The New York Times International - 13.08.2019

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8 | T UESDAY, AUGUST 13, 2019 THE NEW YORK TIMES INTERNATIONAL EDITION

business

votes with vows to halt the influx of mi-

grants and to cut taxes.

But the results have proved disap-

pointing, a sentiment especially palpa-

ble in Naples, a glorious yet fading city

on the Tyrrhenian Sea.

Hauntingly beautiful, its streets are

pockmarked by deterioration. Teeming

with ancient palaces, Naples is now col-

ored with abandonment, as young peo-

ple move north in pursuit of jobs. Mount

Vesuvius — the volcano whose eruption

buried Pompeii — towers over the land-

scape, a reminder that unseen pres-

sures can explode.

On a recent morning, three dozen

health care workers congregated out-

side a regional government building.

They wore red hats emblazoned with

the letters of their union, the CGIL, the

largest in Italy. They blew shrill whis-

tles. One wielded a bullhorn and tilted it

skyward, shouting angrily at officials in

offices above.

The workers were protesting the loss

of 5,000 jobs in regional hospitals over

the past decade, leading to shortages of

doctors and nurses. The new govern-

ment in Rome is uninterested, they said.

“Everyone sees that they fight every

day among themselves and with the

E.U.,” said the head of the local union

branch, Marco D’Acunto. “But what we

care about is what they do for the coun-

try and the region. And that is nothing.”

In the working-class neighborhood of

Montesanto — a warren of cramped

apartments threaded by narrow, litter-

strewn streets — unemployed workers

gathered in an abandoned church seized

by a makeshift community organiza-

tion. They shared strategies for navigat-

ing the bewildering government bene-

fits system.

Nationally, the unemployment rate

sits near 10 percent — lower than a year

ago, but roughly the same level as in

2012, in the aftermath of a brutal eco-

nomic crisis. Many here say the crisis

never ended.

“What was wrong before has just be-

come wrong in a more stable way,” said

Mimi Ercolano, a labor activist. “There

are huge numbers of people who are

working off the books, in the shadows of

the economy. It’s a social cancer.”

In the midst of the global financial cri-

sis, Antonio Pastore lost the job he had

held for two decades, restoring marble

statues. He had earned about $1,350 per

month at current exchange rates. As or-

ders disappeared, his employer pres-

sured him to agree to work off the books,

he said, enabling the company to avoid

paying taxes. He refused and was fired.

That was the last time he has held a real

job.

Mr. Pastore took temporary construc-

tion stints, working under the table for

$22 per day. He moved back in with his

parents.

Now 45, he winced when asked if he

has children.

“It’s not possible to have a family

when you don’t have work,” he said.

Has anything changed since the popu-

list government took over? Mr. Pastore

scoffed. “It’s gotten worse,” he said. “It’s

gotten harder to find a job, because so

many companies are closing.”

Outside Naples, at a factory that

made fruit baskets, the ax fell in March,

ending paychecks for 117 permanent

workers and 200 contractors. Some ap-

plied in vain for jobs at a nearby Fiat au-

tomobile plant, where the work force

has declined to fewer than 5,000, from

15,000 in the 1970s.

Most jobless people do not qualify for

basic income payments, because the

rules bar grants for those drawing finan-

cial support from relatives. Five Star

once pledged that some nine million

people would benefit, but only 674,

had qualified as of early June, according

to the National Social Welfare Institute.

Thirty-five miles east of Naples, in the

town of Avellino, Sabino Basso has

halted plans to hire 30 more people at

the olive oil bottling plant started by his

great-grandfather.

Mr. Basso’s company buys olive oil

from growers in Italy, Spain and Greece,

exporting 80 percent of its wares to

countries around the globe — especially

the United States, where Walmart is a

major customer. He had planned to in-

crease marketing and online sales.

But then Five Star tightened legal re-

quirements for companies that hire

workers on temporary contracts, effec-

tively limiting stints to one year. The

change was aimed at forcing businesses

to hire permanent workers.

Mr. Basso was aghast. All but five of

his 100 workers are permanent, he said.

The others are apprentices, a status that

has allowed him to hire using temporary

contracts.

“In order to understand if I want to

keep people their whole lives, I have to

test them,” he said. The new rules did

not allow him sufficient time. “I just

stopped hiring.”

His sales in Italy have dipped 4 per-

cent this year, a trend he blames on the

noisy reality show that is Italian politics.

