fortune--2020-02-21--Richard Branson’s Virgin launches cruise line just as coronavirus batters the industry

Millennials are passing on wine when dining out .
How the wine industry is changing its approach

Richard Branson’s Virgin brand launched an adults-only cruise ship arm that opens in April — just as the fast-growing sector suffers its most serious setback in years from the coronavirus outbreak.
Scarlet Lady, unveiled in Dover, England, on Friday and the first of four new vessels that will form the Virgin Voyages fleet, aims to bring “the luxe experience of a boutique hotel to the sea,” the billionaire said in a statement.
While the ship will be based in Miami for voyages in the Caribbean, thousands of miles from the Asian epicenter of the virus, it’s not clear what impact the epidemic will have on wider demand. The ordeal of 3,700 people held on board a vessel in Japan as disease spread among passengers has made headlines around the world, while Carnival Corp. and Royal Caribbean Cruises Ltd. have issued profit warnings.
Virgin’s fleet will aim to capitalize on a boom in cruising among younger people. Ships will boast interiors by Tom Dixon and Roman and Williams and offer gym programs, yoga, 20 restaurants featuring Michelin-standard food and entertainment including drag acts and sets by star DJs including Mark Ronson.
Among major operators, Norwegian Cruise Line Holdings is least exposed to Asian markets, followed by Royal Caribbean and Carnival, according to a note from Berenberg analysts. There’s as yet no evidence that media coverage of the vessel quarantined in Yokohama or another turned away by five countries is affecting bookings globally, rather than just in virus-hit Asia, they said.
Scarlet Lady, built in Genoa, Italy, will ply routes that include stops in Mexico, the Dominican Republic, Key West and the Bahamas, where passengers will be able to use their own beach club. A second ship will be based in Barcelona and offer Mediterranean cruises starting next year.
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—Coronavirus misinformation is fueled by government mistrust in China
—In China, oil won’t be the only energy sector battered by the coronavirus
—Europe wants business to share its data and open up A.I. systems for scrutiny
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-21--A malfunctioning 737 Max warning light could cost Boeing millions in new FAA fines

Boeing Co. engineers discovered in 2017 that a software glitch had rendered a warning light on the newly introduced 737 Max inoperable on 80% of the planes. But the company chose not to fix it or to inform U.S. regulators.
The next year, a Lion Air jet suffered the malfunction the alert was designed to detect and crashed in the Java Sea. The lack of an alert was cited as a factor in the crash by Indonesian investigators and Boeing’s failure to fix it drew stiff condemnation from lawmakers and families of the victims.
Now the inoperable warning light is threatening to become a costly new headache for the planemaker: its absence on the jet violated U.S. Federal Aviation Administration regulations. The FAA is considering imposing civil penalties, according to documents and officials, which can amount to millions of dollars.
“A manufacturer cannot alter the airplane’s features after it has been certified,” the then-acting head of the FAA, Daniel Elwell, said in a letter to lawmakers last July, referring to the malfunctioning alert.
The fines could accrue quickly. The agency’s enforcement guidelines say large businesses such as Boeing can be assessed $3,000 to more than $34,000 per violation. That could be applied to each of the more than 300 planes on which the alert didn’t work.
Moreover, a 2015 agreement to settle 13 separate investigations against Boeing — some of them involving similar issues of aircraft certification — gives the FAA a way to take swift action against the company. Boeing paid $12 million in that case, but could be assessed an additional $24 million if FAA finds the violations continued.
At the very least, the failure to disclose the inoperative warning light combined with other recent disclosures by the company — such as messages between employees mocking the FAA — have significantly soured the relationship between the Chicago-based manufacturer and its regulator.
J.E. Murdock, who served as FAA’s chief counsel and acting deputy administrator in the 1980s, said he’d never seen anything like what he called Boeing’s recent “disregard” for norms during his four decades of working in the aviation sector.
“I don’t know how this came about, but it’s worrisome to me,” Murdock said.
Boeing’s decision to withhold two troves of caustic and sarcastic text messages and emails between its employees from the FAA runs contrary to agency policy encouraging self-disclosure. Boeing had compiled at least some of the messages early last year, but didn’t disclose them to FAA until last fall and in January.
The FAA said in an emailed statement it doesn’t comment on potential enforcement actions.
Boeing spokesman Gordon Johndroe said the company wouldn’t comment on any possible open investigations. The company said it may be subject to unspecified penalties in a filing with the Securities and Exchange Commission last month, but said it didn’t anticipate a significant impact on its bottom line.
Family members of Boeing 737 Max crash victims hold photographs as Stephen Dickson, administrator of the FAA, center left, speaks during a House Transportation and Infrastructure Committee hearing in Washington, D.C., on Dec. 11, 2019. Andrew Harrer—Bloomberg via Getty Images
Crashes involving the 737 Max — there was a second one in Ethiopia last March, in which the alert also didn’t work — killed 346, grounded the plane worldwide and will cost the company an estimated $18.6 billion.
The U.S. Justice Department’s Criminal Division has gathered information about the plane through a grand jury. The SEC is also investigating whether Boeing properly disclosed issues with the plane to investors.
Congress is also looking into the disasters, including a provision of the law that permitted Boeing to designate employees to perform much of the Max certification functions on behalf of the agency. One such “designee” signed off on the decision not to immediately fix the warning light issue.
Elwell’s July letter provided a rare window into how the FAA views a high-profile matter that could become an enforcement case. It explicitly said the failure to fix the alert is a violation of agency regulations.
The FAA agrees with Boeing that the failure to install a working warning system — which illuminates when sensors that measure whether the nose is pointed above or below oncoming air disagree with each other — wasn’t a safety violation, Elwell said.
However, “once it was made part of the approved type design, it was required to be installed and functional on all 737 Max airplanes Boeing produced,” he said.
In comments during a Dec. 11 House Transportation and Infrastructure Committee hearing, Steve Dickson, who became FAA administrator in August, said he is considering action against Boeing for that and other issues.
“I have expressed my disappointment to the Boeing leadership about that,” Dickson said at the hearing. “And so, I reserve the right to — to take further action and we very well may do that.”
The agency filed two unrelated enforcement cases against Boeing since December, seeking a total of $9.3 million for claims it knowingly installed substandard parts on wings, including on the 737 Max. In November, the FAA stopped granting Boeing employees authority to certify that individual aircraft were built to legal standards.
Boeing’s actions on the so-called angle-of-attack disagree light also raise questions about the FAA’s system of deputizing Boeing employees to conduct agency approvals and oversight.
A Boeing employee who was the FAA’s authorized representative signed off on the company’s decision not to immediately repair the warning light, Representative Peter DeFazio, the Oregon Democrat who is chairman of the House committee that held the hearing, said in an interview. The involvement of the authorized representative was discovered in recently obtained documents, DeFazio said.
“That points to the huge problem at Boeing and the problem with the system,” he said.
The disagree light was standard equipment on earlier models of the 737, known as Next-Generation, and supposed to be included on the 737 Max. But a software change caused it not to function if airlines didn’t order an optional display that showed what each angle-of-attack sensor was reading.
As a result, 80% of the 387 Maxes the company delivered to airlines didn’t have a working disagree light, according to Indonesia’s final report on the Lion Air crash off of Jakarta, which killed 189 on Oct. 29, 2018. A second crash, of an Ethiopian Airlines Group jetliner on March 10, killed 157 and resulted in the plane’s worldwide grounding.
Boeing recognized the error just months after the 737 Max entered service in 2017, the company said in a statement posted on its website last May. The company “followed its standard process” for resolving such issues by consulting in-house experts, it said in the statement.
A review found that the absence of a disagree light wasn’t a safety issue, according to the statement. There are no emergency procedures associated with the disagree light for pilots and the planes provide flight crews other indications that the sensors have failed.
As a result, the company decided to repair the alert in a later software update. Boeing’s “senior company leadership” wasn’t involved in the decision, it said in the statement.
Only after the Lion Air accident did the company inform the FAA. The company plans to ensure that the alert works on the planes before the grounding is lifted.
The alert was relevant to the Lion Air crash because it should have activated before the accident and on a previous flight, the investigation concluded. If it had done so, it might have helped mechanics diagnose and fix the issue before the crash, the report concluded. A malfunctioning angle-of-attack sensor is what prompted an automated system to repeatedly push down the plane’s nose.
It’s not clear whether the FAA will bring a case against Boeing related to the 737 Max, and it can take years from the time it starts an investigation it until the agency imposes a penalty. The FAA often waives or lowers penalties if companies promise to spend the money on fixing errors.
One potential complication to any such case is the criminal investigation. It’s not uncommon for the Justice Department to ask agencies such as the FAA to delay their enforcement cases if they interfere with a possible criminal case.
In its settlement agreement between FAA and Boeing in 2015, the company agreed to tighten up its internal audits and make regular reports to the agency about its compliance, including ensuring that aircraft conform to their designs, according to a press release at the time.
When asked during the December hearing whether Boeing had complied with the settlement, Dickson said he hadn’t decided yet.
“But it’s something that’s under consideration and it could be the subject of future litigation,” he said.
The largest fine ever paid in an FAA enforcement action was $24.9 million by American Airlines, now known as American Airlines Group Inc., in 2013.
If past FAA practice is a guide, the amount of any civil penalties will be relatively low compared to fines levied against automakers or financial institutions in recent years, which has rankled lawmakers such as DeFazio.
“I think that when companies become repeat offenders, there should be a dramatically escalating series of fines and actions,” DeFazio said.
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—Coronavirus misinformation is fueled by government mistrust in China
—In China, oil won’t be the only energy sector battered by the coronavirus
—Europe wants business to share its data and open up A.I. systems for scrutiny
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-21--Don’t underestimate the economic effects of the coronavirus outbreak

