Former Homeland Security Secretary Kirstjen Nielsen’s attempts to raise the alarm about Russian interference in American elections was thwarted by White House chief of staff Mick Mulvaney, who told her not to bring up the subject with President Donald Trump, The New York Times reported Wednesday.
Mulvaney made it clear Trump viewed any public talk of malign Russian election activity with questions about the legitimacy of his victory and thus did not want the subject discussed.
Even though the Department of Homeland Security has the main responsibility for civilian cyberdefense and Nielsen was extremely concerned about Russia’s interference in the 2018 midterm elections and future ones – due to Trump’s attitude – she gave up on attempts to organize a White House meeting of Cabinet secretaries to coordinate a strategy to protect next year’s elections.
Nielsen’s frustrations were described to the Times by three senior administration officials and a former one, with the White House refusing to provide comment.
The opening page of the Worldwide Threat Assessment, which was compiled by government intelligence agencies and delivered to Congress earlier this year, warned “Russia’s social media efforts will continue to focus on aggravating social and racial tensions, undermining trust in authorities and criticizing perceived anti-Russia politicians” and Moscow might increase its tactics “in a more targeted fashion to influence U.S. policy, actions and elections.”
Nielsen grew so frustrated with Trump’s refusal to discuss an overall strategy she twice held her own top-level meetings on the subject.
Secretary of State Mike Pompeo denied the administration sidestepped the topic, saying “I don’t think there’s been a discussion between a senior U.S. official and Russians in this administration where we have not raised this issue.”
Source: NewsMax America
Former Homeland Security Secretary Kirstjen Nielsen’s attempts to raise the alarm about Russian interference in American elections was thwarted by White House Chief of Staff Mick Mulvaney, who told her not to bring up the subject with President Donald Trump, The New York Times reported on Wednesday.
Mulvaney made it clear that Trump viewed any public talk of malign Russian election activity with questions about the legitimacy of his victory and thus did not want the subject discussed.
Even though the Department of Homeland Security has the main responsibility for civilian cyberdefense and Nielsen was extremely concerned about Russia’s interference in the 2018 midterm elections and future ones, she gave up on attempts to organize a White House meeting of cabinet secretaries to coordinate a strategy to protect next year’s elections due to Trump’s attitude.
Nielsen’s frustrations were described to the Times by three senior administration officials and a former one, with the White House refusing to provide comment.
The opening page of the Worldwide Threat Assessment, which was compiled by government intelligence agencies and delivered to Congress earlier this year, warned that “Russia’s social media efforts will continue to focus on aggravating social and racial tensions, undermining trust in authorities and criticizing perceived anti-Russia politicians” and that Moscow may increase its tactis “in a more targeted fashion to influence U.S. policy, actions and elections.”
Nielsen grew so frustrated with Trump’s refusal to discuss an overall strategy that she twice held her own top-level meetings on the subject.
Secretary of State Mike Pompeo denied that the administration sidestepped the topic, saying “I don’t think there’s been a discussion between a senior U.S. official and Russians in this administration where we have not raised this issue.”
Source: NewsMax Politics
FILE PHOTO: The Google logo is pictured at the entrance to the Google offices in London, Britain January 18, 2019. REUTERS/Hannah McKay
April 24, 2019
WASHINGTON (Reuters) – Top U.S. lawmakers on Tuesday wrote to Google’s chief executive raising concerns about reports of a massive database known as Sensorvault that allegedly contains precise consumer location information from hundreds of millions of devices.
The letter from Democrats and Republicans on the U.S. House Energy and Commerce Committee to CEO Sundar Pichai seeks a briefing and answers on how this information is used and shared, citing a New York Times report that the database includes nearly every consumer with an Android mobile device, in some cases storing information dating back to 2009.
A representative for Google, a unit of Alphabet Inc, said in a statement: “The data in question is used for Location History, which is off by default. If a user chooses to turn it on, we can provide helpful information, like real-time data to help them beat traffic on their way home from work. They can delete their Location History data, or turn off the product entirely, at any time.”
The letter is one of several sent by members of Congress in recent months that raise concerns about how Google and other big Internet companies use information they have gathered about consumers.
The letter, which was signed by Democratic Representatives Frank Pallone and Jan Schakowsky and Republicans Greg Walden and Cathy McMorris Rodgers, asked Google who has access to the Sensorvault database and which Google services or apps collect the information.
