a head
it changes your mind to think start here.
about what kind of services MR. FIELDS: I would disagree.
can we offer via our products. What he’s done with Tesla has
I could argue that with auton- been amazing. The biggest
omous vehicles, the actual benefit he’s done is raise the
mileage on those vehicles will awareness of electrified vehi-
accumulate a lot more than a cles. Now, his company has ca-
personally owned vehicle, plus tered to a very affluent con-
the servicing. That could actu- sumer. Our approach [is that]
ally be a bit of an offset. we have one of the largest se-
lections of electrified vehicles.
The electric company? We’re the No. 2 seller in the
MR. BAKER: Does Elon Musk U.S. in electrified and No. 1 in
keep you awake at night?
MR. FIELDS: They always ask
me, “What keeps you up at
plug-in hybrids. We’re invest-
ing another $4.5 billion, so by
the end of the decade, 40% of
night?” Nothing. I am dead our nameplates around the
world will be electrified.
MR. BAKER: Some of your com-
petitors, most notably GM,
have made some pretty big,
splashy investments them-
selves. Billion dollars, I think,
on cruise automation, half a
billion dollars in Lyft, the ride-
sharing company. You haven’t
gone down the same route.
MR. FIELDS: We formed Ford
Smart Mobility LLC a couple
Change on Wheels
Auto executives increasingly see big changes in the industry soon
How likely is a major business-model disruption in the
next 5 years?
54%
43%
28%
15%
9%
3%
Extremely Somewhat Somewhat Not likely
likely likely unlikely at all
Source: KPMG survey of 800 auto executives world-wide, conducted online between July and November 2015 THE WALL STREET JOURNAL.
THE WALL STREET JOURNAL.
The Future May Be
Clear. The Path Isn’t.
Weaning the world off coal, doubling down on renewables
and investing in breakthrough technologies that can help stop
climate change were hotly debated topics last week at The Wall
Street Journal’s ECO:nomics conference in Santa Barbara, Calif.
At the annual gathering, environmentalists and energy ex-
perts sparred over lofty environmental goals as well as the cur-
rent realities of fossil-fuel demand. Can natural gas replace
enough coal-fired power generation to clear the air of carbon
emissions? The Sierra Club’s Michael Brune thinks not.
Energy banker Jeffrey Holzschuh of Morgan Stanley pre-
dicted solar power will overtake wind. But he warned that better
battery storage of electricity is needed to truly cement green
power in the U.S. energy mix.
Koch Industries defended its environmental record. And U.N.
Secretary-General Ban Ki-moon said that while the Paris climate
talks held in December were flawed, they were the best outcome
that could be hoped for and a necessary step toward combating
the top threat to humanity. “This is not the end,” he said. “This
is the beginning.”
—Lynn Cook
commitment has not been mitment. He knew that, with all
made. It has been pushed back this opposition of the Republi-
until 2020. When it comes to can Party’s stance, he may not
2020, there will have to be a be able to have all this legally—
firm commitment, as well as a through a legal process. But he
road map, framework, how also has executive power. He
$100 billion per year will have will do whatever he can under
to be provided to developing his executive power.
countries. After that, there
should be more than $100 bil- MS. STRASSEL: Do things fall
lion. apart internationally if this
continues to be stalled?
Supreme concern MR. BAN: It has given a certain
MS. STRASSEL: The U.S. has a negative wave to the interna-
plan to reduce emissions by tional community. But I believe
28%. It went to delegation after President Obama’s assurances
delegation and said, “Look at that he will do whatever he can
our commitments, look at the do under his presidential exec-
president’s climate plan.” But utive power.
the plan is now mired in the Su-
preme Court. How much does it MS. STRASSEL: President
concern you that one of the Obama said climate change
leading things that got this was a bigger threat than ter-
done is now uncertain? rorism. Do you agree?
MR. BAN: As the largest econ- MR. BAN: Longer term, it is a
omy in the world, I believe much, much more serious is-
that this climate change issue sue. Of course, terrorism, ex-
should not be a subject of a tremism must be defeated. But
political debate. look at the consequences. Ter-
rorism terrifies the people of
MS. STRASSEL: But it is. the world, but climate change
MR. BAN: Unfortunately. I’m does not respect any borders.
concerned. But I do appreciate It affects a whole humanity, it
President Obama’s strong com- affects our planet Earth.
‘We’re changing our
business model to
look at this as vehicle
miles traveled.’
of weeks ago. Our business control. Then there’s level
there is to design, build, grow four, where the driver or pas-
and invest in mobility solu- senger does not need to be
tions. On some things, we will prepared to take control. That
do on our own, in others, we is what we’re working on. We
will partner with others. will have by some time this
year the largest autonomous-
MR. BAKER: On autonomous vehicle testing fleet.
driving, tell us more about
what you’ve invested in, what
you might be looking to do.
MR. BAKER: How close are we
to autonomous vehicles being
MR. FIELDS: We’ve been work- available, driven on our roads,
ing on autonomous vehicles carrying our children around?
for over 10 years. Our ap- MR. FIELDS: Level-four vehi-
proach is twofold. One is to be cles—[which operate] in a de-
a leader in advanced driver as- fined area that’s been 3-D
sist and semiautonomous fea- mapped—we think that some-
tures, features that will keep body in the industry will have
you in your lane, that will by the end of the decade.
alert you about traffic, that A level-five vehicle, which
will adapt your speed. We’re is, you go into your car, you
one of the leaders in that hit a button, you go to sleep
space. That was what they call and you wake up at grandma’s
level zero through three, house, that is a long way
where the driver has to be in away—15, 20 years.
How much will legislation and regulation
influence the development of the industry?
2015
2016 Average Low or no influence
influence
2%
32% 17%
Very high
influence
29%
14%
High
3% influence
1% 51%
Neutral
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Bankers
Place Their
Energy Bets
Jeffrey Holzschuh and Douglas
Kimmelman on where their
investment billions are going
Jeffrey Holzschuh, the
chairman of Morgan Stanley’s
Institutional Securities Group,
and Douglas Kimmelman, se-
nior partner at Energy Capi-
tal Partners, move billions of
dollars through energy invest-
ments around the world.
The veteran bankers sat
down with Jeffrey Ball, a con-
tributing editor at The Wall
Street Journal, to discuss how
the energy picture is changing
and where they are placing
their bets.
Here are edited excerpts.
MR. BALL: Is there really a
global energy revolution going
on? And where are you putting
your money now?
MR. KIMMELMAN: I’m in pri-
vate equity. We’ve raised
about $13 billion from inves-
tors, mainly public pension
plans. We invest that in en-
ergy, largely in North America.
We don’t invest in [explora-
tion and production]. We don’t
like the volatility around that.
Our focus is in power genera-
tion—fossil generation as well
as renewable generation—and
midstream business such as
pipelines, gathering systems
and storage, which are fee-
based businesses that are
more dependent on the vol-
ume of fossil-fuel movements
rather than the price. We’re
involved in service businesses,
The Sierra Club’s View
Why Michael Brune is optimistic about
combatting climate change
Are government and indus-
try doing the right things to
fight climate change? What
can they do better?
To get an insider’s view of
the question, The Wall Street
Journal’s Russell Gold spoke
with Michael Brune, executive
director of the Sierra Club.
What follows are edited ex-
cerpts of their discussion.
MR. GOLD: I saw a speech that
you gave on YouTube, and you
started your speech by asking
the audience whether they felt
governments and corporations
were going to be able to re-
spond to the challenges of cli-
mate change. Are you optimis-
tic?
MR. BRUNE: I am. We’re con-
fronted with two realities
which are going to happen al-
most no matter what. Climate
change will continue to get
worse. We’re also seeing the
growth of clean energy. We’re
starting to see renewables dis-
place fossil fuels, starting with
coal. That will accelerate al-
most no matter what. I’m opti-
mistic because I think that to-
gether we can solve some of
our biggest problems. I see
countries coming together on
a very large scale to address
what’s being done.
MR. GOLD: You introduced civil
disobedience to the Sierra
Club. Why was that necessary?
MR. BRUNE: We engaged in
civil disobedience on the Key-
stone XL Pipeline because at
the time, it was an important
issue substantively and sym-
bolically, and it needed to be
elevated. It needed to have
more attention, more focus on
it.
We may engage in civil dis-
Wednesday, April 13, 2016 | B5
JOURNAL REPORT | BUSINESS & ENERGY
GENESIS PHOTOS/DOW JONES (3)
MR. HOLZSCHUH: Because there
are no other choices. Look, we
trend toward cleaner genera-
tion of energy.
way [to make money from
coal] is by cleaning it up, so
Jeffreyh Holzschuh (left) and
Douglas Kimmelman
fundamentally have to allow But coal isn’t going any- we built a large activated-car-
things like constructing trans- economies to continue to grow where. It’s going to remain a bon facility in Louisiana that to stay. Having said that, the
mission lines, and we’re also and people to have standard of third of the [energy] mix in removes the mercury emis- question has always been,
very involved in the decom- living. You can’t go to some the world. In the developed sions from coal-fired power “Without subsidies, are they
missioning of nuclear plants. places in the world and not countries it’s dropping fairly plants. We also have a busi- economic?”
burn fossil fuels. There just dramatically and will continue ness that deals with removing I think scale and low-cost
MR. BALL: Jeff, Morgan Stanley isn’t any economic alternative. to go down as plants get nitrogen-oxide emissions. Car- financing has made them
has said it isn’t going to fi- And so there has to be some closed and new build is all bon capture has a long way to much more competitive than
nance strip mines or new coal- flexibility in that policy to be natural gas and renewables. So go. We aren’t investing in that. they were even three years
fired power plants in devel- able to help those economies, we’re helping clients think ago, and that will get better
oped markets. What motivated governments and companies through this as they make MR. BALL: Let’s move on to re- and better. I’m not a big be-
that decision? continue to grow. Over time long-term capital decisions. newables. Some people in this liever that the technologies
MR. HOLZSCHUH: Almost a they’ll come under the same audience will say renewables are at parity yet [with conven-
dozen years ago some in the constraints, I’m sure, that the MR. BALL: Doug, what is your are a charade and a money tionally produced power], but
environmental community developed countries face now. thinking on coal? loser. Others will say renew- they are getting closer. I think
came to Wall Street and said, MR. KIMMELMAN: There are big ables have a viable possibility solar will overtake wind over
“You guys can’t finance coal.” MR. BALL: What are you telling swatches of this country that of supplying all the world’s time. It’s more ubiquitous. It’s
And actually, there was an in- investors about the advisabil- are very comfortable with the electricity and can be profit- got better characteristics. And
credibly constructive outcome ity of investing in coal assets? coal that they’re burning, and able. Jeff, where do you stand? then, if we get storage, the
called the Carbon Principles, MR. HOLZSCHUH: There is no I don’t see that going away. MR. HOLZSCHUH: Right in the supply sector will grow even
[a series of guidelines on fi- doubt that there is a macro For us, the most profitable middle. Renewables are here more dramatically.
nancing electric-power proj-
ects] that has gotten incre-
mentally more stringent and
more defined over time.
We have an incredibly envi-
ronmentally sensitive philoso-
phy within Morgan Stanley. On
the client side—and we cover
every industry and every
country—there are going to be
differences in those policies,
depending on emerging mar-
kets versus developed mar-
kets. But our view now is that
when something is clearly en-
vironmentally hazardous, we
aren’t going to participate.
MR. BALL: But you are going to
participate in the developing
world, right?
Advancing the Science
of Smart Energy
With some of the greatest minds in engineering and computer
science, the Siebel Energy Institute pushes the boundaries of
‘We’re confronted innovation to address today’s pressing energy challenges.
with two realities
which are going to
happen almost no
matter what.’
obedience on voting-rights is-
sues because we depend on a
healthy and thriving democ-
racy in order to address envi-
ronmental issues.
MR. GOLD: Shouldn’t we be cel-
ebrating natural gas because
it’s allowing companies to re-
place coal? You’re not a fan of
natural gas.
MR. BRUNE: The reduction in
coal is coming from a variety
of factors, a significant part of
which is the low price of natu-
ral gas. So our goal is to phase
out of coal as quickly as possi- The Siebel Energy Institute funds research grants in data analytics,
ble and use as little natural
gas as we can in doing so. including statistical analysis and machine learning, to accelerate
The climate impact of burn-
ing gas is half that of coal. advancements in the safety, security, reliability, cost efficiency,
However, the amount of fugi-
tive methanes that come both and environmental integrity of modern energy systems.
at the well head and from
transmission and distribution
is so significant that it nar-
rows the difference between
gas and coal. www.SiebelEnergyInstitute.org
MR. GOLD: The Sierra Club has
said for many years it’s op-
posed to nuclear. Why can’t
you support nuclear?
MR. BRUNE: The Sierra Club A D V I S O R Y B O A R D
has been opposed to nuclear
power since the late ’60s for
concerns about safety, storage
of radioactive waste, etc. If
there was an actual debate
about nuclear power in this
country, and if you had finan-
ciers who really were going to
put serious money behind nu-
clear power, then it would be a
different question. It is not an
active question. There is not a The Siebel Energy Institute is a project of the Thomas and Stacey Siebel Foundation.
serious proposal, particularly
in the U.S., to scale up nuclear All research results will be shared in the public domain.
power in any way that would
make a big difference. I don’t
agree that nuclear power is a
real solution.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Wednesday, April 13, 2016
Boeing Broaches Iran Sales SHIPS
Lifting of nuclear
sanctions against
Tehran opens market
for U.S. aircraft maker
BY JON OSTROWER
AND ROBERT WALL
Boeing Co. has opened talks
to sell airliners to Iran in what
would be one of the highest-
profile deals between a U.S.
company and Tehran since the
West lifted nuclear sanctions
on the country in January.
Iran—eager to re-establish
ties with Western companies
after the deal to limit its nu-
clear program—quickly signed
several landmark agreements
with European companies to
signal it had re-entered the in-
ternational market. Agreements
with U.S. companies have been
slower to materialize, though,
increasing the importance of a
possible deal with a company
like Boeing that is a flagship of
U.S. technology and manufac-
turing around the globe.
Boeing said Monday it had
begun preliminary discussions
in Tehran with Iranian airlines
about the potential sale of its
planes and aircraft services. Its
representatives “discussed the
capabilities of its commercial
passenger airplanes and after-
market services with Iranian
airlines approved by the U.S.
government,” said a Boeing
spokesman, who added that no
formal deals on aircraft or ser-
vices were made during the
meetings.
A deal for Boeing planes
could become the biggest signal
yet that the U.S. and Iran are
moving toward normalized
trade relations. The U.S. gov-
ernment has allowed Boeing to
enter talks with select Iranian
carriers, but delivering the
planes still would require fur-
ther clearance.
Completing any plane pur-
chase would require Iran to re-
gain the ability to tap global
dollar markets, a challenge in
the face of reluctance by most
big Western banks to provide
loans to Iran over concern of
©2016 Dow Jones & Co. Inc. All rights reserved. 6DJ3488
A Boeing plane in Iran Air’s fleet at a Tehran airport in 2002.
running afoul of U.S. currency
restrictions.
Iran has long sought to re-
establish a business relation-
ship with U.S. aircraft makers,
particularly Boeing, due to Teh-
ran’s dependence on aircraft
equipment going back to the
rule of the Shah in the 1960s
and 1970s.
Years of sanctions, some im-
posed in the wake of its revolu-
tion in 1979 rather than over
the country’s nuclear program,
have left Iran with one of the
world’s oldest aircraft fleets,
which it is eager to modernize.
Years of sanctions
have left Iran with
one of the world’s
oldest aircraft fleets.
Most U.S. sanctions remain
in place on Iran. But the Obama
administration has been seek-
ing to promote outside invest-
ment in Iran as a means to bol-
ster the nuclear deal.
Iranian leaders have com-
plained in recent months that
Tehran hasn’t received the
sanctions relief envisaged un-
der the deal because of remain-
ing U.S. financial penalties.
U.S. officials on Monday said
they have seen an uptick in
American companies seeking to
enter the Iranian market in the
sectors allowed under U.S. law,
which include automotive parts
Get on-the-ground facts and high-level analysis from our expanded
team of specialists. WSJ Markets helps you stay in control.
Go to WSJ.com/Markets for data, breaking news and incisive commentary.
BUSINESS NEWS
GETTY IMAGES
and medical services.
General Electric Co., for in-
stance, has been exploring busi-
ness opportunities in Iran.
Lorenzo Simonelli, chief execu-
tive of GE’s oil-and-gas busi-
ness, visited Tehran earlier this
year, he said in early March.
In the airline sector, Iranian
officials have said they expect
to buy 400 or more new air-
planes in the coming years to
satisfy their demand to replace
existing planes, many of which
are more than 25 years old, and
to spur growth.
Iran signaled in January how
lucrative for Western business
its market could be, when it an-