‘ Looking more probable ’ —analysts up the odds of a markets correction as coronavirus fears surge

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Financial markets are down at the moment on news that the coronavirus is continuing its spread. But for the most part, markets have been laid back about the virus, for reasons Neil Irwin of the New York Times analyzes smartly here.
When it comes to all things health-related, my go-to expert is Fortune editor-in-chief Clifton Leaf, who wrote this for yesterday’s Brainstorm Health newsletter:
“While it’s possible that the outbreak can be brought under control in the coming weeks or months, the concern among many experts is that things will get far worse before they get better. There are three reasons.
“Call the first naïveté: Humans seem to have no or little existing immunity to this novel strain of coronavirus. Second is pathogenicity: The virus has the ability to replicate efficiently in our bodies and can cause death or at least serious illness in many. And third is transmissibility: The microbe appears to pass easily from human to human. These are the textbook conditions for a pandemic.”
That’s reason enough to stay concerned. Cliff quotes GAVI CEO Seth Berkley, a certified expert on such things, saying: “Is this the big one, or not?…Who the hell knows? But if this is not the big one, it’s a very expensive and severe dress rehearsal for the big one.” Either way, I’m guessing the economic effects will be bigger than the liquidity-soaked markets currently suspect.
In the meantime, since it’s Friday, some feedback:
My Wednesday post on companies chasing Robotic Process Automation rather than doing more creative A.I. projects generated some interesting responses:
S.F. said that while my post was accurate, it was too negative on RPA. “RPA has been a fantastic starting point to get (companies) thinking about automation more broadly and how to improve their business with software.” Jumping headlong into A.I., he said, is only useful if the company “has a way for that AI insight to ‘act’ on the organization. Otherwise, it is just an interesting report or piece of information.”
G.M. also cautioned against trying to do too much A.I. too quickly. “Billions are being spent on irrational ideas…Companies need to take a deep breath and think before they spend the company’s money.”
But J.R. agreed with me that automation needs to be focused on creating value for customers. “If customers are not integral to your continuous improvement or innovation program, then your continuous improvement or innovation program isn’t integral to your organization.”
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Morgan Stanley
Morgan Stanley (shares down 4.6%) is to pay $13 billion for E*Trade (shares up 21.8%) in the biggest takeover by a U.S. banking giant since the dark days of 2008. E*Trade CEO Michael Pizzi comes along with the deal, which will beef up Morgan Stanley's wealth-management arm as it takes on the merging Charles Schwab and TD Ameritrade. Wall Street Journal
Wexner out
It's official: L Brands is selling a controlling stake in Victoria's Secret to private equity firm Sycamore Partners, and Les Wexner is stepping down as chairman and CEO. The longest-serving CEO of any S&P 500 company, Wexner will retain the title of chairman emeritus. Stepping into the CEO spot is Andrew Meslow, who currently heads up L Brands' Bath & Body Works chain. Fortune
Samsung chairman
Samsung Electronics has a new board chair in the shape of Park Jae-wan, South Korea's former finance minister, who was already a non-executive director at the troubled giant. Park's predecessor, Lee Sang-hoon, belatedly quit last week after having been sentenced to 18 months in jail back in December, for sabotaging labor union activities. Park was, notably, also South Korea's labor minister before he took the finance role. ZDNet
Tesla Germany
Environmentalists have lost a court battle to stop the clearing of a patch of forest near Berlin for Tesla's first European "Gigafactory". A court originally granted the campaigners a temporary injunction while it considered the matter, but yesterday it decided the clearing could go ahead. Tesla still hasn't received planning permission for the plant, though. CNBC
AROUND THE WATER COOLER
Climate emergency
"We cannot rule out catastrophic outcomes where human life as we know it is threatened," write a pair of economists in a new, non-public report seen by the BBC and environmental campaigner Rupert Read, who tweeted that it also includes the sobering words: "Although precise predictions are not possible, it is clear that the earth is on an unsustainable trajectory. Something will have to change at some point if the human race is going to survive." The report doesn't come from a group like Read's Extinction Rebellion; it was written by…a pair of J.P. Morgan economists, whose employer has been criticized for its fossil fuel investments. BBC
Huawei pressure
The U.S. is still badgering the U.K. to reverse its decision to allow Huawei limited access into its 5G networks. The top American cybersecurity official, Robert Strayer, warned that "if countries adopt untrustworthy vendors in 5G technology, it will jeopardize our ability to share information at the highest levels." White House (permanently-acting) Chief of Staff Mick Mulvaney also met with top U.K. officials Thursday, trying to apply pressure—apparently to no effect. BBC
Illegal likes
A Swiss federal court has ruled that merely liking and sharing defamatory posts on Facebook can amount to defamation in itself. The court yesterday upheld a lower-court ruling that fined someone for liking posts that—in the context of a squabble between animal-rights activists—accused someone of antisemitism. TheLocal.ch
Against T-Mobile-Sprint
Seven leading economists write for Fortune that the T-Mobile-Sprint merger should have been rejected, for a variety of reasons. They write: "This decision, to a large extent, disregards the interests of consumers. They will pay in the form of higher prices every month, while the testifying CEOs will celebrate the huge bounty they made off this transaction. The rest of us can take bets on how many years it will take for DISH to build its own network—if ever." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-02-21--‘Looking more probable’—analysts up the odds of a markets correction as coronavirus fears surge

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Happy Friday, everyone. The trading week is ending with a thud. For the second consecutive day, red is dominating the screens.
What’s moving markets? Coronavirus, containment concerns, and the coming—gulp—market correction.
Markets update
Again today the Asian and European markets are down, as are the U.S. futures. So much for that bad-one-day, good-the next “W” trading cycle we’d been seeing.
It’s all about the virus. We’ve reached a new phase in the coronavirus outbreak as contagions flare outside China—the worrying flash-points today are in Japan, South Korea and Australia. Overall, infections have now topped 76,000. What it all means is that hopes of containment are fading. Fast.
Hong Kong’s Hang Seng sank the most on the jitters, down more than 1% on Friday. Brent crude is down even further, and the Dow and S&P 500 appear set to extend yesterday’s losses even further.
As we do every Friday, let’s now take a look at the big numbers of the week.
By the numbers
$1,636.20. That’s the price of gold per troy ounce, a seven-year high. The shiny yellow stuff is up nearly 1% today, and up 7.4% year-to-date. Whenever you see a run on gold like this it almost always means uncertainty in the markets is sky-high. Earlier, I pointed out that tech stocks were actually outperforming gold. But the two are now beginning to trend in opposite directions.
10%. Bulls, you’re not going to like this next data point. Goldman Sachs’ Peter Oppenheimer has warned investors in a note that a stock market correction “is looking more probable.” He believes investors are underestimating the coronavirus impact on corporate earnings. If his analysis is correct, that means a 10% drop from the markets peak. What would that look like? Let’s take the S&P 500. A correction would take the index back down to just above 3,000, or a 340-point drop. The Dow Jones Industrial Average, meanwhile, would drop to about 26,600. On the bright side, he notes, it’s merely a correction, not that we’re nearing bear territory (a 20% drop).
19.78. Since Apple dropped its bombshell sales warning on Monday, the Nasdaq has had a choppy ride. Based on Thursday’s close, it’s up a sliver this week, by 19.78 points. Don’t get too complacent. That meager gain could easily get wiped out at the opening bell today. As noted above, investors have not yet fully taken into account the full coronavirus impact on earnings in coming quarters. It’s not as if companies are hiding the news. Here’s a short-list of the companies (beyond Apple) that have issued coronavirus warnings this week: Procter & Gamble, Alibaba, Adidas, Puma, Foxconn, Qantas, Air France-KLM and Moller-Maersk, the world’s biggest shipping company. They join luxury brands, energy stocks, etc., etc.
***
To end on a positive note—it’s Friday. Have a nice weekend, everyone.
I’ll see you back here on Monday.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
Accounts scandal. Wells Fargo & Co is close to reaching a $3 billion settlement of federal probes into a range of consumer abuses. The Department of Justice and Securities and Exchange Commission may announce penalties as early as Friday. A series of scandals at the San Francisco-based bank date back to 2016, when the bank conceded that employees may have opened millions of fake accounts to meet sales goals.
Call your broker. Morgan Stanley is making its biggest acquisition since the financial crisis, agreeing to buy discount brokerage E*Trade Financial Corp. for $13 billion. The all-stock takeover strengthens the investment bank’s position in the retail market, adding E*Trade’s $360 billion of client assets to Morgan Stanley’s $2.7 trillion. Morgan Stanley also gets E*Trade’s direct-to-consumer and digital capabilities.
Pricey lingerie. L Brands is selling a controlling stake in Victoria's Secret after 82-year-old billionaire founder Les Wexner proved unable to repair the once iconic lingerie brand, Fortune’s Phil Wahba reports. The company, a leading mall-based store operator, said Thursday it was selling a 55% stake in Victoria's Secret for $525 million to retail-focused private equity firm Sycamore Partners.
Market candy
Quiz time. Which recent IMF-bailout recipient has seen yields on its 10-year government bonds dip below 1%, cheaper even than 10-year U.S. Treasurys? Is it:
A. Ukraine
B. Greece
C. Argentina
D. Pakistan
The answer is Greece, which has achieved a stunning economic turnaround from the painful decade-long debt crisis that forced it to seek repeated bailouts from the IMF and euro zone governments. Now the country’s economy is growing at around 2%, beating many of its European peers, and the yield on 10-year Greek bonds, which peaked at more than 30% in 2012, has fallen to an amazingly low 0.97%.


