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Nov 27, 2019

The pre-Thanksgiving week in GRC: Dems propose tough privacy law, and activist looks to remove Colony Capital CEO

This week’s governance, compliance and risk-management stories from around the web

– Reuters reported that Louis Vuitton owner LVMH has agreed to buy Tiffany for $16.2 billion. The deal will boost LVMH’s smallest business, the jewelry and watch division that is already home to Bulgari and Tag Heuer.

LVMH CFO Jean-Jacques Guiony said taking Tiffany off the stock market and investing in its products would help the company deliver its revival plan. ‘We expect to bring Tiffany time and capital, which are two things that are not too easy to get when you report quarterly to the stock market,’ he said. 

In a joint statement with LVMH, Tiffany said its board of directors recommended that shareholders approve the transaction.

– CNN reported that, according to a person familiar with the matter, Carl Icahn now wants to replace Occidental Petroleum's entire 10-person board of directors. Icahn's stepped-up proxy fight includes a bid to remove Occidental CEO Vicki Hollub from her seat on the board, the person said.

It remains unclear whether Icahn can persuade enough Occidental shareholders to remove the board. He has acknowledged it will be a challenge, telling CNN Business earlier this month that he might sell more shares if he doesn't think he can win the proxy fight.

Occidental did not respond to a request for comment. Icahn's representatives declined to provide a comment on the news.

– According to The Wall Street Journal, federal prosecutors filed criminal charges against former executives of Outcome Health, alleging that they falsely reported data to defraud the company’s clients and investors to obtain almost $1 billion in debt and equity financing. The indictments of the company’s former CEO Rishi Shah, ex-president Shradha Agarwal and former CFO Brad Purdy conclude a two-year investigation by the US Department of Justice (DoJ). The SEC also sued the three former executives, alleging they committed civil securities fraud.

A lawyer for Shah said his client denies the charges brought by the DoJ and SEC and ‘looks forward to his day in court and the opportunity to clear his name.’ Agarwal’s attorney said her client denies the allegations made by the DoJ and SEC, saying: ‘Shradha never committed fraud and never participated in any conspiracy. To the contrary, Shradha was committed to transparency and integrity at Outcome Health. She will fight to protect her good name in court.’

The US Attorney’s Office in Chicago and, separately, a lawyer for Purdy didn’t immediately respond to a request for comment.

– Ticketing unit StubHub will be sold by its eBay owner to ticket reseller Viagogo for $4.05 billion in cash, nearly a year after the e-commerce company came under pressure from activist investors to get rid of some of its businesses, according to Reuters

Elliott Management and Starboard Value in January called for eBay to sell its ticket sales business and eBay Classifieds Group as part of a plan that could double the company’s value. Following the activist investors’ request, eBay made changes to its board of directors in March. It announced a review of its StubHub and eBay Classifieds businesses as part of an agreement with activist investors to avert a proxy contest.

Elliott Management declined to comment on the development on Monday, and Starboard Value did not immediately respond to a request for a comment.

– The SEC proposed a new rule governing the use of derivatives by registered investment companies, including mutual funds, ETFs and closed-end funds, as well as business development companies (BDCs). The Investment Company Act limits the ability of registered funds and BDCs to obtain leverage, including by engaging in transactions that involve potential future payment obligations. Derivatives can also create future payment obligations.

The proposed rule would allow these funds to use derivatives that create such obligations, provided they comply with certain conditions designed to protect investors. 

– According to CNN, Australian bank Westpac said CEO Brian Hartzer will step down in the wake of allegations that the bank violated anti-money-laundering and terrorism financing regulations tens of millions of times. Lindsay Maxsted, who serves as chair of the board, will also move up his retirement to the first half of next year. 

The Australian Transaction Reports and Analysis Centre (Austrac) recently said Westpac failed to report more than 19.5 million instructions for transfers in and out of Australia and said the bank neglected to do its due diligence on transactions to the Philippines and other parts of South East Asia.

In a statement on Sunday, Maxsted said Westpac was working through its response to the allegations and was determined to urgently fix the issues raised by the regulator. He added that the bank would commence an independent review. On Tuesday, Westpac said it would shake up its leadership ‘in the wake of’ the allegations and ‘urgently fix’ the issues outlined by the regulator. 

‘As CEO I accept that I am ultimately accountable for everything that happens at the bank,’ Hartzer said in a Westpac statement. ‘And it is clear we have fallen well short of what the community expects of us, and we expect of ourselves.’ Maxsted said in the statement that the board accepted ‘the gravity of the issues raised by Austrac.’

– CNBC said activist investment firm Blackwells Capital is looking to remove Tom Barrack as CEO of real estate and investment management company Colony Capital, saying his ties to President Donald Trump represent ‘significant personal distractions that are a blemish on the reputation of the company.’ Blackwells said it plans to nominate five candidates to the board and said the move came after private efforts to engage with Colony ‘regarding badly needed business improvement initiatives and corporate governance reforms over the course of the last year.’

Barrack and Colony Capital did not immediately respond to requests for comment.

– Joseph Slights, vice chancellor of the Delaware Court of Chancery, ordered broadcaster CBS Corp to turn over records regarding its plan to reunite with Viacom to a shareholder that wants to investigate whether the deal unfairly benefits Shari Redstone, who controls both companies, according to Reuters. Judge Slights ordered CBS to turn over materials the CBS board discussed when considering the merger with Viacom, which was split from CBS 13 years ago.

The company was also ordered to hand over documents regarding the nomination and appointment of board members to the special committee that approved the merger earlier this year, and some communications between Redstone and the board.

CBS declined to comment and Viacom did not immediately respond to a request for comment.

– The Guardian reported that Democrats proposed a tough new privacy law intended to curb the US’ technology companies. The proposal, led by Senator Maria Cantwell, D-Washington, aims to ‘provide consumers with foundational data privacy rights, create strong oversight mechanisms and establish meaningful enforcement.’

The Consumer Online Privacy Rights Act resembles the EU’s sweeping General Data Protection Regulation. It would require tech companies to disclose the personal information they have collected, delete or correct inaccurate or incomplete information, and allow consumers to block the sale of their information. If passed, the act would also make it easier for US authorities to levy large fines on tech companies and make it easier for individuals to bring legal action against the companies that breach the privacy rules.