The lawmakers asked for answers to their questions as well as a briefing on the issue by May 10.
They also asked Google if information is collected from consumers who requested that their data not be shared and asked to be briefed on any third parties, other than law enforcement, given access to location data.
Google, Facebook, Twitter and other free online services rely on advertising for revenue and use data collected on users to more effectively target those ads.
Congress has long been expected to take up privacy legislation after California passed a strict privacy law that goes into effect next year.
Two U.S. senators introduced a bill in early April that would ban online social media companies like Facebook and Google from misleading consumers in order to convince them to give up personal data.
The bill from Mark Warner, a Democrat, and Deb Fischer, a Republican, would also ban online platforms with more than 100 million monthly active users from designing addicting games or other websites for children under age 13.
(Reporting by David Shepardson and Diane Bartz; Editing by Cynthia Osterman and Rosalba O’Brien)
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 23, 2019. REUTERS/Brendan McDermid
April 23, 2019
By Sinéad Carew
NEW YORK (Reuters) – The S&P 500 index and the Nasdaq registered record closing highs after a broadbased rally on Tuesday, as a clutch of better-than-expected earnings reports eased concerns about a slowdown.
In Tuesday’s trading the benchmark index finally erased all the steep losses it saw in late 2018 by ending the day above the previous record reached on Sept. 20. It closed just 0.3% below its intra-day record of 2,940.91 hit on Sept. 21.
The S&P has risen 17 percent so far this year, with help from a dovish Federal Reserve and hopes of a U.S.-China trade resolution as well as the upbeat start to the first-quarter earnings season.
“Part of what’s pushing the S&P up is a general belief it will make a new high,” said Rick Meckler of Cherry Lane Investments, a family investment office in New Vernon, New Jersey, who expects that more earnings reports later in the week could push the index above its all-time high.
The diversity of industry sectors reporting strong results on Tuesday gave further reassurance to Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware, who expects the trend to continue.
“Today was a very broadly representative day of the overall economy. That’s what’s driving the markets,” said Roth citing results from United Technologies Corp, Lockheed Martin Corp and Coca-Cola Co.
“If the earnings season is as strong as we expect the next major signpost is the trade situation with China and getting that resolved,” said Roth.
The Dow Jones Industrial Average rose 145.34 points, or 0.55%, to 26,656.39, the S&P 500 gained 25.71 points, or 0.88%, to 2,933.68 and the Nasdaq Composite added 105.56 points, or 1.32%, to 8,120.82.
Profits of S&P 500 companies are still expected to decline 1.3% in the first quarter, in what analysts say could be the first earnings contraction since 2016. However, forecasts have largely improved since the start of April.
Amazon.com Inc, set to report results later this week, gained 2.2%, providing the biggest boost to the S&P 500 and the Nasdaq.
Ten of the 11 major S&P sectors were higher, with a rebound in healthcare, which gained 1.6%, providing the biggest boost. The healthcare sector has been slammed with 6.7% drop in the last two weeks on U.S. policy concerns.
“People just realized (healthcare) got beaten so far down it might be worth taking a chance,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
The consumer staples sector was the only S&P sector that ended the day lower as investors favored riskier bets. The energy and utilities sectors were the next weakest performers on the day.
Twitter Inc shares soared 15.6% after the social media company posted better-than-expected quarterly revenue and a surprise increase in monthly active users.
Hasbro Inc rose 14.2% after the toymaker reported a surprise quarterly profit.
Coca-Cola rose 1.7% after its quarterly sales beat estimates, helped in part by strong demand for Coke Zero.
Lockheed Martin jumped 5.7% after it reported upbeat quarterly results and lifted its full-year profit forecast on strong demand for its missiles and fighter jets.
United Technologies rose 2.3% after it raised its full-year profit forecast.
Procter & Gamble Co fell 2.6% and was the biggest drag on the market after reporting a decline in its third-quarter operating margin.
Advancing issues outnumbered declining ones on the NYSE by a 2.91-to-1 ratio; on Nasdaq, a 2.82-to-1 ratio favored advancers.
The S&P 500 posted 47 new 52-week highs and four new lows; the Nasdaq Composite recorded 80 new highs and 45 new lows.
On U.S. exchanges was 6.75 billion shares changed hands, compared with the 6.64 billion average for the full session over the last 20 trading days.
