Pension Fund Freezes New Investment With Apollo Over Founder’s Epstein Ties

Saudi Aramco’s Profit Plunges Amid Oil Slump: Live Updates

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A pension fund for Pennsylvania teachers said it had frozen new investments with Apollo Global Management amid concerns about ties between its founder, Leon Black, and Jeffrey Epstein.

The $63 billion Pennsylvania Public School Employees’ Retirement System said it spoke with Apollo officials last week after a New York Times report detailed the financial ties between the two men. Mr. Black made at least $50 million in payments and donations to entities affiliated with Mr. Epstein in the years after Mr. Epstein’s 2008 conviction for soliciting prostitution from a teenage girl.

Mr. Black has said the fees he paid were for services such as estate planning and philanthropic advice. In a letter to investors after the report was published, Mr. Black said he had “never tried to conceal” the work Mr. Epstein had done for him. Mr. Black and Apollo said Mr. Epstein did no work for the firm.

On Tuesday, an Apollo spokeswoman said that the investment firm’s board had retained the law firm Dechert to conduct an independent review of the dealings between Mr. Black and Mr. Epstein. Mr. Black has said he would cooperate with all legal inquiries.

The pension fund had initially been planning to meet with Apollo officials this week, but moved up the meeting after reading the Times report and Mr. Black’s letter, said Steve Esack, a spokesman for the retirement system.

“After that October 13th phone conversation, P.S.E.R.S.’s investment team informed Apollo that it will not consider any new investments at this time,” Mr. Esack said in an email. The retirement system “is closely following the ongoing legal issues and the newly launched internal Apollo investigation,” he said.

That means the fund’s existing investments with Apollo, worth $918 million, will remain intact and gradually decline as the projects they financed are completed and the money is returned to the teachers’ pension fund. Pension fund commitments to private equity vehicles typically last for a number of years.

Other public pension funds that work with Apollo have not gone so far as to freeze investments.

Rob Maxwell, a spokesman for the Texas teachers’ retirement system, said that fund had already been in touch with Apollo and was “closely monitoring the activities that the firm and its board are taking.”

Wayne Davis, a spokesman for the California Public Employees’ Retirement System said the fund called Apollo last week about Mr. Black’s relationship with Mr. Epstein and would continue to monitor the situation. The system expects its outside investment managers “to follow the same core values of integrity and accountability that guide our own investment decision-making,” Mr. Davis said.

A spokesman for the Illinois teachers’ pension system, David Urbanek, said it was “going to monitor this situation very closely as it continues to unfold,” but the trustees responsible for selecting and monitoring outside investment managers had not yet discussed the matter.

A spokeswoman for Scott Stringer, the New York City comptroller who sits ex officio on the boards of pension funds serving teachers and other workers, said, “We are troubled by these reports, and we are closely monitoring the situation in accordance with our fiduciary duty and to protect the interests of our pensioners.”

Shares of Apollo were up 2.6 percent on Wednesday, but are still down more than 12 percent since Oct. 12.

Credit…Aly Song/Reuters

Tesla on Wednesday reported a profit for the fifth consecutive quarter, putting it on track to report its only annual profit since its founding in 2003.

Tesla said it made $331 million, or 27 cents per share, in the three months that ended in September. The company reported a profit of $143 million, or 16 cents per share, in the same period a year earlier.

The automaker set records for sales, revenue, net income and free cash flow, Tesla’s chief executive, Elon Musk, said in a conference call.

“Q3 was the best quarter in our history,” Mr. Musk said.

The company delivered 139,600 cars in the third quarter. That was a roughly 50 percent increase from the second quarter, when sales and production were severely hampered by the coronavirus pandemic. It produced 145,000 vehicles, and had revenue of $8.7 billion.

The company’s profit was helped by $397 million from the sale of regulatory credits to other automakers, three times as much as in the same quarter a year earlier.

But Tesla faces questions about whether that strong sales growth is tapering off. Analysts believe Tesla’s sales in the United States have already slowed, and they have said it may be suffering from sluggishness in other parts of the world. In China, Tesla has cut prices several times this year and sales of the Model 3 sedans it makes in Shanghai declined slightly in September compared with August and July. And in Europe, the company faces growing competition from traditional automakers.

“Tesla is losing ground in Europe to fierce competitors” that have offered more affordable electric models, Vicki Bryan, the chief executive of Bond Angle, a research firm, said in a report before the company’s earnings report. Ms. Bryan also said Tesla’s Model Y hatchback seemed to be taking sales away from the Model 3 rather than adding to the company’s sales.