fortune--2020-02-21--A week of corporate coronavirus warnings starts to quantify the economic toll of China’s outbreak

Supply lines have been disrupted, consumption has dropped, and demand for services has diminished. As containment measures taken against the spread of Covid-19 in China weigh on the global economy, international business is beginning to quantify the economic blow the coronavirus is set to deliver.
According to CB Insights, there were just six mentions of coronavirus on Q1 earnings calls as of February 12, but, as we get deeper into earnings season, a growing number of companies are issuing warnings related to the outbreak.
Alibaba
On February 13, Alibaba posted strong results for the quarter ending December 2019, with revenues rising 40% in the three-month period. The report made short mention of the coronavirus, stating the company had “mobilized Alibaba ecosystem’s powerful forces” to support the fight against the outbreak and will “support our merchants” during this time.
On a call with analysts, however, CEO Daniel Zhang characterized the Covid-19 epidemic as a “black swan event” that “will present near-term challenges to the development of Alibaba’s business across the board.”
Apple
On Monday, Apple warned that it no longer expects to meet the revenue guidance it issued for the quarter ending in March for two reasons: first, “iPhone supply will be temporarily restrained” and second, demand for Apple products in China has been “affected.” Apple said its manufacturing sites in China have all re-opened following the prolonged coronavirus shutdown but “are ramping up more slowly than we had anticipated,” which will dent iPhone revenue worldwide. “The situation is evolving, and we will provide more information during our next earnings call in April,” Apple said.
Analysts remain upbeat, however, even when downgrading forecasts for Q2. “We assume that, as with every other company operating in China, the situation on the ground continues to evolve for Apple. We are reducing our forecasts for both the March and June quarters but we see this as a temporary issue for Apple,” Goldman Sachs said in a note.
“We assume that lost demand is temporary and that consumers planning to replace Apple products will still do so when conditions return to normal.”
Adidas
German sports brand Adidas said on Wednesday that sales in China had dropped 85% in the period since January 25, when compared to sales last year. Adidas has closed temporarily a “significant number” of its stores in China and reported a “pronounced” reduction in customers at stores that have remained open. Besides slumping demand, output at Adidas’s Chinese factories—which produced a fifth of the brand’s footwear in 2018—have been impacted by the outbreak. “We have experienced a material negative impact from the coronavirus on our operations in China,” Adidas said.
Puma
Puma has temporarily closed more than half its China stores and warned it expected a negative impact on revenue and profits in the first quarter. The sportswear brand said it still expects to hit its 2020 targets and that the situation will “normalize in the short term.” However, CEO Bjorn Gulden warned that Puma would have to reconsider its guidance if stores remain closed for another month.
Maersk
Danish shipping giant Maersk on Thursday released its annual report for 2019. Revenue and profit growth was severely impacted by a change in accounting practices, but the company also warned it expected a “weak start to the year” as factories remain on lockdown due to the coronavirus epidemic. Maersk has cut 50 sailings from Chinese ports since January, and said the outlook for 2020 was subject to “significant uncertainties.” On an analysts call, AP Moller-Maersk CEO Søren Skou said “the next two to three weeks will really tell us what trend we’re on.”
According to the Wall Street Journal, Maersk reported a revenue fall of 5.6% to $9.67 billion, missing expectations of $9.94 billion, as its shipping unit lowered capacity to adjust to market conditions.
Air France-KLM
Also on Thursday, Air France-KLM warned the outbreak could wipe out up to $216 million in revenue between February and April, as the airline has suspended flights to China. Meanwhile the International Air Transport Association said that global air travel would see its first passenger demand decline in 17 years, contracting 0.6% in 2020, due to the coronavirus outbreak. The retraction could cost airlines a total $30 billion in revenue.
Proctor & Gamble
P&G CFO Jon Moeller told attendees at the company’s Consumer Analyst Group of New York (CAGNY) conference on Thursday that the coronavirus had disrupted supply for 17,600 different product items and laid out the impact the outbreak was having on the company’s operations.
“China is our second largest market—sales and profit. Store traffic is down considerably, with many stores closed or operating with reduced hours. Some of the demand has shifted online but supply of delivery operators and labor is limited…The operating challenges change with the hour, and of course the path of the virus is unknown, making it very difficult to provide precise estimates of impact.”
That being said, Moeller assured attendees that P&G’s guidance ranges for the company’s top and bottom lines in fiscal 2020 remain accurate.
Looking ahead
It’s no surprise that firms are citing the coronavirus as they assess their financial performance. “It would be difficult to see any companies that would not see some impact from the Covid-19 outbreak due to the disruptions from having large groups of populations staying at home in Asia,” said Lorraine Tan, Asia regional director of equity research at Morningstar. The epidemic has hit supply chains, consumer confidence and transportation, Tan said—a decline that will, in turn, weigh on financial services.
But for now, there are at least loose limits to the fallout. “[W]e continue to expect the impact to be confined to 2020 earnings,” Tan said.
More must-read stories from Fortune:
—Billionaires are donating to fight China’s coronavirus. Where is the money going?
—China’s high smoking rate may be exacerbating the coronavirus outbreak
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus misinformation is fueled by government mistrust in China
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-21--Coronavirus epidemic enters new phase as cases outside of China spike

South Korea has more than 150 cases. Those for Singapore and Japan have topped 85. And then there are the 600-plus from a quarantined cruise ship in Japan.
As the cases of coronavirus infections mount, worries are growing that the outbreak is entering a concerning next phase. Where China had the vast majority of cases and deaths before, there are now signs that infections are spreading more rapidly within other Asian countries beyond its borders.
For now, China still remains the center of the crisis, with 75,000 infections. But as the number of net new cases there declines, attention is shifting to the risks in other countries where the growth in infections is accelerating. Anxiety is already creeping into global financial markets, as investors weigh the impact of a wider regional outbreak on economic growth and corporate earnings.
“The sudden jump in infections in other parts of Asia, notably in Japan and South Korea, has sparked renewed concerns,” said Khoon Goh, Singapore-based head of Asia research at Australia & New Zealand Banking Group Ltd. “This points to a new phase in the outbreak, and one which will see continued disruption and more economic impact than previously thought.”
Marked Uptick
The epidemic that emerged in early December has yet to become a pandemic, which is defined as a situation where the virus is spreading across multiple continents. So far, the numbers outside of China remain small: out of 2,247 deaths, only 11 have occurred in other countries. Yet there’s been a marked uptick in non-China cases this week.
South Korea has seen a five-fold increase in infections, with a surge of cases tied to a cluster from a religious sect in Daegu. At least 82 cases involve those who may have attended church services with a person who was confirmed with the virus earlier this week.
South Korean Health Minister Park Neung-hoo said authorities are aware of transmission channels and the current situation is “manageable.” Daegu has shut down public facilities and advised residents to stay indoors to try to contain the disease.
More alarming is the situation in Japan, which has emerged as one of the riskiest places for the spread of the coronavirus. Health Minister Katsunobu Kato said on Sunday that Japan had lost track of the route of some of the infection cases, which have tripled in the past week to more than 90.
Diamond Princess
Japan is seeing cases in multiple, unconnected areas across the country and authorities have been scrambling to understand where they’re coming from. The government is being faulted for being too slow to bar visitors from China and too lax in its 14-day quarantine of the Diamond Princess cruise ship, the vessel with 3,700 passengers and crew that’s been under the global spotlight.
At least 636 of them have been infected by the virus and two have died.
The situation has the potential to escalate given the presence of high-risk factors like Japan’s elderly population and a societal work ethic where taking a sick day is often frowned upon. The U.S. Centers for Disease Control and Prevention has issued a Level 1 alert for Japan, which doesn’t discourage travel to the country but urges caution.
Containment Efforts
To be sure, Japan’s advanced health-care system puts it in better stead to fight the outbreak than poorer states with fewer resources like China’s neighbor North Korea, and countries in sub-Saharan Africa.
There’s also progress being made in Asian cities where strict containment measures have been put into place. The Chinese-controlled territory of Macau, the world’s biggest gambling hub, hasn’t reported a new infection in more than two weeks, as casinos were shut and travel to mainland China was restricted.
While Singapore has more than 80 cases, the rate of new infections has been steady, and 37 patients have so far recovered.
Hong Kong similarly hasn’t seen a surge. That could change, however, with the case of a police officer infected with the virus. He had a meal with 59 other officers, who are now in quarantine.
Powder Keg
Some believe that the Diamond Princess cruise ship could be a potential powder keg as more than 1,000 quarantined passengers leave by the end of Friday. With people aboard hailing from more than 50 nations and now returning back home, their travels could spawn a fresh wave of global infections. On Friday, two people evacuated to Australia from the cruise ship tested positive for the virus.
“It’s entirely possible to get tested, be negative and get on an airplane and be positive once you land,” said Keiji Fukuda, the director of the School of Public Health at Hong Kong University and a former World Health Organization official who has led responses to outbreaks. “That’s just how infections work.”
For now, the WHO says the situation is still manageable, but warns that if countries don’t take the situation more seriously, the spread will become a wider global threat.
“The virus is very dangerous and it’s public enemy No. 1,” Director-General Tedros Adhanom Ghebreyesus said at a briefing in Geneva Thursday.
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—Coronavirus misinformation is fueled by government mistrust in China
—In China, oil won’t be the only energy sector battered by the coronavirus
—Europe wants business to share its data and open up A.I. systems for scrutiny
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-21--Britain is closing its borders to low-skilled labor. Why economists say this is a bad idea