(Additional reporting by Sruthi Shankar and Amy Caren Daniel in Bengaluru; Editing by Anil D’Silva, Shounak Dasgupta and Tom Brown)
FILE PHOTO: U.S. President Donald Trump attends the 2019 White House Easter Egg Roll on the South Lawn of the White House in Washington, U.S., April 22, 2019. REUTERS/Shannon Stapleton
April 23, 2019
By David Shepardson
WASHINGTON (Reuters) – U.S. President Donald Trump met with Twitter Inc’s Chief Executive Jack Dorsey on Tuesday and spent a significant time questioning him about why he has lost some Twitter followers, a person briefed on the matter said.
The meeting, which was organized by the White House last week, came hours after Trump again attacked the social media company over his claims it is biased against conservatives.
“Great meeting this afternoon at the @WhiteHouse with @Jack from @Twitter. Lots of subjects discussed regarding their platform, and the world of social media in general. Look forward to keeping an open dialogue!” Trump tweeted, posting a photo of Dorsey and others with him in the Oval Office.
Earlier on Tuesday, Trump suggested Twitter was biased against him without providing evidence. He wrote on Twitter that the company does not “treat me well as a Republican. Very discriminatory.”
Twitter said in a statement Dorsey had a “constructive meeting with the president of the United States today at the president’s invitation. They discussed Twitter’s commitment to protecting the health of the public conversation ahead of the 2020 U.S. elections and efforts underway to respond to the opioid crisis.”
Unlike other major U.S. tech company executives, Dorsey had not previously met with Trump.
He was not invited to a December 2016 meeting with president-elect Trump that featured other major tech companies. Reuters reported in 2016 Trump had been angry with Twitter because it had rejected an advertising deal with his campaign.
Trump has been upset about losing followers.
In October, Trump wrote that “Twitter has removed many people from my account and, more importantly, they have seemingly done something that makes it much harder to join – they have stifled growth to a point where it is obvious to all. A few weeks ago it was a Rocket Ship, now it is a Blimp! Total Bias?”
Any reduction is likely the result of Twitter’s recent moves to remove millions of suspicious accounts after it and other social media services were used in misinformation campaigns attempting to influence voters in the 2016 U.S. presidential race and other elections, Reuters reported in October.
Shares in Twitter jumped 13 percent on Tuesday after it reported quarterly revenue above analyst estimates, which executives said was the result of weeding out spam and abusive posts and targeting ads better.
Trump lost 204,000, or 0.4 percent, of his 53.4 million followers in July when Twitter started its purge of suspicious accounts, according to social media data firm Keyhole.
Trump has one of the most-followed accounts on Twitter. But the president and Republicans in Congress have repeatedly criticized the company and its social media competitors for what they have called bias against conservatives, something Twitter denies.
Democratic U.S. Senator Mazie Hirono said earlier this month “we cannot allow the Republican party to harass tech companies into weakening content moderation policies that already fail to remove hateful, dangerous and misleading content.”
Carlos Monje, Twitter’s public policy director, said at a Senate hearing earlier this month the site “does not use political viewpoints, perspectives or party affiliation to make any decisions, whether related to automatically ranking content on our service or how we develop or enforce our rules.”
(Reporting by David Shepardson; Editing by Tom Brown)
President Donald Trump met with Twitter Inc’s Chief Executive Jack Dorsey on Tuesday, the White House confirmed, hours after Trump again attacked the social media company.
Earlier on Tuesday, Trump suggested Twitter was biased against him. He wrote on Twitter that the company does not “treat me well as a Republican. Very discriminatory.”
Twitter did not immediately return messages seeking comment.
Source: NewsMax Politics
FILE PHOTO: The logo of TikTok application is seen on a screen in this picture illustration taken February 21, 2019. REUTERS/Danish Siddiqui/Illustration
April 23, 2019
By Aditya Kalra and Munsif Vengattil
NEW DELHI (Reuters) – India’s ban on popular Chinese video app TikTok is resulting in “financial losses” of up to $500,000 a day for its developer, Beijing Bytedance Technology Co, and has put more than 250 jobs at risk, the company said in a court filing seen by Reuters.
TikTok allows users to create and share short videos with special effects and is one of the world’s most popular apps. It has been downloaded by nearly 300 million users so far in India, out of more than 1 billion downloads globally, according to analytics firm Sensor Tower.
Earlier this month, an Indian state court ordered the federal government to prohibit its downloads, saying the app was encouraging pornography. Acting upon instructions from the federal IT ministry, Apple Inc and Alphabet Inc’s Google last week removed TikTok from their India app stores.
