A2| Friday, November 8, 2019 ** THE WALL STREET JOURNAL.
U.S. NEWS
turers for resale as purportedly
American-made goods to U.S.
civilian and government clients.
The items allegedly manu-
factured in China included a
$13,000 laser-enhanced night-
vision camera found at a U.S.
Navy submarine base in Con-
necticut; $156,000 worth of au-
tomated turnstiles tracked to
an Energy Department facility
in Tennessee; and 25 body
cameras sold to the Air Force
base.
The case highlights the in-
tense concern among U.S. offi-
cials about technological vul-
nerabilities that could be
exploited by foreign govern-ments. The Trump administra-
tion has imposed strict limits
on trade with Chinese surveil-
lance and telecommunications
companies, citing concerns
about national security and hu-
man rights.
Federal prosecutors in
Brooklyn alleged the Long Is-
land company, Aventura Tech-
nologies Inc., made upward of
$88 million in sales—including
more than $20 million in fed-
eral government contracts—on
products the company claimed
to produce at its Commack,
N.Y., headquarters. In fact,
prosecutors said, the devices
came from overseas, includingfrom Chinese manufacturers
that U.S. officials had flagged
as cybersecurity threats.
Aventura and seven current
and former employees, includ-
ing the company’s top execu-
tives, were charged with counts
including money-laundering
conspiracy, unlawful importa-
tion and conspiracy to commit
wire and mail fraud.
Laying out the charges Mon-
day, the Brooklyn U.S. attor-
ney’s office said Aventura ex-
posed the U.S. government and
private consumers to serious
cybersecurity risks, creating a
“channel by which hostile for-
eign governments could haveaccessed some of the govern-
ment’s most sensitive facili-
ties.”
Brooklyn U.S. Attorney Rich-
ard P. Donoghue didn’t say
Thursday whether any breach
or hack had taken place. No
Chinese companies were listed
by name in the complaint, and
there was no allegation against
the Chinese government or Chi-
nese citizens.
According to the complaint,
Aventura executives—including
chief executive Jack Cabasso,
who was among those arrested
Thursday—worked with coun-
terparts in China to conceal the
alleged scheme, including ef-forts to hide branding informa-
tion on equipment.
A lawyer for Mr. Cabasso
couldn’t immediately be
reached for comment. Mr. Ca-
basso was detained after his
court appearance Thursday; the
other defendants were released
on bond.
During the investigation,
U.S. authorities intercepted and
tracked shipments from Chi-
nese sources to Aventura’s
headquarters containing
items—marked with Aventura’s
logo, an American flag and the
phrase “Made In America”—
that were then resold to gov-
ernment agencies.In August 2018, a service
member at a U.S. Air Force
base noticed something un-
usual about a new body camera
there: Chinese characters ap-
peared on its built-in screen,
including what turned out to be
the logo for China’s domestic-
security agency.
The discovery, detailed in a
criminal complaint unsealed in
federal court Thursday, was
one clue that led investigators
to an alleged scheme by a Long
Island company to import sur-
veillance and security equip-
ment from Chinese manufac-
BYREBECCADAVISO’BRIEN
Firm Allegedly Sold Banned Chinese Gear
The Justice Department has
issued civil subpoenas to four
auto makers that reached a tail-
pipe emissions deal this sum-
mer with the state of California,
according to people familiar
with the matter, the latest de-
velopment in a federal antitrust
investigation that has generated
political controversy.
The subpoenas come on the
heels of initial discussions be-
tween the department’s anti-
trust division andFord Motor
Co.,Honda MotorCo.,BMW
AG andVolkswagenAG regard-
ing a July agreement between
the auto makers and theCali-
fornia Air Resources Boardon
fuel efficiency standards. The
California framework is at odds
with the Trump administra-
tion’s regulatory approach.
The Justice Department in
late August began asking the
companies whether they agreed
among themselves on the out-
lines of the deal with California
regulators.
Mary Nichols, chairwoman of
the California Air Resources
Board, has said the state
worked individually with the
auto makers and that all parties
were mindful of not violating
antitrust laws.
The subpoenas, called civil
investigative demands, indicate
the auto makers’ initial dialogue
with the Justice Department
hasn’t fully resolved the matter.
But the department’s formal de-
mands also give companies a
mechanism to provide informa-
tion that could clear them from
suspicion.
The subpoenas essentially
ask the auto makers whether
they engaged in collusive be-
havior, but they don’t make de-
mands for documents, accord-
ing to one of the people familiar
with the matter.
News of the antitrust inquiry,
reported by The Wall Street
Journal in September, sparked
strong political reactions be-
cause the Trump administration
is locked in a battle with Cali-
fornia over emissions policy for
greenhouse gases.