After a radical shake-up of its immigration policy, Britain is set to become one of the most difficult countries on earth for immigrants to enter.
The plan doesn’t go into effect until 2021, and already the new rules are dividing a hardly united United Kingdom.
Following its shock exit from the European Union, the country will, from next January, scrap its current policy that permits free entry from EU countries for a highly selective system. The new regime will allow only “the brightest and the best” from around the world to come and work in the U.K., similar to programs in place in Australia, Canada, and New Zealand.
“For too long, distorted by European free movement rights, the immigration system has been failing to meet the needs of the British people,” the government document setting out the plan said.
Economists counter the policy will hit employers in sectors as diverse as construction to health care and could push up prices for consumers.
For the hundreds of thousands of Europeans who have come to Britain in recent years to take up low-skilled (and low-paying) jobs—think dish-washers, coffee shop baristas, and manual laborers, they will no longer be allowed in. Instead, Britain will give “top priority to those with the highest skills and the greatest talents: scientists, engineers, academics and other highly-skilled workers.”
A government advisory group estimated that 70% of EU migrants who came to Britain under the open-door policy would not be allowed in under the new rules.
The move gives Brexit backers and many of the voters who propelled Johnson to a crushing election win in December what they want—an end to what they perceive as unlimited migration from the EU that’s changed the character of their communities, and has stressed public services to breaking point.
But economists and business leaders were quick to point out that, alongside certain benefits, Johnson’s policy of clamping down on immigration will carry big costs.
Sectors like hospitals, care homes, construction, hotels, bars and restaurants have come to depend heavily on a broad flow of migrants from EU countries ready to work for low wages.
The construction sector and care homes for the elderly already face severe labor shortages, and the new immigration guidelines are set to worsen the situation.
I don’t normally do this, but I’m furious about how social care has been designated an “unskilled” job. So if anyone has a story showing the skills of carers, I’ve temporarily opened my DMs. In confidence obviously. Thank you. — Janice Turner (@VictoriaPeckham) February 20, 2020
Construction squeeze
Business leaders warned the shortages could lead to more care homes closing down and leave construction companies struggling to build the new homes and infrastructure that Johnson’s government wants, including a planned $140 billion high-speed rail line.
Brian Berry, chief executive of the Federation of Master Builders, said more than half of the trade group’s members were already reporting problems recruiting bricklayers and carpenters.
“We need another 168,000 people in construction to meet current demand over the next three years,” he told the BBC in a radio interview, citing recent research.
To be allowed to work in the U.K., applicants, whether from EU countries or elsewhere, must have some English fluency. And, they must have an offer of a skilled job in the U.K. that pays a salary above a certain level. Each requirement carries a certain number of points and applicants must reach 70 points to be granted a work permit.
The new policy won praise from Britain’s tech industry, as it places no limits on the number of computer scientists or software engineers who could come to work in the U.K.
The opposition Labour Party attacked the plan, saying it would inflict considerable economic damage, and potentially devastate the health and social care sectors which relied on international recruitment. Labour’s health spokesman Jonathan Ashworth told the BBC there were already 122,000 vacancies for social care staff.
Economic growth fears
Another casualty could be economic growth. Before the Brexit referendum, Britain regularly achieved annual growth of 2% or more, but GDP growth slowed to 1.3% in 2018 and 1.4% in 2019, partly as uncertainty over Britain’s future trading relationship with the EU led to a slump in business investment. A cut in immigration could cut that lackluster number further, critics say.
“Lower levels of immigration lead to a smaller workforce, which leads to slower growth in GDP. That’s pretty mechanical,” Thomas Pugh, U.K. economist at consultancy Capital Economics, told Fortune.
Samuel Tombs, chief U.K. economist at research firm Pantheon Macroeconomics, said the hit to GDP growth from lower inflows of people would be partially offset by a small boost to productivity should the country succeed in attracting more highly skilled migrants, plus increased investment to raise the output of existing staff. Otherwise, low growth is here to stay, he said.
“Given that the U.K.’s internal demographics look bad in the 2020s—retirees looks set to exceed new U.K.-born entrants to the labor market—1.0% year-over-year growth in GDP likely will be the new normal for the U.K. economy from 2021 onwards,” he told Fortune.
Will it fly abroad?
A surge in undocumented immigration has fueled the rise across a rapidly aging Europe of political parties that back a hard line on all forms of immigration, ranging from the far-right Alternative for Germany to Italy’s League party, and Marine le Pen’s National Rally in France.
These parties will be watching Britain’s new system closely to see if it is a success. If it is, it could lead to stepped-up pressure in other countries to change the EU’s open-borders policy, analysts observe.
The British scheme is similar to the merit-based immigration policy President Trump has repeatedly called for in the United States.
Trump’s plan stalled in the face of Democratic opposition; House Speaker Nancy Pelosi labeled it “dead on arrival.” But immigration is expected to be a major issue in this year’s presidential election and Trump has said he would make a new push for his immigration reform if re-elected.
The British scheme seems destined to shake up the makeup of U.K. businesses.
Businesses from farms to construction firms to coffee bars will no longer be able to rely on a steady flow of cheap, plentiful labor, which has helped keep down wages and prices in the U.K. It’s unclear how employers will shift their resources should some of the worst predictions—higher wages and labor shortages in an already tight jobs market—come true. Consumers too could feel the pinch if, as economists predict, higher labor costs make some goods and services more expensive.
But the British government’s blunt message to business was they had better get used to it.
“U.K. businesses will need to adapt and adjust to the end of free movement … It is important that employers move away from a reliance on the U.K.’s immigration system as an alternative to investment in staff retention, productivity, and wider investment in technology and automation,” the document said.
Brexit-supporting politicians say companies could fill any gaps by simply training Brits to do the jobs. But it isn’t that simple. Many companies say Britons simply do not want to do many of the jobs that EU immigrants readily handle. The director of human resources at sandwich chain Pret a Manger said in 2017 that only one in 50 applicants for jobs with the company was British.
Nor is there a great pool of jobless to draw on. The UK unemployment rate at 3.8% is the lowest since the mid-1970s.
Interior minister Priti Patel stirred controversy by saying that businesses should look to the 8 million economically inactive people, or 20% of the workforce, to fill staffing shortages. But economists there too shot back, saying the vast majority of those were students, retired, caring for their family or suffering from a long-term illness.
“There aren’t 8 million people just sitting around on the sidelines of the labor force that you can just draft in. There obviously are some people, but it will be a lot, lot smaller than 8 million,” Capital Economic’s Pugh said.
The government will ease the immigration rules for sectors where there are deemed to be labor shortages. It also promised separate schemes for scientists, graduates, health and agricultural workers “which will provide businesses with additional flexibility in the shorter term.” There are separate rules for family reunions and asylum.
Mass immigration from the EU has transformed Britain in recent years, particularly after eight eastern European countries, including Czech Republic, Hungary and Poland, joined the EU in 2004. Hundreds of thousands of workers from those countries took advantage of the EU’s freedom of movement to take better-paid jobs in the U.K., working in hotels, bars and restaurants, as builders, plumbers or electricians, on farms or in care homes. Within a few years, their children will be looking to go to university and enter the labor force.
The irony of the timing is that net migration of EU citizens to Britain peaked at more than 200,000 a year in early 2016, but has dropped sharply since the Brexit referendum, falling to 48,000 in the year to June 2019. By contrast, net migration to Britain of people from non-EU countries has increased since the referendum, reaching 229,000 in the same period.
Various research and polls show that many citizens of EU countries plan to stay in Britain despite Brexit. And, the British government has received more than three million applications from EU citizens to continue living in the U.K.
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—Why China is still so susceptible to disease outbreaks
—A new coronavirus red flag on the horizon—a stronger dollar
—Fortune Explains: Tariffs and trade wars
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fortune--2020-02-21--Fertilizer, pest-control, soup: Modern-day reliance on bats makes it hard to banish their virus risk