“When the television says the govern-

ment is fighting with the European Un-

ion, and Salvini is fighting with Di Maio,

it hits consumers,” he said. “Companies

are looking for stability.”

History,

politics and

Italy’s ‘serial

stagnation’

I TA LY, FROM PAGE 7

Emma Bubola contributed reporting

from Milan.

lines the economic pressures coming to

bear on Hong Kong. Forecasters predict

that the long-running protests, on top of

the trade war between the United States

and China, will weigh on growth. Tourist

visits have declined, and the stock mar-

ket has been falling for weeks.

Several Cathay employees inter-

viewed by The New York Times over the

weekend said that the company had not

asked workers about their involvement

in or attitude toward the demonstra-

tions, information that it would presum-

ably need to stop them from working on

flights to or over mainland China.

Still, the employees described an at-

mosphere of rising fear and anger in re-

sponse to China’s demands, and of un-

ease about how Cathay would carry

them out.

“We are all so furious now,” said Sally

Chu, a 28-year-old Cathay flight attend-

ant. “We wonder how they can check on

our activities and ban us, too.”

The airline, one of Asia’s largest inter-

national carriers, has already blamed

Hong Kong’s recent turmoil for a drop in

bookings. The controversy now threat-

ens to test the company’s commitments

to its employees against its own bottom

line, which depends significantly on its

ability to fly through mainland Chinese

airspace.

The pilot whom Cathay removed from

service, Liu Chung-yin, was released on

bail after his arrest late last month. But

the Chinese state news media noted that

he had been allowed to continue flying,

and warned that Cathay would “pay a

painful price” for “tacitly encouraging

antigovernment strikes.” Mr. Liu could

not be reached for comment.

Other Cathay employees’ political ac-

tivities attracted attention in mainland

China after large numbers of the air-

line’s workers called in sick to take part

in a recent general strike, which led to

scores of flight cancellations.

Announcing the pilot’s suspension on

Saturday, Cathay went out of its way to

say that “we express no view whatso-

ever on the subject matter of any pro-

ceedings to which he may be subject.”

In a message to employees that day,

Cathay’s chief executive, Rupert Hogg,

said the airline planned to comply with

the Chinese regulator’s new require-

ments. “Our primary focus must remain

on delivering a safe, comfortable

customer experience for everyone who

chooses to fly with us,” Mr. Hogg wrote.

Just days earlier, the airline’s leaders

had said employees’ political views

were not their concern.

“We certainly wouldn’t dream of

telling them what they have to think

about something,” Cathay’s chairman,

John Slosar, said at a news conference.

“They’re all adults. They’re all service

professionals. We respect them greatly.”

It is also unclear whether meeting the

Chinese authorities’ demands will be

enough to spare Cathay the wrath of

Beijing’s propaganda. In a social media

commentary on Sunday evening, the

People’s Daily, the Communist Party’s

mouthpiece, said that the airline’s ac-

tions had hardly resolved its “crisis.”

“Ground the flights that must be

grounded, punish those who must be

punished, rectify what must be recti-

fied,” the People’s Daily commentary

said. “In the face of such warnings, how

can you joke around!”

Some Cathay workers said it might be

for the best if they did not fly to the main-

land after all, lest they risk being ar-

rested or having their phones and other

personal belongings searched.

“The airline must speak up and en-

sure the rights and personal safety of

employees,” said another Cathay flight

attendant, Karrie Chan, 24. “Otherwise I

would feel unsafe even when at work.”

Cathay rose to pre-eminence decades

ago by connecting Asia’s emerging

economies to London, Los Angeles, New

York and other centers of wealth in the

developed world. Hong Kong prospered

by connecting China to the global com-

panies that wanted to do business there.

Today, though, more of those compa-

nies operate in mainland China directly,

with less need for Hong Kong as a

bridge.

And Cathay is now just one of many

carriers linking East and West. China’s

state-backed airlines can fly interna-

tional passengers directly to and from

the mainland’s megacities.

Cathay Pacific’s history is tied up with

its home city’s emergence as a global

hub in ways that date back to the compa-

ny’s founding, in 1946.

Hong Kong at the time was in near

ruin. Its harbor was cluttered with the

wrecks of warships from the Japanese

occupation, and air service was almost

nonexistent. But as the British colony

grew rich over the following decades, so

did Cathay, transforming from a shoe-

string operation into a carrier of re-

gional, then international, renown.

Cathay employees said over the

weekend that they still trusted the com-

pany to treat its crew members fairly,

and that concerns for their own jobs and

safety were still outweighed by their de-

sire to voice their convictions.

