Financial Times Europe - 10.03.2020

14 ★ FINANCIAL TIMES Tuesday10 March 2020

COMPANIES

BY O RT E N C A A L I A J— LONDON

A New York judge has frozen assets
belonging to hedge fund managerPhilip
Falcone nd hisa Harbinger ffshoreO
fund after he failed to pay millions in
legal fees to a Manhattan law firm that
defendedhimagainstUSregulators.
Judge Arthur Engoron ordered the
freeze last weekafterallegations that
Mr Falcone, who had an estimated net
worth of $1bn in 2014, has reneged on
his debts and sold some of the underly-
ing collateral, which includedworks by
PicassoandWarhol.
Judge Engoron upheld a decision
handed down by an arbitrator earlier
this year in which Mr Falcone and Har-
binger were ordered to pay $13.6m in

legal fees toDontzin Nagy & Fleissig orf
workgoingbackalmosteightyears.
The New York-based law firm repre-
sented Mr Falcone in a 2013 settlement
with the Securities and Exchange Com-
mission over allegations that the inves-
tor had borrowed $113m from his hedge
fund to pay his personal taxes and had
secretly favoured certain clients when it
cametoredemptionrequests.
Mr Falcone and Harbinger admitted
to “multiple acts of misconduct” that
hurt investors and interfered with the
functioningofthesecuritiesmarkets.
The investor and hisfund were
orderedtopay$18minfines.
In a document made public as evi-
dence in court, arbitrator Caroline
Antonacci said DNF had negotiated a
settlement with the SEC which was
“highly lucrative” for Mr Falcone as it
allowed him “to continue to oversee his
substantialLightSquared nvestment,i

remain CEO of a public company, man-

age his hedge fund, and immediately

resumeearningenormoussums”.

Mr Falcone was surprised at the

result, a person familiar with the situa-

tionsaid.

DNF later also agreed a settlement

with the New York attorney-general on

behalf of Harbinger for tax evasion, in

whichitwasforcedtopay$30minfines.

Harbert Management Corporation, the

investment management company that

sponsored Mr Falcone’s hedge fund,

receiveda$40mfine.

Arbitration documents show that

DNF provided legal services to Mr Fal-

coneandhisfirmforsixyears.

DNF lawyers negotiated a termina-

tion agreement for Mr Falcone’s general

counsel, Robin Roger, who resigned

after the investor allegedly failed to pay

her millions of dollars, and a dispute

involving the investor’s interest inMin-

nesotaWild,a hockeyteam.

As lawyers’ bills piled up, Mr Falcone

told DNF that he was having “liquidity”

issuesandwas“tryingeverythingunder

the sun” to resolve them, according to

thearbitrationdocuments.

Mr Falcone has been left nursing

heavy debts and in 2019 sold his New

Yorktownhouseforarecord$77m.

Mr Falcone,chief executive ofHC2,

has also found himself in the crosshairs

of activistMG Capital. The firm has

flaggedconcernsovertheex-hedgefund

manager’sregulatoryissuesandispush-

ingtoousthimfromthe oard.b

“We are concerned about the appro-

priatenessandlegitimacyoftheservices

that HC2 may be receiving from Mr Fal-

cone and his affiliates, especially given

past infractions,” the firm toldinvestors

lastmonth.

“Mr Falcone and the incumbent

board have taken another series of bra-

zen steps to entrench themselves at the

expense of independent stockholders

andcorporatedemocracy.”

In arbitration, Mr Falcone accused

DNF of malpractice and argued that the

firm’s fees were “excessive” and “unrea-

sonable”. Those allegations were dis-

missedbythearbitrator.

Harbingerdeclinedtocomment.

Financials

New York judge

orders freeze of

Falcone assets

Move follows hedge fund

manager’s failure to pay

millions in legal fees

DAV E L E E— SAN FRANCISCO

J O N AT H A N E L E Y— LONDON

Amazon sstartingtosellitscashier-lessi

shopping technology to other retailers,

offering them camera systems that

automatically record what shoppers

pickupandwalkoutwith.

“Since launching Amazon Go years

ago, many retailers have expressed an

interest in offering similar checkout-

free shopping experiences to their cus-

tomers,” the company said on justwalk-

out.com, a website set up to market the

technology.