Every Saturday morning, a dozen or so villagers from a province about 60 miles west of Bangkok creep into a bat-festooned cave to scrape up the precious fecal deposits of its flourishing inhabitants.
In three hours, they can amass as many as 500 buckets of bat dung. The guano is packaged and sold at an adjacent temple as fertilizer, reaping more than 75,000 baht ($2,400). Just 1 kilogram (2.2 pounds) of the nutrient-rich material can fetch as much as the daily minimum wage.
Elsewhere in Asia and Micronesia, meat from bats is sometimes sold in markets or cooked at home after being caught in the wild. Although consumption is rare and limited to certain communities, it’s considered a local delicacy in the Pacific island-nation of Palau, and areas of Indonesia, where meat from other mammals is scarce.
With growing awareness of bat-borne viruses — from Nipah to coronaviruses linked to severe acute respiratory syndrome and the new pneumonia-causing Covid-19 disease that’s killed more than 2,000 people in China — human contact with the ancient flying mammal and their excreta is drawing closer scrutiny.
“Anything to do with bats, in theory, can expose yourself to potential viral transmission because we know bats carry so many viruses,” said Linfa Wang, who heads the emerging infectious disease program at Duke-National University of Singapore Medical School.
Bats contain the highest proportion of mammalian viruses that are likely to infect humans, according to research published in 2017 by disease ecologist Peter Daszak in the scientific journal Nature.
Still, very few bat viruses are ready to transmit directly to humans, said Wang, who has been studying bat origins of human viruses for decades and works with a group of researchers sometimes dubbed ‘The Bat Pack.’
“I always say that if they could do that, then the human population would have been wiped out a long time ago because bats have been in existence for 80-to-100 million years — much older than humans,” he said.
Special Precautions
While still relatively low risk, the possibility that a virus might cross the species barrier and cause disease in humans is enough to require all of Wang’s lab and field researchers involved in bat sampling to take special precautions, including immunization against rabies — the only vaccine available for a bat-borne virus — and to wear personal protective gear, he said.
Danger doesn’t stop with bats. Other mammals, such as civets and camels, have been found to act as intermediate hosts that can pass coronaviruses to humans. Undercooked meat and offal, milk, blood, mucus, saliva and urine of virus-carrying mammals can potentially contain pathogens.
“Viruses evolve all the time — there’s no way to know when it will mutate and become dangerous to humans,” said Supaporn Watcharaprueksadee, deputy chief at the Center for Emerging Infectious Disease of Thailand, who has studied bats for two decades. “The best prevention is to avoid the risk and reduce all risky behaviors,” she said.
At the Khao Chong Phran bat cave in the Thai province of Ratchaburi, where the bat dung is mined, there are an estimated of 3 million wrinkle-lipped free-tailed bats, an insect-eating species that produces high-nitrogen guano, essential for boosting plant growth.
No Protection
Guano collectors usually enter the cave with long sleeved shirts and long pants, with a T-shirt wrapped around their head as makeshift cover — in contrast to how disease ecologists investigate caves in a full-body suit with masks and gloves. Although dry guano has low risk of infection, miners or cave visitors can potentially be exposed to viruses through the fresh saliva and urine of bats.
It’s not a concern foremost in the minds of the cave’s guano collectors, even weeks after Thailand reported the first of its 35 Covid-19 cases.
“We’ve done this for a long time, for many generations,” said Singha Sittikul, who manages the business and fields orders. It’s a small operation trading guano locally, but such fertilizer is also sold by companies and via online commerce platforms, such as Amazon.com Inc and Alibaba Group Holding Ltd. “We carry on as usual.”
Bats are highly valued in Ratchaburi, where they not only produce a potent fertilizer, but also play a role in pollination and pest-control by feeding on insects that ravage rice and other crops. Their cave has been declared an animal sanctuary. Killing or eating them is prohibited.
Bat Soup
In other places, bat consumption is more common. On the Indonesian island of Sulawesi, for example, fruit-eating bats are sold by market vendors and their meat is used in a soup-based dish with vegetables, chili paste and coconut milk. In Palau, a whole bat is served in a soup of ginger, coconut milk and spices — a dish that gained notoriety on social media during the early weeks of Covid-19.
The trade and smuggling of wild mammals, including ones that may act as intermediaries of bat-borne viruses, poses a risk. Carcasses and parts of pangolins, lions, rhinos and elephants are routinely being trafficked through Southeast Asia.
Bat expert Supaporn is expanding her research to look at pangolins as well as horseshoe bats, which may have played a role in the emergence of the novel coronavirus that causes Covid-19, she said.
Smuggling Threat
The Freeland Foundation, a counter-trafficking organization, has alerted Asian nations to the direct virological threat wildlife smuggling poses to “wider human populations.”
Closing markets and refraining from consumption of the animals is the only sure way to prevent the spread and recurrence of outbreaks, it said.
“There are so many bat-borne diseases that we have yet to discover, and they can be dangerous,” said Tawee Chotpitayasunondh, a senior adviser to the Thai Ministry of Public Health. “Now is the time to discourage eating and trading them.”
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—Billionaires are donating to fight China’s coronavirus. Where is the money going?
—China’s high smoking rate may be exacerbating the coronavirus outbreak
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus misinformation is fueled by government mistrust in China
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-21--Some Oracle employees stop work in protest of Larry Ellison’s pro-Trump politics

While a wave of employee activism marked by walk-outs and protests has rippled through Silicon Valley the past few years, Oracle glided along unscathed.
Now, a symbol of tech’s old guard is facing the stirrings of a worker uprising as well. People left their desks Thursday at Oracle offices around the world to protest Chairman Larry Ellison’s fundraiser a day earlier for President Donald Trump, according to people familiar with the matter. The protest, called No Ethics/No Work, involved about 300 employees walking out of their offices or stopping work at remote locations at noon local time and devoting the rest of the day to volunteering or civic engagement, said one of the people, who asked not to be identified for fear of retribution.
Ellison drew employee ire that most didn’t know existed at Oracle. News of the fundraiser for Trump’s re-election campaign at Ellison’s home in Rancho Mirage, California, spurred a petition at Change.org from some of the company’s 136,000 employees. The workers argued the chairman’s public support for Trump violated Oracle’s diversity, inclusion and ethics policies, and harmed the image of the world’s second-largest software maker.
The petition had more than 8,000 signatures as of Thursday afternoon, though it was open to the public and anyone could sign it. Organizers demanded that Oracle and Ellison give money to support a humanitarian cause such as climate change, denounce the Trump administration and commit to diversifying the company’s board.
Employees at Alphabet Inc.’s Google, Amazon.com Inc., Microsoft Corp. and Salesforce.com Inc. started mobilizing more than two years ago over a variety of issues, including law enforcement and military contracts, the gender pay gap and the treatment of contract workers.
Thursday’s activism at Oracle, a database stalwart founded in 1977, showed cultural differences from the younger companies like Google. Some Oracle workers who participated in the “log off” used vacation time for the protest, the people said. Many had asked the company’s human resources officials whether they would be targeted for participating and didn’t receive a response before the protest, so they took the precaution of participating on their own time, the people said.
Others who supported the action, but were leery about the company’s potential response, chose to donate money to charitable groups that oppose Trump administration policies rather than leave work, the people said.
Some employees received a warning Thursday when trying to access the protest organizers’ website from a work computer: “Access to this site may not be permitted by the Oracle Acceptable Use Policy. However, if user is authorized and has legitimate business reason to access the requested site, then click below to access. Your access will be logged.”
Oracle, however, said the message was an error that was corrected.
“The site was not intentionally blocked by Oracle,” said spokeswoman Deborah Hellinger. “It was temporarily blocked by a ‘false positive’ from our McAfee network security and anti-virus software. Once we were notified by employees of this issue, our security team conducted a review, determined that there was no actual security threat, and then whitelisted the site.”
Organizers said the protest participation at Oracle’s headquarters in Redwood City, California, seemed more muted than in other locations, such as New York City and Austin, Texas, which have more young workers.
The organizers hope Thursday’s action is the first effort to voice concerns about the company’s policies, and employees will continue to feel motivated to speak out, one of the people said.
More must-read stories from Fortune:
—HTC CEO on the company’s “new vision,” VR, and Facebook rivalry
—New, online A.I. course targets an important market: bosses
—Can San Francisco be saved?
—Did the ‘techlash’ kill Alphabet’s city of the future?
—How wireless carriers rank on 5G speeds
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-21--How to invest in health care? Step one: Ask the right questions

Harvey Weinstein jurors indicate deadlock , with judge ordering them to work toward unanimous verdict