Mr. Musk last month appeared to temper expectations when he forecast that sales would rise 30 to 40 percent this year, implying a range of 482,000 to 514,000 cars. To sell a half a million cars this year, Tesla would have to sell 182,000 cars in the fourth quarter.

He did not elaborate on the outlook for the fourth quarter on Wednesday, but he did suggest that he’s expecting a significant increase in sales in 2021. Mr. Musk said Tesla is working to cut costs so that it can lower car prices and make them affordable to more people.

In the conference call, Mr. Musk was asked by an analyst if 2021 sales might fall between 840,000 and one million cars. The range is based on increased production Tesla is expecting from its plants in Fremont, Calif., and Shanghai, and new factories its is building near Berlin and Austin, Texas. Mr. Musk replied: “It’s in that vicinity.”

While several automakers have introduced electric vehicles, Tesla so far has faced little serious competition. But that could change over the next year or so.

On Tuesday, General Motors offered a preview of a battery-powered and technology-packed Hummer pickup truck that it plans to begin selling in about 12 months. The Hummer EV is supposed to go 350 miles or more on a full charge — in line with Tesla’s top models. The first edition will start at $112,595. Other models due in 2022 and later will be available for under $100,000.

The Hummer EV is meant to compete with Tesla’s pickup, the Cybertruck, which is supposed to go into production late next year. Ford Motor, Rivian and other automakers are also hoping to bring electric pickup trucks to the market soon.

Credit…Michael Reynolds/EPA, via Shutterstock

President Trump cast doubt Wednesday on the prospects of a bipartisan, multi-trillion-dollar stimulus deal before Election Day, as Senate Republicans continued to resist a compromise they called too costly and politically fraught.

Mr. Trump blamed Democrats, citing their push to give billions of dollars in aid to state and local governments as a reason an agreement is unlikely before Nov. 3.

“Just don’t see any way Nancy Pelosi and Cryin’ Chuck Schumer will be willing to do what is right for our great American workers, or our wonderful USA itself, on Stimulus,” Mr. Trump posted to Twitter.

The president’s tweet came just hours after Speaker Nancy Pelosi and Mark Meadows, the White House chief of staff, said that they were continuing to narrow their differences on a plan. Ms. Pelosi had also conceded that a deal might not be possible before the election.

A nearly one-hour conversation between Ms. Pelosi and Steven Mnuchin, the Treasury secretary, brought the pair “closer to being able to put pen to paper to write legislation,” a spokesman for Ms. Pelosi said Wednesday afternoon. Separately, Mr. Meadows said that he was “still very hopeful and very optimistic that we’re making progress.”

But with time waning to cement an agreement, both sides also were wary.

Mr. Meadows, who met with Senate Republicans on Capitol Hill on Wednesday, told reporters that lawmakers in his party had grown suspicious of Ms. Pelosi’s tactics and were “starting to get to a point where they believe that she is not negotiating in a fair and equitable manner.”

Ms. Pelosi said she remained upbeat about the prospects for a compromise but allowed for the possibility that it would wait until after the election.

“I’m optimistic that there will be a bill,” she said in an interview on MSNBC. “It’s a question of, is it in time to pay the November rent, which is my goal, or is it going to be shortly thereafter and retroactive.”

On the other side of the Capitol, Senate Democrats blocked a move by Republicans to advance a $500 billion plan that would have revived lapsed federal unemployment benefits and a popular federal loan program for small businesses, as well as provide additional money for testing.

Democrats, who have argued the package falls far short of the level of aid needed, unanimously opposed it, and it fell short on a party-line vote of 51-44, failing to clear the 60-vote threshold required to move forward.

Mr. Meadows said earlier Wednesday that the toughest obstacles to a bipartisan stimulus deal were a push by Democrats for hundreds of billions of dollars more in federal aid for states and cities and their resistance to a liability shield for businesses. The White House has proposed providing $250 billion to states and municipalities, Mr. Meadows said, while House Democrats have called for double that.

“The biggest issue remains state and local assistance,” Mr. Meadows said on the Fox Business Network. “That remains a stumbling block.”

Ms. Pelosi and Mr. Mnuchin are expected to speak again on Thursday.

Credit…Erik S Lesser/EPA, via Shutterstock

Lael Brainard, a Federal Reserve governor who is seen as a possible future Treasury secretary if former Vice President Joseph R. Biden Jr. wins the election, warned in a speech Wednesday that “the easiest improvements” in the labor market “are likely behind us.”

Ms. Brainard pointed out that the share of permanent layoffs is rising — bad news because it takes longer to rehire those workers than people who have temporarily lost their jobs — and that unemployment insurance claims have ticked up. She also noted that participation rates for women in their prime working years have fallen.