“The heavy-handed tactics of main-

land China only make me feel that I

must speak out so that they know how

much we value freedom and democra-

cy,” said Ms. Chu, the flight attendant.

“Otherwise, they will only get worse.”

Protesters crowded into Hong Kong International Airport on Monday to express their anger over how the police responded to protests in the city the night before. More than 100 flights were canceled.

LAM YIK FEI FOR THE NEW YORK TIMES

Hong Kong airline feels Beijing’s grip

A IRLINE, FROM PAGE 7

Raymond Zhong reported from Hong

Kong, and Tiffany May from San Fran-

cisco.

The money, tens of millions of dollars of

it, would flow among Jeffrey Epstein’s

dozens of bank accounts, shell compa-

nies and, at times, charities linked to

high-powered friends.

Where was the money going? What

was it for? Who was actually sending

and receiving it?

A convicted pedophile and accused

sex trafficker who surrounded himself

with an elite network of business and po-

litical leaders, Mr. Epstein enjoyed the

trappings of great wealth: private jets,

mansions, his own island. But much re-

mains unknown about the sources of his

wealth.

Legions of lawyers, bankers and ac-

countants have been trying in recent

weeks to solve that mystery, and their

quest is unlikely to end even after Mr.

Epstein was found dead on Saturday.

The answers could illuminate how Mr.

Epstein allegedly operated a long-run-

ning sex-trafficking operation, whether

he had help from others and who — in-

cluding Mr. Epstein’s victims — will re-

ceive any of his remaining assets. It is

not known if Mr. Epstein had a will.

Interviews with people briefed on

various investigations into Mr. Epstein’s

wealth, and legal and financial docu-

ments in multiple countries, show that

tens of millions of dollars coursed

through his offshore companies and

foundations in sometimes unusual

ways.

In the early 2000s, for example, $

million appeared in Mr. Epstein’s Virgin

Islands-registered company that nor-

mally was home to only small amounts

of money. At another point, an entity

once linked to Mr. Epstein sent tens of

millions of dollars to the charity of a bil-

lionaire retail tycoon, Leslie H. Wexner

— years after Mr. Wexner has said he

severed ties with Mr. Epstein.

Executives at the companies with the

deepest connections to Mr. Epstein ex-

pect that federal prosecutors will inten-

sify their focus on his financial affairs.

Geoffrey S. Berman, the United States

attorney for Manhattan, said on Satur-

day that his office’s investigation into

Mr. Epstein and those around him would

continue, despite his death.

Officials at JPMorgan Chase and

Deutsche Bank, the two banks that for

years served Mr. Epstein, have spent re-

cent weeks poring through their

records, belatedly trying to ascertain

how they ended up doing business with

a sex criminal and what Mr. Epstein was

using his bank accounts for, according to

people familiar with the internal re-

views.

Years before Mr. Epstein’s accounts

were shut down, compliance officers

and other employees at both banks had

urged executives to stop serving Mr. Ep-

stein, citing the legal and reputational

risks of working with him, according to

former Deutsche Bank and JPMorgan

employees. At both banks, executives

rejected that advice and kept doing busi-

ness with the lucrative client.

Deutsche Bank, where Mr. Epstein

was a client from 2013 until June 2019,

has been handing over transaction-by-

transaction data to federal prosecutors

and other authorities, according to two

people familiar with the matter. One of

those people, who was briefed on the

bank’s internal review, said it appeared

that Mr. Epstein was using his accounts

for sex trafficking and possibly other il-

legal activity. The banker who initiated

the relationship with Mr. Epstein left

Deutsche Bank last year, around the

time that the company decided to begin

shutting down Mr. Epstein’s accounts,

according to one of the people.

JPMorgan has not been contacted by

government authorities, a person famil-

iar with the bank said, but executives

expect they will be asked to provide

records about their relationship with

Mr. Epstein, which lasted from the late

1990s until 2013.

But the knottiest financial enigma in-

volves Mr. Epstein’s relationship with

Mr. Wexner, the chief executive of the

apparel conglomerate L Brands, who for

years entrusted Mr. Epstein with his fi-

nancial life.

L Brands, a publicly traded company

that owns Victoria’s Secret and Bath &

Body Works, has hired a prominent law

firm, Davis Polk & Wardwell, to investi-

gate what role, if any, Mr. Epstein played

at the company, according to people

briefed on the matter.