nounced a deal to buy 118
airliners from Boeing’s princi-
pal rival, Airbus Group SE, val-
ued at $27 billion at list price.
The deal, which hasn’t been
finalized yet, includes every-
thing from Airbus single-aisle
planes to 12 of its flagship
A380 superjumbos, which carry
a list price of $432.6 million,
though buyers typically get dis-
counts.
With a population of more
than 80 million and pent-up de-
mand for travel after years of
isolation, the country repre-
sents one of the few large re-
maining untapped markets for
new planes.
In a sign Iran still retains a
special status reflecting West-
ern concerns about the coun-
try’s weapons programs, plane
discussions so far have focused
on buying them, rather than
transferring technology to help
ALL
P
AND NO
L
Don’t be confused by today’s topsy-turvy market.
locally produce parts which
have become the hallmark of
other mega-airliner deals
around the world.
Boeing was granted a license
by the U.S. in February to dis-
cuss the needs of Iran’s airlines.
Neither Boeing nor Iran would
identify what specific airplane
models are under discussion,
though an Iranian official said
the country was eager to buy
737 single-aisle jets from the
Chicago-based plane maker, as
well as 777 long-range planes.
The recent meetings be-
tween Boeing and the Iranians
were limited to discussing tech-
nical aspects, such as range,
cabin configurations and fuel
economy, but such conversa-
tions are the foundations for
any future deal.
Fewer than 10 Boeing em-
ployees made the trip to Teh-
ran for meetings with several
Iranian carriers, including Iran
Air, the country’s biggest
airline, according to a person
familiar with the meetings.
Members of Boeing’s Middle
East sales team, which also
sells to carriers like Emirates
Airline and Qatar Airways,
were part of the delegation.
The company’s top Middle East
salesman, Marty Bentrott,
wasn’t present for the meetings
in Tehran, the person said.
Iran Air said the meeting
“was fruitful and informative
for both sides after a long
time” without providing details
of what was discussed.
Boeing has taken a cautious
approach to its dealings with
Iran, concerned about overstep-
ping the authority granted un-
der the Iran nuclear agreement,
which formally took effect in
January. The company had pre-
viously received limited ap-
proval to provide some parts
and documentation to Iranian
carriers.
“Should any agreements be
reached at some future point,
they would be contingent on
the approval of the U.S. Gov-
ernment,” Boeing said in a
statement.
—Jay Solomon, Ted Mann
and Nick Timiraos
contributed to this article.
The New WSJ Markets
Continued from page B1
a 22% market share of all
cargo moved between Asia and
Europe, the world’s busiest
ocean trade route.
“We are becoming a larger
shipping line and we are in the
position to select the partners
with whom we want to do
business,” Rodolphe Saade,
vice chairman of CMA CGM,
said in February. “We are dis-
cussing with the new China
Shipping group, but we are
also discussing with others.”
Cosco belongs to a different
alliance, called CKYHE, made
up of Asian operators. CKYHE
controls a 25% share of the
Asia-Europe trade loop. Indus-
try leaders A.P. Møller-Mae-
rsk A/S of Denmark and Ge-
neva-based Mediterranean
Shipping Co., comprising the
2M alliance, have a 34% share.
“Regardless of the regula-
tors, the alliances themselves
can’t accept merged entities
where their members belong
to different groupings,” said
Chris Welsh, secretary-general
of Global Shippers’ Forum.
Alliance members share
ships, networks and port calls,
saving hundreds of millions of
High-Seas Camaraderie
Four corporate alliances dominate the shipping industry...
Asia-Europe market share by alliance
2M: 34%
Asia-North America market share
15% 14% 35%
...and the 14 largest companies, which make up 73.1%
of the market share, almost all belong to alliances.
Maersk Line 14.7%
MSC 13.2
CMA CGM 8.9
Evergreen 4.6
Hapag-Lloyd 4.6
Cosco 4.2
CSCL 3.4
Hamburg Süd 3.2
Hanjin 3.1
OOCL 2.8
MOL 2.7
APL 2.6
Yang Ming 2.6
UASC 2.5
Note: As of Jan. 1 Source: Alphaliner
THE WALL STREET JOURNAL.
dollars in annual costs as the
industry remains mired in one
of its worst downturns ever.
Anemic economic growth in
Europe and falling growth in
China is exacerbated by an es-
timated 30% overcapacity of
ships in the water, which has
resulted in rates barely cover-
ing fuel over the past year.
Cosco is considering joining
Ocean Three or leading a new
alliance with CSCL, people fa-
miliar with the situation said.
The Cosco-CSCL merged entity
is called China Cosco Shipping
Group, based in Shanghai.
CMA CGM has told Euro-
pean regulators that it will
withdraw NOL from another
alliance, called G6, which con-
trols an 18% market share in
Asia-Europe. NOL’s container
unit, APL, expects to stay in
G6 until the first quarter of
2017. CMA CGM declined to
comment.
“The only alliance which
will likely stay intact is 2M be-
cause of their dominant posi-
tion,” Mr. Doyle said.
Regulatory approvals can
take up to three months or
longer. In the past, alliances
got the green light by regula-
tors if their combined market
share was below 35%.
—Erica Phillips
contributed to this article.
Ocean 3: 22% CKYHE: 25% G6: 18%
Others: 1%
30% 6%
THE WALL STREET JOURNAL.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
TUESDAY’S MARKETS B8 | MARKETS DIGEST B10 | FINANCE WATCH B12 | HEARD ON THE STREET B12
Nomura to Cut 500
From Europe Staff
BANKING | B9
© 2016 Dow Jones & Company. All Rights Reserved.
As of 4 p.m. ET EUR/GBP 0.7996 g 0.21%
Wanted: Weak
Chinese Firms
With a Listing
SHANGHAI—One of China’s
best-performing stocks during
the past year was struggling
Chongqing New Century
Cruise Co.—and that speaks
volumes about the challenges
facing the world’s second-larg-
est equities market.
Shares of the riverboat op-
erator have gained nearly
300% over the past 12
months—versus a 9% fall for
its exchange’s benchmark in-
dex—even though New Cen-
tury estimates it lost 31.6 mil-
lion yuan ($4.9 million) last
year as river cruising fell out
of favor.
What turned the stock into
a winner, and its father-and-
son management team into
billionaires, was a takeover
bid from a game maker that
wanted its stock listing—not
its seven ships.
Other unlikely winners dur-
ing the past year include
chemical-products maker Wei-
fang Yaxing Chemical Co. and
commodities trader Jilin
Chengcheng Group Co., whose
shares rose 81% and 93%, re-
spectively, even though both
firms lost money for two
straight years.
Weifang Yaxing didn’t re-
spond to requests for com-
Och-Ziff and Justice
Spar Over Plea Deal
Federal authorities are
wrangling with hedge fund
Och-Ziff Capital Management
Group LLC over a possible
criminal guilty plea and the
amount of potential financial
sanctions as they wrap up a
five-year international bribery
investigation, according to
people familiar with the mat-
ter.
By Michael Rothfeld,
Christopher M.
Matthews and Jean
Eaglesham
The Justice Department is
pushing for the company to
plead guilty, which would be
rare for a major financial insti-
tution. Securities regulators
also are seeking civil sanctions
of as much as $400 million
from Och-Ziff, based on what
they believe were the com-
pany’s profits from alleged
bribery overseas, these people
J.P. Morgan Weighs ‘Cloud’ Trade
BY SARAH KROUSE
AND EMILY GLAZER
After decades of transmit-
ting trades by phone line, J.P.
Morgan Chase & Co. is close to
cutting the cord.
The largest U.S. bank by as-
sets said it is in discussions to
move its worldwide trading
systems to an Internet-based
cloud computing service main-
tained by startup Cloud9 Tech-
nologies LLC. The New York
bank lent money to Cloud9 last
year, said Rick Smith, head of
private investments at J.P.
Morgan.
Wall Street for decades has
relied on telephone lines con-
nected to workstations to
transfer trading data and to
record phone conversations.
But some of the biggest U.S.
banks have been contemplat-
ing shifting some services to
the cloud, where they can rent
computing power from compa-
nies that maintain large clus-
ters of servers rather than
running their own data cen-
ters.
The moves have been
slowed by banks’ concerns
about security. Cloud-based
YEN/DLR ¥108.56 À 0.57% GOLD 1259.40 À 0.21%
ment. Jilin Chengcheng de-
clined to comment.
The odd outperformance of
shares of often-struggling
companies is the latest quirk
in China’s markets, whose
combined capitalization was
around $7.8 trillion in April,
the second-biggest pool of
stocks after the U.S.
Such companies are central
to a minimerger trend that has
taken hold as Chinese compa-
nies reckon with multiyear
waits to go public in the tradi-
tional way. That has increased
the popularity of “backdoor”
listings, where private compa-
nies clamber onto markets by
combining with already listed
firms—often those whose op-
erational woes have pushed
down share prices.
The trend is expected to ac-
celerate after the Chinese gov-
ernment signaled last month
that it had postponed two
measures supposed to make
listing easier: a revamp of ini-
tial public offering rules and a
new board that some Chinese
companies delisting from the
U.S. markets had hoped to
join.
So strong is the demand for
such takeover candidates
Please see CHINA page B8
said.
Och-Ziff’s lawyers have ar-
gued that the company
shouldn’t be held criminally li-
able, and any potentially illegal
behavior wasn’t widely known
at the firm, with profits from
the activities in question total-
ing less than $100 million,
these people said.
The investigations by Jus-
tice and the Securities and Ex-
change Commission have ex-
amined whether Och-Ziff, the
nation’s largest publicly traded
hedge-fund firm with $42 bil-
lion of assets under manage-
ment, knowingly paid bribes to
government officials to obtain
an investment from Libya’s
sovereign-wealth fund and in
natural-resources deals in
other African countries, these
people said.
The firm’s lawyers have at-
tempted to persuade prosecu-
tors to agree to a deferred
Please see PACT page B8
trading can be handled on lap-
tops and tablets, but a dropped
call caused by an Internet con-
nection could interrupt trades.
What’s more, not all financial
services firms want to grant
employees permission to trade
outside the office because of
worries about confidential in-
formation. J.P. Morgan has
some of these same concerns,
said people familiar with the
matter.
With Cloud9, the
bank’s 8,000 traders
could work from
anywhere.
J.P. Morgan hasn’t signed a
contract yet and any changes
would take years to imple-
ment. The benefits of the tech-
nology are potentially lower
costs, flexibility for traders
and elimination of the need for
a separate facility in a disas-
ter-recovery scenario, Mr.
Smith said. It also has higher
voice quality and data security
than the bank’s current inter-
nal system, he said.
THE WALL STREET JOURNAL.
Soybeans are planted over wheat stubble. La Niña often poses a risk to production of both crops.
The Cool Sister
If El Niño reverses and becomes a La Niña there could be further commodity disruptions.
Expected conditions: Wet
Dry
Cold
Higher rainfall in
Australia could
see restocking of
cattle, sheep farms
*June to August, all other conditions expected December to February
Sources: National Oceanic and Atmospheric Administration; commodities analysts
Next Weather Risk:
A Possible La Niña
BY LUCY CRAYMER
HONG KONG—Exit El Niño.
Enter La Niña?
Government forecasters in
Japan and Australia have
strengthened their assessment
that a La Niña weather pattern
will hit the Northern Hemi-
sphere this summer, join-
ing the U.S. in rating it at
around a 50% chance.
The possible advent of La
Niña poses a fresh challenge
for farmers and agricultural
markets dealing with an excess
supply of some crops such as
wheat, because of falling de-
mand, and shortages of others,
such as palm oil, caused
droughts related to El Niño in
recent months.
The company’s 8,000 trad-
ers for the first time could
work from anywhere if the
deal is completed. “We’ve had
people trading in the Hamp-
tons, from airplanes, from a
speedboat,” said Gerald Starr,
chief executive officer of
Cloud9, who worked previ-
ously for several trading tech-
nology firms.
New York-based Cloud9
Technologies, which relies on
Amazon.com Inc.’s cloud-com-
puting service, has attracted
investments of “tens of mil-
lions” from J.P. Morgan, ICAP
PLC and Barclays PLC in a new
funding round, the company
said.
J.P. Morgan and ICAP also
lent the firm a smaller amount
in August 2015, Mr. Smith said.
That debt is converting to eq-
uity and the two firms, along
with Barclays, are adding addi-
tional investments, he added.
J.P. Morgan was among a
number of brokerage and com-
modities advisers that agreed
to use the new technology in
recent months and the system
is now used by 2,000 traders
across 350 firms in 21 coun-
tries, Cloud9 executives said.
Italian Property IPO
Prepares for Debut
THE PROPERTY REPORT | B11
OIL 42.17 À 4.48%
Colder winters in
parts of Canada,
U.S. could increase
gas demand
“Recent changes in the
tropical Pacific Ocean and at-
mosphere, combined with cur-
rent climate model outlooks,
suggest the likelihood of La
Niña in 2016 has increased to
around 50%,” Australia’s Bu-
reau of Meteorology said
Tuesday.
La Niña, which often follows
on the heels of an El Niño
event, occurs when easterly
trade winds strengthen, cool-
ing water across the central
and eastern Pacific Ocean.
That typically brings drier-
than-usual weather to some
states in the U.S. and South
America.
Conversely, it can bring
wetter-than-normal conditions
for much of Australia, Papua
U.S. Banks Have Silver Lining
BY AARON BACK
Control what you can.
That should be a new bank-
ing mantra.
J.P. Morgan Chase &
Co. on Wednesday kicks off
bank earnings season. And it
is going to be tough. Ana-
lysts expect it and
AHEAD the other three
OF THE big U.S. banks—
TAPE Bank of America
Corp., Citigroup
Inc. and Wells
Fargo & Co.—to post an av-
erage earnings decline of 17%
from the year-earlier period.
If there is a bright side, it
is that bank shares already
are priced for bad news. And
the causes of weakness are
well known: market turmoil,
global growth fears and a
commodities-price slump
that has sparked defaults.
Most onerous have been re-
newed drops in long-term
yields and a slow-moving
Federal Reserve.
The Fed’s initial rate in-
crease in December was ex-
pected to boost net-interest
margins—many loans reprice
Wednesday, April 13, 2016 | B7
3-MONTH LIBOR 0.62960%
Lower rain in parts
of the U.S. could
hit crop production
Drier weather*
in Argentina
could reduce
soybean yields
THE WALL STREET JOURNAL.
New Guinea, Indonesia and
Central America, while in-
creasing the likelihood of trop-
ical cyclones in the Pacific is-
lands.
Historically, La Niña has
brought a significant risk to
the production of corn, soy-
beans, wheat, sugar, cotton
and coffee.
During years when El Niño
transitions to La Niña, prices
of such commodities typically
rise.
Over the 12 months follow-
ing the confirmation of the
last observed La Niña in July
2010, for example, wheat fu-
tures on the Chicago Board of
Trade rallied around 21% and
soybeans rose around 39%,
Please see NIÑA page B8
Profit reports from the biggest U.S. lenders begin on Wedneday
rapidly in line with move-
ments in short-term rates,
while banks are slower to ad-
just deposit rates. But the
central bank’s reluctance to
follow with more rate rises,
and the continued decline in
long-term yields, means re-
lief was possibly limited.
The direction of rates is
dependent on the Fed and
markets. So banks must fo-
cus on things they can influ-
ence: namely, boosting lend-
ing and turning the screws
even tighter on costs.
Loan growth can help
counter margin pressure.
This partly depends on de-
mand, but bankers have
some control over the pace
of lending. Loans and leases
at U.S. banks were up 7.3%
from a year earlier at the
10-YR TREAS g 17/32 yield 1.781%
Meeting
Looms
Over Oil
Trading
BY GEORGI KANTCHEV
AND KEVIN BAXTER
Investors are bracing for a
meeting this week of the
DIEGO GIUDICE/BLOOMBERG NEWS
world’s largest oil producers
that could make or break
crude’s recent price rally.
On April 17, oil heavy-
weights including Saudi Arabia
and Russia will meet to talk
about a production freeze that
investors hope will curb the
oversupply that has pressured
oil prices for almost two years.
To reach an agreement,
these countries have to negoti-
ate the complexities of Middle
East politics while hoping that
producers not at the table, in-
cluding the U.S. and Norway,
don’t take advantage and ramp
up their production.
Underscoring the uncer-
tainty, analysts haven’t
reached a consensus on what
will happen in Doha, Qatar.
Whatever the outcome, inves-
tors expect a big market reac-
tion, with oil moving by as
much as $5 in either direction.
“It’s 50-50 they are going to
get it done,” said Michael
Wittner, chief oil analyst at
Société Générale SA “If they
do, prices could quickly jump
by up to $5—but also fall by as
much if the negotiations break
down.”
On Tuesday, futures for
Brent, the global oil bench-
mark, gained $1.86 per barrel,
or 4.3%, to $44.69. West Texas
Intermediate, the U.S. price
gauge, was up $1.81 per barrel,
or 4.5% to $42.17 .
Hopes of an agreement have
influenced the market
since Saudi Arabia, Russia,
Venezuela and Qatar said
on Feb. 16 they would freeze
oil production at January lev-
els if other producers joined
in. Some, such as Kuwait and
the United Arab Emirates, did
express support for the
deal. That lifted prices by
around 30% over the following
weeks. But the rally then
stalled as Saudi Arabia indi-
cated that it would agree to
curb production only if still
more producers followed suit.
That may prove difficult.
Shortly after the February
meeting, Iran’s oil minister
called the plan “a joke,” dent-
ing market optimism about the
deal. Iran had only recently re-
turned to international oil
markets after sanctions were
lifted in January, and the
country wants to regain lost
Please see FREEZE page B8
RICHARD DREW/ASSOCIATED PRESS
end of March, according to
Fed data. That is in line with
the rate seen over the past
year, but much higher than
the postcrisis average.
Business loans, which have
driven growth for some time,
are holding up. Since
mid-2014, monthly data have
shown them rising by around
10% from a year earlier. The
total amount of such loans
topped $2 trillion for the
first time ever in March.
Banks also will have to
keep cutting costs, such as
by further shrinking branch
networks.
Banks are playing a wait-
ing game. The key is to keep
busy while the Fed ponders
its next move.
Email: tape@wsj.com
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Wednesday, April 13, 2016 THE WALL STREET JOURNAL.