The developments have dealt a blow to the India growth plans of Bytedance, which is backed by Japan’s SoftBank Group Corp and by private equity. Bytedance, one of the world’s most valuable startups potentially worth around $75 billion, was considering a public listing in Hong Kong this year, sources told Reuters in August.
The ban has also worried the social media industry in India as it sees legal worries mounting if courts increasingly regulate content on their platforms.
In the filing made to India’s Supreme Court on Saturday, Bytedance urged the court to quash the ban and direct the federal IT ministry to tell companies such as Google and Apple to make the app available again on their platforms.
The court filing is not publicly available and its contents have not been previously reported.
Bytedance pegged financial losses at $500,000 each day, which it said includes destruction in the value of its investments and loss of commercial revenue. It added the ban would result in its reputation and goodwill taking a hit with both advertisers and investors.
“Banning has had adverse impact on the user base of this app, losing close to 1 million new users per day … It is estimated that approximately six million requests for downloads could not be effected since the ban came into effect,” the company said in the filing.
A spokesman for TikTok and the federal IT ministry did not respond to requests for comment.
COURT BATTLE, CONTENT WOES
The Supreme Court has so far not provided any interim relief on repeated pleas by Bytedance and referred the case back to the court in southern Tamil Nadu state, where the case will next be heard on Wednesday.
Memes and music videos thrive on TikTok, although some clips show youngsters, some scantily clad, lip-syncing and dancing to popular tunes.
Its growing popularity has drawn criticism from some Indian politicians and parents who say its content is inappropriate. The Tamil Nadu court, which ruled against TikTok after an individual filed a public interest litigation, has said the app could also expose children to sexual predators.
The Supreme Court filing included a table in which Bytedance compared TikTok to Facebook, Instagram and Twitter by listing 13 of its implemented safety features, including parental controls.
A “very minuscule” proportion of TikTok’s videos were considered inappropriate or obscene, the company has said.
“The constitutionally guaranteed fundamental rights of free speech and expression … of numerous Indian citizens have been severely impacted,” the company said in its latest filing.
(Reporting by Aditya Kalra; Editing by Martin Howell and Muralikumar Anantharaman)
An illustration photo shows the Facebook page displayed on a mobile phone internet browser held in front of a computer screen at a cyber-cafe in downtown Nairobi, Kenya April 18, 2019. REUTERS/Stringer
April 23, 2019
By Maggie Fick and Paresh Dave
NAIROBI/SAN FRANCISCO (Reuters) – Facebook Inc’s struggles with hate speech and other types of problematic content are being hampered by the company’s inability to keep up with a flood of new languages as mobile phones bring social media to every corner of the globe.
The company offers its 2.3 billion users features such as menus and prompts in 111 different languages, deemed to be officially supported. Reuters has found another 31 widely spoken languages on Facebook that do not have official support.
Detailed rules known as “community standards,” which bar users from posting offensive material including hate speech and celebrations of violence, were translated in only 41 languages out of the 111 supported as of early March, Reuters found.
Facebook’s 15,000-strong content moderation workforce speaks about 50 tongues, though the company said it hires professional translators when needed. Automated tools for identifying hate speech work in about 30.
The language deficit complicates Facebook’s battle to rein in harmful content and the damage it can cause, including to the company itself. Countries including Australia, Singapore and the UK are now threatening harsh new regulations, punishable by steep fines or jail time for executives, if it fails to promptly remove objectionable posts.
The community standards are updated monthly and run to about 9,400 words in English.
Monika Bickert, the Facebook vice president in charge of the standards, has previously told Reuters that they were “a heavy lift to translate into all those different languages.”
A Facebook spokeswoman said this week the rules are translated case by case depending on whether a language has a critical mass of usage and whether Facebook is a primary information source for speakers. The spokeswoman said there was no specific number for critical mass.
She said among priorities for translations are Khmer, the official language in Cambodia, and Sinhala, the dominant language in Sri Lanka, where the government blocked Facebook this week to stem rumors about devastating Easter Sunday bombings.
A Reuters report found last year that hate speech on Facebook that helped foster ethnic cleansing in Myanmar went unchecked in part because the company was slow to add moderation tools and staff for the local language.
Facebook says it now offers the rules in Burmese and has more than 100 speakers of the language among its workforce.
The spokeswoman said Facebook’s efforts to protect people from harmful content had “a level of language investment that surpasses most any technology company.”