That decline “could have longer-term implications for household incomes and potential growth,” she said.

A shortfall in government support could pose a major risk to the pace of the economic rebound, Ms. Brainard said, especially if additional help comes after hard-hit households burn through the savings they built up earlier in the crisis.

Apart from the course of the virus itself, the most significant downside risk to my outlook would be the failure of additional fiscal support to materialize,” she said.

Economists often refer to the economic rebound underway as K-shaped, meaning that it is sharply divided. Some people have held onto their jobs, watched their savings rise and maintained basically normal consumption patterns despite some pandemic-spurred modifications. But another broad segment of workers has lost jobs and seen its labor income dry up. While many such households are now living off savings from earlier government support, those funds will not last forever. Likewise, many big businesses are doing well, even as smaller companies and those in hard-hit sectors struggle.

“Further targeted fiscal support will be needed alongside accommodative monetary policy to turn this K-shaped recovery into a broad-based and inclusive recovery,” Ms. Brainard said. “The most important message is simply that we will have a much better, stronger, more inclusive recovery if we do continue to see that targeted fiscal support” alongside Fed policy.

Credit…Jessica Hill/Associated Press

Purdue Pharma, the maker of OxyContin, has agreed to plead guilty to criminal charges of defrauding federal health agencies and violating anti-kickback laws, and faces penalties of roughly $8.3 billion, the Justice Department announced on Wednesday.

The company’s owners, members of the wealthy Sackler family, will pay $225 million in civil penalties.

Wednesday’s announcement does not conclude the extensive litigation against Purdue, but it does represent a significant advance in the long legal march by states, cities and counties to compel the most prominent defendant in the opioid epidemic to help pay for the public health crisis that has resulted in the deaths of more than 450,000 Americans since 1999, according to the Centers for Disease Control and Prevention.

Still, it is unlikely the company will end up paying anything close to the $8 billion negotiated in the settlement deal. That is because it is in bankruptcy court and the federal government will have to take its place in a long line of creditors. Typically, creditors end up collecting pennies on the dollar.

Credit…Patrick Semansky/Associated Press

One of the fronts in the Justice Department’s case against Google is a 13-year-old agreement between Apple and Google that has evolved into a multibillion-dollar deal with enormous consequences for both companies and many of their rivals.

When Apple introduced the iPhone in 2007, Google was the device’s default search engine. In return, Google paid Apple a chunk of the ad revenue it collected from the millions of Google searches conducted on iPhones.

Today that arrangement covers all Apple devices, which now account for nearly half of all Google search traffic, according to the Justice Department’s lawsuit. As a result, Google pays Apple an estimated $8 billion to $12 billion a year, according to the suit. That has made Apple and Google hugely reliant on one another, while edging out other search engines and, according to the U.S. government, protecting Google’s monopoly.

“By paying Apple a portion of the monopoly rents extracted from advertisers, Google has aligned Apple’s financial incentives with its own and set the price of bidding for distribution extraordinarily high — in the billions,” the Justice Department said in its lawsuit.

With billions of dollars on the line, the partnership is critical to both companies. Inside Google, losing its pole position on iPhones is considered a “Code Red” scenario, according to the lawsuit. And Google’s payments account for roughly 15 percent to 20 percent of Apple’s profits.

Google officials said they weren’t aware of the Justice Department’s “Code Red” allegation and that the company’s deal with Apple is no different than Coca-Cola paying a supermarket for prominent shelf space.

Apple did not immediately respond to a request for comment.

Credit…Mark Wilson/Getty Images

A federal judge appointed by President Barack Obama will preside over the Justice Department’s antitrust lawsuit against Google, according to a note posted to the case’s docket on Wednesday.

Judge Amit P. Mehta of the U.S. District Court for the District of Columbia was appointed to the bench in late 2014. He spent much of his career in private practice and worked a public defender in the early 2000s.

Mr. Mehta has handled some high-profile cases. Last year, he ruled in favor of Congress’s attempt to subpoena President Trump’s financial records. He partially ruled against the Trump administration’s freeze to visa programs earlier this year.

And he has supported a federal attempt to rein in business concentration. In 2015, he sided with the government’s plan to block the proposed merger of US Foods and Sysco, two prominent food distributors. The merger ultimately fell apart because of the opposition.

He did not immediately respond to a call seeking comment on Wednesday.

