* * * * * * FRIDAY, MARCH 8, 2019 ~ VOL. CCLXXIII NO. 55
00
DJIA 25473.23 g 200.23 0.8%
What’s
News
Business & Finance
oncern over sluggish
C global growth is causing
central bankers to shift tacks,
as the ECB unveiled surprise
plans to stimulate the euro-
zone’s flagging economy and
Fed officials signaled their
growing reluctance to
raise U.S. rates at all. A1, A9
 Stocks fell after the ECB’s
moves, with the Dow and S&P
500 losing 0.8%. Government
bonds on both sides of the
Atlantic strengthened. B11
 China’s exports dropped
sharply last month, possibly
reflecting weakening de-
mand and the impact of the
Lunar New Year holiday. A9
 The administration pro-
posed a rule that would raise
the salary threshold for over-
time eligibility to $35,308 from
the current $23,660 a year. A2
 The productivity of U.S.
workers is showing glim-
mers of recovery after years
of subdued increases. A2
 The total net worth of U.S.
households dropped during
last year’s fourth quarter. A2
 Hedge fund Hildene has
tossed investment entities
of Purdue’s Sacklers due to
the family’s ties to opioids. B1
 Kroger shares fell 10%
after the supermarket chain
reported lower revenue and
profit for its latest quarter. B1
 Wall Street firms voted to
support a single mortgage-
backed security for Fannie
Mae and Freddie Mac. B5
 Disney shareholders nar-
rowly approved a say-on-
pay referendum concerning
CEO Iger’s compensation. B2
 Digital-health startup
Livongo is preparing for
an initial public offering as
soon as the third quarter. B10
World-Wide
 Manafort was sentenced
by a federal judge to 47
months in prison for dodging
taxes and committing bank
fraud, much less than the
former Trump campaign
chairman could have faced. A1
 The Trump administra-
tion is sounding out the
medical industry on requir-
ing health-care providers to
make public the secretly ne-
gotiated prices they charge
insurers for services. A1
 The House approved a res-
olution condemning hate in all
forms, a response to remarks
by Rep. Omar, but the move
also exposed a rift that is roil-
ing Democratic leadership. A4
 The administration is
pressing eight European
allies to commit by Friday
to a U.S. proposal to stabi-
lize northeastern Syria. A8
 The U.S. will ask North
Korea to admit American
inspectors to a missile-
launch site that Pyongyang
has begun to restore. A8
 Cohen sued the Trump
Organization for not pay-
ing legal fees that he al-
leges he was owed for his
work for the company. A4
 A Philadelphia law that
will require most retail stores
to accept cash puts the city
at the forefront of a debate
over the cashless trend. A3
 A French cardinal was
found guilty of failing to re-
port child sex abuse by a
priest of his archdiocese. A10
 A French-Algerian man
and his accomplice were
found guilty of a terrorist
attack that killed four in
Brussels in 2014. A10
CONTENTS
Business News...... B3
Crossword.............. A12
Heard on Street. B12
Life & Arts...... A12-13
Mansion............. M1-14
Markets............. B11-12
s 2019 Dow Jones & Company, Inc.
All Rights Reserved
WSJ.com
NASDAQ 7421.46 g 1.1% STOXX 600 373.88 g 0.4%
Slow Growth Prods Central Banks
Europeans reverse
course with stimulus
plans, as Fed signals
bias against rate rise
Concern over sluggish global
growth is causing central bank-
ers to shift tacks, as the Euro-
pean Central Bank unveiled sur-
By Nick Timiraos,
Tom Fairless
and Brian Blackstone
prise plans Thursday to
stimulate the Continent’s flag-
ging economy and Federal Re-
serve officials signaled their
House Votes to Condemn Hate Following Comments on Israel
MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
UNDER FIRE: The House on Thursday approved a resolution condemning hate, in response to remarks by Democratic Rep. Ilhan Omar,
shown after the vote, that were seen as anti-Semitic. The resolution condemned both anti-Semitism and anti-Muslim bias. A4
Manafort Sentenced to 47 Months
BY ARUNA VISWANATHA
ALEXANDRIA, Va.—A federal
judge sentenced Paul Manafort,
who served as Donald Trump’s
2016 campaign chairman, to 47
months in prison on Thursday
for dodging taxes and commit-
ting bank fraud, much less than
he could have faced.
U.S. District Judge T.S. Ellis
ordered the sentence, saying
guidelines calling for Mr.
Manafort to spend between 19
and 24 years in prison were
“out of whack.” The judge said
Shkreli, From Cell,
Plots Comeback
Using contraband cellphone, disgraced
‘Pharma Bro’ steers his old company
BY ROB COPELAND
AND BRADLEY HOPE
From a top bunk in a 12-
person prison cell in Fort
Dix, N.J., Martin Shkreli is at
work on a big second act.
Wielding little more than a
contraband smartphone, the
disgraced pharmaceutical ex-
ecutive remains the shadow
power at Phoenixus AG, the
drug company that became a
national lightning rod for
jacking up the prices of rare
drugs under its former name,
Turing Pharmaceuticals AG.
Mr. Shkreli still helps call the
shots. A few weeks ago he
rang up his handpicked chief
executive during a safari va-
Opinion.............. A15-17
Personal Finance.. B5
cation—to fire him, according
Sports....................... A14 to a person familiar with the
Technology........... B4,6 exchange.
U.S. News............. A2-6 This is the secret life of in-
Weather................... A12
World News..... A8-10
mate 87850-053, 16 months
into a seven-year sentence
for securities fraud.
> He flouted Twitter Inc.’s
ban from the social-network-
ing site by posting from a
new account, @sriole, that
doesn’t list his name. On a
personal blog, he compares
himself to famed entrepre-
10-YR. TREAS. À 15/32 , yield 2.637%
growing reluctance to raise U.S.
interest rates at all.
The ECB, acting less than
three months after it phased out
a €2.6 trillion ($2.9 trillion)
bond-buying program, said it
would hold interest rates at
their current levels at least
through the end of this year—
months longer than it previ-
ously signaled. It also will issue
a fresh batch of cheap long-term
loans for banks starting in Sep-
tember.
Several top Fed officials,
meanwhile, have stopped talking
about the need to lift interest
rates, a stark change from three
months ago. The stance sug-
gests more officials won’t pencil
the roughly 4-year sentence
was a suitable punishment for
the crimes he said Mr.
Manafort had committed.
Judge Ellis said he viewed
the matter as a regular tax- and
bank-fraud case, despite the
role of special counsel Robert
Mueller's team in the case.
“These are very serious
crimes,” Judge Ellis said. “Hid-
ing money from the govern-
ment so that you don’t have to
pay taxes on it [amounts to] a
theft of money from everyone
who pays taxes.”
neurs like Elon Musk and
regularly criticizes the justice
system with offbeat humor,
such as a Jan. 25 “Memo to
Roger Stone Jr.,” the former
Trump campaign adviser, in
which he hoped “a supra-ju-
diciary entity will intervene
in your case.” He added: “P.S.
Never, ever, ever snitch.”
Even his uniform of sweat-
pants and T-shirts remains
essentially unchanged.
Mr. Shkreli reads about re-
search into fatty acids and
the prevention of cardiovas-
cular disease in the inmate
computer lab or on his
phone. He cuts his own hair
with safety scissors and is
growing a patchy beard. The
low-security federal correc-
tional institution is built on
the grounds of an old army
base about 90 minutes from
Mr. Shkreli’s former multi-
million-dollar Manhattan
penthouse.
He has made prison
friends, including “Krispy”
and “D-Block,” some of
whom affectionately call him
“Asshole,” according to peo-
ple familiar with his new life.
Please turn to page A11
HHHH $4.
OIL $56.66 À $0.44
in any rate increases this year
after their March 19-20 meeting.
The U.S. economic outlook
“appears to have softened
against a backdrop of greater
downside risks,” said Fed gover-
nor Lael Brainard on Thursday.
“Prudence counsels a period of
watchful waiting.” She made no
mention of the need to raise in-
terest rates, a shift from her po-
sition last year.
Investors quickly reacted to a
ECB response to slowing global
Please turn to page A9
 ECB measures underscore
Draghi’s activism...................... A9
 Heard on the Street: New
stimulus to aid banks......... B12
Sitting in a wheelchair, Mr.
Manafort read a brief state-
ment to the judge in which he
said the last two years had
been the most difficult of his
life, and the public perception
of him wasn’t one he recog-
nized. “To say that I feel humil-
iated and ashamed would be a
gross understatement,” Mr.
Manafort said.
Judge Ellis also ordered Mr.
Manafort to pay $25 million in
restitution, but he gave the
former lobbyist credit for the
nine months he has already
TOMORROW
mark ronson & jordan peele
WSJ. MAGAZINE
Scuffed Those Air Jordans? Call In the Sneaker Cleaners
Footwear fans pay to keep shoes looking good; ‘works of art’
BY RAY A. SMITH
Moshood Olafunmishe rarely
wore his $660 Kanye West-de-
signed, limited-edition Yeezy
Boost sneakers, preserving
them for special occasions only.
When he did finally wear the
shoes to a party recently, the
unthinkable happened: Some-
one spilled a drink on them.
“It was a massive stain on
GOLD $1,283.80 g $1.10
Performance over the past two days, 5-minute intervals
0.5%
0
–0.5
–1.0
–1.5
–2.0
3 a.m. ET noon
March 6
Source: SIX
spent in prison in connection
with the case.
Mr. Manafort was convicted
by a jury in August of not pay-
ing taxes on more than $16 mil-
lion in income he earned from
advising Russia-aligned politi-
cians in Ukraine in the early
2010s, and of lying to two
banks from which he sought
loans in 2015.
Separately, he pleaded guilty
Please turn to page A6
 Cohen sues Trump Organization
for unpaid fees................................ A4
i i i
the front,” said the London-
based 28-year-old market re-
searcher. “I was so annoyed
when I looked at it and knew
there was no way I was going
to be able to do them justice.”
Because the shoes are made of
knitted fused yarn, suede and
have a fabric loop at the heel,
he knew they would require a
clean beyond his expertise. He
put the Yeezys away in a box to
EURO $1.1194 YEN 111.57
ECB LOWERS
GROWTH FORECASTS
Stoxx
Europe 600
–0.5%
DJIA
–1.5%
4 p.m. noon
March 7
New Push
Calls for
Disclosing
Medical
Prices
BY STEPHANIE ARMOUR
AND ANNA WILDE MATHEWS
WASHINGTON—The Trump
administration is sounding out
the medical industry on requir-
ing hospitals, doctors and
other health-care providers to
publicly disclose the secretly
negotiated prices they charge
insurance companies for ser-
vices, a move that would ex-
pose for the first time the ac-
tual cost of care.
Mandating public disclosure
of the rates would upend a
longstanding industry practice
and put more decision-making
power in the hands of patients.
Hospitals and insurers typi-
cally treat specific prices for
medical services as closely
held secrets, with contracts be-
tween the insurers and hospi-
tal systems generally bound by
confidentiality agreements.
The U.S. Department of
Health and Human Services is
seeking public comment on
whether patients have a right
to see the discounted prices in
advance of obtaining care, fed-
eral officials said. The invita-
tion for comment—outlined in
a little noticed passage of a
broader patient-data proposal
released last month—is a ma-
jor step toward a possible rule
that could require providers to
release such information, they
said.
Commercial health-care
markets are rife with complex
systems of hidden charges and
secret discounts. Policy mak-
ers, employers and patients are
often unable to see clearly
which hospital systems and
doctor practices are driving
high costs.
The administration’s vi-
sion—which would possibly in-
clude fines for noncompli-
ance—is to arm patients with
information needed to make
health-care decisions much like
shopping for other consumer
services. Rates potentially
could be posted on public web-
sites, where consumers would
check the negotiated price of a
service before they pick a pro-
vider. That, in turn, could lead
to lower copays or deductibles.
“It’s an effort by the presi-
dent to help put Americans
back in control of price data,”
said Dr. Don Rucker, national
coordinator for health informa-
tion technology at the Depart-
ment of Health and Human
Services. “Our interest is on
how can we empower the
Please turn to page A2
languish in limbo. “I was on the
brink of throwing them away.”
Pressure to keep limited-
edition, expensive footwear
looking good has long been
high among luxury sneaker
lovers. But a toothbrush and
soapy water are no match for
today’s lavish styles which can
cost more than $1,000 and
feature at least three different
Please turn to page A11
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A2 | Friday, March 8, 2019 * * THE WALL STREET JOURNAL.