MONEY & INVESTING

Oil’s Jump Boosts Stocks

BY LESLIE JOSEPHS manager at Rainier Investment pany’s De Beers unit reported nue, as companies grappled
AND RIVA GOLD Management, which he said a third straight month of with steep declines in oil
has about $3 billion in assets higher rough-diamond sales. prices and a stronger dollar at

GENE J. PUSKAR/ASSOCIATED PRESS

U.S. stocks gained Tuesday under management. Mr. Mar- U.S. financial companies the start of the year.
as surging oil prices sparked a gard said he has been buying also rose more than the Shares of aluminum maker
rally in energy shares. shares of energy companies broader market. Concerns had Alcoa, which unofficially
European markets also this week. mounted about banks’ loans to kicked off the U.S. corporate
climbed, led by The Dow Jones Industrial the still-troubled energy sec- earnings season late Monday,
TUESDAY’S gains in com- Average gained 164.84 points, tor as oil prices languished dropped 2.8% after the com-
MARKETS modity-re- or 0.9%, to 17721.25. The S&P near multiyear lows. pany said its first-quarter
lated shares. 500 rose 1%. Energy compa- While commodities prices earnings declined 92%. Alcoa
The Stoxx Eu- nies in the index were up 2.8% led the rally, every sector in lowered its outlook for 2016.
rope 600 index rose 0.5% to in late trading. the S&P 500 gained. J.P. Morgan Chase and pipe- Alcoa shares dropped 2.8% after a 92% fall in quarterly earnings.
334.64. The Nasdaq Composite “That does suggest overall line operator Kinder Morgan
Oil prices jumped on expec- climbed 0.8%. that it’s broader investor opti- are scheduled to report earn- ton Trust. Investors “aren’t fully com-
tations that some major pro- U.S. crude for May delivery mism than just the rebound in ings on Wednesday. “We expect to see compa- mitted to the rally,” said Er-
ducers would freeze produc- gained $1.81 a barrel, or 4.5%, oil,” said Kate Warne, invest- The outlook for the rest of nies beat on the bottom line, nesto Ramos, head of equities
tion levels, and other raw- to $42.17. Brent for June deliv- ment strategist at Edward the year will continue to be in but the top line won’t look at BMO Global Asset Manage-
materials prices gained, giving ery rose $1.86 a barrel, or Jones. focus for many investors good,” he said. ment.
investors hope that the long 4.3%, to $44.69. Still, many investors are throughout the earnings sea- Haven assets such as U.S. On Tuesday, gold for April
commodity bust could ease Chevron was up 2.3% in late bracing for what is expected son. government debt and gold are delivery gained $2.70 a troy
and help improve corporate U.S. trading. Total SA and BP to be a grim first-quarter “After a weak first quarter, both still up on the year as ounce, or 0.2%, to $1,259.40.
profits. PLC gained 1.8% and 1.45% in earnings season. I don’t expect much surpris- many investors have remained The yield on the 10-year Trea-
“We’re in the process of Europe, respectively. Analysts expect the S&P ingly positive forward guid- cautious about a sharp rally in sury note rose to 1.781%, com-
turning a corner,” said Jim Anglo American PLC leapt 500 to show a fifth consecu- ance,” said Tony Roth, chief stocks and energy prices since pared with 1.723% Monday.
Margard, senior portfolio 9.2% after the mining com- tive quarter of declining reve- investment officer at Wilming- mid-February. Yields rise as prices fall.

PACT FREEZE
fee to a Tunisian broker who Not all market players are
had a relationship with Gad- downbeat. Some expect the
hafi’s son, Seif al-Islam, people price to rise because cheap oil
familiar with the matter have has led to huge cuts in explo-
Continued from the prior page said. That transaction was Continued from the prior page ration budgets, which will lead
prosecution agreement, in overseen by Mr. Cohen, who market share. to shrinking supply down the
which any charges would be traveled to Libya at the time, “It would be suicide for pol- road—regardless of whether
SIMON DAWSON/BLOOMBERG NEWS

dismissed after a period if the people familiar with the inves- iticians in Tehran to capitulate delegates in Doha clinch an
company stays out of trouble, tigation said. Och-Ziff has told to Saudi Arabia and freeze out- agreement.
the people familiar with the investigators that it wasn’t put,” said Saadallah al-Fathi, a “We’re going to have a lot
matter said. aware the fee paid to the mid- U.A.E.-based consultant and of volatility going forward, but
A settlement could be final- dleman was passed to anyone former official at the Organi- from here on, the trend is up,”
ized in the next three months, else, and the middleman had zation of the Petroleum Ex- Torbjorn Tornqvist, chief exec-
the people said. Och-Ziff Chief assured the firm he had com- porting Countries. “How can utive of Swiss trading house
Financial Officer Joel Frank plied with all laws, people fa- Saudi Arabia seriously ramp Gunvor Group, said at an in-
said in February that “it’s cer- miliar with the investigation up to over 10 million barrels a dustry conference on Tuesday.
tainly still our hope the inves- A copper and cobalt mine in the Democratic Republic of Congo. have said. day, say it is going to freeze He is predicting a slow recov-
tigation is concluded by the Och-Ziff has helped fund oil and mining deals in the country. Messrs. Cohen and Baros and then expect Iran to comply ery to around $60 to $70 a
middle of this year.” also were involved with Och- with that?” barrel. Other heads of trading
At the center of the investi- allegedly illegal payments, ac- then-dictator Col. Moammar Ziff’s dealings in the Demo- Saudi Arabia raised its oil houses were equally upbeat at
gation is Michael L. Cohen, cording to people familiar with Gadhafi’s regime, according to cratic Republic of Congo, output above 10 million barrels the Swiss conference. Jeremy
Och-Ziff’s former London- the matter. people familiar with the mat- where the firm helped fund Af- a day last year in a bid to gain Weir, chief executive of Tra-
based head of European in- Any charges or settlement ter. Another involves loans by rican oil and mining deals. market share. Iran, currently figura Group Pte. Ltd., pre-
vesting, who oversaw invest- would cap a wide-ranging in- Och-Ziff that U.S. officials The Journal, citing corpo- pumping around 3.1 million dicted the market would begin
ments in Libya and other vestigation into whether Wall think funded illegal payments rate documents, reported in barrels a day, plans to raise its to rebalance in the third or
African countries, these people Street firms paid bribes for to members of President Jo- April 2014 that Och-Ziff made output to four million barrels a fourth quarter.
said. Mr. Cohen resigned in business from sovereign- seph Kabila’s government in two loans totaling $234 mil- day.
March 2013 after 15 years at wealth funds across the world. the Democratic Republic of lion to companies controlled Negotiations have hit other
the firm. Bank of New York Mellon Congo, where the hedge-fund by Israeli mining magnate Dan obstacles that have added
Brent, the global oil
Mr. Cohen and an analyst Corp. agreed last year to pay firm was investing in natural Gertler, and that the loans market volatility, including un- benchmark, gained
who worked for him, Vanja $14.8 million to settle an SEC resources, the people said. were routed through the Brit- certainty over whether OPEC
Baros, each has received a civil investigation into whether The SEC also has talked to ish Virgin Islands and the Cay- members Iraq and Libya will
$1.86 a barrel to
“Wells notice” from the SEC, it violated bribery laws by giv- the company about what regu- man Islands. participate. $44.69 on Tuesday.
indicating that the agency’s ing internships to relatives of lators believe were potentially Federal prosecutors have Meanwhile, some analysts
staff has recommended a civil government officials con- illicit payments by Och-Ziff in presented Och-Ziff with infor- question the effectiveness of a
enforcement action against nected to a Middle East sover- Chad, Guinea, Niger and the mation they said indicates that freeze at current high levels. Some say the very fact that
them, and prosecutors also eign-wealth fund. The bank Republic of Congo, which is some of the loans were used Russian oil output, for in- producers inside and outside
have investigated them crimi- neither admitted nor denied adjacent to the Democratic Re- for bribes, a person familiar stance, has chalked up several of OPEC are meeting is a posi-
nally, people familiar with the wrongdoing in the settlement. public of Congo, these people with the probe said. post-Soviet records in recent tive sign.
matter have said. The federal Foreign Corrupt said. A person familiar with Och- months. “They are making the right
Messrs. Cohen and Baros Practices Act prohibits U.S. The Wall Street Journal re- Ziff’s agreements with Mr. But as oil ministers sit noises this time,” said Doug
didn’t respond to emailed re- companies or those doing ported in December 2014 that Gertler or affiliated companies down in Doha, they will be King, chief investment officer
quests for comment. business in the U.S. from mak- authorities were probing a previously told the Journal thinking about those countries at RCMA Asset Management
The investigations have fo- ing payments or giving gifts to $300 million investment in that they included anticorrup- not present. If a deal is and manager of that firm’s
cused on whether the men foreign officials in exchange Och-Ziff funds from the Libyan tion clauses that would have reached, global output could $240 million Merchant Com-
knew that Och-Ziff funds they for business, whether directly Investment Authority in 2007, triggered immediate repay- still rise as other big produc- modity hedge fund.
deployed in deals would be or through intermediaries. a fund controlled by the Gad- ment if breached. ers man the pumps, analysts Hedge funds and other
used for bribes. No criminal Prosecutors are deciding hafi government. A spokesman for Fleurette say. money managers have grown
charges have been filed whether to seek a guilty plea A key part of the investiga- Group, Mr. Gertler’s holding The U.S. alone produces more-bullish about oil since a
against them. from Och-Ziff’s corporate par- tion related to a fee that Och- company operating in Congo, close to 10% of global crude. planned freeze was an-
Och-Ziff’s lawyers have ar- ent or an affiliate, these people Ziff paid to the company of a said the company “vigorously “It is nearly impossible to nounced and as worries about
gued to federal authorities said. London middleman for help contests and categorically de- reach an agreement. If you the global economy have re-
that the company shouldn’t be One aspect of the potential winning the investment and nies any accusations of wrong- limit your output, someone ceded. The number of long po-
held criminally liable because settlement relates to a broker’s whether any of the fee was doing in its dealings in the else will take your place on the sitions in Brent—bets that
there is no indication anyone fee paid by Och-Ziff for an in- passed to Libyan officials, the Democratic Republic of market,” said Fereidun Fesha- prices will rise—increased to a
at the firm other than Messrs. vestment by Libya that author- Journal reported. The middle- Congo.” Neither Mr. Gertler raki, chairman of energy con- record 409 million barrels last
Cohen and Baros would have ities believe was funneled in man was close to Gadhafi’s spy nor Fleurette have been ac- sultancy FGE. week, data from the Intercon-
potentially been aware of any part to one or more officials of chief and passed some of the cused of wrongdoing. That is the market’s conun- tinental Exchange Inc.
drum. An agreement could ex- showed Monday.
tend the recent rally and en- But most investors are pre-