Democrats have criticized
the probe and questioned
whether the Justice Department
was using it to further the ad-
ministration’s political aims.
They said there was nothing
wrong with companies together
lobbying the California govern-
ment on policy.
The Justice Department’s top
antitrust official, Makan Delra-
him, in Senate testimony in
September said the probe
wasn’t political, describing the
investigation as a fact-finding
mission. BMW and Honda said
they are cooperating with the
department. Spokesmen for
Ford, Volkswagen and the Jus-
tice Department declined to
comment.BYBRENTKENDALL
ANDBENFOLDYCar Makers
Subpoenaed
Over Deal
With State
U.S. WATCH
MARKING HISTORY: A replica of the Berlin Wall commemorating 30 years since its fall drew a crowd at Georgetown University on Thursday.THE WALL STREET JOURNAL
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Our newspapers are 100% sourced from sustainably certified mills.GOT A TIP FOR US? SUBMIT IT AT WSJ.COM/TIPSDuring a disputewith a
Chinese developer, a woman
in Tianjin, China, threatened
to jump from a small ledge
about 8 feet above the roof-
top, which is atop a 30-story
building. In some editions
Wednesday, a Property Report
article about a cooling hous-
ing market incorrectly said
the ledge is about 8 feet off
the ground. In other editions,
the article failed to make clearthat the rooftop is 8 feet un-
der the ledge.Peloton Interactiveis one
of the few initial public offer-
ings this year with a stock-
price decline on its first day of
trading. In some editions
Wednesday, a Heard on the
Street column about Peloton
incorrectly said it was the
only other one besides Uber
Technologies.Readers can alert The Wall Street Journal to any errors in news articles by
[email protected] by calling 888-410-2667.CORRECTIONSAMPLIFICATIONS
UTAHNo Mechanical Issues
Found in Crashed BusU.S. authorities investigating
a tour-bus crash that killed four
Chinese tourists in Utah said
Thursday they haven't uncov-
ered any mechanical problems
that could explain why the
driver lost control of the vehicle.
The 60-year-old driver was
on his first run for a new com-
pany when the bus crashed on
Sept. 20, but he knew the area
from trips with another agency,according to the preliminary re-
port from the National Transpor-
tation Safety Board. The bus
crashed near Bryce Canyon Na-
tional Park.
Investigators don't know why
the bus left the road. When the
driver tried to correct course, the
bus began to cross into an on-
coming-traffic lane, so he steered
sharply back to the right, the re-
port said. The bus rolled, hitting a
guard rail, crushing the roof and
throwing 11 people from the vehi-
cle. In addition to the four dead,
15 people suffered serious injuries.
—Associated PressTEXASJudge Stays Execution
Of ‘Texas 7’ MemberThe execution of a “Texas 7”
gang member who killed a police
officer has been stayed again
because the state refuses to
provide him with a Buddhist
chaplain in the death chamber.
The U.S. Supreme Court ini-
tially blocked Patrick Murphy's
execution in March, saying his
religious rights would be violated
if no Buddhist chaplain was
present. A month later, theTexas Department of Criminal
Justice banned all clergy in
death chambers and rescheduled
Mr. Murphy's execution for Nov.
13.
U.S. District Judge George C.
Hanks stayed Mr. Murphy's exe-
cution on Thursday.
Mr. Murphy and six other in-
mates escaped prison in 2000,
committed robberies and killed
Officer Aubrey Hawkins. One
subsequently killed himself, four
have been executed, while Mr.
Murphy and another await exe-
cution.
—Associated PressCHICAGO
Police Superintendent
To Leave at Year-End
Police Superintendent Eddie
Johnson, who took over the
force in the nation’s third-larg-
est city following an infamous
officer-involved shooting and
oversaw a deep reduction in
murders, on Thursday an-
nounced plans to step down.
Superintendent Johnson,
who will remain in office
through the end of the year,
oversaw a push to use technol-
ogy that has helped curb a
murder rate in 2016 that hadn’t
been seen since the drug wars
of the 1990s.
Police relationships with res-
idents on the city’s largely mi-
nority South and West Sides
remain strained, however, and
the rate of unsolved murders
had remained high, according
to a recent report.
At a press conference, Su-
perintendent Johnson denied a
connection between his deci-
sion to retire and an investiga-
tion by the city’s inspector gen-
eral into a recent incident in
which officers found him
asleep in his police SUV.
Superintendent Johnson, 59
years old, was named chief by
former Mayor Rahm Emanuel
in March 2016, shortly after
the emergence of video show-
ing a white officer firing 16
shots and killing Laquan
McDonald, a 17-year-old Afri-
can-American who was veering
away from the officer. The offi-
cer was later convicted of mur-
der.