U.S. NEWS
U.S. Worker Productivity Picks Up Household
BY SHARON NUNN
Net Worth
WASHINGTON—U.S. worker
productivity, an important
Fell Late
driver of wage and output
growth, is showing glimmers of
recovery after years of sub-
Last Year
dued increases that held back BY HARRIET TORRY
the economy.
Output per hour of nonfarm The total net worth of U.S.
business-sector workers grew households dropped during the
at a 1.9% annual rate in the fourth quarter of 2018, as
fourth quarter and registered stock-market turbulence hit
the strongest nine-month Americans’ wealth and offset a
stretch of growth between slight gain in the value of real-
April and December since 2010, estate holdings.
averaging 2.2% growth during In a potential sign of cau-
that period last year. It beat tion, households and businesses
the 1.3% average growth regis- borrowed at a slower pace in
tered so far in the expansion the fourth quarter, and Ameri-
and was near a 2.1% post- cans saved a greater share of
World War II average. their incomes.
Productivity growth, along Household net worth—the
with growth in the labor force, value of all assets such as
are two key components of stocks and real estate minus li-
REBECCA COOK/REUTERS

overall economic activity. A na- abilities such as mortgages and

tion can only produce as much credit-card debt—declined by
as its overall number of work- 3.5%, or $3.730 trillion, from
ers are capable of turning out the third quarter, to $104.329
on a regular basis. Worker pro- trillion, according to data the
ductivity gains also tend to Federal Reserve released
create a backdrop for rising General Motors employees work on pickup trucks at a Flint, Mich., plant. U.S. worker productivity grew at a 1.9% rate last quarter. Thursday. The 3.5% decline was
wages, corporate profits, or the largest quarterly drop in
both, that don’t generate sub- The recent productivity up- the firm’s facilities by almost Philadelphia Fed district were Higher, But Still Low household net worth since the
stantial inflation. tick coincides with solid busi- 200,000 square feet and added looking to automation to fill la- final quarter of 2008. The fig-
Quarterly change in
For those reasons, econo- ness-investment growth. Com- another metal shaping machine bor gaps. Firms in the Atlanta ures are from a quarterly re-
productivity, three-quarter
mists keep close track of pro- panies might be putting capital to its fleet because demand was district reported they had “a port known as the Flow of
moving average
ductivity trends for clues on in place that allows them to so high. renewed focus on productivity Funds, which tracks the aggre-
the economy’s longer-run pros- produce goods and services “We added that plant ca- enhancements using existing 8% gate wealth of all U.S. house-
pects. Slow productivity more efficiently in the longer pacity hoping that we would and/or new technology and au- holds and nonprofit organiza-
growth has led many forecast- run and sustain the recent have some extra or even excess tomated systems.” tions.
ers to raise doubts about how gains they have registered in capacity to deal with [orders], Some analysts were skepti- 6 The fourth-quarter decline
fast the economy can grow. A output-per-hour. Last year’s but we ended up using all of cal the recent gains would be came after household net worth
nine-month stretch of more ro- cuts in corporate tax rates may that excess capacity,” said sustained. had increased in the first three
bust gains doesn’t necessarily have played a role in encourag- Larry Sanford, executive vice “Productivity has been tem- 4 quarters of 2018. U.S. house-
mean the long postrecession ing that investment. president at the company. porarily boosted by last year’s holds ended 2018 in the black,
slump is over, but economists Still, the productivity gains A scarcity of workers has fiscal loosening, which boosted but only just. In the year to
2
see it as a promising signal. might prove transitory. Per- encouraged some businesses to demand but did not trigger a that quarter, household net
“We’ve had a nice little sonal and corporate tax cuts invest in machines that can proportionate rise in hiring, worth rose 0.8%.
pickup in productivity, and it and government spending in- help increase the output of presumably because firms sus- The main reason for the
0
helps offset some of the rising creases last year might have their existing workforces. This pected the kick would not last,” drop in wealth in the final
wage and input cost pressures encouraged a burst of activity is potentially adding to the Ian Shepherdson, chief econo- three months of last year was a
that companies are facing now,” in 2018 that won’t be sustained. productivity uptick too. mist at Pantheon Macroeconom- –2 rout in stock markets. After ris-
said Kathy Bostjancic, head U.S. The owners of M-D Building The Federal Reserve’s Beige ics, said in a note to clients. “We ing 9% through the first three
2000 ’10
financial market economist at Products, an Oklahoma maker Book report released this week think this will prove the high- quarters of the year, the S&P
Oxford Economics. of building material, expanded showed some businesses in the water mark” for productivity. Source: Labor Department via. St. Louis Fed 500 ended the year down 6.2%.
Stocks have largely recovered
in early 2019.

Expanded Overtime Eligibility Is Proposed

BY LAUREN WEBER would raise the salary thresh-
AND ERIC MORATH old from the current $23,660 a
year to $35,308—left many
An additional 1.3 million employers with a sense of re-
Americans who work more lief, in part because the Trump
than 40 hours a week would administration’s proposal sets
become eligible for overtime the threshold far below the
pay under a rule proposed by $47,476 that President Barack
the Labor Department. Obama had hoped to institute.
The rule would increase the A federal judge in November
annual salary threshold that 2016 halted that rule from be-
generally determines who ing implemented.
qualifies for time-and-a-half Worker advocates criticized
pay. It would affect workers the proposal, saying the floor
and employers in many indus- would remain too low to ensure
tries, including retail, fast that workers being asked to put
food, higher education and in extra hours are fairly com-
nonprofits. pensated. Under the Obama-era
The proposed rule—which proposal, 4.2 million more
Americans would have qualified
for additional pay.
The lower the threshold,
the stronger the incentive is
for employers to “classify
hourly workers as managers in
order to have them work end-
less hours as a way to not pay
overtime,” said Saru Jayara-
man, president of Restaurant
Opportunities Centers United,
which advocates for higher
pay for restaurant-industry
workers.
Labor Department Secre-
tary Alexander Acosta said the
new rule would bring “higher
wages to working Americans.”
Officials believe they won’t
have difficulty getting the rule
passed even if it is challenged
in court. “We re-ran the exact
same methodology used in
2004 for the last increase and
that has withstood the test of
time,” said one agency official.
More than one million
workers will become eligible
for overtime under the new
threshold, which is equivalent
to $679 a week. Another
200,000 will see their incomes
rise under threshold changes
for a smaller category of highly
compensated workers who are
also covered by overtime rules.
Some businesses said the
proposal struck a middle
Household wealth in the
stock market decreased by
about $4.57 trillion in the quar-
ter, according to the Fed report.
ground of avoiding being too American consumers accu-
onerous while still increasing mulated debt at a slower pace
pay for some. in 2018. Household debt rose at
It could take months before a 3.2% seasonally adjusted an-
the rule is finalized. It will be nual rate, compared with 3.9%
open for public comment for in 2017.
60 days via the Labor Depart- The value of real estate in-
ment’s website. creased by about $279.4 billion
The proposal doesn’t call in the fourth quarter. That ad-
for automatic adjustments to vance was larger than the
the salary threshold to ac- $156.6 billion gain in the third
count for inflation. The quarter but smaller than the
Obama-era proposal would $485.7 billion in the second.
have adjusted the level every U.S. households collectively
three years by indexing it to saved a bit more toward the
salary growth in the lowest-in- end of the year: The saving rate
come region of the country. rose to 6.7% of disposable per-
—Micah Maidenberg sonal income from 6.4% in the
contributed to this article. third quarter.

Hospital before,” said Caitlin Donovan,

director of outreach and public
affairs at the National Patient
network negotiated rates.
Health systems that charge
higher negotiated rates could

Prices May Advocate Foundation, which

advocates for quality health
care for people with chronic,
lose business if they don’t
match competitors’ rates or
justify the reasons for their

Be Shown debilitating or life-threatening

illnesses.
The request for public com-
steeper costs. Employers could
press their insurers to include
hospitals with lower negoti-
ment has been largely over- ated rates in their networks.
ROBERT RAY/ASSOCIATED PRESS

Continued from Page One looked because it was tucked
American public to shop for into a 700-page draft regula-
their care and control it.” tion released last month on im-
Industry officials say the ad- proving patients’ access to
ministration faces many hur- their electronic health records.
dles before implementing such Many insurers and hospital
price transparency. The move groups declined to discuss the
is likely to be met by fierce op- government’s request for com-
position, including possible le- ment, saying they were still
gal challenges, from hospitals, studying the idea.
doctors groups and insurers Some hospital groups and
since it could have far-reaching insurers said mandating disclo-
impact. sure of negotiated rates could
Insurers might demand the violate antitrust or contract
same hospital discounts won law and that negotiated rates
by competitors, while some are proprietary.
hospital systems might push Hospital groups also said
for payment rates that match the rule is unnecessary be-
their crosstown rivals’. If doc-
tors’ negotiated rates become
cause they already publicly re-
lease their list prices. Hospitals
public, other doctors could
lower their prices to try to lure
had to comply with that new
Trump administration require-
away patients. ment this year. But the steep
The American Hospital As- discounts that insurers negoti-
sociation said it opposes the ate from the list prices remain
move. “Disclosing negotiated kept from public view.
rates between insurers and Administration officials
hospitals could undermine the could move to issue a final rule
choices available in the private mandating the disclosure of
market,” said Tom Nickels, an negotiated rates after the com-
executive vice president of the ment period closes May 3.
trade group. “While we sup- The move follows a report
port transparency, this ap- on health-care markets issued
proach misses the mark.” in December by the Trump ad-
A group that advocates for ministration, which called for
patients praised the proposed greater pricing transparency
rule. and cited reporting in The Wall
“If this rule goes forward, it Street Journal on the complex-
will be a huge step towards ity of health costs, among
true pricing transparency and other sources.
will finally allow patients to re- Regulators said the author-
ally see what their costs will ity for requiring price disclo-
be before a service—something sure stems from the 21st Cen-
that has rarely been possible tury Cures Act enacted in 2016,
Hospitals would have to disclose actual prices of procedures under a Trump administration proposal.
which makes blocking of health
information illegal under pen-
alty of up to $1 million, and
from regulations stemming
from federal privacy law.
The prices charged for
health care vary widely de-
pending on whether a provider
is in or out of the patient’s in-
surance network and on the in-
surer’s undisclosed price
agreements with hospitals.
Employers and patients are
often unable to see which hos-
pital systems and doctor’s of-
fices are driving prices up-
ward. Some health-care
economists argue that the se-
crecy is a factor in why the
U.S. spends more per resident
on health care than any other
developed nation.
Fully forcing the rates into
the open could change the dy-
namics of the health market.
Employers and patients, given
clearer comparisons, might
change their habits—though
consumers often show limited
inclination to shop for health-
care services, even when they
face significant costs under
high-deductible health plans.
“You can’t shop for care if
you don’t know what the prices
are,” said HHS’s Mr. Rucker.
Once publicly available, pa-
tients may have the benefit of
third-party technology compa-
nies aggregating the price data
CORRECTIONS 
AMPLIFICATIONS
Pakistan has 140 to 150 nu-
clear warheads, according to
the Stockholm International
Peace Research Institute. In
some editions Thursday, that
reference was garbled in a
World News article about North
Korea’s weapons programs,
omitting the word “warheads.”
The first name of Markus
Manns, a portfolio manager at
Union Investment, was incor-
rectly given as Manfred in a
Feb. 26 Business & Finance ar-
ticle about litigation over
Roundup weedkiller.
Readers can alert The Wall Street
Journal to any errors in news articles
by emailing wsjcontact@wsj.com or
by calling 888-410-2667.
Hospitals are likely to push
for insurers to be under the
same transparency rules and
be required to release the ne-
gotiated discounts they pay for
patient care.
“They’d need to bring insur-
ers and payers into the equa-
tion because they have the
data to determine for patients
and building shopping tools what their costs should be,”
that show the negotiated costs said Chip Kahn, president of
for services charged by various the Federation of American
hospitals and providers. Hospitals, which represents in-
Out-of-network doctors vestor-owned community hos-
could try to compete with in- pitals and health systems.
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THE WALL STREET JOURNAL. Friday, March 8, 2019 | A3