CHINA Sudden Stars

Some of the best performers on Chinese markets are the struggling companies increasingly in demand as
backdoor-listing targets while IPOs continue to languish.
courage new supply from
nimble U.S. shale drillers,
which would put pressure back
on the oil price.
dicting uncertainty in the com-
ing weeks, particularly given
the potential that Doha’s at-
tendees will kick the can down
Continued from the prior page “Any resolute agreement the road and say an agreement
these days that some investors Hedy Holding Chongqing New Century Cruise Jilin Chengcheng Group that would support prices could come later.
are pouring money into poorly 1 The computer component maker The river cruise company suspends 1 The commodities trader from current levels would “If they come out harmoni-
performing companies they suspends shares due to “major asset shares due to “major asset announces a second straight year prove self-defeating,” Goldman ous, that’s another egg in the
hope will be snapped up as restructuring” restructuring” on Oct. 27, 2014 of losses, fanning speculation it Sachs Group Inc. said in a re- basket of those saying that the
listing vehicles and get stock 2 Announces reverse merger with 1 Announces reverse merger with could be a takeover target port issued on Monday. market is healing. If it falls
pops. advertising company Focus Media game company Giant Interactive The bank sees greater odds apart, oil can quickly fall to
Jiang Bingbing, a 37-year- 3 Shares resume trading 2 Shares resume trading that the Doha meeting delivers $35,” said Mr. King, whose
old legal compliance officer at a bearish catalyst for oil prices hedge fund is neutrally posi-
600% 600% 600%
an asset-management firm in and predicts $35 a barrel in tioned ahead of the talks. “We
the northern city of Jinan, 1 May 4 the second quarter. are in a wait-and-see mode.”
said she watches regulatory
400 400 400
notices from the smallest com-

NIÑA
2 Sept. 1 2 Nov. 11 1 April 30
panies for signs they might be that any [sudden] shift would
distressed and in need of a 1 Oct. 31 see a pretty dramatic move,”
200 200 200
lifeline. One recent invest- said Adrian Redlich, chief in-
ment, which she declined to 3 Sept. 2
vestment officer at Merricks
name, “may turn out to be a Continued from page B7 Capital, a Melbourne-based
0 0 0
real deal, because the firm just while the benchmark sugar firm that runs a US$350 mil-
suspended trading,” she said. Shenzhen Composite contract traded in New York lion soft-commodities fund.
Although every market has Shanghai Composite surged 67%. But some investors said any
–200 –200 –200
its share of backdoor listings, “A potential La Niña impact on agricultural prices
in China they have long helped 2015 ’16 2015 ’16 2015 ’16 weather pattern could signifi- could be muted at a time when
companies sidestep a particu- Sources: Wind Info (performance); staff reports THE WALL STREET JOURNAL. cantly damage global grain demand for key commodities
larly challenging IPO system, crops for the 2016-2017 sea- is already relatively weak in
where the government strictly Enthusiasm for shells Within days, several Chi- have said in regulatory state- son, spurring more significant major markets such as China.
controls the number and pric- picked up last month, after nese brokers made lists of po- ments they were approached price rises across the food “At this point, grain and ed-
ing of companies going public. measures that would make tential shells and advised cli- by potential suitors that would complex than we currently ible-oil inventories are high, so
Shanghai data provider listing easier appeared to be ents to move money into use them as listing vehicles, forecast,” analysts at BMI Re- it would require a significant
Wind Information has a 73- delayed. them. versus 65 for the whole of last search said in a note. La Niña weather event for
stock roster of such backdoor- China Premier Li Keqiang “The storm of shells will year, according to Wind data. While there are early signs there to be a major impact on
listing prospects, including an- didn’t mention a long-awaited roil the market again,” said Onetime tour guide Peng Ji- that a La Niña will emerge this pricing,” said James Govan, an
nounced deals like New IPO overhaul in his two-hour Guangxi-based Sealand Securi- anhu founded New Century in year, accurately forecasting investment manager at Baring
Century. Those stocks are up state of the union address on ties in a March 17 report. 1994 as a bet on tourist de- when it will arrive and how se- Asset Management based in
an average 31% since August, March 16, widely taken as a Sealand’s picks included mand to see the Yangtze vere the impact will be is London.
compared with a 4% gain for sign the measures were on the money-losing property devel- River’s famed Three Gorges. tricky. Moreover, widely traded
the Shanghai Composite Index back burner. A few days later, opers Cosmos Group Co. and He expanded it to a fleet of Australia’s weather bureau commodities such as palm oil
and 15% for the Shenzhen China’s important five-year Harbin High-Tech (Group) seven luxury cruisers, but said forecasts made at this could see prices fall if La Niña
benchmark. plan also didn’t include either Co., whose shares have risen company reports show its rev- time of year tend to be less ac- materializes, because wetter
Demand extends to compa- IPO changes or a new Shang- 22% and 14%, respectively, enue topped out as the river curate than those made later conditions are good for oil-
nies that failed to turn a profit hai exchange that many com- since the report. got crowded with competitors. in the year. palm plantations.
two or three years in a row, panies had been counting on Cosmos and Harbin High- The company suspended trad- The severity of the phenom- Prices for palm oil—used in
putting some at risk of delist- to host a flood of startups as Tech, as well as the China Se- ing in its shares in October enon is measured by ocean a range of products from lip-
ing. Those 50 “special treat- well as companies moving curities Regulatory Commis- 2014 pending a “major asset temperatures and changes in stick to cooking oil—have
ment” stocks have risen an av- from U.S. exchanges to home sion, didn’t respond to restructuring.” wind patterns. surged to two-year highs re-
erage 13% since August, markets, where valuations requests for comment. —Yifan Xie “There is such a big net cently thanks to crop damage
according to Wind data. tend to be higher. This year, 27 companies and James T. Areddy short position in agriculture wrought by El Niño.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Nomura to Cut 500 From Europe Staff
Equity research,
underwriting and
derivatives businesses
will be affected
BY PHILIP GEORGIADIS
AND TIM BURKE
Nomura Holdings Inc. is
cutting up to 500 jobs in Eu-
rope and about 10% of its
Americas workforce, scaling
back an ambitious international
expansion that began when it
bought parts of Lehman Broth-
ers almost eight years ago.
The Japanese bank blamed
“extreme” market volatility and
a decline in liquidity as it an-
nounced a “strategic reassess-
ment” of its international busi-
ness. This will result in the loss
of up to 500 jobs—or 10% to
15% of head count—across its
Europe, Middle East and Africa
equities business, according to
people familiar with the plans.
Equity research, underwrit-
ing and derivatives businesses
will be affected by the cuts. The
bank will still have a London
and EMEA equities business.
After the cuts, Nomura’s eq-
uities business in EMEA will
have between 200 and 250
staff, according to one person.
The bank began to tell
staff on Tuesday that their jobs
were at risk, with some staff
leaving the building immedi-
ately, according to one person
familiar with the plans.
Around 10% of the Americas
workforce is also likely to be
laid off, said another person,
but the bank doesn’t plan to
Swiss Political Force Assails Central Bank
BY JOHN REVILL
ZURICH—One of Switzer-
land’s most controversial and
influential politicians has criti-
cized his country’s central bank
for trying to limit the strength
of the Swiss franc, a costly pol-
icy he said that was destined to
fail.
Christoph Blocher, vice pres-
ident of Switzerland’s biggest
party, the right-wing Swiss
People’s Party, took a swipe at
the Swiss National Bank in an
interview that also covered the
potential exit of Britain from
the European Union and the
rise of Donald Trump in the
U.S. presidential race.
Mr. Blocher, a billionaire in-
dustrialist who bankrolled the
party and made it into the
strongest force in Swiss poli-
tics, said foreign-currency pur-
chases by the SNB wouldn’t
work, especially with the franc
still seen as a haven investment
in troubled economic times.
“The SNB should leave the
currency alone,” said the 75-
year-old former head of the
justice department, who has
dominated the Swiss political
landscape for the past 20 years
even though he isn’t in the cur-
rent government. “They cannot
fight against the world. They
should only react to the big
problems, but not try to man-
age the currency.”
The critique is unlikely to al-
ter Swiss monetary policy. Offi-
cials are fighting a strong Swiss
franc that has the potential to
hurt Switzerland’s export-de-
pendent economy and further
intensify deflationary pressures
Switzerland Expands Investigation Into 1MDB
BY JOHN LETZING
AND NICOLAS PARASIE
ZURICH—Swiss authorities
have expanded their investiga-
tion of 1Malaysia Development
Bhd., or 1MDB, to focus on two
former Abu Dhabi officials
linked to financial dealings with
the Malaysian state investment
fund that have come under
mounting global scrutiny.
Switzerland’s Office of the
Attorney General said Tuesday
that the unidentified former of-
ficials are suspected of fraud,
criminal mismanagement, forg-
ery, bribery, misconduct in pub-
lic office and money laundering
in connection with a 1MDB fi-
nancing deal for power plants
that was to be guaranteed by
an Abu Dhabi sovereign-wealth
fund.
The attorney general’s office
said it has reason to believe
that payments made to guaran-
tee the financing were diverted
from the sovereign-wealth fund
and went instead to “the public
officials concerned as well as a
Nomura Holdings, based in Tokyo, is struggling with declining profitability, lower liquidity and more-stringent regulation.
exit any businesses there. Cuts
in the Americas will fall hardest
in equity capital markets, eq-
uity research and securitized
products, the person said.
Nomura employed 2,501
people in the U.S. and 3,433 in
Europe as of Dec. 31. It employs
16,282 in Japan.
The cuts are the latest re-
trenchment to the bank’s inter-
national expansion since it ac-
quired the Lehman Brothers’
investment-banking franchise
in Asia-Pacific and Europe in
Christoph Blocher says the Swiss National Bank’s efforts to curb the franc are destined to fail.
Still, the comments by Mr.
Blocher underscore frustration
in parts of Europe over the rad-
ical steps central banks have
taken since the financial crisis.
German Finance Minister Wolf-
gang Schäuble recently called
on governments to press their
central banks to slowly with-
draw easy-money policies.
“Although the SNB does not
have to worry too much about
public pressure, when influen-
tial figures like Mr. Blocher
criticize it, that can undermine
the long-term standing of the