But human rights officials say Facebook is in jeopardy of a repeat of the Myanmar problems in other strife-torn nations where its language capabilities have not kept up with the impact of social media.
“These are supposed to be the rules of the road and both customers and regulators should insist social media platforms make the rules known and effectively police them,” said Phil Robertson, deputy director of Human Rights Watch’s Asia Division. “Failure to do so opens the door to serious abuses.”
ABUSE IN FIJIAN
Mohammed Saneem, the supervisor of elections in Fiji, said he felt the impact of the language gap during elections in the South Pacific nation in November last year. Racist comments proliferated on Facebook in Fijian, which the social network does not support. Saneem said he dedicated a staffer to emailing posts and translations to a Facebook employee in Singapore to seek removals.
Facebook said it did not request translations, and it gave Reuters a post-election letter from Saneem praising its “timely and effective assistance.”
Saneem told Reuters that he valued the help but had expected pro-active measures from Facebook.
“If they are allowing users to post in their language, there should be guidelines available in the same language,” he said.
Similar issues abound in African nations such as Ethiopia, where deadly ethnic clashes among a population of 107 million have been accompanied by ugly Facebook content. Much of it is in Amharic, a language supported by Facebook. But Amharic users looking up rules get them in English.
At least 652 million people worldwide speak languages supported by Facebook but where rules are not translated, according to data from language encyclopedia Ethnologue. Another 230 million or more speak one of the 31 languages that do not have official support.
Facebook uses automated software as a key defense against prohibited content. Developed using a type of artificial intelligence known as machine learning, these tools identify hate speech in about 30 languages and “terrorist propaganda” in 19, the company said.
Machine learning requires massive volumes of data to train computers, and a scarcity of text in other languages presents a challenge in rapidly growing the tools, Guy Rosen, the Facebook vice president who oversees automated policy enforcement, has told Reuters.
Beyond the automation and a few official fact-checkers, Facebook relies on users to report problematic content. That creates a major issue where community standards are not understood or even known to exist.
Ebele Okobi, Facebook’s director of public policy for Africa, told Reuters in March that the continent had the world’s lowest rates of user reporting.
“A lot of people don’t even know that there are community standards,” Okobi said.
Facebook has bought radio advertisements in Nigeria and worked with local organizations to change that, she said. It also has held talks with African education officials to introduce social media etiquette into the curriculum, she said.
Simultaneously, Facebook is partnering with wireless carriers and other groups to expand internet access in countries including Uganda and the Democratic Republic of Congo where it has yet to officially support widely-used languages such as Luganda and Kituba. Asked this week about the expansions without language support, Facebook declined to comment.
The company announced in February it would soon have its first 100 sub-Saharan Africa-based content moderators at an outsourcing facility in Nairobi. They will join existing teams in reviewing content in Somali, Oromo and other languages.
But the community standards are not translated into Somali or Oromo. Posts in Somali from last year celebrating the al-Shabaab militant group remained on Facebook for months despite a ban on glorifying organizations or acts that Facebook designates as terrorist.
“Disbelievers and apostates, die with your anger,” read one post seen by Reuters this month that praised the killing of a Sufi cleric.
After Reuters inquired about the post, Facebook said it took down the author’s account because it violated policies.
ABILITY TO DERAIL
Posts in Amharic reviewed by Reuters this month attacked the Oromo and Tigray ethnic populations in vicious terms that clearly violated Facebook’s ban on discussing ethnic groups using “violent or dehumanizing speech, statements of inferiority, or calls for exclusion.”
Facebook removed the two posts Reuters inquired about. The company added that it had erred in allowing one of them, from December 2017, to remain online following an earlier user report.
For officials such as Saneem in Fiji, Facebook’s efforts to improve content moderation and language support are painfully slow. Saneem said he warned Facebook months in advance of the election in the archipelago of 900,000 people. Most of them use Facebook, with half writing in English and half in Fijian, he estimated.
“Social media has the ability to completely derail an election,” Saneem said.
Other social media companies face the same problem to varying degrees.
(GRAPHIC: Social media and the language gap – https://tmsnrt.rs/2VHjwTu)
Facebook-owned Instagram said its 1,179-word community guidelines are in 30 out of 51 languages offered to users. WhatsApp, owned by Facebook as well, has terms in nine of 58 supported languages, Reuters found.