U.S. NEWS

Philadelphia
Keeps Cash
On the Table
City will make stores mobile payments will speed
up transactions and reduce
accept paper money lines. Ten kiosks around the
to ensure access by arena will convert cash to a
prepaid debit card with no
lower-income patrons transaction fee.
But backers of measures
BY SCOTT CALVERT forcing stores to accept cash
say they worry about people
Philadelphia is the first ma- who don’t have credit or debit

MARK MAKELA/REUTERS
jor U.S. city to ban cashless cards. Supporters also say some
stores, placing it at the fore- consumers prefer to pay with
front of a debate that pits retail currency for privacy reasons.
innovation against lawmakers “I think it’s more the future
trying to protect all citizens’ than a fad, and that’s why
access to the marketplace. there is a need for a legislative
Starting in July, Philadel- response,” said New York City A Starbucks barista gives change to a customer in Philadelphia. Starting in July, the city will require most retail stores to accept cash.
phia’s new law will require Councilman Ritchie Torres, a
most retail stores to accept Democrat, who is sponsoring to be part of it,” she said. Cold, Hard and Here to Stay
cash. A New York City council- legislation to ban cashless A survey by the city found a
As stores across the country go cashless, consumers still reach for cash for 30% of their payments.
man is pushing similar legisla- stores. handful of retailers don’t take
tion there, and New Jersey’s Philadelphia City Council- cash, including the salad chain This number is down from 33% ...but cash is still the preferred method of payment for smaller
legislature recently passed a man William Greenlee, a Dem- Sweetgreen, at least one cloth- in 2015... transactions and by lower-income households.
bill banning cashless stores ocrat, said he was inspired to ing store and some eateries at
Share of payments, 2015-17 Share of payments, by amount
statewide. A spokesman for introduce the bill after notic- a University of Pennsylvania
New Jersey Gov. Phil Murphy, ing some Center City sandwich food court. Sweetgreen and 40 % Cash Debit $- 55% 21 14 10
a Democrat, declined to com- shops had gone cashless. Penn declined to comment on Credit Other* $- 32% 34 25 9
ment on whether he would “Most of the people who the legislation. 33% $- 20% 33 28 19
sign it. Massachusetts has don’t have credit tend to be Before the City Council 30 30%
$- 15% 28 26 31
gone the farthest on the issue lower income, minority, immi- passed the legislation, Ama- $+ 7% 18 18 57
and is the only state that re- grants. It just seemed to me, if zon expressed concern about
quires retailers to accept cash. not intentional, at least a form the impact on its ability to 20 Share of payments, by income
The measures seek to blunt of discrimination,” he said. open cashierless Amazon Go
$-k 47% 27 7 19
a nascent trend that could Now, he said, stores will be re- convenience stores in Phila-
10 $-k 36% 29 13 22
rapidly accelerate thanks to quired “to do what businesses delphia, city officials said.
Amazon.com Inc.’s power to have been doing since Ben The company says on its web- $-k 27% 31 19 23
shape nationwide retail Franklin was walking the site that it has Go stores in $-k 31% 29 21 19
0 33% 31% 30% $-k 24% 23 30 23
trends. They represent an at- streets of Philadelphia.” San Francisco, Chicago and
tempt to strike a balance be- Philadelphia Mayor Jim Seattle. Customers, who must 2015 ’17 $k+ 24% 21 33 22
tween equity for lower-income Kenney, a Democrat, signed have Amazon accounts, swipe *Other includes electronic payments and checks.
consumers and merchants’ ea- the bill into law last week. His their smartphones as they en- Source: Federal Reserve Bank of San Francisco
gerness to embrace technolog- spokesman noted that 26% of ter the store and are automat-
ical advances. city residents live below the ically charged for any items The law also has a provi- mobile app, a Prime member- Goldie, a falafel shop, said he
Businesses that have gone poverty line and many don’t they take. sion meant to accommodate ship isn’t required to shop understands the impetus be-
cashless point to greater effi- have a bank account. Cash can An Amazon spokesperson the Amazon Go model, an aide there, said a Commerce De- hind the new law but thinks
ciency for employees, who be loaded onto prepaid debit declined to comment. to Mr. Greenlee said. It ex- partment spokeswoman. the world is moving toward a
don’t have to make change or cards, but those come with The Philadelphia law has empts “transactions at retail The company has taken cashless society.
count cash at closing time, various fees. several carve-outs. The cash stores selling consumer goods steps to broaden its customer The Goldie shop at Penn
and improved safety because Sylvie Gallier Howard, a top requirement won’t apply to exclusively through a member- base to include lower-income will start taking cash due to
workers don’t have to carry official in the city’s Commerce parking garages or lots; ship model that requires pay- consumers, such as by offering the legislation, and two other
large bank deposits. Department, told City Council wholesale clubs like Costco ment by means of an affiliated a discounted version of its Goldie locations already ac-
Mercedes-Benz Stadium in members last month she that sell to consumers through mobile device application.” Prime membership service to cept cash, said Mr. Cook. “I
Atlanta, which on Sunday will hoped the ban proves to be a membership model; or But Amazon told the city Americans who qualify for don’t think it’s great policy,”
be the first NFL stadium to go temporary. “Modernization is rental-car companies or hotels that provision won’t apply to Medicaid and other govern- he said, “but it’s not going to
fully cashless, said requiring going to happen with or with- where a credit-card deposit is Amazon Go because, while ment-assistance programs. be make-or-break for whether
fans to use plastic or make out Philadelphia, and we want often required for incidentals. payment would be made via Steven Cook, co-owner of our business is successful.”

Facebook Curbs Antivaccine Posts Special-Ed Policy

BY ROBERT MCMILLAN
AND BRIANNA ABBOTT By Obama Upheld
Facebook Inc. said it would
make it tougher for vaccine BY MICHELLE HACKMAN have access to adequate spe-
skeptics to spread misinforma- cial-education services. Others
tion, amid criticism that the WASHINGTON—A federal believe that the proportions of
tech giant wasn’t doing enough court in Washington ruled minority students being iden-
to limit the proliferation of Thursday that an Obama ad- tified as special-education stu-
such content. ministration policy seeking to dents is so much higher than
The company’s move Thurs- address the high proportion of their white peers that root
day follows similar efforts from black and Hispanic children in causes of racism must be ad-
other social-media firms, and special-education classes must dressed.
rising interest from lawmakers go into effect. Proponents of the policy,
JIM WATSON/AGENCE FRANCE-PRESSE/GETTY IMAGES

about how best to tackle this The Trump administration which was issued in the final
issue. On Tuesday, an Ohio attempted to delay the rule’s weeks of the Obama adminis-
teenager testified before Con- implementation last year, tration, view it as a check on
gress that his mother believes which would require school schools that knowingly or un-
the false claim that vaccines districts not to place dispro- knowingly move minority stu-
cause autism because of what portionate numbers of minor- dents down paths that can
she read on Facebook. Ethan ity students—either too many lead to lower educational at-
Lindenberger, 18 years old, or too few—into special-edu- tainment.
said he got vaccinated against cation tracks or isolated set- Black students are more
his mother’s wishes. tings at school. The rule was than twice as likely to be iden-
In its crackdown, Facebook originally set to take effect in tified as having an intellectual
will ban ads that include misin- July 2018, before the Trump disability or emotional distur-
formation about vaccines and administration delayed it. bance as their peers, accord-
will tweak its algorithms so The federal judge, Tanya S. ing to Education Department
pages that spread this type of Ethan Lindenberger, center, testified before Congress this week about being vaccinated against his Chutkan, an Obama appointee data compiled before the rule
content are no longer recom- mother’s wishes. She thinks vaccines cause autism because of what she saw on Facebook, he said. on the District of Columbia was delayed. Hispanic stu-
mended. It will also downgrade district court, argued in her dents are 40% more likely to
those pages in the platform’s from the World Health Organi- On Wednesday, Facebook months due to measles out- opinion that the delay violated be identified as having a
news feed and in search results zation and the U.S. Centers for pledged to provide end-to-end breaks in areas or communi- administrative law, and that learning disability, while Na-
so they don’t spread as easily. Disease Control and Prevention encryption technology to all ties across the U.S. with low there was little evidence states tive American students are
The effort began Thursday, to determine the validity of its instant-messaging clients. vaccination rates. Lawmakers were unprepared to comply in 90% more likely.
but it will take several weeks vaccine information. The com- The company said that it was in several states have recently time. “Some racial disproportion-
to take full effect. It will also pany is also exploring new too early to speculate on how introduced legislation to bar “For 18 months between the ality is justified, and some of
extend to Instagram, where the ways of presenting users with it might police vaccine misin- personal and religious exemp- effective date of the [Obama it’s unjustified,” said Seth Gal-
company will stop displaying scientifically backed informa- formation on these messaging tions to vaccinations. regulations] and the compli- anter, who worked in the
antivaccine messages on its In- tion whenever it encounters platforms, whose content A study published in the ance date, states were prepar- Obama Education Depart-
stagram Explore and hashtag vaccine misinformation on its isn’t visible to Facebook, but Annals of Internal Medicine ing to utilize the standard ment’s office for civil rights.
pages. platforms. added that it was committed on Tuesday found no link be- methodology” set forth by the “What we want states and
Vaccine misinformation has to safety. Facebook has al- tween the measles, mumps, rule, she wrote. school districts to do is figure
become a new battleground as ready limited users’ ability to rubella vaccine and autism, The Education Department, out whether it’s the good kind
technology companies grapple forward messages on its en- confirming previous scientific which delayed the rule last or the bad kind, and if so
with how and when to police
The company’s move crypted WhatsApp platform, research. This study followed year, argued at the time it spend other federal money on
content on their platforms. comes as lawmakers in a bid to prevent misinfor- more than 600,000 Danish would have required schools early interventions” to prevent
Last month, Pinterest Inc. said mation from going viral. children born between 1999 to set arbitrary quotas for the more students from being di-
it had temporarily blocked
consider how to Concerns about vaccina- and 2010 from one year of number of children requiring rected toward special educa-
searches for vaccine-related tackle the problem. tion date back decades, but age until August 2013. special education. The depart- tion later on.
content on its visual discovery antivaccine messages have Measles was officially de- ment in one analysis esti- The Trump administration’s
platform. YouTube, owned by mushroomed in the internet clared eliminated in the U.S. mated that nearly half of all opposition to the rule also
Alphabet Inc., has also prom- era, said Jonathan Jarry, a in 2000, but incidences have school districts would be iden- falls in line with its broader
ised to crack down on this type As part of the changes, science communicator with increased in recent years with tified for having dispropor- disapproval of a legal philoso-
of content. Facebook has already removed the Office for Science and So- a rise in state-sanctioned tionate numbers of minority phy known as “disparate im-
Tech companies have also a controversial advertising op- ciety at McGill University, exemptions in some areas, students in special-education pact,” which prohibits racial
battled terrorism-recruitment tion that let advertisers target which tracks scientific misin- allowing parents to have their programs under the Obama discrimination on the basis of
campaigns, hate speech and users who were interested in formation. Social-media mes- children opt out of vaccina- standard. a policy’s impact, rather than
sexual harassment—moves that “vaccine controversies.” sages are particularly adept tions for personal and reli- A spokeswoman for the de- acts of deliberate racism. Late
have opened them up to com- “We are fully committed to at tapping into messages of gious reasons. There have partment, Liz Hill, said it was last year, the administration
plaints of censorship and polit- the safety of our community fear. “The misinformation been 206 confirmed cases of now reviewing its legal op- withdrew another Obama pol-
ical bias. Critics say the con- and will continue to expand on works in part because it can measles in the U.S. across 11 tions. icy directing schools not to
tent-moderation process on this work,” Monika Bickert, be very easy to find,” Mr. states since Jan. 1, according Educators and policy ex- discipline minority students at
these platforms is often opaque Facebook’s vice president of Jarry said. to the CDC. perts have been at odds over disproportionately high rates,
and arbitrary. global policy management, said Public backlash against the the need for the rule. Some ar- and it has undone similar poli-
Like Pinterest, Facebook in a post on the company’s antivaccine movement has re-  China’s WeChat sets example gue that too few minority stu- cies in housing and consumer
says it will rely on information website. surfaced in the past several on messaging............................. B1 dents, rather than too many, protection.
A4 | Friday, March 8, 2019 P W L C 10 11 12 H T G K B F A M 1 2 3 4 5 6 7 8 9 O I X X ****** THE WALL STREET JOURNAL.