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Listen closely to the stump speeches and debate comments of those running for president and you’ll hear only two related questions raised about health care. Just two: Who should get insurance coverage? And how do we pay for it? At the Democratic debate in Las Vegas earlier this week, the word “health” was uttered 34 times. Nearly all of those comments centered on the fight over “Medicare for All.” (Translation: “Who should get coverage and how do we pay for it?”) The rest focused on which of the candidates had yet to flesh out a health insurance plan. (Translation: “Who should get coverage and, um, how do we pay for it?”)
For what it’s worth, nobody had a convincing answer for the last part.
But the bigger issue is that these are the wrong questions to begin with. The more essential one to ask right now is: How do we invest smartly in the nation’s health and wellbeing? Indeed, we should reframe the central debate to focus not on “how to pay for someone else to pay for a decreasing portion of our increasing health care bills” (i.e., the current system of insurance coverage) to “how do we get a genuine return on investment from our mammoth health-related spending?”
And mammoth it is. In 2018, the U.S. national expenditure was $3.6 trillion, or $11,172 per person, according to government statistics—a figure that’s expected to grow to nearly $6 trillion over the next seven years. Think about that for a moment. Imagine somebody told you your mortgage payments in 2027 were going to be two-thirds higher than what they are now, even as the value of your home will decrease. That’s where we are. Mail your check here please.
So how DO we invest in transforming health care in America?
We’ll have a rare opportunity to explore that question over two days in April at FORTUNE’s fifth annual Brainstorm Health conference. We’ll pose it directly to the CEOs of Amgen, Baxter International, Bristol-Myers Squibb, Cardinal Health, Centene, Cisco, GE Healthcare, and Levi-Strauss, who have each agreed to take the hot seat.We’ll ask the new bosses of IBM Watson Health and Google Health about their own prodigious investments in big data, the murky realm of AI, and how they believe all of this will change health outcomes for millions.
We’ll ask Verily’s Dr. Jessica Mega, Ancestry CEO Margo Georgiadis, and the CEOs ofAthenahealth, Box, Beyond Meat, and others about the power (and peril) of personalized data, the challenge of innovation, and how each is shifting the health care conversation today. We’ll hear from top investor-entrepreneurs like Sean Parker—who, by the way, is changing the way research in cancer immunology is being done—and from a host of other top venture capitalists about where they’re investing now (and what they’ve given up on).
We’ll probe, one-on-one, CMS Administrator Seema Verma about what we can learn, good and bad, from America’s biggest health payer of all, Medicare. And we’ll ask the leaders of some of the country’s top-tier hospitals and medical schools how we should reimagine both of these institutions for the coming decades. To flesh out this sprawling conversation, we’ll be joined by the leaders of American Heart Association, the NIH’s National Institute of Mental Health, the NBA—yes, Commissioner Adam Silver will be there too—and some of the most compelling, surprising, and provocative speakers on the planet.
Helping us direct, frame, and prod, once again, will be my conference co-chairs, Thrive Global CEO Arianna Huffington and Dr. David Agus, founding director of USC’s Lawrence J. Ellison Institute for Transformative Medicine. We’ll also be guided by a slew of FORTUNE journalists and the brilliant physician-interrogators Dr. Lloyd Minor, Dean of Stanford University School of Medicine, and CNN’s brain surgeon-journalist-in-residence, Dr. Sanjay Gupta.
We may not solve anything in just two days of intimate conversation this April, but I do promise we’ll ask fundamental questions about everything.
For more on our participants and agenda, click here.
Clifton Leaf, Editor in Chief, FORTUNE
clifton.leaf@fortune.com
@CliftonLeaf
INDICATIONS
Gilead faces another loss in its HIV patent battle. Biotech giant Gilead has lost yet another patent battle related to its HIV drug Truvada, which has been shown to prevent HIV infection in clinical trials. There are billions at stake in this IP spat, which pits Gilead and the U.S. government (specifically, the Centers for Disease Control) against each other. The Trump administration has filed suits against Gilead over the patent dispute; Gilead has rejected government claims over ownership of the patents.
THE BIG PICTURE
Coronavirus hits South Korea. The coronavirus outbreak has now spread to South Korea (among other countries), prompting renewed concerns about the virus. Public health officials and economic experts alike highlighted the issues behind the growing number of cases beyond Chinese borders. "This points to a new phase in the outbreak, and one which will see continued disruption and more economic impact than previously thought," said Khoon Goh, Singapore-based head of Asia research at Australia & New Zealand Banking Group Ltd. (Fortune)
REQUIRED READING
Private equity firms raised more money in 2019 than they ever have before, by Polina Marinova
Corporate coronavirus warnings start to quantify the economic toll of China's outbreak, by Eamon Barrett
Money, politics, and tampons, by Maria Aspan
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fortune--2020-02-21--Bloomberg says 3 women can be released from NDAs

How to invest in health care ?
Step one : Ask the right questions

Democratic presidential candidate Mike Bloomberg said Friday that he’s willing to release at least three women from nondisclosure agreements that prevented them from speaking publicly about sexual harassment or discrimination suits filed against him over the last three decades.
Dozens of lawsuits have been filed against his company over the years. Bloomberg said his company has identified “3 NDAs that we signed over the past 30-plus years with women to address complaints about comments they said I had made.”
He wrote: “If any of them want to be released from their NDA so that they can talk about those allegations, they should contact the company and they’ll be given a release.”
Bloomberg was attacked repeatedly this week in his debut debate for declining to release women from the nondisclosure agreements.
He wrote: “I’ve done a lot of reflecting on this issue over the past few days and I’ve decided that for as long as I’m running the company, we won’t offer confidentiality agreements to resolve claims of sexual harassment or misconduct going forward.”
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—What happens to leftover campaign funds when a candidate drops out of the race?
—Europe wants business to share its data and open up A.I. systems for scrutiny
—America’s heading for a tax on the middle class
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-02-21--Wells Fargo reaches $3 billion settlements related to fraudulent sales practices

Wells Fargo & Company today announced that it has entered into agreements with the United States Department of Justice (DOJ) and the United States Securities and Exchange Commission (SEC) to resolve these agencies’ investigations into the Company’s historical Community Bank sales practices and related disclosures. As part of this resolution, Wells Fargo has agreed to make payments totaling $3 billion.
Charlie Scharf, chief executive officer, said: “The conduct at the core of today’s settlements — and the past culture that gave rise to it — are reprehensible and wholly inconsistent with the values on which Wells Fargo was built. Our customers, shareholders and employees deserved more from the leadership of this Company. Over the past three years, we’ve made fundamental changes to our business model, compensation programs, leadership and governance. While today’s announcement is a significant step in bringing this chapter to a close, there’s still more work we must do to rebuild the trust we lost. We are committing all necessary resources to ensure that nothing like this happens again, while also driving Wells Fargo forward.”
As the settlement agreements with the DOJ recognize, Wells Fargo cooperated fully with the government’s investigations.
Today’s resolution includes:
An agreement with the DOJ that resolves the criminal investigation into sales practice activities in the Community Bank from 2002 to 2016. As part of the agreement, no charges will be filed against Wells Fargo provided Wells Fargo abides by all the terms of the agreement.
A separate settlement agreement that resolves DOJ’s civil investigation.
And a separate administrative order that resolves the SEC’s civil investigation. Wells Fargo has agreed to the establishment of a $500 million Fair Fund for the benefit of investors who were harmed by the conduct covered in the agreement. The Fair Fund is part of the $3 billion settlement.
Wells Fargo had fully accrued for the amount of this settlement as of Dec. 31, 2019.
Remedial actions taken by company since 2016:
Since 2016, Wells Fargo has made fundamental changes to its leadership, governance, processes, controls and culture to ensure the misconduct that is the subject of today’s actions can never recur.
These changes include:
Significant leadership changes: A new CEO and majority of new members on the Operating Committee, Wells Fargo’s senior-most management committee. Significant management changes at all levels of the Community Bank, including senior executives.
Reconstitution of a majority of the Board’s independent directors (8 new independent directors), including the majority of Board Committee Chairs.
Elimination of all product-based sales goals that led to this conduct.
Implementation of a new incentive compensation structure for retail bankers that rewards them based on customer outcomes and requires risk accountability at all levels.
Enhancement of the Community Bank’s processes for customer consent and stronger oversight and controls.
Investment of more than 800,000 hours in learning and development for retail bank employees to support cultural, process and policy changes, with training ongoing.
Reorganization and centralization of key Company functions, including Risk, Human Resources, Finance, Technology, and Data.
Even before today’s establishment of the Fair Fund, agreement to pay more than $500 million to customers and investors as remediation for harm that resulted from the historical Community Bank sales practices.
More must-read stories from Fortune:
—What will get people to save more for retirement? Letting them “opt out”
—America’s heading for a tax on the middle class
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—How Blackstone became the world’s biggest corporate landlord
—A legendary investor offers a green-energy manifesto
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fortune--2020-02-21--Harvey Weinstein jurors indicate deadlock, with judge ordering them to work toward unanimous verdict