“We’re excited to now offer the ability

for retailers to leverage Just Walk Out

technology from Amazon in their

stores,” adding that the installation can

take“aslittleasafewweeks”.

The system allows customers to enter

shops by scanning their credit card.

Once inside, cameras and shelf-weight

monitors track what they pick up and

bill them accordingly.If the customer

wants a receipt, they will need to enter

their email address at a kiosk. The card

and customer is then stored for future

visits.

Amazon has several motivations for

sharing its cashier-free tech, considered

the most sophisticated among its com-

petitors. As well as selling the technol-

ogy itself — the cost of which was not

divulged by the company — the Just

Walk Out system runs on Amazon’s

cloud computing platform, a segment

thatdrove two-thirds of the company’s

operatingincomeinthelastquarter.

The move also opens up avenues for

Amazon to collect more data on con-

sumer habits beyond its own stores, and

a greater number of stores using the

technology will increase its reliability

and accuracy through machine learn-

ing.

The move is similar to Ocado’s focus

on commercialising its technology. The

Britishcompanyspentadecadeperfect-

ingtheroboticsandsoftwareforpicking

and delivery online grocery orders, and

has around 1.5 per cent of the total UK

grocerymarket.

Butinrecentyears,itssharepriceper-

formancehasbeendrivenbythedealsit

has signed to provide that technology to

others.

Amazon’s entry into the grocery sec-

tor with the purchase ofWhole Foods ni

2017 has prompted other supermarkets

toacceleratetheirdigitalplans.

Since buying Whole Foods, Amazon

has so far opened 25 Amazon Go stores

in the US, andrecently extended the

concept to a full-size grocery store in

Seattle.

The company is also gearing up to

launch a number of “traditional”

smaller stores, under a yet-to-be-un-

veiled brand, that would have human

cashiers. Floor plans submitted to local

regulators suggest these dual-purpose

locations will be used as “microfulfil-

ment” centres for increasing the deliv-

ery speeds of online orders, bringing

Amazon’s warehousing infrastructure

closertocommunities.Amazonsaysthe

first of these hybrid stores will open in

LosAngelesthisyear.

Despite these inroads, Amazon has

not expanded into online grocery as

aggressively as many expected. Today it

handles around 4 per cent of the US gro-

ceriesmarket.

“They’ve no interest in food retail-

ing,” said Steve Dresser, founder of con-

sultancy Grocery Insight, who has vis-

ited some of the Amazon Go stores in

the US. He added that the technology

was “wonderful” but questioned if it

would work cost-effectively in large

stores. “If they were reasonably confi-

dent in the need for it, or the demand,

then surely they’d put it into Whole

Foods?”

Amazon is not the only provider of

such technology.Trigo, an Israeli

start-up,hasagreedtoinstallitscashier-

less system in over 200 stores operated

byShufersal, Israel’s leading supermar-

ket.Bloomberglastyearreportedthatit

is also working with Tesco, although the

UK supermarket has refused to com-

ment.

Portuguese start-upSensei, which is

backed by German wholesalerMetro

andSonae, a technology investment

specialist, is also working to commer-

cialise a camera-based cashier-less sys-

tem.

Expanding this technology to other

retailers, who do not independently

have the knowhow to do so, will

heighten concerns among workers

rightsgroups.

“This so-called cashier-less technol-

ogy is nothing but a Trojan horse that

will let Amazon control and monopolise

competing retailers and giveJeff Bezos

direct access to their customer data. It is

timeforregulatorsandourelectedlead-

ers to act before Amazon does lasting

damage to our already-fragile econ-

omy,” said Marc Perrone, president of

the United Food and Commercial Work-

ersUnion.

Retail.Innovation

Amazon sells checkout-free

shopping technology to rivals

In-store camera system allows

group to collect data on buying

habits beyond its own shops

J O H N R E E D —BANGKOK

J O N AT H A N E L E Y —LONDON

Tesco as agreed to sell its south-easth

Asian operations to Thai conglomerate

CharoenPokphand or$10.6bnincash,f

taking another big step back from its

global expansion and setting the stage

foralavishreturnofcashtoinvestors.

The UK’s largest supermarket chain

yesterday announced the proposed

deal, which is Asia’s largest corporate

acquisition in the year to date and the

biggestinThailand’shistory.