Alphabet Inc’s YouTube presents community guidelines in 40 of 80 available languages, Reuters found. Twitter Inc’s rules are in 37 of 47 supported languages, and Snap Inc’s in 13 out of 21.
“A lot of misinformation gets spread around and the problem with the content publishers is the reluctance to deal with it,” Saneem said. “They do owe a duty of care. “
(Reporting by Maggie Fick in Nairobi and Paresh Dave in San Francisco; Additional reporting by Alister Doyle in Fiji and Omar Mohammed in Nairobi; Editing by Jonathan Weber and Raju Gopalakrishnan)
FILE PHOTO: A BT (British Telecom) company logo is pictured on the side of a convention centre in Liverpool northern England, April 9, 2016. REUTERS/Phil Noble
April 23, 2019
By Emilio Parodi
MILAN (Reuters) – A criminal investigation into accounting fraud inside British Telecom’s Italian unit has uncovered more evidence of what prosecutors say was the involvement of senior executives in artificially inflating the division’s financial performance.
Emails seized by the police and reviewed by Reuters show for the first time why Italian prosecutors allege that top BT employees were at the heart of the problem, contrary to the company’s assertions that managers at head office knew nothing about the misconduct.
“A series of emails between the top financial executives of BT Plc and managers of the (Italian) unit point to the existence of ‘insistent’ requests by the leadership of the parent company aimed at achieving ambitious economic targets, even using aggressive, anomalous and knowingly wrong accounting practices,” Italy’s financial police said in a 353-page report.
The report has not been made public and its contents have not previously been reported.
The report contains emails from Brian More O’Ferrall, currently finance director at BT Wholesale, the company’s business-to-business division, in which he asks colleagues in Italy to find ways of adjusting their accounts to boost profits.
At the time, O’Ferrall was chief financial officer (CFO) for BT Europe, the European part of Global Services, one of the company’s biggest businesses.
O’Ferrall did not respond to Reuters’ requests for comment. BT declined to make O’Ferrall or group Chief Executive Philip Jansen available for interview.
“We cannot comment on ongoing legal proceedings,” spokesman Richard Farnsworth said.
In the past, BT has blamed former executives in Italy for the bookkeeping irregularities, saying they had kept their bosses in London in the dark about what was going on. The scandal required the company to take a 530 million pound charge in early 2017. For a timeline click on.
In a complaint filed in April 2017 with Milan prosecutors against the conduct of its former managers, BT said the company itself was a victim of any fraud found to have taken place.
Italian prosecutors named three top BT executives among an expanded list of 23 suspects allegedly involved in the debacle, Reuters exclusively reported in February. O’Ferrall was not on that list.
Prosecutors are not investigating O’Ferrall because he was not on BT Italy’s board and did not sign off on the division’s accounts in the four years, 2013-2016, under scrutiny, according to a source familiar with the probe.
O’Ferrall was appointed chairman of BT Italy in February 2017, taking up the post after an internal investigation was launched into the unit’s bookkeeping. He stepped down from that role in November 2018.
Prosecutors in Milan allege that three former senior BT executives, Luis Alvarez, Richard Cameron and Corrado Sciolla, set unrealistically high business targets and were complicit in false accounting at BT Italy.
Alvarez and Cameron, were respectively the former chief executive and former chief financial officer of BT Global Services and Sciolla was the former head of continental Europe for BT. The three men, two of whom were based in London, left the company in 2017.
Reuters tried to contact Alvarez and Cameron via social media and email but they did not respond to those requests for comment. Sciolla declined to comment.
“AN URGENT REQUEST”
Allegations of fraudulent bookkeeping are part of a range of suspected wrongdoing at BT Italy. Italian prosecutors allege that a network of people at the unit exaggerated revenues, faked contract renewals and invoices and invented bogus supplier transactions in order to meet bonus targets and disguise the unit’s true financial performance.
The company has publicly disclosed that it uncovered a complex set of improper sales, leasing transactions and factoring at the division. Factoring is a way in which firms sell future income to financiers for cash.
Several BT shareholders have filed a class-action lawsuit in the United States alleging the group misled investors and failed to promptly disclose the financial irregularities. BT has moved to have the case dismissed.
In their report, Italy’s financial police reference an email dated Aug. 5, 2016, from O’Ferrall in which he says that Cameron wanted operating profit to increase by 700,000 euros and suggests to Luca Sebastiani, then CFO at BT Italy, along with other colleagues across Europe, that they capitalize labor costs as a solution.