The Justice Department lawsuit filed on Tuesday argues that Google obtained a monopoly over online search services — and the ads that run on them — and then used contracts with phone makers like Apple to protect that power. Google has said that the lawsuit is groundless and denies it engages in anti-competitive behavior. The company expects it will be at least a year before the lawsuit goes to trial.

  • Stocks on Wall Street fell on Wednesday, after drifting back and forth from positive to negative territory, as investors sought clarity on the prospects of a stimulus deal in Washington.

  • Europe’s benchmark stock indexes headed lower as the region’s central bank warned of the risk to Europe’s economy from a second wave of the pandemic.

  • The S&P 500 ended 0.2 percent lower. Stocks in Europe fell, with major indexes down 1 to 2 percent as coronavirus cases continued to rise.

  • Netflix was lower after the company reported Tuesday that it had signed up fewer new subscribers last quarter than expected. Snap, the parent company of Snapchat, surged on its report that it had recorded a big increase in users.

  • On Tuesday, stocks were whipsawed by conflicting comments about the state of the stimulus talks, but ended the day up half a percent. Speaker Nancy Pelosi said she was “optimistic” a deal could be reached with the Trump administration in the coming days. A few hours later, Senator Mitch McConnell, the majority leader, told Republicans that he had advised the White House not to strike a deal. Later still, Ms. Pelosi’s spokesman said the speaker and Steven Mnuchin, the Treasury secretary, had found “common ground as they move closer to an agreement.”

  • On Wednesday, Mark Meadows, the White House chief of staff, said that a push by Democrats for hundreds of billions of dollars in federal aid for states and cities and Democrats’ resistance to a liability shield for businesses remained the toughest obstacles to a stimulus deal.

Credit…Christian Monterrosa/EPA, via Shutterstock
  • Netflix attracted 2.2 million new subscribers for the third quarter, about one million fewer than what investors were expecting and short of the 2.5 million Netflix itself had forecast, the company reported Tuesday. Consumer interest in Netflix accelerated earlier in the year as households in lockdown streamed films and shows more than usual, giving the company a record number of new subscribers.

  • Britain’s postal service, Royal Mail, announced it would start to pick up parcels from residential houses as the country sees a surge in online shopping. It will cost 72 pence per package, or nearly $1, for the service.

  • Pioneer Natural Resources, a leading shale oil producer, said on Tuesday that it would buy Parsley Energy for $4.5 billion to expand its operations in the Permian Basin, the oil field that straddles West Texas and New Mexico. A day earlier, ConocoPhillips announced that it was acquiring Concho Resources, another Permian producer, for $9.7 billion. These and other acquisitions signal that oil and gas companies are looking for ways to cut costs because they do not anticipate a quick recovery in demand for their products, which tumbled this spring when the pandemic took hold.

  • Snap, the parent company of Snapchat, said revenue for the third quarter was $678 million, up 52 percent from a year ago, exceeding analysts’ estimates of $559 million. While some analysts had predicted that Snap’s growth would tail off as people returned to school, its number of daily active users rose 18 percent to 249 million. But the company posted a net loss of nearly $200 million in the quarter, narrower than the loss of $227 million a year ago. The company’s stock jumped on the news.

Credit…Chang W. Lee/The New York Times

Michael Roth, the longtime chief executive and chairman of the Interpublic Group of Companies, one of the world’s largest advertising companies, said on Wednesday that he would step down from his job at the end of the year.

He will be replaced, as has long been expected, by the current chief operating officer, Philippe Krakowsky, an 18-year IPG veteran and the architect of its $2.3 billion acquisition of the data company Acxiom in 2018. The change goes into effect Jan. 1. Mr. Roth, 74, who has been chairman of IPG since 2004 and chief executive since 2005, will become executive chairman. IPG’s internal guidelines encourage board members not to stand for re-election after age 74.

Before Mr. Krakowsky, 58, takes over, Mr. Roth must lead the company through the fourth quarter, always the most important of the year for advertising companies — the “crucial holiday shopping season,” he said on a conference call with analysts on Wednesday.

Coronavirus cases are surging around the world, unemployment remains high and the status of government stimulus programs is unclear, especially in the United States. “All this makes client decision-making for the fourth quarter difficult to forecast,” Mr. Roth said.

In the third quarter, which ended on Sept. 30, IPG’s net revenue sank 5.2 percent, to $1.95 billion, as clients in the automotive, transportation and industrial sectors suffered. The company slashed its head count by 7 percent from a year earlier, to 50,500 people. It also cut back its substantial travel and entertainment costs and said it plans to trim its real estate budget by exiting more leases. “The workplace environment is going to be different,” Mr. Roth said on the call.