“I’m confident I’m leaving
CPD in better shape than when
I took over,” said Superintend-
ent Johnson.
—Joe Barrett
AL DRAGO/REUTERS“It’s going to just become
harder to eke out any returns
from public markets,” said
Stephen O’Neill, Nest’s head of
private markets. With the new
investments, “the main moti-
vation is to try to pick up a
private-credit premium—or li-
quidity premium—over the
comparable bonds in the pub-
lic market,” he said.
For pension funds in the
Netherlands, the shrinking
yields are a growing headache
as they are required to sur-
pass—and not just meet—esti-
mated liabilities. Those that
fall short must submit a recov-
ery plan within a specified
time frame.
APG, which has €440 billion
($486.9 billion) under man-
agement and oversees invest-
ments for the Netherlands’
largest pension fund for gov-
ernment and education em-
ployees, has less than 40% of
its portfolio in fixed income,
said Thijs Knaap, a senior
strategist at the asset man-
ager.
“You have to work harder
for your money,” Mr. Knaap
said. “This means we’re taking
on risk rather than the old sit-
uation of putting everything in
bonds.”
—Julie Steinberg
contributed to this article.from $17 trillion in August.
The giant pools of retire-
ment money are under pres-
sure to take on more risk fol-
lowing decades of declining
interest rates that have
chipped away at returns from
their traditional bond-heavy
portfolios. Those concerns
have been exacerbated this
year as yields on government
bonds dropped sharply and
central banks loosened mone-
tary policy to stimulate eco-
nomic growth.
Pension funds’ allocations
to alternative asset classes
rose to 26% in 2018 in the
U.S., U.K., Japan, Australia,
Canada, Switzerland and the
Netherlands, from 19% in
2008, according to estimates
from Thinking Ahead Institute,
a research firm affiliated with
Willis Towers. The allocation
to bonds has remained steady
at around 30%. That trend
shows no sign of reversing, in-
vestors and analysts said.
Falling bond yields hurt
pensions by lowering a key
metric called the discount
rate, which measures the cur-
rent value of a program’s fu-
ture obligations to retirees.
That forces the pensions to
boost their assets to satisfy li-
abilities in the coming years.
To help U.K. pensions gen-
erate steady returns, Willis
Towers is advising its clients
to invest in long-term prop-
erty rental markets and infra-
structure projects, as well as
buying trains and leasing them
to the government, according
to Mr. Hale.
His fund backs a company
that purchased land in eastern
ContinuedfromPageOne
Pensions
Ta ke O n
More Risk
England for the construction
of two greenhouses with a
combined size of about 47 soc-
cer fields. Those will be leased
out for 20 years to tomato
growers and others, and are
projected to generate annual-
ized yields of more than 6%
over the period.
Another project backed by
the fund involves investing in
a company that collects waste
from London boroughs to be
burned, helping generate elec-
tricity through turbines. Local
authorities pay for the waste
collection, while the electricity
is sold back into the grid, ac-
cording to Mr. Hale. The re-
turns are expected to be more
than 5% annually over 20
years, he said.
Some pension funds are
moving into emerging-market
debt—which can be volatile
and sensitive to political head-
winds—or less-liquid assets
such as real estate.
One U.K. pension-fund cli-
ent placed a sliver of its assets
in the 100-year Argentine
bond sold in 2017, according to
Con Keating, head of research
at Brighton Rock Group, an in-
surance provider for pensions.
The bond currently offers a27.712% yield, according to
FactSet.
In August, the value of
those ultralong bonds fell by
nearly half because of political
uncertainty.
“This stuff really doesn’t
belong in a pension fund,’’ Mr.
Keating said. Because of the
search for better returns, “you
see all sorts of deals being
done for all sorts of credit
that wouldn’t ordinarily be
touched,” he said.
The need to boost returnsprompted Nest, a £8.5 billion
($10.9 billion) workplace-pen-
sion fund manager backed by
the U.K. government, to make
its first foray into private mar-
kets.
The firm is financing infra-
structure projects such as toll
roads and airports, and lend-
ing to commercial real-estate
projects and buying collateral-
ized mortgage-backed securi-
ties, through investments
managed by Amundi SA and
BlackRock Inc.1.–0.–0.–0.00.0.0.1.%Jan. March May July Sept. Nov.Share of assets in the
pension funds of some
advanced economies**Data are for the U.S., U.K., Japan, Australia, Canada, Switzerland and the Netherlands.
Sources: Thinking Ahead Institute (assets); FactSet (yields)OtherEquitiesBondsCash U.K.FranceNetherlands
Germany100020406080%1998 2003 ’08 ’13 ’Yields on 10-year
government bonds