U.S. NEWS

House Passes Resolution Opposing Hate

Vote of 407-23 is a King (R., Iowa) voting “pres- discussions this week—and in leviate the hurt caused by Rep.
ent”—denounced hate and big- the ultimate resolution—that Omar’s continuous anti-Se-
response to freshman otry in all forms, including many people treat anti-Semi- mitic rhetoric and beliefs,”
Democrat’s remarks anti-Semitism, Islamophobia tism differently than other said Minority Whip Steve Sca-
and white nationalism. While it forms of bigotry and hatred,” lise (R., La.).
viewed as anti-Semitic doesn’t directly mention Ms. said Josh Gottheimer (D., N.J.), The 23 votes opposing the
Omar, who is a Muslim, it who is Jewish. “There shouldn’t resolution were all Republicans.

JIM LO SCALZO/EPA/SHUTTERSTOCK
BY NATALIE ANDREWS springs from a debate between be an asterisk next to anti-Sem- House Speaker Nancy Pelosi
leadership and members that itism—and I will continue to (D., Calif.), asked during her
WASHINGTON—The House flared after Ms. Omar’s com- fight it and any form of preju- weekly briefing if Ms. Omar
on Thursday overwhelmingly ments on Jews and Israel. dice, no matter who says it.” should apologize or if she
approved a resolution con- The resolution had initially “We’ve got a lot of new thought Ms. Omar’s words
demning hate in all forms, a been drafted to condemn anti- members that haven’t been in were offensive, defended the
response to a freshman Demo- Semitism, but following a this position before,” said Rep. freshman congresswoman.
crat’s remarks that were seen tense closed-door meeting of Dan Kildee (D., Mich.), the chief “I don’t think that the con-
as anti-Semitic, but the move Democrats on Wednesday, lan- deputy whip, acknowledging gresswoman perhaps appreci-
also exposes the rift that is guage condemning anti-Mus- Rep. Ilhan Omar is one of three Muslim members of Congress. there is a reason to be con- ates the full weight of how it
roiling Democratic leadership lim bias was added at the re- cerned, but not panicked about was heard by other people, al-
as it struggles to find common quest of lawmakers in the against anti-Muslim bigotry. money in politics, most re- how the first two months of the though I don’t believe it was in-
ground with its newly embold- party’s progressive wing who A Somali refugee, Ms. Omar cently in a public forum last Democratic majority are going. tended in any anti-Semitic
ened progressive wing. said Ms. Omar had been un- immigrated to the U.S. when week, that some people de- Republicans have been way,” Mrs. Pelosi told reporters.
At issue were comments fairly singled out, underscor- she was 12. In Congress, she has scribe as anti-Semitic and quick to call out Democrats Jeremy Slevin, a spokesman
from Rep. Ilhan Omar (D., ing the debate taking place joined her party’s left flank as a have drawn sharp criticism over their own infighting over for Ms. Omar, said the con-
Minn.), who last week spoke of within the Democratic caucus. vocal advocate for single-payer from Democrats and Republi- how to condemn anti-Semitism gresswomen was trying to say
people who “push for alle- Ms. Omar, who voted for health care, gun control and ex- cans alike. The reverberations and have called on Democratic there is a distinction between
giance to a foreign country,” the resolution, called it “great panding U.S. immigration. in particular have revealed di- leadership to remove Ms. criticism of a particular faith
which many listeners viewed progress” in a statement with In her first months in Con- visions in the Democratic cau- Omar from her House Foreign and fair critiques of lobbying
as referring to Israel. the other two Muslim mem- gress, she has faced a backlash cus still navigating its new Affairs Committee post. groups, and that “to suggest
The resolution—which bers of Congress, as it was the for repeated comments about majority position in the House. “A watered-down condem- otherwise is an inaccurate
passed 407-23, with Rep. Steve first time the House had voted U.S. policy toward Israel and “It was also clear from the nation of hate does little to al- reading of her remarks.”

Window for
Bipartisan Deals
Narrows Fast
BY KRISTINA PETERSON president legislative wins,” he
said, adding that “the presi-
WASHINGTON—Intensify- dent is not likely to react well
ing partisan conflict in Con- to wide-ranging attacks on his
gress is further clouding pros- family and businesses.”
pects for any major legislative Mr. Trump indicated Tues-
compromises with the White day that House Judiciary Com-
House in the few months be- mittee Chairman Jerrold Na-
OCTAVIO JONES/TAMPA BAY TIMES/ZUMA PRESS

fore the 2020 election cycle dler’s request for records from
consumes Capitol Hill. more than 80 people and or-
President Trump, Senate ganizations related to Mr.
Republicans and Democrats Trump’s business dealings
now in control of the House didn’t leave him inclined to-
began the year with a short ward bipartisan compromise.
list of shared policy goals, in- “It’s too bad, because I’d
cluding investing in infrastruc- rather see them do legisla-
ture and lowering the cost of tion,” Mr. Trump said of House
prescription drugs. Democrats. “We have so many
But House Democrats’ things—actually things that we
ratcheting up of investigations agreed on, like infrastructure.”
into the Trump administration, House Democrats say they Infrastructure spending is an area that both congressional Democrats and President Trump have identified as a legislative priority.
along with a possible rules can conduct oversight probes
change by Senate Republicans of Mr. Trump and his adminis- ment on Wednesday. they could run and get in front activity. But comity in the Sen- could be accomplished in the
to speed up the confirmation tration without sacrificing The House Ways and Means of,” said Rep. Earl Blumenauer ate may also take a hit if Re- time between the five-week
of nominees, is fueling a more their ability to work with him Committee held a hearing (D., Ore.), referring to the publicans go forward with a government shutdown that
partisan climate that is ex- on legislation, but they ac- Wednesday to examine poten- Trump administration. rule change allowing them to ended last month and the
pected to make legislating knowledge the difficulty. tial methods of paying for a Many House Democrats be- confirm some lower-level nom- 2020 election cycle, which tra-
more challenging. “This is our challenge,” said major infrastructure package, lieve passing bipartisan legisla- inees more quickly. The pro- ditionally leaves congressional
Already, “the antagonism Rep. Jamie Raskin (D., Md.), a long the biggest obstacle on an tion will help protect their vul- posal would cut the amount of leaders reluctant to force law-
level has reached a fever pitch. member of the Judiciary Com- issue that has bipartisan sup- nerable colleagues up for re- time the chamber has to con- makers to take tough votes.
In theory, it’s hard to imagine mittee, saying Democrats must port. While many lawmakers election in the most competitive sider many nominees after a Democratic presidential pri-
a lot of complicated things get- press their policy agenda on are skeptical an infrastructure districts. “If we don’t do some- key procedural vote to two mary debates are set to begin
ting done,” said Stewart Verd- issues including gun control deal will come together, some thing about prescription drugs, hours from 30 hours. this summer.
ery, a former GOP Senate aide and health care while “at the are hopeful that Mr. Trump the American people are going “If we don’t do that, we’re The biggest hurdle may be
and now chief executive of same time we are defending might embrace a way to de- to be very upset,” said Rep. Deb- going to be so wrapped up on what Mr. Trump is willing to ac-
Monument Advocacy, a biparti- the Constitution and the Bill of liver on an unfulfilled promise bie Dingell (D., Mich.). confirmations that there cept in negotiations. His shift-
san lobbying group. Increasing Rights against corruption and from his 2016 campaign—to Across the Capitol, a crop of wouldn’t be any opportunity to ing stance during the shutdown
partisan conflict is only going lawlessness in the executive inject $1 trillion or more into Senate Republicans up for re- do anything else anyways,” said left Republicans guessing over
to heighten the animosity, he branch of government.” the nation’s roads, dams, air- election next year in swing Sen. Kevin Cramer (R., N.D.). what would end the standoff.
said. “Democrats are not going The White House didn’t re- ports and bridges. states also are seeking oppor- Many lawmakers already —Ted Mann
to be very excited to give the spond to a request for com- “It could be a parade that tunities to promote bipartisan were pessimistic about what contributed to this article.

Cohen Sues the Trump Organization for Unpaid Legal Fees

BY REBECCA BALLHAUS
Stormy Daniels September sent Ms. Clifford a or controversy before the
Michael Cohen, a former at- letter saying they agreed not to court.” As a procedural matter,
torney for President Trump, Lawsuit Dismissed enforce the nondisclosure agree- the judge sent the case back to
sued the Trump Organization ment. At the time, an attorney state court in Los Angeles,
for not paying legal fees that for Mr. Cohen also demanded where it was initially filed, but
Mr. Cohen alleges he was owed LOS ANGELES—A federal the return of the $130,000 that said in a footnote, “This does
for his work for the company judge Thursday dismissed a Ms. Clifford received in ex- not mean that the litigation
In the suit filed Thursday in lawsuit filed against President change for her silence. continues in state court.”
New York State Supreme Trump and his former lawyer Despite the September con- Mr. Avenatti said via email
Court, Mr. Cohen said he had Michael Cohen by the adult film cessions, Ms. Clifford’s attorney, Thursday, “The Court found that
incurred nearly $2 million in star Stephanie Clifford, ruling Michael Avenatti, had pressed Ms. Daniels received everything
unreimbursed legal fees aris- there was nothing left to litigate the court to keep the lawsuit she asked for by way of the
ing from “multiple” congres- now that a nondisclosure agree- alive, saying he still wanted to lawsuit—she won.” An attorney
sional hearings, special ment at the heart of the case depose the president and Mr. for Mr. Cohen disputed that
counsel Robert Mueller’s Rus- was no longer being enforced. Cohen and believed his client characterization, calling the ruling
sia investigation, and other Ms. Clifford, known profes- was owed legal fees. the latest of several to go in fa-
matters. sionally as Stormy Daniels, had U.S. District Judge S. James vor of his client. An attorney for
He also accused the Trump sued Messrs. Trump and Cohen Otero disagreed, saying in his Mr. Trump didn’t respond to a
KEVIN LAMARQUE/REUTERS