“All, I have an urgent request from Richard to find another €700K,” O’Ferrall wrote to Sebastiani and his counterparts in Germany, Benelux, France, Spain, Hungary as well as Simon Whittle, then finance manager, reporting and consolidation, at Global Services Europe.
“Please can you look at all opportunities and come back to me and Simon asap. Labour capitalization? Regards Brian,” says the email, whose subject line reads “Another €700K EBITDA needed in P4.”
P4 refers to the month of July.
Reuters tried to reach Whittle via social media but he did not respond to requests for comment. The other finance officers O’Ferrall contacted did not respond to Reuters requests for comment.
Sebastiani’s lawyers, Giammarco Brenelli and Federico Riboldi, told Reuters the email was significant because “along with many others, it shows the constant and unrelenting pressure the parent company was putting on European subsidiaries with regards to accounting policies.”
Sebastiani is among the 23 suspects in the case.
In another email, dated April 8, 2016 and sent to Sebastiani’s predecessor Alessandro Clerici and Rosa Ronda Andres, CFO for BT Global Services in Spain, O’Ferrall says he has received a request “to find another €1 million of capitalization for 15/16.
“Can either of you accommodate this? €500K each?” the e-mail says.
Clerici and Andres did not comply with the request, according to a source familiar with the matter.
Andres did not respond to Reuters’ requests for comment. Clerici declined to comment. He is among the 23 suspects in the case.
Capitalizing costs is an accounting method that allows companies to amortize a cost related to an asset over time as opposed to book it as an expense in the income statement when the cost was incurred. The technique allows companies to smooth out expenses over time, and therefore boost profits.
“You can’t capitalize labor costs to improve earnings ex post (after the event), just to boost your accounts,” said Gian Gaetano Bellavia, an accounting expert who has in the past worked as a consultant for the Milan prosecutors. He is not involved in the BT Italy investigation.
Bellavia said it was common for top executives of a parent company to ask managers of subsidiaries to “always do more.” But he said some of the BT emails, which Reuters showed him a copy of, constituted “significant evidence” of wrongful accounting.
“EBITDA measures how much a company is earning. But to go up it needs actual income.”
Bellavia said another email, dated September 2016, in which Sebastiani says he has been told that Cameron would not accept an earnings estimate for the fiscal year 2016/17 below a certain amount, was less problematic because it could be interpreted as an aspiration and not a forecast communicated to investors.
The police report says the alleged accounting irregularities could have had an impact on the price of BT shares and this may justify adding market manipulation to the list of alleged crimes being investigated.
However, Milan prosecutors decided not to take this step on jurisdiction grounds, a source with direct knowledge of the probe said, since BT shares are listed in London and such allegations would have to be investigated by UK authorities.
Britain’s Serious Fraud Office (SFO) which investigates and prosecutes complex and often multinational fraud and corruption, declined to comment on whether it was investigating BT.
Britain’s accounting regulator, the Financial Reporting Council (FRC), said it was continuing to investigate PricewaterhouseCoopers’ (PwC) audits of BT from 2015 to 2017. BT dropped PwC as its auditor in 2017.
A spokesman for the accounting firm said it would continue to cooperate fully with the FRC in its enquiries.
(Additional reporting by Paul Sandle and Kirstin Ridley in London. Writing by Silvia Aloisi, editing by Carmel Crimmins.)
FILE PHOTO: Jennifer Newstead, Legal Advisor, U.S. Department of State, attends a hearing for alleged violations of the 1955 Treaty of Amity between Iran and the U.S., at the International Court in The Hague, Netherlands August 27, 2018. REUTERS/Piroschka van de Wouw
April 22, 2019
(Reuters) – Facebook Inc on Monday named the legal adviser to the U.S. State Department as its general counsel, as the social media giant faces growing regulatory hurdles and privacy concerns.
Jennifer Newstead, who brings government and private sector experience to the role, will succeed Colin Stretch, who decided to quit the company in July 2018, Facebook said in a blog post.
Facebook has come under increasing pressure around the world to stop the spread of misinformation on its platform, while its ad practises have been in the spotlight for two years amid growing discontent over its approach to privacy and user data.
The social media company also named John Pinette as vice president of global communications, succeeding Caryn Marooney, who decided to leave the company in February.
(Reporting by Sayanti Chakraborty in Bengaluru; Editing by Arun Koyyur)