SNB,” said Joachim Blatter,
professor at the University of
Lucerne.
In addition to foreign cur-
rency purchases to limit the
franc’s gains, the SNB has
company related to the motion-
picture industry.”
The disclosure comes after a
Wall Street Journal report
about the possible diversion of
funds from 1MDB to movie pro-
duction company Red Granite
Pictures, which was co-founded
by Riza Aziz. Mr. Aziz is the
stepson of Malaysian Prime
Minister Najib Razak, who es-
tablished 1MDB in 2009.
A representative for Mr. Aziz
didn’t immediately respond to a
request for comment.
A spokesman for the Swiss
attorney general’s office de-
clined to comment.
Mr. Najib has previously de-
nied wrongdoing. 1MDB has
also previously denied wrong-
doing.
The new Swiss statement
also comes shortly after the In-
ternational Petroleum Invest-
ment Co., the Abu Dhabi sover-
eign-wealth fund known as
IPIC, disclosed that it didn’t re-
ceive payments from 1MDB
which the Malaysian fund had
previously claimed it sent.
MONEY & INVESTING
2008, bringing aboard 8,000
former Lehman employees.
The expansion was an op-
portunity for Nomura to com-
pete as a global investment
bank. It also sharply increased
the bank’s fixed costs.
Nomura has since struggled
to profit from the move and
has announced several cost-
saving strategies, including $2
billion of cuts that began in late
2011.
In its most recent results,
Nomura’s overseas operations
maintained a minus-0.75% rate
on bank deposits above a cer-
tain threshold stored at the
SNB. The policies are designed
to make the franc, which the
SNB describes as “significantly
overvalued,” less appealing to
foreign investors.
While banks have largely
shielded retail depositors from
negative rates, savers are see-
ing little if any interest on their
savings.
Last year, the bank posted a
record loss of 23 billion francs
($21.4 billion), due mainly to a
fall in the value of its large for-
eign-currency positions. In Jan-
uary 2015, the SNB scrapped a
ceiling it had imposed on the
franc’s value for more than
three years. The move caused
In addition, Abu Dhabi’s cen-
tral bank recently moved to
freeze assets held at domestic
banks for former IPIC officials
Khadem Al Qubaisi and Mo-
hammed Badawy Al Husseiny.
In its earlier statement, IPIC
said it was aware of media re-
ports that 1MDB sent money to
a company with a similar name
to one of its subsidiaries,
Aabar Investments PJS, but
added that the company in
question—Aabar Investments
PJS Ltd.—isn’t a part of IPIC.
The Journal has reported
previously that Messrs. Al
Qubaisi and Al Husseiny had
set up the imitation Aabar. The
men were removed from their
positions at IPIC last year.
A report released last week
by a Malaysian parliamentary
committee inquiry into 1MDB,
which is the subject of corrup-
tion probes in at least seven
countries, put the amount
transferred by the fund to the
imitation IPIC subsidiary at
$3.5 billion.
Messrs. Al Qubaisi and Al
posted a pretax loss of ¥19.9
billion for the period of October
to December, a second consecu-
tive losing quarter. Nomura’s
Asia-Pacific operations will be
unaffected by the changes an-
nounced Tuesday.
The bank separately cut 12
jobs in investment banking in
Asia in recent months and is
planning to cut a further 20 to
30 outside investment banking,
people familiar with the matter
said
The bank’s move to scale
ARND WIEGMANN/REUTERS
the franc to soar, eroding the
value of foreign-currency assets
on the SNB’s balance sheet.
Further currency inventions
carried more risk of big losses,
Mr. Blocher said. Ralf Wieden-
mann, an analyst at Bank Von-
tobel, estimates that the SNB
has bought nearly 18 billion
francs of foreign currencies this
year, based on the SNB’s bal-
ance sheet and sight-deposits
data. Still, the franc has risen
against the euro since early
February. The euro fetched
1.0880 francs Tuesday in New
York.
“The exporters are finding it
hard, but despite the problems
with the currency, the Swiss
economy is doing well,” Mr.
Blocher said. Gross domestic
Husseiny didn’t immediately re-
spond to requests for comment.
An IPIC spokesman declined
to comment.
The Abu Dhabi government
has not publicly commented on
the 1MDB affair.
Abu Dhabi set up IPIC in
1984, to invest the emirate’s oil
income surplus. Under Mr. Al
Qubaisi, IPIC’s former manag-
ing director, the fund rapidly
expanded. His dismissal last
year came with no public expla-
nation.
The expanded Swiss probe
could offer a rare glimpse into
the operations of a state-owned
sovereign wealth fund. IPIC’s
current chairman is a member
of Abu Dhabi’s ruling Al Nahyan
family, as well as the deputy
prime minister of the United
Arab Emirates.
The Swiss attorney general’s
office said that as it widens its
investigation, it has made new
requests for mutual legal assis-
tance from Singapore and Lux-
embourg.
In a separate statement on
Wednesday, April 13, 2016 | B9
Street Journal reported that
Morgan Stanley planned to
slash up to one-fourth of its
bond- and currency-trading
jobs.
Citigroup is planning to cut
roughly 70 jobs across its Lon-
don sales and trading business
in the coming weeks, according
to a person familiar with the
matter. That is part of a
broader plan from late last year
to cut 2,000 globally.
The latest round of job cuts
come as new data showed job
vacancies in London’s financial
sector were down in March by
one-fifth from March
2015, according to the re-
cruiter Morgan McKinley,
which attributed the drop to a
slowing economy and the com-
ing vote on the U.K.’s future in
KIYOSHI OTA/BLOOMBERG NEWS
the European Union.
Richard Hoar, a director at
the London financial-sector re-
cruitment firm Goodman Mas-
son, said the Morgan McKinley
findings echoed his firm’s expe-
rience.
“There are more and more
people looking for jobs because
of redundancies,” he said.
back comes in the face of de- “There are a huge amount of
clining profitability, lower li- markets people looking.”
quidity and more-stringent —Lucy Burton
regulation. and Anna Irrera
Nomura said in Tuesday’s contributed to this article.
statement that its changes re-
flected “the new market and
regulatory environment.”
Banks including Barclays
PLC, Credit Suisse Group AG Delivering news and insight
and Deutsche Bank AG have all on finance and markets
announced major strategy from London
changes and cost-cutting plans
in recent months. Download on the App Store
In November, The Wall
Chinese
product rose 0.9% last year, af-
ter 1.9% growth in 2014.
Brokerage
However, negative interest
rates “reduce the value for the
savers in a country where peo-
Plans IPO
ple save for the bad times,” Mr. BY ALEC MACFARLANE
Blocher said. “The value of pen-
sions is in danger, too; it is Citigroup Inc.’s China secu-
quite a problem.” rities joint-venture partner,
The SNB declined to com- Orient Securities Co., is gear-
ment on Mr. Blocher’s com- ing up for a Hong Kong initial
ments. public offering that could raise
Looking outside Switzerland, $1 billion or more, testing
Mr. Blocher said the U.K.’s ref- global investors’ appetite for
erendum in June on whether to Chinese brokerage houses.
stay in the European Union The Shanghai-based broker-
highlighted that many Europe- age firm filed for its IPO with
ans are unhappy with the EU, the Hong Kong stock exchange
particularly its policy on immi- Tuesday. The offering could
gration. raise $1 billion or more in the
“Switzerland is not a mem- coming months, according to
ber of the EU and for that we people familiar with the situa-
can thank direct democracy,” tion.
said Mr. Blocher, whose anti- Bankers will try to sell in-
immigrant and anti-European vestors on one of the first ma-
rhetoric has sparked contro- jor Chinese brokers to list
versy in Switzerland. “People shares in Hong Kong since
have voted against it clearly China’s stock market plum-
each time they have been meted last summer. Shares on
asked.” the country’s benchmark
The U.S. elections this year Shanghai Composite Index ha-
are another source of global ven’t recovered, and are down
uncertainty, amid the rise of about 15% this year. Citigroup,
Donald Trump in the Republi- Goldman Sachs Group Inc.,
can nomination contest. Mr. and Nomura Holdings Inc. are
Blocher played down Mr. handling the offering.
Trump’s controversial com- Orient Securities, which is
ments about immigration, say- already listed in Shanghai, is
ing they were mainly for effect one of at least three big Chi-
and to raise the issues, and he nese securities firms looking to
would behave differently if raise money in Hong Kong this
elected. year. China Merchants Securi-
“I remember before Reagan ties Co. and Everbright Securi-
was elected and everyone was ties Co. are among the local
saying he was just a film star brokers that have been consid-
and an idiot,” said Mr. Blocher. ering multibillion-dollar Hong
“But he was the best president Kong IPOs.
I have seen.” Investors got burned on one
of the last Chinese securities
firms to go public, Guolian Se-
curities Co., which listed in
June 2015 just as the Chinese
domestic stock market spiraled
down. The brokerage sold $457
Tuesday, Singapore’s Attorney million worth of shares at eight
General’s Chambers confirmed Hong Kong dollars (US$1.03)
it has received the Swiss re- each. On Tuesday, Guolian’s
quest, and said it would “render shares closed at HK$4.23.
all possible assistance.” Shares of another Chinese bro-
The Journal has reported ker, Hengtai Securities, are
previously that Luxembourg au- down 10% since going public in
thorities were examining the October.
movement of funds tied to two Citigroup formed Citi Orient,
bonds issued by 1MDB in 2012, its partnership with Orient Se-
meant to fund the development curities, in 2012, giving the
of power plants. Wall Street bank a long-sought
Investigators probing 1MDB foothold in China’s domestic in-
believe that some of the money vestment-banking industry. The
sent by 1MDB, related to the joint venture is allowed to un-
bond guarantees for the power- derwrite stocks and bonds, and
plant development, was di- advises on mergers and acqui-
verted to Red Granite Pictures, sitions. Citigroup owns one-
a Hollywood studio that pro- third of the joint venture. Ori-
duced the film “The Wolf of ent Securities’ IPO won’t alter
Wall Street,” the Journal has the Citigroup joint venture,
reported previously. which is a separate entity.
The West Hollywood, Calif., Orient Securities, which
studio said earlier this month it listed in Shanghai in March
had no reason to believe the 2015, plans to use the money
source of its financing was ir- raised from the IPO to boost its
regular. wealth-management offerings
“Red Granite is responding and other divisions, including
to all inquiries and cooperating its margin-lending and over-
fully,” a company spokesman seas investment-banking busi-
said. nesses.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B10 | Wednesday, April 13, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
15928.79 s 177.66, or 1.13% Year-to-date t 16.31% 334.64 s 1.77, or 0.53% Year-to-date t 8.52% 2061.72 s 19.73, or 0.97% Trailing P/E ratio * 23.62 20.47
High, low, open and close for each 52-wk high/low20868.03 14952.61 High, low, open and close for each 52-wk high/low 414.06 303.58 High, low, open and close for each P/E estimate * 17.41 17.53
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.20 1.99
All-time high: 2130.82, 05/21/15