The jury in Harvey Weinstein’s rape trial indicated Friday that it is deadlocked on the most serious charges, but the judge told the panel it must keep working.
In a note to the judge late in the fourth day of deliberations, jurors asked if it was permissible for them to be hung on one or both counts of predatory sexual assault while reaching a unanimous verdict on the other charges on their complicated verdict sheet.
Weinstein’s lawyers said they would accept a partial verdict, but prosecutors said no and Judge James Burke refused to allow it. He sent jurors back to deliberate for a few more minutes before letting them go home for the weekend. They’ll resume Monday morning.
“Just remember you are in a critical stage, you are in the process of deliberations and you are not sequestered,” Burke told the panel of seven men and five women.
The jury has been particularly focused on the key aspect of the predatory sexual assault counts that Weinstein is facing: “Sopranos” actress Annabella Sciorra’s allegations that Weinstein raped and forcibly performed oral sex on her in the mid-1990s. Those charges carry a maximum penalty of life in prison.
In all, Weinstein, 67, is charged with five counts stemming from the allegations of Sciorra and two other women — an aspiring actress who says he raped her in March 2013 and a former film and TV production assistant, Mimi Haleyi, who says he forcibly performed oral sex on her in March 2006.
To convict Weinstein of a predatory sexual assault charge, jurors must agree on two things: that Weinstein sexually assaulted Sciorrain some way and that he committed one of the other charged offenses. The predatory sexual assault charge requires prosecutors to show that a defendant committed a prior rape or other sex crime, but doesn’t have the statue of limitation constraints that would bar Sciorra’s allegations from consideration on their own.
Weinstein has maintained any sexual encounters were consensual.
The Associated Press has a policy of not publishing the names of people who allege sexual assault without their consent. It is withholding the name of the 2013 rape accuser because it isn’t clear whether she wishes to be identified publicly.
Jurors started the day Friday by listening to a reading of Sciorra’s cross-examination and follow-up questioning by prosecutors. About 90 minutes into the reading, the jurors notified the judge they had “heard enough” and resumed their deliberations.
Sciorra testified nearly a month ago. She was the first accuser to do so in the closely watched #MeToo trial.
The jury has already focused on emails that Weinstein sent regarding Sciorra, including ones to the private Israeli spy agency he allegedly enlisted to dig up dirt on would-be accusers as reporters were working on stories about allegations against him in 2017.
Sciorra, now 59, told jurors how the once-powerful movie mogul showed up unexpectedly at the door of her Manhattan apartment before barging in and raping and forcibly performing oral sex on her in late 1993 or early 1994.
On cross-examination, Sciorra was grilled about why she opened her door in the first place and didn’t find a way to escape if she was under attack.
Weinstein lawyer Donna Rotunno asked: “Why didn’t you try to run out of the apartment? Did you scratch him? Try to poke him in the eyes?”
Prosecutors say Sciorra weighed only about 110 pounds (50 kilograms) in those days, making her no match for the 300-pound (135-kilogram) Weinstein.
“He was too big” to fight off, she told the jury. “He was frightening.”
Sciorra went public in a story in The New Yorker in October 2017 after one of the few people she says she told about the incident, actress Rosie Perez, got word to reporter Ronan Farrow that he should call her.
Sciorra didn’t get involved in the criminal case until later. Her allegations weren’t part of the original indictment when Weinstein was arrested in May 2018, but after some legal shuffling they were included in an updated one last August.
Weinstein’s lawyers fought to get her nixed from the case in the run-up to the trial, arguing to no avail that prosecutors shouldn’t be allowed to use her claims because they predated the enactment of the predatory sexual assault charge in 2006.
Weinstein’s lawyers have also argued that it’s plainly unfair to make the producer defend himself against something alleged to have happened more than a quarter-century ago. They contend prosecutors shoehorned Sciorra into the case to get a marquee name on the witness stand.
“Annabella was brought into this case for one reason and one reason only,” Rotunno said in her closing argument last week. “She was brought in so there would be one witness who had some star power, one witness you may recognize and one witness whose name may mean something.”
More must-read stories from Fortune:
—Breaking Bad ended six years ago—but Better Call Saul and merchandise keep gaining steam
—How ’90s cult rock band Guided by Voices flourishes despite industry odds
—With Sonic the Hedgehog big at box office, Paramount catches “lightning in a bottle”
—Rob McElhenney on exploring misogyny and censorship in gaming with Mythic Quest: Raven’s Banquet
—Contagion writer, scientific adviser reflect on film’s newfound relevance amid coronavirus crisis
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fortune--2020-02-21--Citigroup stands out in Congress’s diversity report on the banking industry

Citigroup impresses Congress with its diversity plan, how Google’s employee revolt fell short, and Florida is one step closer to restoring voting rights for the formerly incarcerated.
But first, here’s your week in review in Haiku.
Reparations for
Jalaiah, a Renegade
hip-hop solution
Stopped-and-frisked minding
his own big business, since he
met the description
A POTUS pal and
showman gets jail time
was the judge’s decision
Blagojevich will
stay sprung if he can handle
court supervision
A system rigged and
ready to fail. Will we
find absolution?
Have an absolutely fantastic weekend.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On Point
Citigroup one of the few bright spots in a banking industry diversity report The U.S. House Committee on Financial Services released a report this month analyzing the diversity data and policies of 44 financial institutions with $50 billion or more in assets. Diversity and Inclusion: Holding America’s Large Banks Accountable breaks down the lack of diversity in the financial services industry, in the workforce, at the board level and supplier networks:
Overall, Black and Latinx talent comprise 4% or less of banks' executive and senior level employees and 6% or less of first and mid-level leadership employees,
and women made up only about 29% of their executive and senior-level workforce.
Among the few outliers in the report is Citigroup, which is using a Rooney Rule-like strategy to meet a goal of having 40% of assistant vice president and above roles filled by women by the end of 2021.
HR Dive
The end of the great Google revolt Last November, Google fired four employees who had been persistent activists for change within the search giant. One is transgender and was undergoing a medical transition. The four had been part of a vocal group who had been lobbying for the company for changes; to address a “tech-bro” culture, but also asking tough questions about the kinds of impact Google projects were having in the world — like a contract with the U.S. Defense Department to improve a drone warfare program. While they wanted to save the world from Google, “[t]hey were also organizing to save themselves from Google, where those who didn’t fit the mold of the straight, white, male techie felt they could be too easily marginalized or dismissed,” says Noam Scheiber and Kate Conger in this must-read look at a culture in turmoil.
New York Times Magazine
Oklahoma tribes feud with the state’s Cherokee governor Nearly all of Oklahoma’s 39 tribal nations are united against Governor Kevin Stitt, who promised during his campaign that his association with Cherokee Nation would help him better understand and advocate for Native issues. Instead, one of his first acts was to threaten to hike the fees the tribes pay to run their profitable casinos, prompting an immediate outcry. Tribal nations are a product of genocide and forced relocation, and the perceived betrayal has surfaced longstanding and painful issues. “I don’t think he can spell sovereignty,” says John Berrey, chairman of the Quapaw Nation. Now, Cherokee Nation is collecting signatures for a petition to remove Stitt’s citizenship.
New York Times and High Country News
A step closer to voting rights for certain Florida ex-felons A three-judge panel of the U.S. Court of Appeals for the 11th Circuit found that a legislative measure requiring ex-felons to pay all of their “legal financial obligations,” like court fines and fees before they could resume voting, violates the Constitution’s guarantee of equal protection under the law. Florida’s S.B. 7066 was passed in response to a measure approved by Florida voters in 2018 that restored voting rights to some 1.4 million former felons. While the governor has vowed to appeal the decision, the ruling sent a ripple of hope to voting-rights activists in other states.
Washington Post
On Background
Forgetting the hunger In this poignant essay, Paul Nezaum Saiedi reflects on his fraught journey to gastric sleeve surgery, and how his changed relationship with food also changed his relationship with himself. By the time we meet him post-surgery, he is in a mood to reflect on “[a] messy and pleasurable affair between the curves of what my mother referred to as my ‘husky’ body growing up, the bliss of consumption, and the emotional residue (both joyous and vile) of being a fat queer.” Forgetting food, which was impossible to eat after surgery, became an exercise in accepting the person who longed for comfort in a body that never quite fit. “Forgetting food ushered an introduction to a clear version of myself, one undone, naked, and at peace.”
Colorbloq
On the trailblazing feminism of Ja’Net DuBois Watching Good Times in the 1970s, I was left with the vague notion that if I grew up to be some version of Willona Woods, the outspoken, independent and funny neighbor who lit up a room like a supernova, I would have turned out alright. She was the type of Black character I hadn’t seen before and she seemed like a good option. “My job as Willona was to make it right, fast and funny,” DuBois once said in an interview. “It was a wonderful thing that happened. It changed the scene for the type of black woman being shown. The wigs, the hats, my everything was a dream come true.” DuBois died recently at 74 (or maybe older), but she left Black folk with an enduring, aspirational anthem: She co-wrote “Moving on Up,” the theme song for the hit show The Jeffersons.
The Undefeated
How to “replace” your manager If you’ve got a manager who won’t give you constructive feedback, help you map out a career plan, or even help you deal with thorny workplace issues, then manager coach Lara Hogan suggests you replace them with a volunteer or two or five. A diverse crew of manager-peers from across your organization can be valuable replacements for the coaching that your official (and perhaps overloaded) manager may be unable to provide. She has practical advice on how to assemble your squad, and how to structure your interactions. Look to fill in your own leadership blanks by recruiting people who “will push you out of your comfort zone; have different levels of experience than you; have experience in a different industry; are good at the things that you’re terrible at,” she says.
Lara Hogan blog
Tamara El-Waylly produces raceAhead and manages the op-ed program.
Quote
"I want to point out first that I am very happy to be here this evening and I'm thankful [to the Afro-American Broadcasting Company] for the invitation to come here to Detroit this evening. I was in a house last night that was bombed, my own. It didn't destroy all my clothes, not all, but you know what happens when fire dashes through -- they get smoky. The only thing I could get my hands on before leaving was what I have on now. It isn't something that made me lose confidence in what I am doing, because my wife understands and I have children from this size on down, and even in their young age they understand. I think they would rather have a father or brother or whatever the situation may be who will take a stand in the face of any kind of reaction from narrow-minded people rather than to compromise and later on have to grow up in shame and in disgrace. So I just ask you to excuse my appearance. I don't normally come out in front of people without a shirt and a tie.”
—From Malcolm X’s last speech, February 14, 1965. He was murdered on February 21, 1965.