Mr. Wexner has said that he had sev-

ered ties with Mr. Epstein in late 2007,

more than a year after Mr. Epstein was

first charged with sexual misconduct

with minors. In 2008, Mr. Epstein

pleaded guilty in Florida to soliciting

prostitution from a minor.

In a letter last week to his family foun-

dation, Mr. Wexner, 81, accused Mr. Ep-

stein of having misappropriated “vast

sums.”

People briefed on the matter said Mr.

Epstein created a complex web of in-

vestment vehicles for Mr. Wexner, then

collected high fees or withdrew funds

for his personal use. Tax records show

that many millions of dollars moved

from one of Mr. Wexner’s charities to a

charity that Mr. Epstein controlled.

But Mr. Wexner has not made public

evidence showing that Mr. Epstein mis-

appropriated the money, disclosed how

much money Mr. Epstein took or said

where Mr. Epstein misappropriated the

money from. For about 16 years, Mr.

Wexner had formally delegated to Mr.

Epstein virtually blanket control of his

finances — the authority to sign checks,

borrow money, buy and sell real estate

and hire workers on his behalf.

Mr. Wexner said he discovered the

missing money when he and Mr. Epstein

parted ways in 2007. The billionaire

never contacted the state and federal

authorities who were investigating Mr.

Epstein at the time for sex crimes, ac-

cording to people briefed on the matter.

Instead, Mr. Wexner’s lawyers worked

out a private arrangement in which Mr.

Epstein’s foundation and business

would repay some of the misappropri-

ated money, the people said. They said

Mr. Epstein returned about $100 million

to Mr. Wexner.

But in 2011 — four years after Mr.

Wexner has said he had severed all ties

with Mr. Epstein — Mr. Wexner’s chari-

table foundation received a $56 million

contribution from a trust linked to Mr.

Epstein, according to charity records

and other financial documents reviewed

by The New York Times.

The trust, named Community Inter-

est, had been listed as being under Mr.

Epstein’s control in a Swiss bank ac-

count, according to financial records in-

cluded in a leak to the French newspa-

per Le Monde. The documents were

shared with The Times through a col-

laboration organized by the Interna-

tional Consortium of Investigative Jour-

nalists. It is not clear from public

records who controlled Community In-

terest in 2011.

Thomas Davies, a spokesman for Mr.

Wexner, said in a statement, “A Charita-

ble Remainder Trust established prior

to Mr. Epstein’s termination in 2007 ma-

tured according to its terms and assets

flowed into the charitable fund at the

time of its maturity.”

Through his spokesman, Mr. Wexner

declined repeated interview requests or

to answer questions about why he did

not contact the authorities about the

claims that Mr. Epstein had misappro-

priated his money.

Tens of millions of dollars were also

flowing in and out of a tiny financial ad-

visory company that Mr. Epstein incor-

porated on St. Thomas, in the United

States Virgin Islands.

Sometime between June 2000 and

June 2001 — when Mr. Epstein was serv-

ing as a financial adviser to Mr. Wexner

— $88 million suddenly appeared in the

company’s coffers, according to docu-

ments filed in St. Thomas. It was an ex-

traordinary sum for such an offshore

company, where a lone shareholder of a

private holding company would gener-

ally only invest a token amount to keep

the company legally solvent.

Then, over the next several years, the

money was periodically withdrawn

from the company, the filings show.

There are no public clues as to where the

$88 million came from or where it went.

After 2005, the company and its succes-

sor had no more than $700,000 in their

bank accounts at any one time.

Two of Mr. Epstein’s longtime attor-

neys, Darren Indyke and Jeffrey

Schantz, were involved with some of his

trusts and other entities in New York

and in the Virgin Islands, according to

incorporation documents. Neither law-

yer responded to requests for comment.

Financier’s hazy dealings likely to draw further scrutiny

Jeffrey Epstein in 2004. The accused sex

trafficker was found dead last weekend.

RICK FRIEDMAN/CORBIS, VIA GETTY IMAGES

Emily Steel reported from Columbus,

Matthew Goldstein from New York, Steve

Eder from Columbus and New York, and

David Enrich from New York. Kate Kelly

and Jessica Silver-Greenberg contribut-

ed reporting from New York. Kitty Ben-

nett, Susan Beachy and Alain De-

laquérière contributed research.

COLUMBUS, OHIO

Millions of dollars crossed

Jeffrey Epstein’s accounts;

where did it all come from?

BY EMILY STEEL,

MATTHEW GOLDSTEIN,

STEVE EDER

AND DAVID ENRICH

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