* P/E data based on as-reported earnings from Birinyi Associates Inc.

65-day moving average Session high
18800 360 2100
DOWN UP 65-day moving average

t
Session open Close

Close t Open 18000 350 2050

Session low
17200 340 2000

16400 330 1950

15600 320 65-day moving average 1900

14800 310 1850

Bars measure the point change from session's open

14000 300 1800
Jan. Feb. Mar. Apr. Jan. Feb. Mar. Apr. Jan. Feb. Mar. Apr.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2318.34 23.10 1.01 2033.03 • 2643.78 –0.8 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1640.06 8.02 0.49 1471.88 • 1956.39 –4.4 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 832.36 8.35 1.01 691.21 • 1067.74 4.8 3.250 Australia 2 1.888 116.2 116.5 107.8 126.8 1.868 2.034 1.824
4.250 10 2.477 69.9 69.6 70.4 42.8 2.424 2.688 2.376
Americas DJ Americas 495.23 5.40 1.10 433.38 • 525.25 1.6
3.500 Belgium 2 -115.8 -132.7 -75.2 -0.467 -0.371 -0.196
-0.432 -116.9
Brazil Sao Paulo Bovespa 52107.77 1942.29 3.87 37046.07 • 58574.79 20.2
0.800 10 0.416 -136.2 -136.2 -145.5 -161.6 0.366 0.529 0.331
Canada S&P/TSX Comp 13572.69 149.93 1.12 11531.22 • 15524.75 4.3
4.250 France 2 -0.449 -117.5 -116.0 -135.2 -72.9 -0.458 -0.397 -0.173
Mexico IPC All-Share 45116.20 355.67 0.79 39256.58 • 46307.61 5.0
0.500 10 0.517 -126.1 -126.4 -144.3 -151.1 0.464 0.541 0.437
Chile Santiago IPSA 3140.53 24.07 0.77 2730.24 • 3361.36 6.7
0.500 Germany 2 -0.510 -123.7 -122.1 -141.6 -82.3 -0.519 -0.461 -0.267
U.S. DJIA 17721.25 164.84 0.94 15370.33 • 18351.36 1.7
0.500 10 0.170 -160.8 -161.6 -171.4 -178.8 0.112 0.270 0.159
Nasdaq Composite 4872.09 38.69 0.80 4209.76 • 5231.94 –2.7
4.500 Italy 2 0.027 -69.9 -69.4 -99.3 -47.3 0.009 -0.037 0.083
S&P 500 2061.72 19.73 0.97 1810.10 • 2134.72 0.9
2.000 10 1.377 -40.1 -37.7 -65.2 -72.3 1.351 1.333 1.225
CBOE Volatility 15.10 –1.16 –7.13 10.88 • 53.29 –17.1
0.100 Japan 2 -0.253 -98.0 -94.7 -111.7 -54.6 -0.245 -0.162 0.011
EMEA Stoxx Europe 600 334.64 1.77 0.53 303.58 • 414.06 –8.5 0.100 10 -0.096 -187.4 -180.9 -199.5 -160.8 -0.081 -0.011 0.340
Stoxx Europe 50 2775.23 19.54 0.71 2556.96 • 3602.76 –10.5 0.500 Netherlands 2 -0.467 -119.4 -119.6 -140.5 -76.7 -0.493 -0.449 -0.211
Austria ATX 2251.17 4.56 0.20 1929.73 • 2695.57 –6.1 0.250 10 0.263 -151.5 -150.6 -160.5 -171.2 0.222 0.379 0.236
Belgium Bel-20 3370.69 1.69 0.05 3117.61 • 3910.33 –8.9 4.350 Portugal 2 0.417 -31.0 -30.6 -69.5 -54.7 0.397 0.261 0.009
France CAC 40 4345.91 33.28 0.77 3892.46 • 5283.71 –6.3 2.875 10 3.262 148.4 149.3 77.0 -33.4 3.221 2.754 1.614
Germany DAX 9761.47 78.48 0.81 8699.29 • 12339.81 –9.1 4.500 Spain 2 0.002 -72.5 -69.4 -97.5 -47.7 0.009 -0.019 0.080
Greece ATG 553.43 –7.54 –1.34 420.82 • 857.92 –12.3 1.950 10 1.538 -24.0 -21.9 -50.2 -71.8 1.509 1.482 1.230
Hungary BUX 26027.14 –241.28 –0.92 20452.90 • 26650.44 8.8 4.250 Sweden 2 -0.445 -117.1 -116.8 -155.4 -88.1 -0.465 -0.599 -0.325
Israel Tel Aviv 1448.30 –3.65 –0.25 1383.34 • 1728.89 –5.3 1.000 10 0.794 -98.4 -98.4 -136.9 -158.8 0.745 0.615 0.359
Italy FTSE MIB 17444.80 –277.86 –1.57 15773.00 • 24157.39 –18.6 1.250 U.K. 2 0.451 -27.6 -30.2 -39.2 0.9 0.401 0.564 0.565
Netherlands AEX 439.50 2.94 0.67 378.53 • 510.55 –0.5 2.000 10 1.444 -33.4 -33.3 -40.8 -33.7 1.395 1.577 1.610
Poland WIG 47351.22 –125.09 –0.26 41747.01 • 57460.44 1.9 0.875 U.S. 2 0.727 ... ... ... ... 0.703 0.955 0.556
Russia RTS Index 911.07 10.09 1.12 607.14 • 1092.52 20.3 1.625 10 1.778 ... ... ... ... 1.728 1.984 1.948
Spain IBEX 35 8546.30 48.70 0.57 7746.30 • 11862.60 –10.5
Sweden SX All Share 482.92 –0.84 –0.17 432.78 • 564.90 –4.4 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 7788.78 37.20 0.48 7425.05 • 9537.90 –11.7 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 52059.76 631.68 1.23 45975.78 • 55355.12 2.7 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 4/11/2016
Turkey BIST 100 83719.80 –267.73 –0.32 68230.47 • 88651.88 16.7
One-Day Change Year Year
U.K. FTSE 100 6242.39 42.27 0.68 5499.51 • 7122.74 0.001 Commodity Exchange Last price Net Percentage high low
365.75 6.00 1.67% 383.25 351.25
Asia-Pacific DJ Asia-Pacific TSM 1350.75 10.52 0.78 1188.42 • 1621.10 –2.8 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 938.50 10.25 1.10 938.75 856.00
Australia S&P/ASX 200 4975.60 44.10 0.89 4765.30 • 5982.70 –6.0
Wheat (cents/bu.)
CBOT
CBOT 458.25 4.00 0.88 499.00 449.50
China Shanghai Composite 3023.65 –10.31 –0.34 2655.66 • 5166.35 –14.6
Live cattle (cents/lb.) CME 122.750 -0.475 -0.39% 131.350 118.775
Hong Kong Hang Seng 20504.44 63.63 0.31 18319.58 • 28442.75 –6.4
Cocoa ($/ton) ICE-US 2,964 32 1.09 3,211 2,746
India S&P BSE Sensex 25145.59 123.43 0.49 22951.83 • 29044.44 –3.7
Coffee (cents/lb.) ICE-US 126.05 0.80 0.64 138.20 115.35
Japan Nikkei Stock Avg 15928.79 177.66 1.13 14952.61 • 20868.03 –16.3
Sugar (cents/lb.) ICE-US 14.34 -0.05 -0.35 16.63 12.68
Singapore Straits Times 2814.65 5.41 0.19 2532.70 • 3539.95 –2.4
Cotton (cents/lb.) ICE-US 60.77 0.53 0.88 64.92 54.33
South Korea Kospi 1981.32 10.95 0.56 1829.81 • 2173.41 1.0 Robusta coffee ($/ton) ICE-EU 1559.00 11.00 0.71 1,570.00 1,342.00
Taiwan Weighted 8531.18 –31.41 –0.37 7410.34 • 9973.12 2.3
Copper ($/lb.) COMEX 2.1470 0.0565 2.70 2.3235 1.9440
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1259.40 1.40 0.11 1,287.80 1,063.00
Silver ($/troy oz.) COMEX 16.220 0.244 1.53 16.230 13.760
Currencies London close on April 12 Aluminum ($/mt)* LME 1,506.50 -2.50 -0.17 1,588.50 1,451.50
Tin ($/mt)* LME 16,975.00 250.00 1.49 17,500.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 4,641.00 5.50 0.12 5,070.50 4,320.50
10% Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,697.00 -0.50 -0.03 1,888.00 1,598.00
8
Europe Zinc ($/mt)* LME 1,758.00 1.00 0.06 1,866.00 1,467.00
6 Euro
s
Bulgaria lev 0.5823 1.7172 –4.6 Nickel ($/mt)* LME 8,605.00 155.00 1.83 9,400.00 7,750.00
4
Croatia kuna 0.1522 6.570 –6.3 Rubber (Y.01/ton) TCE 191.90 2.90 1.53 192.80 175.10
2
s
Yen Euro zone euro 1.1390 0.8780 –4.6
0 Palm oil (MYR/mt) MDEX 2639.00 -28.00 -1.05 2,793.00 2,419.00
Czech Rep. koruna-b 0.0421 23.728 –4.7
–2 s Denmark krone 0.1530 6.5353 –4.9 Crude oil ($/bbl.) NYMEX 43.38 1.63 3.90 43.57 30.79
–4 WSJ Dollar index
0.003660 273.25 –5.9
Hungary forint NY Harbor ULSD ($/gal.) NYMEX 1.2784 0.0637 5.24 1.2846 0.8950
–6 Iceland krona 0.008102 123.43 –5.2
–8 RBOB gasoline ($/gal.) NYMEX 1.5355 0.0278 1.84 1.5782 1.1488
Norway krone 0.1223 8.1767 –7.5
0.2653 3.7700 –3.9
Natural gas ($/mmBtu) NYMEX 2.023 0.111 5.81 2.5490 1.7310
2015 2016 Poland zloty
Russia ruble-d 0.01525 65.567 –8.8 Brent crude ($/bbl.) ICE-EU 44.62 1.79 4.18 44.81 29.31
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1238 8.0808 –4.3 Gas oil ($/ton) ICE-EU 379.50 17.25 4.76 384.00 266.50
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0468 0.9553 –4.7
Turkey lira 0.3524 2.8380 –2.7 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1290 7.7548 0.1
Ukraine hryvnia 0.0391 25.5560 6.5
Argentina peso-a 0.0688 14.5418 12.4
India rupee
Indonesia rupiah
0.0151
0.0000763
66.3417 0.2
13102 –5.3
U.K. pound 1.4245 0.7020 3.4 Cross rates London close on Apr 12
Brazil real 0.2812 3.5567 –10.2 Middle East/Africa
Japan yen 0.009211 108.56 –9.8
Canada dollar 0.7810 1.2804 –7.5 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002979 335.71 –0.9 Bahrain dinar 2.6522 0.3771 –0.01
Chile peso 0.001485 673.50 –5.0 Australia 1.3058 1.8599 1.3667 0.0120 0.1684 1.4869 1.0198 ...
Macau pataca 0.1252 7.9901 –0.2 Egypt pound-a 0.1126 8.8810 13.4
Colombia peso 0.0003273 3054.85 –3.8 Canada 1.2804 1.8236 1.3407 0.0118 0.1651 1.4580 ... 0.9806
Malaysia ringgit-c 0.2590 3.8617 –10.3 Israel shekel 0.2654 3.7673 –3.2
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6900 1.4493 –1.0 Kuwait dinar 3.3186 0.3013 –0.7 Euro 0.8780 1.2507 0.9193 0.0081 0.1132 ... 0.6858 0.6724
Mexico peso-a 0.0571 17.5153 1.8
Pakistan rupee 0.0095 104.750 –0.1 Oman sul rial 2.5973 0.3850 0.02 Hong Kong 7.7548 11.0454 8.1187 0.0714 ... 8.8320 6.0572 5.9387
Peru sol 0.3046 3.2833 –3.8
Philippines peso 0.0217 46.089 –1.6 Qatar rial 0.2746 3.641 –0.04 Japan 108.5640 154.6400 113.6500 ... 13.9990 123.6300 84.7977 83.1400
Uruguay peso-e 0.0322 31.040 3.8
Singapore dollar 0.7433 1.3453 –5.1 Saudi Arabia riyal 0.2667 3.7502 –0.1 0.9553 1.3607 ... 0.0088 0.1232 1.0878 0.7459 0.7317
Venezuela bolivar 0.100125 9.99 58.4 Switzerland
South Korea won 0.0008730 1145.52 –2.6 South Africa rand 0.0680 14.7035 –5.0
U.K. 0.7020 ... 0.7349 0.0065 0.0905 0.7996 0.5484 0.5377
Asia-Pacific Sri Lanka rupee 0.0069161 144.59 0.2 Close Net Chg % Chg YTD % Chg
0.7658 1.3058 –4.8 Taiwan dollar 0.03094 32.321 –1.8 U.S. ... 1.4245 1.0468 0.0092 0.1290 1.1390 0.7810 0.7658
Australia dollar WSJ Dollar Index 85.88 –0.03 –0.03 –4.76
China yuan 0.1547 6.4642 –0.5 Thailand baht 0.02857 35.000 –2.9 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 0.43715% 0.18250% ¥ TakedaPharm 4502 5156.00 1.00 -14.99 £ RioTinto RIO 2086.50 2.76 5.41 Last: 126.91 s 1.49, or 1.19% YTD t 6.9%
Three month 0.62960 0.27555 Asia Titans HK$ TencentHoldings 0700 160.00 0.31 4.78 CHF RocheHldgctf ROG 243.90 0.58 -11.76
140
Six month 0.89415 0.40490 HK$ AIAGroup 1299 43.45 0.81 -6.76 ¥ TokioMarineHldg 8766 3465.00 0.87 -26.46 £ RoyDtchShell A RDSA 1759.00 1.56 15.27 50–day
One year 1.20905 0.70010 1438.50
moving average
¥ AstellasPharma 4503 -0.66 -16.92 ¥ ToyotaMtr 7203 5485.00 3.92 -26.75 € SAP SAP 68.45 1.53 -6.72 130
Euro Libor AU$ AustNZBk ANZ 22.84 2.65 -18.22 AU$ Wesfarmers WES 39.53 -1.22 -5.00 € Sanofi SAN 74.25 0.05 -5.53 t
120
One month -0.33971% -0.03786% AU$ BHP BHP 16.90 2.11 -5.38 AU$ WestpacBanking WBC 29.13 2.50 -13.20 € SchneiderElectric SU 53.69 0.24 2.15
Three month -0.26214 0.00500 HK$ BankofChina 3988 3.10 0.32 -10.40 AU$ Woolworths WOW 20.74 -0.38 -15.35 € Siemens SIE 89.81 0.47 -0.08 High 110
Six month -0.14843 0.06214 HK$ CKHutchison 0001 97.60 -1.36 -6.51 € Telefonica TEF 9.38 0.78 -8.35 100
Close
One year -0.02657 0.18500 HK$ CNOOC 0883 9.15 0.55 13.38 Stoxx 50 € Total FP 40.93 1.84 0.18 Low 90
Euribor ¥ Canon 7751 3166.00 0.83 -13.85 CHF ABB ABBN 18.87 1.34 5.07 CHF UBSGroup UBSG 14.68 0.75 -24.80
One month -0.34200% -0.02500% ¥ CentralJapanRwy 9022 18910 -0.26 -12.45 € AXA CS 20.71 2.65 -17.90 € Unilever UNA 39.73 0.49 -0.95 15 22 29 5 12 19 26 4 11 18 25 1 8
Three month -0.24900 0.00800 HK$ ChinaConstructnBk 0939 4.94 0.41 -6.97 € AirLiquide AI 97.85 2.57 -5.60 £ Unilever ULVR 3239.50 0.12 10.70 Feb. Mar. Apr.
Six month -0.13600 0.07600 HK$ ChinaLifeInsurance 2628 18.26 0.11 -27.25 € Allianz ALV 142.10 1.75 -13.12 £ VodafoneGroup VOD 226.50 0.51 2.49
One year -0.01200 0.18300 HK$ ChinaMobile 0941 85.95 0.23 -1.77 € Anheuser Busch ABI 106.20 0.14 -7.17 CHF ZurichInsurance ZURN 203.10 1.30 -21.40
Yen Libor AU$ CmwlthBkAust CBA 72.22 2.15 -15.56 £ AstraZeneca AZN 4057.00 -0.20 -12.12
DJIA Stoxx 50
One month 0.22571% 0.24000% ¥ EastJapanRailway 9020 9565.00 -0.88 -16.46 € BASF BAS 64.83 1.12 -8.33
Last: 2775.23 s 19.54, or 0.71% YTD t 10.5%
Three month 0.55696 0.39000 ¥ Fanuc 6954 17895 4.44 -15.11 € BNP Paribas BNP 42.56 0.58 -18.51 $ AmericanExpress AXP 60.68 1.47 -12.75
Six month 0.88732 0.54071 ¥ Hitachi 6501 487.60 4.41 -29.49 £ BT Group BT.A 444.35 0.73 -5.80 $ Apple AAPL 110.42 1.28 4.90 3150
One year 1.28057 0.84214 TW$ Hon Hai Precisn 2317 82.00 0.99 1.49 € BancoBilVizAr BBVA 5.50 0.73 -17.55 $ Boeing BA 129.49 1.24 -10.44
$ Caterpillar CAT 76.10 1.97 11.98 3000
Offer ¥ HondaMotor 7267 2929.50 3.79 -25.08 € BancoSantander SAN 3.77 1.10 -17.24
KRW HyundaiMtr 005380 148500 1.71 -0.34 £ Barclays BARC 155.65 1.40 -28.89 $ Chevron CVX 97.50 2.37 8.38 2850
Eurodollars
HK$ Ind&Comml 1398 4.15 0.24 -11.32 € Bayer BAYN 102.55 0.49 -11.44 $ CiscoSystems CSCO 27.64 0.05 1.77
One month 0.4500% 0.3500%
$ CocaCola KO 46.65 0.45 8.59
2700
Three month 0.6500 0.5500 ¥ JapanTobacco 2914 4606.00 -1.05 3.02 £ BP BP. 356.95 1.45 0.83
¥ KDDI 9433 2965.50 -1.93 -5.98 £ BritishAmTob BATS 4167.50 -0.62 10.51
$ Disney DIS 97.35 1.12 -7.36 2550
Six month 0.9000 0.8000
¥ Mitsubishi 8058 1843.00 3.02 -9.12 CHF FinRichemont CFR 60.95 1.58 -15.46
$ DuPont DD 64.30 1.71 -3.45 2400
One year 1.2500 1.1500
505.70
$ ExxonMobil XOM 84.35 1.24 8.21
Latest 52 wks ago ¥ MitsuUFJFin 8306 5.86 -33.21 CHF CreditSuisse CSGN 13.42 1.05 -38.13 15 22 29 5 12 19 26 4 11 18 24 1 8
$ GenElec GE 30.81 0.33 -1.09
¥ Mitsui 8031 1284.00 1.26 -11.17 € Daimler DAI 61.30 1.32 -20.98 Feb. Mar. Apr.
Prime rates $ GoldmanSachs GS 154.29 1.37 -14.39
¥ Mizuho Fin 8411 162.00 5.19 -33.47 € Deutsche Bank DBK 13.98 -0.14 -37.94
U.S. 3.50% 3.25% $ HomeDepot HD 134.38 1.03 1.61
¥ NTTDoCoMo 9437 2624.50 0.34 5.66 € DeutscheTelekom DTE 15.32 1.06 -8.21
Canada 2.70 2.85 $ Intel INTC 31.86 0.60 -7.52
AU$ NatAustBnk NAB 25.56 2.53 -15.36 1904.00 0.34 2.56
Japan
Hong Kong
1.475
5.00
1.475
5.00 ¥ NipponStl&SmtmoMtl 5401 2210.00 6.48 -8.53
£
€
Diageo
ENI
DGE
ENI 12.96 0.54 -6.09
$
$
IBM
JPMorganChase
IBM
JPM
149.60
59.28
0.23
1.86
8.71
-10.22
Dow Jones Industrial Average P/E: 18
¥ NipponTeleg 9432 4705.00 -0.99 -2.71 £ GlaxoSmithKline GSK 1479.00 0.92 7.72 $ JohnsJohns JNJ 109.60 0.58 6.70 Last: 17721.25 s 164.84, or 0.94% YTD s 1.7%
Policy rates
ECB 0.00% 0.05%
¥ NissanMotor 7201 983.20 3.28 -23.16 £ HSBC Hldgs HSBA 420.10 0.44 -21.65 $ McDonalds MCD 127.61 0.04 8.02
Britain 0.50 0.50
¥ NomuraHldgs 8604 481.50 7.43 -29.10 € INGGroep INGA 10.37 -0.05 -16.75 $ Merck MRK 55.34 0.53 4.77 18000
Switzerland 0.50 0.50
¥ Panasonic 6752 928.30 2.43 -25.17 £ ImperialBrands IMB 3789.00 -0.88 5.65 $ Microsoft MSFT 54.65 0.63 -1.50 17400
Australia 2.00 2.25
HK$ PetroChina 0857 4.97 1.22 -2.36 € IntesaSanpaolo ISP 2.24 -4.11 -27.53 $ NikeClB NKE 58.51 1.02 -6.38
HK$ PingAnInsofChina 2318 35.40 -0.14 -17.48 € LVMHMoetHennessy MC 148.30 1.54 2.35 16800
U.S. discount 1.00 0.75 $ Pfizer PFE 31.96 0.22 -0.99
Fed-funds target 0.25 0.00
$ RelianceIndsGDR RIGD 31.35 0.48 2.45 £ LloydsBankingGroup LLOY 66.64 1.71 -8.80 $ Procter&Gamble PG 82.83 0.12 4.31 16200
Call money 2.25 2.00
AU$ RioTinto RIO 45.33 2.37 1.39 € LOreal OR 154.50 0.36 -0.52 $ 3M MMM 168.00 0.85 11.52 15600
KRW SamsungElectronics 005930 1275000 0.71 1.19 £ NationalGrid NG. 993.90 0.25 6.02 $ TravelersCos TRV 115.19 0.36 2.06
Overnight repurchase rates 15000
U.S. 0.44% 0.23%
¥ Seven&I Hldgs 3382 4559.00 -1.79 -17.86 CHF Nestle NESN 70.15 0.14 -5.90 $ UnitedTech UTX 103.09 0.93 7.31
Euro zone n.a. n.a.
¥ SoftBankGroup 9984 5740.00 1.11 -6.50 CHF Novartis NOVN 71.75 -0.14 -17.34 $ UnitedHealthGroup UNH 126.79 0.36 7.78 15 22 29 5 12 19 26 4 11 18 24 1 8