There’s a new gorilla in the bond market.

The European Union issued debt in a big way for the first time this week to finance pandemic relief programs, generating huge demand from investors eager for an alternative to the United States Treasuries that dominate the government bond market.

The bloc has issued debt before, for example to help Greece recover from a financial crisis, but never on the scale seen Tuesday. The European Commission sold 17 billion euros ($20 billion) in 10-year and 20-year bonds, the first of a series of issues that will raise a total of €900 billion during the next five years.

Previously, national governments were responsible for almost all of their own financing. Countries like Germany and the Netherlands were against issuing common debt, but the pandemic changed their views.

“We have done it before, but we are entering a new level,” Johannes Hahn, the European commissioner in charge of budget and administration, told reporters at a news conference in Brussels Wednesday to announce the results of the sale.

Demand for the bonds, which had interest rates near zero, was 13 times the supply, a sign that investors have grown uneasy about having too much of their money in Treasuries, analysts said. Investors are worried about soaring government spending by the United States government, a widening trade deficit and falling interest rates, George Saravelos, a bond strategist at Deutsche Bank, said in a research report.

The sale is “a vote of confidence on the euro as a reserve asset, particularly at a time when the dollar’s dominant role is being questioned,” Mr. Saravelos said.

The money is earmarked for relief programs such as subsidized furloughs for workers in industries hard hit by the pandemic. But the funds will take a while to reach European citizens because of a political impasse in Brussels.

The European Parliament is demanding that money be withheld from Hungary and Poland because of their increasingly authoritarian governments and violations of European Union rules. European leaders like Angela Merkel, the German chancellor, are against withholding the money.

Credit…Anthony Wallace/Agence France-Presse — Getty Images

Cathay Pacific, Hong Kong’s major airline, on Wednesday said it would slash thousands of jobs and scrap its subsidiary carrier, Cathay Dragon, in a major restructuring intended to cope with the continued impact of the coronavirus pandemic on the airline industry.

About 8,500 jobs, or 24 percent of the company’s head count, would be cut under the new plan. Of those, about 5,300 Hong Kong employees would be laid off. Executives would also take pay cuts, and company will also suspend salary raises next year.

“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive,” Augustus Tang, the chief executive of the company said in a statement.

“We have to do this to protect as many jobs as possible,” he said, adding that the company had already scaled back capacity, frozen recruitment and cut executives’ salaries, but was still burning up to about $260 million monthly. Mr. Tang said he hoped to reduce that to about $65 million under the restructuring, which will begin to take effect immediately.

So far, the pandemic has slashed more than 90 percent of international flights, and it could take until 2024 for passenger traffic to reach pre-Covid-19 levels, according to the International Air Transport Association. Internationally, a number of airlines have canceled routes and cut budgets, while some regional carriers have shuttered completely.

Even before the pandemic, Cathay Pacific was grappling with a drop-off in Hong Kong tourism because of last year’s sometimes violent pro-democracy demonstrations. Many mainland Chinese passengers avoided the airline because of the perception that some Cathay Pacific employees supported the pro-democracy movement.

Credit…Justin Lane/EPA, via Shutterstock

Morgan Stanley’s two most senior commodities executives are leaving the firm after the bank caught them using the encryption app WhatsApp against company policy and failing to monitor other employees’ use of unauthorized communication channels, according to a person familiar with the bank’s operations who was not authorized to speak publicly.

The news was reported earlier by Bloomberg News.

An internal review by the bank found that Nancy King, the global head of commodities, and Jay Rubenstein, head of Morgan Stanley’s commodities trading operations, had communicated over WhatsApp and had not stopped their employees in the division from using other platforms that Morgan Stanley has outlawed, the person said.

Neither Ms. King nor Mr. Rubenstein could be reached to comment.

Morgan Stanley found no evidence that anyone in its commodities division had engaged in wrongdoing while using the forbidden communication platforms, the person said.

Nevertheless, the division is being restructured. Its new leaders will be Jay Hallik and Jakob Horder, two executives who oversee fixed income trading at the bank. Ms. King is retiring from the firm, while Mr. Rubenstein is leaving.

The bank prohibits the use of certain apps and devices for communications related to sales and trading because it cannot see what is being said on them. Regulators require banks to monitor their employees’ messages to ensure that they are not doing anything illegal.

In the past, Wall Street traders have used chat platforms to skirt financial regulations. Over the past decade, for instance, authorities in the United States and the United Kingdom have filed criminal charges against major Wall Street banks after their traders were caught using instant messaging apps to make secret deals to manipulate markets in interest rates, foreign currencies and metals.

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