In a stock exchange statement, Tesco

saidthesalewouldreturnabout£5bnto

shareholders via a special dividend nda

pay £2.5bn into its defined-benefit pen-

sionschemestoeliminatetheirdeficits.

“Following inbound interest and a

detailed strategic review of all options,

we are announcing today the proposed

sale of Tesco Thailand and Tesco

Malaysia,”Dave Lewis, Tesco’s chief

executivesaid.

“This sale releases material value and

allows us to further simplify and focus

the business, as well as to return signifi-

cantvaluetoshareholders.”

Tesco and its advisersheld meetings

in London with interested parties last

week, and the company’s board met

overtheweekendtodiscussthedeal.

CP facedcompeting bids rom twof

rival Sino-Thai family-controlled con-

glomerates,Central Group nda TCC

Group. Central, Thailand’s biggest

department store operator, made an

offerofjustover$9bn,accordingtopeo-

ple close to the deal, and TCC recently

raised a $10bn two-year loan to finance

itsbid,accordingtoBloomberg.

For Tesco, selling its nearly 2,

stores in Thailand and 74 in Malaysia

marks the final stage of the UK retailer’s

exit from Asia. Tesco sold its South

KoreanHomeplus usinessin2015.b

Thesale to CP is subject to approval

by Tesco shareholders and regulatory

reviewbytheThaiauthorities.

CPalreadyoperatesmorethan10,

7-Eleven onveniencestoresinThailandc

as well as the country’s biggest cash-

and-carrychainSiamMakro.

Retail

Tesco offloads SE Asia units

to CP Group for $10.6bn

R O B E RT A R M ST R O N G —NEW YORK

Wells Fargo’s board chair and another

board member resignedyesterday

beforethisweek’shearingsscrutinising

thebank’s2016fakeaccountsscandal.

Betsy Duke, a former Federal Reserve

regulator who joined Wells Fargo’s

board in 2015, had been chair since the

start of 2018. Audit committee head

James Quigley, a former Deloitte execu-

tive,joinedtheboardin2013.

“We believe that our decision will

facilitate the bank’s and the new CEO’s

ability to turn the page and avoid dis-

traction that could impede the bank’s

future progress,” the two said in a joint

statement.

Charles Noski, the former chief finan-

cial officer of Bank of America, will

serveasthenewchairman.Hewillwork

withchief executiveCharlie Scharf, who

joinedthebankinOctoberfromBankof

New York Mellon, to take on the biggest

clean-upinUSbanking.

Wells Fargo has struggled to regain its

footingsinceitwasrevealedin2016that

its retail bankers, working under an

aggressive incentive pay scheme,

opened millions of customer accounts

withoutclientconsent.

Last month Wells Fargo, the fourth-

biggest bank in the US by assets, agreed

to pay $3bn in criminal and civil penal-

tiesrelatedtothescandal,whichfederal

authorities said reflected a “complete

failureofleadership”attheUSbank.

The board membersand Mr Scharf

were due to appear before the Demo-

cratic-controlled House financial serv-

ices committeetoday and tomorrow to

giveanaccountof rogressinaddressingp

theproblemsrevealedbythescandal.

Wells Fargo shares have fallen 30 per

cent in the past 12 months, almost dou-

blethefallinthewiderbankingsector.

Analysts saidyesterday the board

members’ departures were necessary,

giventhepoliticalclimate.

“At some point you hope manage-

ment and board turnover is a thing of

the past,” said Scott Siefers of Piper San-

dler, but “the anger at Wells is still

there”,sochangeswereneeded.

Banks

Wells Fargo chair steps down

beforefake accountshearing

Cameras and shelf-weight

monitors track what

shoppers pick and bill

them accordingly

Philip Falcone and

his Harbinger fund

have been told to

pay $13.6m in legal

fees to Dontzin

Nagy & Fleissig

A worker checks

grocery items in

an Amazon Go

store, above,

and shoppers,

left, scan their

phones in the

same store in

Seattle, the first

large retail

location to

deploy the

cashier-free

technology

Ted Warren/AP; David

Ryder/Getty Images

MARCH 10 2020 Section:Companies Time: 9/3/2020- 18:22 User:alistair.fraser Page Name:CONEWS3, Part,Page,Edition:EUR, 14, 1