¥ Sumitomo Mitsui 8316 3299.00 5.23 -28.38 DKK NovoNordiskB NOVO-B 364.20 -0.55 -8.93 $ VISAClA V 78.51 0.89 1.24 Feb. Mar. Apr.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 94.80 1.17 1.12 £ Prudential PRU 1345.00 2.44 -12.15 $ Verizon VZ 51.97 0.70 12.44 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 158.50 ... 10.84 £ ReckittBenckiser RB. 6794.00 0.74 8.17 $ WalMart WMT 68.82 2.11 12.27 Sources: WSJ Market Data Group; Birinyi Associates
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
JOHN G. MABANGLO/EUROPEAN PRESSPHOTO AGENCY
Uber Technologies purchased this former Sears retail building in downtown Oakland, Calif., as part of an expansion of its corporate headquarters in the Bay Area.
Behind San Francisco Office Boom
Tech sector fuels city’s
growth but a retreat
could hurt firms with
bets on banked space
BY ELIOT BROWN
SAN FRANCISCO—On the
gritty edge of this city’s down-
town, workers in backhoes are
readying the foundation for a
new office building with space
for at least 1,800 employees,
leased in full by online-pay-
ments startup Stripe Inc.
The rapidly growing com-
pany’s head count today?
About 400 employees.
The tech boom has vaulted
the San Francisco office mar-
ket to become the hottest in
the U.S., a favorite of property
investors where vacancy has
evaporated and rents have
soared 137% since 2010 to ri-
val Manhattan levels.
But as deals like Stripe’s
forthcoming headquarters
show, behind this strength is a
market packed with big bets
on growth—risky wagers that
could prove painful should the
historically turbulent tech in-
dustry retrench.
Companies including Uber
Technologies Inc., business-
services giant Salesforce.com
Inc. and Pinterest Inc. have
signed on for vast swaths of
space for expansion, moti-
vated in part by fear the office
market will tighten further
and they will have no place to
Italian Property IPO Prepares for Debut
BY ART PATNAUDE
Italy’s main stock exchange
is on the cusp of welcoming
its first new real-estate com-
pany in a decade.
Milan-based Coima Res
plans to raise €215 million
($245.1 million) from U.S. and
European investors in an ini-
tial public offering this month.
It would be the first property
IPO on the FTSE MIB since
2006, according to data-pro-
vider Dealogic.
Seeking to jump-start a
stagnant sector for real-estate
investment trusts has been
challenging, with investors
fretting about volatile markets
and the general lack of trans-
parency in Italian property.
Coima reduced the target
amount last week from €300
million in part because of such
concerns. It postponed the IPO
in January because of market
volatility stemming from in-
vestors’ worries about slowing
economic growth.
Compared with January, the
“general environment in the
market is more volatile now,
and more of a challenge,” said
Manfredi Catella, chief execu-
tive at Coima. “We’re fully
aware we’re opening the mar-
ket in Italy for the REIT indus-
try.”
Investor sentiment toward
THE PROPERTY REPORT
put the growing workforce
they forecast.
The tech sector overall now
occupies 22 million square
feet, or 29% of the entire city’s
office market, according to
CBRE Group Inc., up from an
estimated 15% in 2009. That
makes for an enormous con-
centration in a single industry
for a city once known for a
more diversified economy.
Given a marked cooling of
venture capital and recent fall-
ing private valuations of many
multibillion-dollar startups in
the past six months, concerns
are mounting about the mar-
ket’s health.
San Francisco’s office mar-
ket “continues to defy expecta-
tions and common sense in
some ways,” said Jed Reagan,
an analyst who follows the of-
fice market for Green Street
Advisors. “There is a specula-
tive growth component to a
lot of the tech demand out
there,” he added. “That’s a big
concern.”
The risk extends not only to
tech companies but to land-
lords who have ridden the
wave. Multiple owners are
seeking more than $1,000 a
square foot for their build-
ings—while $600 to $700 was
considered rich five years ago.
A reckoning that hits this
city’s skyscrapers is by no
means assured. Despite in-
creasing jitters, rents remain
high and the list of tenants
looking for space is long. Sub-
lease space, which has re-
Italy has deteriorated signifi-
cantly from a positive start to
the year. In March, Italian and
Swiss stocks were the least fa-
vored among European fund
managers, according to a Bank
of America Merrill Lynch sur-
vey. The FTSE MIB is down
around 17% from the start of
January in highly volatile
trading.
Adding to worries, last
week Italy’s government cut
Porta Nuova, built by property firm Coima, is one of the biggest redevelopment projects in Milan.
Game maker Zynga is trying to sell a building it bought in 2012.
cently increased amid slowing
growth, is still at low levels.
“We just don’t see a mas-
sive potential here for compa-
nies to pull back in the way
that people seem to be con-
cerned could happen,” said
Stephen Richardson, who runs
the San Francisco office for
Alexandria Real Estate Equi-
ties. Alexandria is building
new buildings for Uber, Stripe
and Pinterest.
But for tenants like these,
real-estate decisions are
tricky. Given the large number
of San Francisco-based start-
ups all planning on rapid
growth, those that avoid large
leases today risk being left
with few options for space in
coming years. And the more
companies that snap up space
for growth, the less space
there is for everyone else to-
day—conditions that create
something of a space race.
its already cautious growth
forecasts for 2016 and 2017 to
1.2% and 1.4%, respectively,
from 1.6% for both years.
Coima’s fraught journey to
the Milan bourse follows fail-
ures of other Italian real-es-
tate firms. Two Italian prop-
erty groups withdrew plans to
go public last year—one of
them twice, in July and again
in October, Dealogic data
show. Other firms’ plans for
Wednesday, April 13, 2016 | B11
pleted within two years.
Meanwhile, Uber, valued at
more than $60 billion, has
committed to a glassy new
headquarters and signed nu-
merous long-term leases.It
DAVID PAUL MORRIS/BLOOMBERG NEWS
controls at least 1.4 million
square feet to be completed
and occupied by 2019, enough
for 10,000 to 12,000 workers.
As of last fall, it had just 2,000
workers in the Bay Area.
“We are excited to be in-
vesting in our home commu-
nity—the Bay Area—for years
to come,” an Uber spokes-
woman said.
But the risks of this strat-
While statistics aren’t avail- egy can be seen in the compa-
able for the amount of so- nies that recently started pull-
called space banking in the ing back. Twitter Inc. is
market, some of the more no- seeking tenants for a floor it
table companies offer clues. leased only a few months ago
Stripe, which is valued at and never occupied, while in-
$5 billion, secured its 300,000- surance broker Zenefits is
square-foot lease with Alexan- looking for tenants for a
dria in April 2015, when it was 24,000-square-foot space it
based in a tiny former luggage leased about a year ago. A
factory. It signed on to more Twitter spokeswoman declined
than four times the space it to comment. Zenefits didn’t
occupied at the time. respond to a request for com-
The largest consumer of ment.
space in the city has been A cautionary tale exists
Salesforce.com, which was with online game maker
founded in 1999. The company Zynga. In 2012, the then-rap-
reported it occupied 1.4 mil- idly growing company bought
lion square feet at the end of its 680,000-square-foot build-
2015, but has leased an addi- ing at 650 Townsend St. It saw
tional 1.1 million square feet of plenty of space to grow, and at
space to be delivered by 2018. one point occupied 480,000
That figure includes a lease square feet. Soon after, its
for half of what is to be the growth stalled, and its stock
tallest tower in San Francisco, price plunged. Layoffs fol-
a 970-foot edifice named after lowed, and now the company
Salesforce and due to be com- is trying to sell the building.
IPOs never materialized. lack of transparency and low
Meanwhile, demand for deal flow are limits to trans-
Italian commercial real estate actions, analysts said.
is booming as international in- A successful IPO from
vestors hunt for returns amid Coima is “potentially very pos-
low interest rates. Commercial itive for the REIT sector” both
property transaction volumes in Italy and Europe, said Peter
in Italy rose 66% in 2015 from Papadakos, managing director
2014, according to Real Capital at real-estate firm Green
Analytics. Street Advisors. “It could be
The $9.7 billion of deals last taken as a sign that the mar-
year was just 3.4% of the Euro- ket for IPOs is more open than
pean total, the data show. A we thought,” he said.
The listed real-estate sector
in Europe is relatively small.
According to Green Street, the
market capitalization of Euro-
pean REITs is just 15.4% of the
global total, compared with
48.4% in the U.S. and 30.8% in
the Asia-Pacific region.
The Italian government
softened its REIT regulation in
late 2014. Analysts said Italy
could be next to take off, al-
though they cautioned that
major challenges still exist.
Coima Res is being
launched by Coima, a property
firm set up by the Catella fam-
ily in 1974. In 2007, Coima
STEFANO RELLANDINI/REUTERS
formed a business with Texas-
based property investor Hines
to build the 28-building Porta
Nuova, one of the biggest re-
development projects in Milan.
Mr. Catella bought the major-
ity interest from Hines’s Ital-
ian fund-management business
last September.
Debate
Over Visa
Program
Revisited
BY ELIOT BROWN
U.S. lawmakers in Congress
are gearing up for a new
round of fighting over who
should benefit from a federal
program that offers green
cards to certain foreign inves-
tors.
The program, known as
EB-5, has become a favorite
tool of real-estate developers,
who are using it to help secure
low-cost financing for major
projects like the $20 billion
Hudson Yards development in
New York and luxury condo
towers in Miami.
The funding comes from as-
piring immigrants who invest
$500,000 apiece in certain
projects measured to create 10
jobs per investor. Applications
have soared as developers
have rushed to the program.
But behind this prolifera-
tion is a controversial feature:
The bulk of the money is going
to projects that are located in
affluent areas but use a provi-
sion of the EB-5 program
meant to benefit rural and
high-unemployment areas.
On Wednesday, this practice
is due to come under the mi-
croscope in a hearing of the
U.S. Senate Judiciary Commit-
tee, where lawmakers have
called it an abuse and distor-
tion of the program.
Under current rules, devel-
opers and state officials create
special districts that connect
their projects with low-income
neighborhoods, giving the dis-
trict a high unemployment
rate.
Known as “targeted em-
ployment areas,” this allows
developers to raise money
from immigrants putting in
$500,000 each, a far easier
level than the $1 million that
normally would be required.
This has made it more diffi-
cult to get financing for proj-
ects located in poor and rural
areas, EB-5 professionals say,
and angered many lawmakers,
The roster of large
urban developers
using EB-5 has
grown quickly.
particularly the leading Re-
publican and Democrat on the
committee, Sen. Charles Grass-
ley (R., Iowa) and Sen. Patrick
Leahy (D., Vt.).
Both have vowed to ratchet
up pressure this year on oppo-
nents of their overhauls, say-
ing they want legislation that
would better allow low-income
and rural areas to find foreign
investors.
Mr. Leahy said in a Febru-
ary hearing that he wants
“real incentives to invest in
distressed areas as Congress
intended.” Speaking of inves-
tors, he said, “We want them
to go to the poor areas—which
wouldn’t get investment oth-
erwise.”
Already, developers and
their allies in Congress, in-
cluding Sen. Charles Schumer
(D., N.Y.), blocked one attempt
at changing these rules last
fall, extending the law through
September. The developers,
who spent heavily on lobbying,
didn’t want to see much of
Manhattan and other major
cities lose access to the tar-
geted unemployment area ben-
efit, saying they created jobs
throughout the region.
Now the roster of large ur-
ban developers using EB-5 ap-
pears to be growing by the
week.
The program reported re-
ceiving 17,691 applicants last
year, up from 11,744 in 2014
and 6,554 in 2013, leaving a
yearslong waiting list for im-
migrant investors to get their
green cards.
And last month, two New
York University real-estate
professors, Jeanne Calderon
and Gary Friedland, released a
report that listed 27 major
projects that have sought a to-
tal of $5.4 billion in EB-5 fi-
nancing, including multiple
large Manhattan-based devel-
opers like Tishman Speyer and
Harry Macklowe. Nineteen are
in New York or Miami, and
these projects all come in ad-
dition to a similar-sized list
the professors compiled last
May.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B12 | Wednesday, April 13, 2016
Email: heard@wsj.com
Note to Rome: Fix the Bankruptcy Regime Inflation in
One small lender’s strug-
gle to raise equity brought
Italy to the brink of a severe
loss of confidence. The gov-
ernment’s answer has been
to bang heads together and
push the whole finance in-
dustry to draw a line under
the country’s €360 billion
($409.18 billion) bad-debt
problem.
The outcome is a €5 bil-
lion to €6 billion common in-
vestment fund backed by the
country’s biggest banks and
other investment funds that
will backstop rights issues
and provide foundations for
sales of pools of bad loans.
This should forestall a
system-wide crisis. But
its success rests on the gov-
ernment’s long-promised
overhaul of the bankruptcy
system, which will allow the
recovery work on bad loans
to really begin.
The bluntest view of It-
aly’s problem asks how much
money it would take to end
bad-loan questions. The an-
swer: About €45 billion
Alibaba-Lazada: A Deal Close to Home
Alibaba Holding Co. may
have finally hit on a deal
that makes sense.
The Chinese e-commerce
giant, which has ventured far
from its core marketplace
services into health care,
newspapers, entertainment
and department stores, said
it would shell out $1 billion
to buy into Lazada, South-
east Asia’s leading e-com-
merce platform. Half that
will go to buy stakes from
Lazada investors such as
German tech incubator
Rocket Internet and British
supermarket operator Tesco.
The other $500 million will
end up with Lazada to in-
vest.
The deal fits nicely into
Alibaba’s business, opening
up a largely untapped mar-
ket as the field at home gets
Possible Berkshire Heir
Gets Expanded Role
BY ANUPREETA DAS
Ajit Jain, a potential suc-
cessor to Berkshire Hathaway
Inc. Chief Executive Warren
Buffett, has added to his re-