Organization of having last March to invalidate an Oc- ruling Thursday that Ms. Clif- request for comment.
“breached the covenant of tober 2016 nondisclosure ford isn’t in line for attorney’s Judge Otero said in his
good faith and fair dealing,” agreement she signed to keep fees and that the assurances Thursday order that he didn’t
alleging that the company quiet about an alleged sexual that the president and Mr. Co- have the authority to rule on
failed to reimburse his legal encounter with Mr. Trump. hen won’t sue her for any vio- the issue of whether the
expenses “only after it became The lawsuit lost steam when lations of the nondisclosure $130,000 needs to be returned.
clear that Mr. Cohen would co- Mr. Cohen and the president in agreement “eliminate the case —Sara Randazzo
operate in ongoing investiga- Michael Cohen on Wednesday after testifying before a House panel.
tions into his work for the
Trump Organization” and into gested that Mr. Cohen had the Trump Organization ini- House. Ryan, his lawyer at the time, Mr. Cohen said that
executives at the company. started cooperating with in- tially upheld the agreement, In April 2018, federal stopped representing him due through June 2018, when the
As of January 2019, Mr. Co- vestigators because the com- paying the law firm represent- agents raided Mr. Cohen’s to the company’s refusal to payments stopped, the Trump
hen said his unreimbursed le- pany stopped paying his legal ing him $137,460 in October home, office and hotel room pay his legal fees and is still Organization directed more
gal fees amount to more than fees—rather than the reverse, 2017, while the Trump cam- as part of an investigation owed more than $1 million in than $1.7 million for his attor-
$1.9 million. He said he asked which Mr. Cohen alleged. paign footed the bill for an into hush-money payments he fees. ney’s fees, either by paying
the Trump Organization on “Cohen is now laying out additional $230,000 between arranged during the 2016 cam- In the months leading up to through the company or
Jan. 25 to reimburse him for another reason he turned and that month and January 2018, paign to two women who al- June, Mr. Cohen frequently through the Trump campaign,
those fees, but that the com- started lying because he according to Federal Election leged sexual encounters with told associates he was frus- according to the lawsuit.
pany hasn’t responded. wanted continued payment of Commission records. Mr. Trump. Mr. Trump has de- trated that the president In August, Mr. Cohen
Marc Mukasey, a lawyer for his legal fees,” Mr. Giuliani In December 2017, he said nied the affairs. hadn’t offered to pay his legal pleaded guilty to eight
the Trump Organization, said said. the company said it would In June, when Mr. Cohen fees, which he said were charges, including two cam-
late Thursday: “The Trump Or- In the suit, Mr. Cohen said continue to pay Mr. Cohen’s said he began telling friends “bankrupting” him, the Jour- paign-finance violations for
ganization doesn’t owe Mi- that in July 2017, he entered legal fees—an assurance that and family that he was willing nal reported at the time. He arranging hush-money pay-
chael Cohen one penny of legal into an agreement with the Mr. Cohen said came after he to cooperate with investiga- said he felt Mr. Trump owed ments during the 2016 elec-
fees. This is a desperate Trump Organization in which made a “direct appeal” to tors, Mr. Cohen said in the him after his years of loyalty tion to two women who al-
money grab by a desperate the company would pay for his Donald Trump Jr. and Eric lawsuit that the Trump Organ- to the former real-estate de- leged sexual encounters with
convicted felon.” legal fees related to investiga- Trump, the president’s sons, ization stopped paying his veloper, whom he served for Mr. Trump. Mr. Cohen pleaded
Rudy Giuliani, a lawyer for tions that stemmed from his who are running the company lawyers, “without notice or nearly a decade at the Trump guilty to a ninth charge, lying
Mr. Trump, on Thursday sug- work for the company. He said while he is in the White justification.” He said Stephen Organization. to Congress, in November.
 A6 | Friday, March 8, 2019
IHS Faces Questions on Failures
BY CHRISTOPHER WEAVER
AND DAN FROSCH
Lawmakers summoned the
U.S. Indian Health Service’s
leader to answer for the
agency’s failure to stop a pedi-
atrician from sexually abusing
his child patients and a slate
of longstanding problems with
the quality of the agency’s
care, according to a letter
from the U.S. House Energy
and Commerce Committee.
The letter, sent Thursday,
asks Rear Adm. Michael Weah-
kee, the IHS’s acting leader, to
brief committee staff on the
failures. Members of the com-
mittee, which oversees the IHS,
said in interviews they expect
to hold oversight hearings on
the agency later this year.
“I will fight for a committee
hearing on Indian Health Ser-
vice issues,” said Rep. Raul
Ruiz (D., Calif.), a committee
member who signed the letter.
HUGH CAREY/SUMMIT DAILY NEWS/ASSOCIATED PRESS
SNOWSLIDE: A man cleared his driveway Thursday in Frisco, Colo. Historic avalanche conditions have persisted in the state, shutting down portions of vital highways.
SUPREME COURT
Workplace Code of
Conduct Considered
Chief Justice John Roberts is
weighing whether to create a
code of conduct for members of
the Supreme Court, Justice El-
ena Kagan told lawmakers
Thursday, a sign that the #Me-
Too movement’s challenge to
workplace sexual harassment
has reached the most powerful
level of the legal profession.
Unlike lower courts, which are
bound by federal law and inter-
nal regulations, the Supreme
Court, citing its unique place in
the constitutional structure, has
considered itself exempt from
many rules of judicial conduct.
Justices say they voluntarily fol-
low ethical guidelines, however,
and that they haven’t been af-
Manafort
Sentenced
To Prison
Continued from Page One
in Washington, D.C., to two
counts of conspiracy against
the U.S. and conspiracy to ob-
struct justice, agreeing to coop-
erate with Mr. Mueller’s office.
U.S. District Judge Amy Berman
Jackson is scheduled to sen-
tence Mr. Manafort on Wednes-
day in that case.
Mr. Manafort, who is 69
years old, faces up to 10 years
in prison for those charges, but
Judge Jackson can decide
whether that sentence should
be added to Thursday’s or run
concurrently.
One factor weighing on the
case: Last month Judge Jackson
agreed with prosecutors that
Mr. Manafort repeatedly lied to
Mr. Mueller’s team about sev-
eral relevant matters, including
his communications with his
longtime Ukrainian-born associ-
* ***** THE WALL STREET JOURNAL.
U.S. NEWS
“We need to instill a leader- view by HHS Secretary Alex people who “covered up or tinued to work—despite a se-
Colleges
Hacked,
ship culture in IHS that no
longer tolerates bad behavior.”
The letter is the latest in a
Azar last month. The Indian
Affairs Committee is holding a
hearing on the agency next
turned a blind eye to the re-
peated concerns raised by Mr.
Weber’s behavior.”
ries of allegations about his
conduct—for another 21 years.
One senior agency official in
Ransom
salvo of congressional inqui-
ries since an investigation last
month by The Wall Street
week. “The committee expects
a thorough investigation,” a
spokeswoman for chairman
A statement provided by an
IHS spokeswoman said the
agency has implemented new
Pine Ridge told the Journal
and Frontline that he didn’t
relay allegations to law en-
Demanded
Journal and the PBS series John Hoeven (R., N.D.) said. policies to better protect forcement because he feared BY DOUGLAS BELKIN
Frontline showed IHS had ig- Sen. Steve Daines (R., against and respond to the his superiors would punish AND MELISSA KORN
nored warnings signs about Mont.) also wrote to Adm. sexual abuse of children. “In him for doing so.
the pedophile pediatrician for order to have complete confi- Mr. Weber was convicted in Hackers breached the sys-
decades, transferred the prob- dence in the integrity of the September of sexually abusing tem that houses applicant in-
lem doctor from one reserva- federal government and to two of his former patients as formation for three U.S. col-
tion to another, and tried to
Lawmakers expect to achieve our agency mission children in Montana. He is leges in recent days and
silence a whistleblower who hold hearings on the and goals, IHS believes we scheduled to stand trial for demanded thousands of dol-
accused him. must work positively and co- sexually assaulting four more lars in ransom from prospec-
Last week the Senate Com-
Indian Health Service operatively with our external later this year in South Da- tive students for personal in-
mittee on Indian Affairs asked later this year. authorities, including the HHS kota. Mr. Weber is appealing formation they claimed to
the U.S. Department of Health Office of the Inspector Gen- the Montana verdict. have stolen.
and Human Service’s inspector eral,” the statement said. The Indian Health Service The schools include Oberlin
general to conduct a review of Mr. Weber worked at an ordered an outside investiga- College in Ohio, Grinnell Col-
the IHS safeguards to prevent Weahkee late last month in- IHS hospital in Browning, tion into the episode after re- lege in Iowa and Hamilton
such conduct, “including the quiring about the agency’s han- Mont., in the mid-1990s. After ceiving questions from the College in New York. All three
process and procedures for dling of Stanley Patrick Weber, colleagues complained he Journal and Frontline in Octo- use a system called Slate to
transferring employees within the pediatrician who sexually might be a pedophile, the ber. Proposals are due from track information about stu-
the agency.” abused patients. He asked, agency transferred him to an- contractors seeking to carry dents who have applied for
That follows a request for a among other things, how the other reservation hospital in out the probe later this month, admission. Slate is owned by
separate inspector general re- agency would hold accountable Pine Ridge, S.D., where he con- contracting records show. Technolutions Inc.
Slate collects and stores
U.S. WATCH
thousands of data points
about prospective students,
ranging from biographic infor-
mation to test scores and
notes on interviews with ad-
missions counselors.
Technolutions CEO Alexan-
der Clark said the company
was aware of three colleges
where an unauthorized party
reset college staff members’
passwords and then used them
to gain access to the database.
“We have advised all of our
colleges and universities to re-
view the security practices of
their single sign-on and pass-
word reset systems,” he said.
A copy of the note circulat-
ing on Reddit and confirmed
by one of the schools said stu-
dents could “purchase your
entire admission file,” includ-
ing “comments by admissions
officers, assigned ratings, in-
terview report (if present),
teacher recommendations,
tentative decision (if applying
for regular)” admission. It
sought a ransom of 1 bitcoin,
or more than $3,800.
A subsequent email lowered
the price to $60 for a more
limited amount of informa-
tion.
Hamilton spokeswoman
Vige Barrie confirmed that the
school learned Monday some-
one may have accessed the
system.
She said the school
“promptly began an investiga-
tion, engaged cybersecurity
professionals to assist, and
took additional steps to pre-
vent further unauthorized ac-
cess to applicant records.”
Hamilton said it was reach-
flicted by the harassment allega- declined by 3,000 to a season- wife, journalist Connie Schultz, FLORIDA ing out to those who may have
tions that have led at least one ally adjusted 223,000 in the to states with early nominating been affected by the incident
federal appeals judge to step week ended March 2, the Labor contests, would have occupied Ex-Officer Guilty in and had contacted the Federal
down. Department said Thursday. space on his party’s center-left Slaying of Motorist Bureau of Investigation.
Justice Kagan said the idea Economists surveyed by The had he run. Grinnell received questions
was in preliminary stages and Wall Street Journal had forecast “I will keep fighting for all A fired Florida police officer from prospective students
hadn’t yet been formally dis- 221,000 new applications for workers across the country,” said was found guilty of manslaugh- Thursday morning asking if
cussed among all nine justices. jobless benefits last week. Mr. Brown, who was re-elected ter and attempted murder the messages they were re-
Such a code would have “pros Claims for the week ended in November to a third term. Thursday for fatally shooting a ceiving were legitimate. The
and cons, I’m sure, but it’s some- Feb. 23 were revised up to Mr. Brown is the fourth Dem- stranded black motorist, becom- school urged applicants not to
thing that’s being thought very 226,000 from an initially re- ocrat this week who had been ing the first officer in the state respond, and said it had con-
seriously about,” she said. ported 225,000. considering a presidential cam- to be convicted of an on-duty tacted the FBI, among other
—Jess Bravin —Paul Kiernan paign to announce he wouldn’t shooting in 30 years. authorities.
run. Nouman Raja, 41 years old, “We’re still trying to figure
ECONOMY OHIO Former New York City Mayor faces a mandatory minimum of this out,” said Debra Lukehart,
Michael Bloomberg, former At- 25 years at sentencing April 26, a spokeswoman for the school.
U.S. Jobless Claims Sen. Brown Won’t torney General Eric Holder, and and could spend his life in prison “We’ve shut down all access to
Declined Last Week Run For President Oregon Sen. Jeff Merkley also for the death of Corey Jones, 31. the Slate application and we
said they wouldn't run. The four-man, two-woman don’t know what implications
The number of U.S. workers Ohio Sen. Sherrod Brown said Former Secretary of State jury deliberated for four hours. it will have. We expect to pro-
filing new applications for unem- Thursday that he wouldn’t seek Hillary Clinton, who had made Prosecutors said Mr. Raja esca- ceed with normal school deci-
ployment benefits fell slightly the 2020 Democratic nomination no preparations for a campaign, lated what should have been a sions.”
last week. for president. also said she wouldn’t seek the routine interaction. Mr. Raja’s Grinnell and Hamilton are
Initial jobless claims, an indi- Mr. Brown, who had spent re- presidency. lawyers left without comment. both expected to send out ad-
cation of layoffs across the U.S., cent weeks traveling with his —Reid J. Epstein —Associated Press mission notices this month.
ate, Konstantin Kilimnik, whom
the FBI has assessed to have
links to Russian intelligence, as
dicted in June on charges of
trying to influence the testi-
mony of potential witnesses
Born in Connecticut, Mr.
Manafort received undergradu-
ate and law degrees from
well as a payment to a law firm
and details important to an-
other Justice Department in-