fortune--2020-02-21--How technology is changing how we volunteer

When a teenage Sam Fankuchen sought a volunteering gig in the early 2000s, his feel-good quest quickly turned to frustration: It was hard to find an organization that matched his skills and, when he did find one, it was even harder to figure out who was in charge. The whole field of volunteering felt dominated by delays and disorganization.
“I was frustrated with how much work it was to try and volunteer. I went through school, religious groups, and family, but I could rarely find an opportunity,” says Fankuchen. “And when I did, the reality never matched what the opportunity described.”
Years later, Fankuchen, who became the first to major in social entrepreneurship at Stanford, channeled this frustration into building Golden, a startup that relies on technology to match volunteers with organizations that need them.
Today, Fankuchen’s firm operates much like a Silicon Valley software company—using algorithms and A.I. to sift through thousands of volunteers by skill level and find them opportunities at large charities, small nonprofits, or disaster relief efforts. The company is also built with a mobile-first mentality, letting people easily find volunteering gigs with an app.
All of this helps those looking to do good find the right forum. But it also reduces the time organizations expend on well-meaning but unqualified volunteers—a common problem for charitable outfits besieged with help they don’t need.
Golden has also introduced another feature that mimics the tech industry. Namely, it offers a social media feature that lets volunteers earn and share rewards called “karats,” which can be used as raffle tickets to enter draws for plum prizes like Disney trips, courtside Los Angeles Lakers tickets, and meetups with Grammy winner Billie Eilish.
The rise of Golden—whose clients include a publicly traded social network and a global bank—is part of a larger shift in the world of volunteering. Instead of relying on the haphazard efforts of well-meaning individuals, the field has become increasingly technical and professionalized—especially when it comes to the workplace.
A recent report underwritten by the Bill and Melinda Gates Foundation describes dozens of companies, including Golden, that offer software to help organizations make volunteering and philanthropy more efficient.
“It used to be very ad hoc, with an individual taking on all the trouble of matching people’s passions and values with nonprofits. Today, it’s almost like we have Tinder for corporate volunteering,” says Mina Askovic, a Ph.D. student who researches volunteering at the University of Sydney Business School.
Askovic added that the alternatives to using one of the volunteering platforms is “a spreadsheet” and that some large companies, including Salesforce, have even built software of their own to facilitate employee volunteering.
For some companies, the software platforms also serve as a way to track and reward employees for volunteer hours they log—a benefit that Askovic says has become an expectation for many millennials.
The growth of volunteering services driven by technology has also resulted in more for-profit companies operating in what has traditionally been a nonprofit sector. These include Benevity, a Canada-based startup that boasts of processing more than 23 million hours of volunteer time, as well as charitable donations, for hundreds of thousands of causes. Benevity is a certified B-Corporation—a designation also enjoyed by the likes of Etsy and Patagonia—which obliges it to adhere to high ethical and environmental standards. But Benevity has also raised $69 million in investments, including from private equity giants General Atlantic and JMI Equity.
This might raise the question of whether the profit motive that comes with such investments might conflict with the spirit of volunteering, but Fankuchen doesn’t see a contradiction. While Golden is dedicated to growing revenues and pursuing a profit—Fankuchen declined to provide any details about his company’s financials—he believes the company is ultimately a force for good.
“We believe strongly in the for-profit model. It delivers the technology that we know will deliver better outcomes quickly, but this also requires capital for things like R&D and helping organizations integrate their software with third parties,” he says.
More must-read stories from Fortune:
—HTC CEO on the company’s “new vision,” VR, and Facebook rivalry
—New, online A.I. course targets an important market: bosses
—Can San Francisco be saved?
—Did the ‘techlash’ kill Alphabet’s city of the future?
—How wireless carriers rank on 5G speeds
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-21--94% of the Fortune 1000 are seeing coronavirus supply chain disruptions: Report

To understand the potential painful impact of the coronavirus on the Fortune 1000 takes just one word: resin.
When the 2011 earthquake and tsunami struck the Fukushima Prefecture of Japan, the electronics industry had a huge problem on its hands. Two Mitsubishi Gas Chemical factories in the affected area made almost the entire world’s supply of an epoxy resin called bismaleimide triazine, or BT. Electronics chip manufacturers regularly used BT to seal their components. No BT, no chips, without a major manufacturing overhaul.
“It was buried within a supply chain—a component of a component,” said Josh Nelson, a principal in strategy and business transformation practice of The Hackett Group, a strategic consultancy.
Now, as coronavirus continues to spread, the region of China most heavily affected by the outbreak is a hub of global supply chains. A new Dun & Bradstreet study estimates that 163 of the Fortune 1000 have tier 1 suppliers—those they do direct business with—in the area. And 938 have tier 2 suppliers, which feed the first tier.
“That’s where it becomes troubling,” Nelson said. “It’s going to be that [item] where only one plant is qualified to make that and it’s going to interrupt a whole production line.”
The pinch is already being felt. Amazon has been stockpiling Chinese-made goods, Under Armour warned of a $50-$60 million potential shortfall in Q1, multiple automakers have shut down factories in China, and Nintendo expects “inevitable” production and shipment delays. And a growing number of companies have issued earnings warnings related to coronavirus.
Beyond the already announced effects, many Fortune 1000 companies still don’t know how seriously their operations will be affected. Although likely aware of tier 1 suppliers’ statuses, they (and 5 million other companies globally, by Dun & Bradstreet’s estimation) have little interaction with the tier 2 level they indirectly use, all of which happen to be in the same part of China.
“The waters get murkier,” said Brian Alster, general manager of third-party risk and compliance for Dun & Bradstreet. Plus, China’s impact on the world’s commerce has grown. “When you look at SARS outbreak in 2003, they were 2% of global GDP,” Alster said. “Today they’re 20%.”
Already feeling the impact, according to the study, are the automobile and electronics industries, which face the largest first quarter effects on earnings. Then come retail and financial services, followed by total services, with a heavy emphasis on disrupted tourism.
“We have seen reports of customers paying air freight to get the parts out of there at a substantially increased cost,” said Ann Marie Uetz, a partner with Foley & Lardner and co-chair of the law firm’s national automotive crisis response team. “But we haven’t seen lines shutting down here in North America.” Auto manufacturers are doing what they must to keep producing their most profitable vehicles. “To be blunt, I think GM is going to keep building trucks—the Silverado in particular,” she said.
Doing what is necessary can result in big spending. “A lot of times [manufacturers are] working on 5% or 10% margins,” said Richard Lebovitz, CEO of LeanDNA, which provides supply chain management services to large companies in the aerospace, automotive, and industrial controls sectors. Air freighting parts in gets expensive. “You could be adding a cost of parts of 10% to 30% in some cases,” Lebovitz said. That can become a big bottom-line hit.
But the alternative is worse. Stop production and a company could lose customers. Like BT epoxy resin, it only takes a single automobile panel or one industrial motor to keep a product from shipping. Because increasingly work has become custom, rather than using off-the-shelf parts, finding an alternative source may be at best costly and at worst nearly impossible.
“The tooling [to make the part] could be in the $10,000 range, but it could be in the several hundred-thousand-dollar range” for larger items, Lebovitz said.
Beyond customer loss, a factory shutdown has another long-term implication. A company can easily stop production. Restarting, though, means reengaging the entire supply chain and getting it to work again on all the necessary components. The participating companies likely have shifted attention elsewhere to keep their own revenue streams alive.
While there is concern now, the great unknown is how long the situation in China could last. Some manufacturers and their suppliers have more options than others. “If you’re a Fortune 50 or Fortune 100, you’re going to have a lot of resources to identify and mitigate risk,” Nelson said.
On the other hand, corporations in the bottom half of the Fortune 1000—which individually still have billions in annual revenue—frequently run with less inventory and more reliance on components, ingredients, and products arriving only when needed. That could mean having “only 30 to 40 days of materials on hand,” Nelson said. Anticipation of the lunar new year probably meant that companies had already laid in additional inventory because of planned shutdowns, adding perhaps two more weeks of production capacity.
“Another month beyond that you’re going to see some of the companies having issues,” Nelson said.
More must-read stories from Fortune:
—Billionaires are donating to fight China’s coronavirus. Where is the money going?
—China’s high smoking rate may be exacerbating the coronavirus outbreak
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus misinformation is fueled by government mistrust in China
—Coronavirus may be the straw that breaks the back of oil fracking
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