sponsibilities at the conglom-
erate by taking on oversight of
a key insurance subsidiary.
Tad Montross, the 60-year-
old chief executive of Berk-
shire’s General Re, will retire
at the end of the year, the
company said. His successor
will report to Mr. Jain, Gen Re
said. In contrast, Mr. Mon-
tross, who has been CEO since
2008, reports to Mr. Buffett.
The move will streamline
two of Berkshire’s biggest in-
surance businesses under Mr.
Jain. At 64 years old, the top
lieutenant long has been con-
sidered a potential CEO suc-
cessor to Mr. Buffett, who
turns 86 in August. Berkshire
owns dozens of insurance
businesses, from primary in-
surers such as Geico that sell
policies to customers to rein-
surers such as Gen Re that sell
protection to insurance firms.
A 30-year veteran of the
company, Mr. Jain runs Berk-
shire Hathaway Reinsurance
Group and is credited with
building the obscure business
into a source of fat profits
Finance
Watch
€500 NOTE
Germany Would
Back Slow Phaseout
The Bundesbank is willing to
support a gradual phaseout of
the €500 ($570) bank note, a
person familiar with the matter
said, signaling the central bank’s
openness to an idea that has
sparked opposition in Germany.
The person said that a possi-
bility whereby the European
Central Bank would stop printing
new versions of the €500 bill
HEARD ON THE STREET
U.K. Is Far
Losing Faith
Share-price performance
20%
0 cree next week to speed up
–20
–40
–60
–80
2015 ’16
Sources: FactSet; Reuters (photo)
THE WALL STREET JOURNAL.
would cover the cost of writ-
ing down the worst bad
loans to just 20% of their
face value.
Next to that, a €5 billion
to €6 billion fund seems in-
adequate. But this fails to ac-
count for valuable real estate
that secures many bad loans,
especially in the north. The
biggest problem for Italian
increasingly crowded. La-
zada, founded by Rocket In-
ternet in 2011, has grown ex-
plosively in the past few
years.
Alibaba also will find itself
at home with Lazada’s style
of e-commerce, which has
evolved from Amazonian—
owning warehouses and in-
ventory—to more like Ali-
baba’s own. More than three-
quarters of Lazada’s gross
merchandise value now
comes from hosting online
marketplaces for buyers and
sellers, instead of selling di-
rectly to customers.
The deal values Lazada at
$1.5 billion, or 5.9 times its
sales, not outrageously ex-
pensive considering Alibaba
itself trades at 13 times
sales. True, Lazada has yet
to turn a profit. But for Ali-
that fueled the conglomerate’s
growth.
Berkshire acquired Gen Re,
another reinsurer, in 1998. To-
gether, the two businesses ac-
count for nearly three-quar-
ters of Berkshire’s $88 billion
of “float”—money that insur-
ance businesses hold and in-
vest for their benefit, exploit-
ing the fact that premiums are
paid up front and claims gen-
erally are paid out much later.
This float has been a corner-
stone of Berkshire’s business
model, helping fund its expan-
sion into diverse businesses
and investments.
News of Mr. Montross’s re-
tirement was reported Tues-
day by industry publication In-
surance Insider.
In an interview, Mr. Jain
said he was in the early stages
of picking Mr. Montross’s suc-
cessor.
In addition to insurance,
Berkshire owns a railroad as
well as manufacturing, retail,
housing and other companies
that collectively brought in
$200 billion of revenue last
year. As Berkshire has ex-
panded and diversified, insur-
ance has become a smaller
contributor to earnings, ac-
counting for less than a quar-
ter of Berkshire’s $24 billion
“could be seen as reasonable by
everybody on the Governing
Council,” including Bundesbank
President Jens Weidmann, who
sits on the policy-setting body.
The person said that Mr.
Weidmann was opposed to a
rapid removal of the note.
Earlier this year, ECB Presi-
dent Mario Draghi said that the
€500 note increasingly was be-
ing seen an instrument for illegal
activities,” prompting policy mak-
ers to weigh taking action.
CROMWELL PROPERTY GROUP
Office-Fund Takeover
May Get Competitive
Cromwell Property Group
has acquired a 9.8% stake in In-
vesta Office Fund, which could
upset a 2 billion Australian dollar
(US$1.52 billion) takeover bid for
FINANCIAL ANALYSIS & COMMENTARY
Banca
Popolare
di Milano
Unicredit
UBI Banca
Banco
Popolare
The logo of Banca
Popolare di Vicenza
creditors has always been
getting their hands on this
collateral.
An Italian bankruptcy pro-
cess takes more than seven
years on average, versus two
to three years elsewhere in
Europe. In parts of the
south, it takes 15 years or
more.
This is a big reason why
baba, the $1 billion it is bet-
ting on a linkup with a geo-
graphically adjacent market
of 600 million people seems
like money better spent than,
for example, the roughly
$300 million it and its finan-
cial affiliate put up to buy an
obscure money-losing lottery
firm in March or the $265
million it sank into the South
China Morning Post.
The key challenge in
Southeast Asia is logistics.
The six countries Lazada op-
erates in are anything but a
single market. Delivering
across them could be costly.
Singapore Post, in which Ali-
baba has a 14.5% stake, could
offer a helping hand.
Alibaba is right to turn to
China’s neighbors in its hunt
for its next treasures.
—Jacky Wong
MONEY & INVESTING
DANIEL ACKER/BLOOMBERG NEWS
Ajit Jain
in 2015 profit. This year, Berk-
shire closed a $32 billion deal
for industrial-components
maker Precision Castparts
Corp., its largest-ever acquisi-
tion.
With an ever-increasing
stable of managers reporting
to Mr. Buffett, handing Gen Re
to Mr. Jain made sense, a per-
son familiar with Mr. Buffett’s
thinking said.
Berkshire acquired Gen Re
for $22 billion in stock. Soon
after, underwriting losses and
other problems at the com-
pany led Mr. Buffett to take
several corrective measures,
including promoting Mr. Mon-
tross to president. The execu-
tive began his career at Gen
Re in 1978. In his most recent
annual letter, Mr. Buffett said
Gen Re’s problems were long
gone, and it was “now a gem.”
the office landlord from Dexus
Property Group.
Cromwell, 25%-owned by
South Africa’s Redefine Proper-
ties Ltd., has yet to say whether
it plans to launch a rival bid or
negotiate with Dexus for some
of Investa Office’s assets.
It would be Cromwell’s sec-
ond play for a slice of Morgan
Stanley’s former commercial
real-estate empire in Australia. It
bid last year when the U.S. in-
vestment bank sold Investa
Property Group.
Investa Office Fund share-
holders will vote Friday on the
offer—0.424 Dexus share and
A$0.8229 in cash per Investa
Office share—which is backed by
the fund’s board but opposed by
its manager, Investa Commer-
cial Property Fund Group.
—Rebecca Thurlow
THE WALL STREET JOURNAL.
WSJ.com/Heard
Italy has accumulated Eu- The rest will be used to
rope’s biggest stack of bad
loans.
The government has told
inject equity into bad-loan
securitizations, in the hope
that this will encourage
From Dead
institutions backing the fund other investors to buy the Inflation is attempting a
that it will pass a de- less-risky senior bonds that comeback in the U.K. The
fund these sales. headline reading for March
bankruptcy. This is critical: This is high-risk money of 0.5% was the highest since
Without it, efforts to clean without a doubt. But the al- December 2014; core infla-
up bad loans are wasted. ternative for Italy’s healthy tion, excluding energy, food,
Before then, the details of banks is to wait for a true alcohol and tobacco of 1.5%
exactly who will invest what system-threatening crisis to was the highest since Octo-
and how the money will be blow up, when the pain will ber 2014. Both readings were
used have to be nailed down. be far worse for Italy and its slightly higher than analysts
Intesa Sanpaolo and Uni- retail savers, who own bil- had expected.
Credit, Italy’s biggest banks, lions in bank debt. The True, there were some
will contribute about €1 bil- healthy banks will have to volatile influences. Airfares
lion each. Smaller banks pay one way or another. jumped 22.9% in March from
such as UBI Banca will put in If more of this fund were February and 17.9% from a
several hundred million, dedicated to underpinning a year earlier; this is likely to
while pension funds, local functioning market in bad prove temporary. It did push
foundations and insurers loans, Italy’s weaker banks services inflation higher, to
such as Generali are being could probably raise equity 2.8%, however: That puts it
asked to contribute similar without help. But too much back closer to its longer-run
amounts. time has been wasted for trend. But a potentially more
Most of the money is ex- that option to be viable. powerful change is that the
pected to backstop rights is- The government can’t af- long downward drag on in-
sues by banks such as Banca ford to squander any more. flation from energy prices is
Popolare di Vicenza, the If it doesn’t act to fix the fading, with the oil price
lender whose struggles to bankruptcy process, this proving more resilient in the
raise capital sparked this fund will count for naught. past couple of months.
process. —Paul J. Davies Rising core and services
inflation will be food for
thought at the Bank of Eng-
land, which recently marked
OVERHEARD the seventh anniversary of
interest rates at 0.5%. The
debate over U.K. member-
First ASOS, now Tesco. The rapidly growing ASOS needs to ship of the European Union,
past week has brought admis- prove its capital discipline fol- with the referendum due
sions of defeat in the once- lowing its 2014 profit warnings. June 23, will no doubt stay
fashionable emerging markets Both companies have re- policy makers’ hands in the
of Asia from both U.K. retailers. sponded by focusing on retail next few months. But if the
Tesco announced Tuesday it basics—low prices and good U.K. votes to remain in Eu-
was selling part of its 20% service in core markets. Interim rope, then the rate question
stake in Lazada, a money-los- results from ASOS Tues- will take on greater promi-
ing e-commerce hub for South- day were impressive, with con- nence—particularly since the
east Asia, to Chinese online-re- stant-currency sales up 25%. pound’s current weakness
tail giant Alibaba as part of Tesco reports full-year raises the risk of higher im-
the grocer’s debt-reduction numbers Wednesday, ported inflation later.
plan. with hopes high that it, too, U.K. government-bond
Last week, online fashion can show signs of recovery. yields rose across the curve
group ASOS said it would close The difference is that the Tuesday, although they re-
its money-losing Chinese opera- supermarket’s investors would main at extremely low levels.
tion. cheer even modest sales Investors have done ex-
The moves are responses to growth. As more consumers tremely well in government
corporate crises as well as move online, ASOS has been bonds so far this year, but a
emerging markets’ slowdown. quick to move on from its 2014 sustained re-emergence of
Tesco’s position has been under dog days. On the opposite side inflation could shake confi-
attack from discounters and e- of that trend, Tesco will have dence. The ride could get
commerce in the U.K., while to work much harder. bumpier from here.
—Richard Barley
Doubts on Italy Bank Aid
BY GIOVANNI LEGORANO
GIUSEPPE CACACE/AGENCE FRANCE-PRESSE/GETTY IMAGES
A plan by major Italian fi-
nancial institutions to set up a
€5 billion ($5.7 billion) fund to
support Italy’s troubled banks
may not be enough to restore
confidence in the sector, ana-
lysts caution.
Late Monday, the govern-
ment announced the setting
up of a privately funded in-
vestment vehicle that will buy
bad loans from lenders and
purchase unsold shares when
weaker banks issue stock to
prop up their capital bases. UniCredit will invest about €1 billion in the fund. The stock fell.
UniCredit SpA and Intesa
Sanpaolo SpA are set to con- pended,. securitized bundles of sour
tribute around €1 billion each “The market isn’t digesting loans, by providing a guaran-
to the fund, according to peo- the large contribution of the tee for the less-risky chunks.
ple familiar with the matter. two big banks,” said Vincenzo But little appetite for the debt
Cassa Depositi e Prestiti, a Longo, market strategist at IG has emerged so far.
government-controlled invest- Markets. The time needed to recover
ment agency, plans to inject Analysts said that although collateral backing bad loans—
€500 million into the fund, the fund is a good first step, a up to eight years in Italy, com-
one of the people said. more aggressive approach pared with two to three years
The move follows a plunge would be needed to truly ad- in most European countries—
in Italian banking shares in re- dress the problem. has also depressed prices of
cent months as investors have “It is certainly positive these assets, preventing deals.
questioned the ability of banks news for banks,” said Fabrizio Late Monday, the govern-
to digest bad loans. According Spagna, managing director at ment pledged to act soon to
to the Bank of Italy, bad debts Axia Financial Research. “But amend bankruptcy laws to
at Italian banks amounted to it would be better to finally shorten this time frame, some-
€196 billion at the end of Feb- draw the line and reboot the thing banks and investors have
ruary, 4.7% more than in the system.” been demanding for years.
same month in 2015. There is A market for bad loans has House prices declined by
also expected to be little appe- struggled to take off, as banks 12% in the last four years, fur-
tite for €3.8 billion in fresh have been wary of selling ther damping the value of bad
shares three banks plan to sell soured loans at prices inves- loans, according to national
in the coming months to shore tors have been offering. Buy- statistical institute Istat.
up their finances. Since the ers have tended to offer Prices of office buildings and
beginning of the year, Italian roughly 20% to 25% of the face industrial property suffered
banks have lost a third of their
value, while their European
value of loans backed by real-
estate collateral, while banks
even sharper declines.
“To see any return for the
peers shed a fourth.
After initial gains in early
had written down these bad
loans to 40%, on average.
investors in the fund the suc-
cessful implementation of
trading, UniCredit and Intesa In an attempt to revitalize shorter bankruptcy procedure
shares closed down 5.15% and this market, Italy started a and a recovery in the Italian
4.1%, respectively. Trading in program in January aimed at housing market is crucial,”
both stocks was briefly sus- encouraging investors to buy Bernstein analysts said.
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