against him. The Manhattan
district attorney’s office has
also been pursuing a case
Georgetown University. He had
a role in advising the campaigns
of Republican Presidents Gerald
vestigation. against him related to bank- Ford, Ronald Reagan, George
DANA VERKOUTEREN VIA ASSOCIATED PRESS
On Thursday, a prosecutor fraud allegations. H.W. Bush and presidential can-
on Mr. Mueller’s team said Mr. In memos seeking leniency, didate Bob Dole; he had a job in
Manafort provided no help to Mr. Manafort’s attorneys ar- the Reagan White House as as-
the special counsel’s investiga- gued the public perception of sociate director in the Presiden-
tion and only offered informa- Mr. Manafort was distorted by tial Personnel Office.
tion already known to investi- the intense interest in the crim- Though Mr. Manafort prac-
gators. “He told us things we inal case, and that he was both ticed law at one point, his
already knew,” prosecutor Greg a talented political consultant prominence around Washington
Andres told Judge Ellis, arguing and a family man who put his took off in the 1980s and 1990s,
that Mr. Manafort shouldn’t get wife of 40 years and his chil- after he co-founded a lobbying
any credit for the roughly 50 dren “first and foremost.” A firm and became known for
hours he spent with prosecu- Paul Manafort sat in a wheelchair at his sentencing hearing. sentence within the guidelines representing strongman leaders
tors after reaching his plea range was “clearly dispropor- such as former Philippines
deal. custom-made suits and land- the pardon and clemency pro- tionate” for the conduct, and President Ferdinand Marcos,
“Mr. Manafort made crimi- scaping at his multiple homes. cess by having most requests for a first-time offender like Angolan guerrilla leader Jonas
nal choices…he is not remorse- The president said in November go through a special office in Mr. Manafort, his lawyers Savimbi and Zaire’s former dic-
ful,” Mr. Andres said. that a potential pardon for Mr. the Justice Department. maintained. tator Mobutu Sese Seko.
After Mr. Manafort’s state- Manafort wasn’t “off the table” For his part, Mr. Trump has Mr. Manafort’s longtime as- That brief stint in Mr.
ment, Judge Ellis said: “I was and that it was “very sad repeatedly declined to rule out sociate in business and on the Trump’s immediate orbit was
surprised I did not hear you ex- what’s happening to Paul.” pardoning his former aides be- Trump campaign, Richard long enough to land Mr.
press regret.” Were he to pardon Mr. ing investigated by Mr. Mueller Gates, pleaded guilty last year Manafort in the middle of the
Mr. Trump has voiced sym- Manafort, Mr. Trump would and federal prosecutors in New and testified against Mr. special counsel’s investigation.
pathy for Mr. Manafort, an ad- likely face swift accusations of York. His lawyer, Rudy Giuliani, Manafort to a packed court- The events in the Alexandria
viser to four presidents who obstructing justice, even though has said the president won’t room over three days. Mr. Gates courtroom played out as Mr.
earned some $60 million as a the Constitution gives the pres- consider pardons while investi- said he committed crimes with Mueller’s probe was believed to
political consultant in Ukraine ident an unreviewable pardon gations are still under way. Mr. Manafort but also admitted be drawing to a close.
and spent hundreds of thou- authority. Traditionally, presi- Mr. Manafort has been in jail he stole from his former boss. —Byron Tau
sands of dollars monthly on dents have tried to depoliticize for nine months after being in- He hasn’t yet been sentenced. contributed to this article.
 A8 | Friday, March 8, 2019
U.S. Urges Allies to Commit to Syria Plan
Trump administration
sets Friday target for
accepting proposal on
post-ISIS strategy
BY NANCY A. YOUSSEF
AND DION NISSENBAUM
The Trump administration
is pressing eight European al-
lies to commit by Friday to a
U.S. proposal to stabilize
northeastern Syria, U.S. offi-
cials said, setting a target
meant to persuade reluctant
partners to join Washington in
the still-developing plan.
With U.S.-backed forces
poised to seize the last re-
maining pocket of Islamic
State resistance in Syria, U.S.
officials have asked key allies,
including France, the U.K. and
Turkey, to remain part of the
alliance and ensure the terror
group doesn’t regain a foot-
hold in northeastern Syria.
The plan also is meant to avert
a potential clash between the
U.S.’s Kurdish allies there and
Turkey, which considers the
Syrian fighters terrorists.
Gen. Joseph Votel, the head
of U.S. forces in the Middle
East, on Thursday described
the allied presence as essential
to the U.S. effort in Syria, say-
ing the absence of allies would
make the mission more diffi-
cult and hurt momentum.
Under the latest Trump ad-
ministration plans, U.S. forces
would stay in the northern Syr-
ian city of Manbij, continuing
joint patrols with Turkish coun-
terparts. A second group would
be based east of the Euphrates
River Valley as part of a safe
zone between Turkey and Syria.
Those U.S. forces also will help
train and advise local forces so
they can secure reclaimed terri-
tory once under Islamic State’s
self-proclaimed caliphate, de-
fense officials have said.
A third U.S. contingent would
remain in the southern city of al
Tanf, as part of a counter Is-
lamic State campaign and a buf-
AIRBUS DEFENCE & SPACE/38 NORTH/PLEIADES
Satellite images show construction at the Tongchang-ri missile facility in northwest North Korea, which has sparked questions in the U.S..
North Korea Facility Draws Scrutiny
BY MICHAEL R. GORDON
WASHINGTON—The U.S.
will ask North Korea to admit
American inspectors to a mis-
sile-launch site that Pyong-
yang has begun to restore, but
the Trump administration
hasn’t concluded the facility is
currently operational, a senior
State Department official said.
Satellite photos made pub-
lic on Thursday by 38 North, a
website on North Korean nu-
clear issues, shows construc-
tion to rebuild the launchpad
at the site has moved quickly
and that a structure to move
missiles to that pad now ap-
pears to have been completed.
Work also has been done on a
missile engine test stand.
Given this construction and
other activity at the location,
38 North said the site “ap-
pears to have returned to nor-
mal operational status.”
The State Department offi-
cial said the U.S. wasn’t cer-
tain why the activity was tak-
ing place and was monitoring
it closely. He added that the
U.S. would continue to press
for access to the site as part of
a larger effort to eliminate the
North’s nuclear weapons and
long-range missile programs.
Women and children evacuated from Islamic State-held Baghouz arrived Wednesday at a screening area operated by the U.S.-backed Syrian Democratic Forces in Deir Ezzour.
fer against Iranian expansion in
that region, military officials
have said, but not part of the
training and advising effort, a
senior U.S. defense official said.
In 2015, European allies
agreed to work alongside U.S.
forces in Syria with the under-
standing that they would all
leave at the same time, Euro-
pean officials said. Both sides
originally planned to stay
through the stabilization pe-
riod and train local forces.
“It’s always been ‘in to-
gether, out together,’ ” a Euro-
pean official said.
“We will definitely be seek-
ing clarification,” the official
said. “We will definitely be con-
tinuing to seek the admission
of U.S. inspectors to the site to
verify the permanent disman-
tlement and destruction.”
The missile-launch site that
is the focus of concern is
Tongchang-ri, which is located
in the country’s northwest.
Tongchang-ri has been used to
The U.S. will ask for
American inspectors
to be allowed into the
missile-launch site.
conduct satellite launches and
test liquid-fueled rocket engines.
Work at the site, which 38
North says began before the
summit meeting between Presi-
dent Trump and North Korea’s
Kim Jong Un last week in Ha-
noi, is seen by some experts as
a sign that the North is un-
happy about its failure to secure
sanctions relief from the U.S.
and is trying to pressure the
U.S. for economic concessions.
Some former officials have
WORLD NEWS
But when President Trump
abruptly announced his inten-
tion in December to withdraw
the more-than-2,000 U.S.
forces from Syria, the U.S.
tried to persuade France, the
U.K. and other European allies
to remain to patrol a new safe
zone in the northeast. Euro-
pean leaders balked at the plan
and said they planned to follow
the U.S. move and leave Syria.
Faced with resistance from
Europe as well as Turkey, Mr.
Trump in February decided to
leave several hundred Ameri-
can troops in Syria. Those
also speculated that the North
may try to make the case that
satellite launches aren’t cov-
ered by its moratorium on
missile launches.
The senior State Department
official said the U.S. would
view a satellite launch as a
breach of Mr. Kim’s vow during
recent summit meetings not to
carry out missile launches.
North Korea argued in 2012
that satellite launches were ex-
cluded from an agreement it
negotiated with the Obama ad-
ministration to halt its nuclear
and missile tests and freeze nu-
clear activities at its Yongbyon
complex in return for food aid.
The Obama administration
never accepted that argument,
and that accord collapsed after
North Korea carried out a sat-
ellite launch in April 2012.
While the prospects for fu-
ture negotiations between the
two sides remains unclear, the
U.S. negotiating objectives re-
main very ambitious. The se-
nior State Department official
said that the Trump adminis-
tration is still seeking to elimi-
nate North Korea’s nuclear
forces and programs during Mr.
Trump’s current term in office.
Mr. Trump has previously
signaled more flexibility on the
troops will be tasked with
training local forces and cur-
tailing Iranian expansion to-
ward western Syria.
Top U.S. defense officials
said the troops were staying at
the request of the Europeans
who said they still need Ameri-
can air support, logistics and
an assurance of quick U.S. re-
sponse. U.S. defense officials
said the allies didn’t care how
many ground troops stayed, so
long as American forces were
there, ensuring other American
support would remain as well.
So far, the U.S. officials said
time frame for denucleariza-
tion. During his visit to the
United Nations in September,
Mr. Trump said: “We’re not
playing the time game. If it
takes two years, three years or
five months, it doesn’t matter.
There’s no nuclear testing and
there’s no testing of rockets.”
Mr. Trump said Thursday he
was “a little disappointed” by
reports that North Korea was
restoring the launch site at
Tongchang-ri and that it could
take time to determine if Pyong-
yang was prepared to give up its
nuclear program and long-range
missiles. “We’ll let you know in
about a year,” Mr. Trump added
without further explanation.
A diplomat at the U.N. said
the latest satellite imagery
about the site hasn’t been re-
ported to sanctions committee
established on North Korea. The
U.S. has left the door open for
seeking tougher sanctions if
Pyongyang refuses to give up its
nuclear and missile forces and
programs. But the diplomat said
if any action was taken, it would
likely take the form of renewed
calls to impose existing sanc-
tions more diligently.
—Farnaz Fassihi
at the United Nations
contributed to this article.
THE WALL STREET JOURNAL.
France is the only ally to indi-
cate it is willing to keep forces
in Syria. French officials said
this week that they still want
more details on the U.S. pro-
posal.
European allies “have indi-
cated they will [stay], but have
not committed yet,” a U.S. de-
fense official said. Others have
described the Friday timetable
as the start of a conversation
about the coalition’s Syria
strategy, not a firm deadline
for the makeup of the alliance.
Gen. Votel, testifying on
Thursday before the House
Hong Kong Under
Fire for Draft Law
On Extradition
BY NATASHA KHAN
HONG KONG—A proposed
law that would allow criminal
suspects to be extradited from
Hong Kong to mainland China
is drawing opposition, includ-
ing from foreign business
leaders who warn China could
exploit the law for political
purposes and shake confidence
in the city.
Security officials in the city
proposed changes to close
what they say is a legal loop-
hole that prevents Hong Kong
surrendering fugitives to law-
enforcement authorities in the
many jurisdictions with which
it doesn’t have extradition
agreements, including China.
The absence of such a
mechanism was highlighted af-
ter a Hong Kong man allegedly
murdered his girlfriend in Tai-
wan, a self-governed island off
China, last year and fled back
to his home city. Local author-
ities said they had no legal av-
enue to send him to Taiwan.
The planned law change has
drawn opposition from groups
in the city, prompted by wor-
ries Beijing would abuse the
law to seize people in Hong
Kong for political reasons un-
der the guise of alleged
crimes.
Business groups are already
concerned by diminishing free-
doms after a British journalist
who offended Beijing was
kicked out of the city in Octo-
ber. They say the proposed law
could have significant implica-
tions for Hong Kong’s reputa-
tion as a global business and
financial center.
In a letter to the city’s top
security official, the American
Chamber of Commerce in
Hong Kong wrote that the in-
ternational business commu-
nity had “grave concerns”
about China’s legal system,
which it said was deeply
flawed. The letter was pub-
lished Thursday by a local
newspaper, and cited China’s
lack of an independent judi-
ciary or fair public trials, as
well as arbitrary detentions.
Any change that increased
BULENT KILIC/AGENCE FRANCE-PRESSE/GETTY IMAGES
Armed Services Committee, ac-
knowledged that “details are be-
ing developed now” for the pe-
riod that comes after the fall of
Islamic State’s self-proclaimed
caliphate. But he said it would
emphasize the continuity of the
U.S.-led campaign, including the
contributions of U.S. partners.
Marine Gen. Joe Dunford,
the chairman of the Joint
Chiefs of Staff, remains confi-
dent that the U.S. will “main-
tain campaign continuity” and
that allies would provide sup-
port, said his spokesman, Air
Force Col. Patrick Ryder.
the chance of arrest and rendi-
tion to mainland China of in-
ternational business execu-
tives who live in, or are
transiting through, Hong Kong
“would undermine perceptions
of Hong Kong as a safe and se-
cure haven for international
business operations,” the
group wrote to John Lee, the
city’s secretary for security.
China’s Foreign Ministry
couldn’t be reached for com-
ment.
The proposed legal changes
would allow Hong Kong to sur-
render fugitives on a case-by-
case basis to any jurisdiction
with which the city hasn’t en-
tered into long-term extradi-
tion agreements. Hong Kong,
which retains a common-law
system from its time as a Brit-
ish colony before 1997, has ex-
tradition agreements with
more than a dozen countries,
including the U.S., U.K. and
Singapore. China operates a
civil-law system.
Mr. Lee has said the city
wouldn’t surrender anyone to
jurisdictions where the death
penalty could be imposed, nor
would it accede to requests re-
lating to political offenses.
Several pro-establishment
lawmakers have publicly
backed the law change, saying
there are enough safeguards to
prevent abuses.
Many residents in the city,
however, see the move as fur-
ther evidence Beijing is gradu-
ally absorbing Hong Kong into
the mainland and diluting peo-
ple’s rights. Under its hand-
over agreement to Chinese
sovereignty, Hong Kong has a
guaranteed separate legal sys-
tem until 2047.
“The fact that there has
been no long-term rendition
arrangement with mainland
China for two decades after
the handover is not an over-
sight,” the Hong Kong Bar As-
sociation said in a statement
Monday. “The absence of such
an agreement is evidence of
the grave concerns the Hong
Kong public has concerning
the mainland legal and judicial
system.”
THE WALL STREET JOURNAL.
ECB Stimulus Marks
Draghi’s Activism
BY TOM FAIRLESS
AND BRIAN BLACKSTONE
FRANKFURT—With a major
policy reversal Thursday, the
ECB became the first rich-
country central bank to unveil
new stimulus in response to
the global economic slow-
down.
The ECB said Thursday it
would hold interest rates at
subzero levels at least
through December, months
longer than previously sig-
naled. It also announced plans
for a series of cheap long-
term loans for banks, a stimu-
lus tool it hasn’t rolled out for
three years.
The measures underscore
the activism of the ECB under
President Mario Draghi since
he became president in No-
vember 2011. Under his watch
the ECB has installed negative
interest rates, launched cheap,
long-term loans to banks and
bought swaths of government
and corporate bonds.
He hasn’t raised short-term
interest rates, and Thursday’s
move effectively ensured he
will end his eight-year tenure
with a negative policy rate.
Though Mr. Draghi has
been credited with holding the
euro together through the
ECB’s policies and his famous
2012 pledge to do “whatever
Banks
React to
Global Lag
Continued from Page One
growth that was more aggres-
sive than they expected.
Shares slid, with both the
Stoxx Europe 600 and the Dow
Jones Industrial Average falling
0.8%. The euro fell 0.4% against
the dollar, as yields on Italian
and German bonds declined, a
sign investors are uncertain
about prospects for growth and
inflation.
Negative interest rates in Eu-
rope and Japan, together with
historically low nominal rates in
other rich nations, leave central
bankers with little room to cut
borrowing costs to provide
stimulus if their economies fall
into recession. The drop in Ger-
man 10-year bond yields shows
that extraordinarily loose lend-
ing conditions continue in the
eurozone.
As a result, global central
bankers appear to be moving
pre-emptively to shore up flag-
ging growth before any slow-
down deepens.
The Bank of Canada held on
Wednesday its key interest rate
steady at 1.75%, and officials ex-
pressed more caution about the
outlook while revising down do-
mestic growth forecasts. Austra-
lia’s central bank likewise held
its rate steady on Tuesday and
warned of growing risks to the
global economy.
China’s government has un-
veiled growth-enhancing efforts,
including new tax cuts and in-
creased bank lending to small
and private companies.
ECB President Mario Draghi
said Thursday the likelihood of
a recession is very low, but risks
CANADA
Trudeau Laments
‘Erosion of Trust’
Prime Minister Justin
Trudeau acknowledged missteps
in his office’s dealings with the
former attorney general, in an
effort to move beyond a political
firestorm consuming his govern-
ment and threatening his re-
election prospects.
The former attorney general,
Jody Wilson-Raybould, in parlia-
mentary testimony last week ac-
cused aides in Mr. Trudeau’s of-
fice and other officials of
pressing her repeatedly and in-
appropriately to drop the crimi-
nal prosecution of SNC-Lavalin
Group Inc., an engineering and
construction company based in
the politically important province
of Quebec.
Mr. Trudeau said Thursday
they contacted Ms. Wilson-Ray-
bould believing she would review
whether the company was eligi-
ble for an out-of-court settle-
* * * * *
it takes” to preserve the cur-
rency, the ECB has at times
faced criticism for acting too
late in response to economic
weakness.
For instance, the ECB
started buying government
bonds to stimulate the econ-
omy in early 2015, months af-
ter the Federal Reserve ended
its own program.
“We never thought we were
behind the curve,” Mr. Draghi
said at a news conference
Thursday, and “in any event
today we are not behind the
curve, for sure.”
ECB officials are treading a
careful path between provid-
ing sufficient support for the
region’s softening economy
while avoiding any appearance
of panic, which could ricochet
through financial markets.
But some analysts ques-
tioned whether the ECB would
have enough ammunition left
to deal with any fresh eco-
nomic shock, such as a British
exit from the European Union
with no agreement or a deci-
sion by the U.S. to place tar-
iffs on European autos.
“In terms of regional appe-
tite for assets, Europe is still
the lowest in the pile because
the capacity for stimulus is
less than elsewhere,” said
Karen Ward, chief market
strategist for EMEA at J.P.
Growth Alert
The European Central Bank announced new stimulus measures Thursday in response to downgraded
forecasts for GDP and inflation. Italian and other bank stocks fell as did the euro and German bond yields.
Eurozone GDP
projected change
Forecast made in December
Forecast made in March
1.5%
1.0
0.5
0 Imports fell 5.2% in Febru-
2019 2020 2021
Eurozone inflation
projected
Forecast made in December
Forecast made in March
1.5%
1.0
0.5
0 –4
2019 2020 2021
Sources: European Central Bank (GDP, inflation) SIX (Stocks); Tullett Prebon Information (euro); Refinitiv (bond yields)
to the economy remain preva-
lent. The ECB’s decision was
unanimous, he said. “We never
thought we were behind the
curve,” Mr. Draghi said, and “in
any event today we are not be-
hind the curve, for sure.”
The Fed’s shift reflects offi-
cials’ calculation that weaker
demand abroad and diminished
risk-taking in financial markets
could keep a lid on domestic
prices. Inflation has been run-
ning slightly below the Fed’s 2%
target through a period in which
ment.
Ms. Wilson-Raybould said in
testimony last week she had re-
viewed the case in September,
after a meeting with the prime
minister, and stood by prosecu-
tors’ decision to not proceed
with an out-of-court settlement.
“Even though I heard she
made a decision, I asked her if
she could revisit that decision.
She said that she would,” Mr.
Trudeau said, recounting a Sept.
17 encounter he had with Ms.
Wilson-Raybould. He added he
wasn’t aware she had made up
her mind.
“There was an erosion of
trust, a lack of communications
to me and to my office about
her state of mind on this, and
that is certainly something I am
going to have to reflect on as a
leader going forward,” he said.
Mr. Trudeau’s news confer-
ence was an effort to counter
the events relayed by the for-
mer attorney general. This
builds on Wednesday’s testi-
mony from Mr. Trudeau’s long-
WORLD NEWS
Morgan Asset Management in
London.
The ECB’s move reflects a
reversal in Europe’s outlook.
Boosted by the ECB’s stimulus
measures—including the bond
buying and negative interest
rates—and a surge in demand
for its exports from China and
elsewhere, the eurozone’s
economy grew at the fastest
rate in a decade during 2017,
outpacing the U.S. But it
slowed sharply last year as
those sources of support
waned, growing at its weakest
pace since 2014.
On Wednesday, the Organi-
zation for Economic Coopera-
tion and Development slashed
its forecast for eurozone
growth this year to 1%, from a
1.8% projection in November.
In contrast, it only shaved
slightly its projections for the
U.S. and China, by 0.1 percent-
age point each to 2.6% and
6.2%, respectively.
The ECB’s early response
should allow it to “get the big-
gest bang for its buck,” said
Ms. Ward. “They’ve done the
right thing in terms of using
their ammunition early,” she
said.
Although the global econ-
omy has weakened in recent
months, Europe seems to be
feeling the brunt of it.
Mr. Draghi continued to pin
Italian and eurozone bank-share performance
at five-minute intervals Thursday
2%
1 from a year earlier in Febru-
0 by The Wall Street Journal
–1
–2
Intesa
FTSE Italia
–3
All-Share Banks
UniCredit
Euro Stoxx Banks
3 a.m. ET 6 9
many officials had projected
prices to edge up.
Last year, Fed officials raised
their benchmark rate four times
in a bid to raise borrowing costs
closer to a so-called neutral
level that neither spurs nor
slows growth.
As recently as December, of-
ficials had projected two more
rate increases for 2019. Officials
are set to lower projections at
their meeting this month, likely
showing either one or zero rate
increases for the year.
WORLD WATCH
SOMALIA BLAST: A car bomb near a checkpoint at the presidential
palace in Mogadishu killed at least two people, police said.
time friend and confidant, Gerald
Butts, who until a few weeks
ago was one of Canada’s most
powerful officials. He also denied
wrongdoing and said discussions
with Ms. Wilson-Raybould were
the usual thrust-and-parry of
crafting policy.
—Paul Vieira
‘The persistence of uncertainties related to
geopolitical factors, the threat of protectionism and
vulnerabilities in emerging markets appears to be
leaving marks on economic sentiment.’
ECB President Mario Draghi at a news conference on Thursday
most of the blame for the eu- sentiment,” Mr. Draghi said.
rozone’s weakness on external Still, Italy’s economy, the
factors. eurozone’s third largest, slid
“The persistence of uncer- into recession at the end of
tainties related to geopolitical last year, while Germany nar-
factors, the threat of protec- rowly avoided a second quar-
tionism and vulnerabilities in ter of negative growth. The re-
emerging markets appears to gion’s inflation rate has fallen
be leaving marks on economic to 1.5%, some way from the
Dollars per euro
ECB LOWERS
at five-minute intervals Thursday
$1.135 ECB LOWERS
GROWTH FORECASTS GROWTH FORECASTS
1.130
1.125
1.120
3 a.m. ET 6 9 noon
German 10-year bond yields
at one-minute intervals Thursday
0.15 %
0.10
0.05
noon 3 a.m. ET 6 9 noon
The latest change suggests Jan. 3, and it has rallied 12%
more officials could conclude since Fed chairman Jerome
rates aren’t as far from neutral Powell first signaled a rate
as previously thought. pause on Jan. 4. The index is 6%
The Fed’s January shift to below the all-time high reached
pause rates helped calm mar- last September.
kets that turned more volatile The Fed is preparing to say
last December, when trade ten- when this year it will end the
sions between the Trump ad- gradual runoff of its $4 trillion
ministration and China flared asset portfolio, which will leave
and the federal government be- the Fed with a much larger bal-
gan a partial shutdown that ance sheet than officials had an-
lasted for 35 days, a record. ticipated when they began
The S&P 500 slid 11% be- shrinking the holdings in 2017.
tween the end of November and Several Fed officials, mean-
amid what appeared to be one
of the biggest blackouts yet in a
country where power failures
have become common.
The power outage began just
as commuters were leaving work.
Hundreds crammed the streets
of Caracas, forced to walk be-
cause subway service was
stopped. A snarl of cars jammed
the streets amid confusion gen-
erated by blackened stoplights.
FEISAL OMAR/REUTERS
President Nicolás Maduro
blasted the outage as an “elec-
trical war” directed by the U.S. in
a statement on Twitter. His in-
formation minister, Jorge
Rodríguez, said right-wing ex-
tremists intent on creating pan-
demonium by leaving the South
American nation without power
VENEZUELA for several days were behind the
blackout, but he offered no
Power Outages Hit proof.
Much of the Nation “A little bit of patience,” Mr.
Rodríguez urged on state televi-
Much of Venezuela plunged sion. “If you’re in your home,
into darkness Thursday evening, stay in your home. If you’re in a
creating chaos as people strug- protected space or at work, it’s
gled to navigate their way home better for you to stay there.”
Friday, March 8, 2019 | A9
ARMANDO BABANI/EPA/SHUTTERSTOCK
ECB’s target of just below 2%.
Mr. Draghi argued that the
likelihood of a recession is
“very low.” Thursday’s deci-
sion was unanimous, he said
at a press conference Thurs-
day. “Given the complexity of
the package, I think this is a
very positive sign,” he said.
China Exports Down
Sharply in February
BEIJING—China’s exports
dropped sharply last month,
data released Friday showed,
possibly reflecting weakening
demand and impacts from
the Lunar New Year.
Exports tumbled 20.7%
ary, after surging 9.1% in Jan-
uary, according to data from
the General Administration of
Customs. Economists polled
expected exports to drop 6%.
ary, after a 1.5% drop in Janu-
ary, according to customs
data. Economists polled ex-
pected a 2.5% drop in imports.
China’s trade surplus
stood at $4.12 billion in Feb-
ruary, smaller than the $39.16
billion surplus in January and
undershooting the $24.45 bil-
lion forecast in the survey.
For the first two months,
China’s exports declined 4.6%,
while imports dropped 3.1%.
Stripping impacts from
the Lunar New Year, Febru-
ary’s exports and imports
were up 1.5% and 6.5% re-
spectively, from a year earlier.
—Liyan Qi and Grace Zhu
while, have set a high bar to
raise rates again, particularly
now that the target range for
their benchmark rate is at the
low end of estimates of a neu-
tral setting.
One camp has said rates are
still below neutral, and their
baseline outlook has the Fed
raising rates once more this
year. Another camp has said it
sees little need to raise interest
rates so long as inflation isn’t
rising above the central bank’s
2% target.
But as night wore on in Cara-
cas, patience was running thin.
Residents threw open their win-
dows and banged pots and pans
in the darkness. Some shouted
out expletives and Mr. Maduro’s
name in a sign of mounting
frustration.
The outage comes as Vene-
zuela is in the throes of a politi-
cal struggle between Mr. Maduro
and opposition leader Juan
Guaidó, the head of congress
who declared himself the na-
tion’s rightful president in Janu-
ary and is recognized by the U.S.
and about 50 nations.
Mr. Guaidó took to Twitter to
blast Maduro for the outage.
“How do you tell a mom who
needs to cook, an ill person who
depends on a machine, a worker
who should be laboring that we
are in a powerful country with-
out electricity?” he wrote, using
the hashtag #SinLuz, meaning
without light. “Venezuela is clear
that the light will return with
the end of usurpation.”
—Associated Press
 A10 | Friday, March 8, 2019 THE WALL STREET JOURNAL.

WORLD NEWS

Two Found Guilty

In Brussels Attack
BY VALENTINA POP
BRUSSELS—A French-Alge-
rian man and his accomplice
were found guilty of shooting
four people in the Jewish Mu-
seum of Brussels five years
ago, the first verdict against a
European who joined Islamic
State in Syria and returned to
stage terrorist attacks.
A Belgian jury on Thursday
said Mehdi Nemmouche, a 33-
year-old French national of Al-
gerian descent, had shot and
killed two Israeli tourists, an
employee and a museum vol-
LAURENT CIPRIANI/ASSOCIATED PRESS
the trial, Nemmouche already
had been radicalized and had a
strong influence on his new
acquaintance.
Once out of prison, in De-
cember 2012, Nemmouche left
for Syria and joined Islamic
State.
During the trial, two French
journalists who had been ab-
ducted in Syria by Islamic
State, identified Nemmouche
as their guard while in captiv-
ity. They described him as a
“playful sadist” who enjoyed
torturing his other victims.
Evidence presented during

unteer in fewer than two min-

utes in the May 2014 attack.
His sentence, which could
be life in prison, is expected to
Frenchmen are
be read Monday. Jury trials convicted in the 2014
are rare in Belgium, and the 12
jurors deliberated for two days
killing of four in the
before reaching their verdict city’s Jewish Museum.
after a two-month trial.
Nemmouche’s co-defendant,
Cardinal Philippe Barbarin was found guilty on Thursday in Lyon, France, of covering up sexual abuse by a priest in his archdiocese. Nacer Bendrer, a 30-year-old
Frenchman of Algerian de- the trial also exposed Nem-

French Cardinal Convicted

BY NOEMIE BISSERBE
AND FRANCIS X. ROCCA
PARIS—A French cardinal
was found guilty on Thursday
of failing to report child sex
abuse, the first conviction of
such a high-ranking Catholic
Church official for covering up
instances of a criminal practice
that has deeply marred the
church’s image in recent years.
Cardinal Philippe Barbarin,
who was appointed archbishop
in the French city of Lyon in
2002, faced charges of covering
up for an abusive priest and
endangering minors. The abuse
by Father Bernard Preynat, a
priest in the Lyon archdiocese
after questioning Father
Preynat about rumors of sex-
ual abuse, and again in July
2014 when one of the priest’s
victims contacted him, judges
in Lyon said in their ruling.
His first offense in 2010 falls
outside the statute of limita-
tions, judges added, but the
second one made him liable
for prosecution.
French judges handed the
cardinal a six-month sus-
pended jail sentence. His law-
yers said they would appeal
the court’s decision.
After the verdict, Cardinal
Barbarin said he would tender
his resignation to Pope Fran-
cis. “I’ve decided to go see the
Lyon, and it would be up to
Pope Francis to decide
whether to remove Cardinal
Barbarin from the College of
Cardinals, to which he was
named in 2003.
The conviction illustrates
the growing assertiveness of
civil authorities around the
world toward church officials
accused of covering up clerical
sex abuse. While that trend
has put significant pressure on
church leaders to police them-
selves more stringently, the
Vatican and many bishops are
still struggling to respond.
The Vatican held a summit
last month on the sex-abuse
problem that included talk
scent, was convicted of sup- mouche as a member of the
plying weapons to and helping same Franco-Belgian terror
Nemmouche carry out the at- cell that carried out attacks in
tack. Bendrer’s sentence, Paris and Brussels in 2015 and
which also could be life in 2016, killing a total of 162
lack of concrete steps to ad- prison, is due Monday, too. people.
dress clerical sex abuse. The two men met in prison In closing statements
The Barbarin verdict raises in southern France in 2008, Wednesday, Nemmouche
pressure on the Vatican to in- where they were serving sen- claimed he had been framed,
vestigate and try the cardinal tences for robberies. Accord- but he also said that “if I
under church law. In 2016, ing to the prison director at could change things, I’d
Pope Francis signed legislation the time, who testified during change everything.”
specifying that a bishop can
be removed from office for ig-
noring or covering up sex
abuse by others. The Vatican
didn’t respond to requests for
comment on Thursday.
Father Preynat, now 74
years old, allegedly raped or
sexually assaulted several
dozen boys aged 6 to 18 during
church camps in the 1970s,
’80s and early ’90s, according
to legal documents reviewed

from 1971 to 2015, occurred a
decade before Cardinal Bar-
barin became archbishop but
came to the cardinal’s attention
in the late 2000s.
Cardinal Barbarin failed to
report a crime in March 2010
Holy Father to hand in my res-
ignation, he will meet me in a
few days,” Cardinal Barbarin
told reporters. A spokes-
woman for the archdiocese
said the cardinal was resign-
ing only from his duties in
about possible measures for
disciplining bishops who en-
gage in or cover up abuse.
Pope Francis called on society
to wage an “all-out battle”
against all abuse of minors,
but disappointed critics with a
YVES CAPELLE/REUTERS
by The Wall Street Journal.
Father Preynat was removed
from parish work in August
2015 and admitted wrongdoing
to police. He is under investi-
gation and faces preliminary
charges of child sexual abuse. A courtroom sketch of convicted Frenchman Mehdi Nemmouche

OR

E
D F

G
E

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I R

T
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THE WALL STREET JOURNAL.
Sneaker
Specialists
Clean Up
Continued from Page One
materials whether mesh,
suede, leather or some type of
fabric in addition to rubber.
Hardcore fans, known as
“sneakerheads,” are increasingly
finding the best way to get their
shoes clean is to pay someone
else to do it for them. Some of
the most effective cleaners turn
out to be Marines.
Mr. Olafunmishe eventually
discovered a sneaker-cleaning
business on Instagram with be-
fore-and-after pictures of
cleaned-up kicks. After mailing
in his Yeezys and paying about
$35, he says he got them back a
few weeks later looking practi-
cally brand new. Now, he can
take out any of his 20 high-end
sneakers whenever he wants.
The desire to keep these
harder-to-clean shoes looking
“fresh out the box,” has created
an emerging industry of self-
proclaimed sneaker-cleaning
Shkreli’s
Comeback
Strategy
Continued from Page One
They walk alongside him in the
hall to ward off shenanigans
from other inmates.
Mr. Shkreli’s continued in-
volvement with Phoenixus, his
private Swiss drug company
operating out of Manhattan,
could prove perilous. The Fed-
eral Bureau of Investigation
has interviewed associates
about his role there, say people
who have been interviewed. An
FBI spokeswoman declined to
comment.
The prison warden denied a
Wall Street Journal reporter’s
request to visit Mr. Shkreli, cit-
ing “safety and security con-
cerns.” The prison inmate
handbook says: “Conducting a
business, in any way, is a pro-
hibited act.” A spokesperson
said the Bureau of Prisons
“continues to tackle the prob-
lem of contraband being intro-
duced into our facilities, in-
cluding contraband cell
phones.”
For Mr. Shkreli, 35 years
old, the risk is worth it. He
plans to emerge from jail
richer than he entered.
His back-of-the-commissary-
envelope calculation indicates
that Phoenixus could be worth
$3.7 billion by the time he is
due to be freed in 2023, ac-
cording to a person familiar
with his thinking. His plan in-
volves acquiring more rare
drugs in various stages of de-
velopment and plowing money
into an ambitious research-
and-development agenda. Both
are guided by his long days
reading pharmaceutical re-
search. He has, for now, aban-
doned the strategy that led to
his explosion into the limelight
in 2015 when Turing raised the
cost of an HIV drug to $750
per pill from $13.50.
Minority holders
The company’s minority
shareholders are tired of big
promises and want to curtail
Mr. Shkreli’s influence so the
company can be sold. “This in-
vestment is an absolute disas-
ter,” says Austrian interior de-
signer Sabine Gritti, who owns
a million-dollar stake in Phoe-
nixus. “We can’t get informa-
tion, and anything they do
send out, we don’t know if it is
trustworthy.”
Akeel Mithani, a Phoenixus
board member, said in an email
that Mr. Shkreli “gets treated
like any other shareholder.” He
said the fact that Mr. Shkreli
has a cellphone in prison is
“widely known” but that his
“business related communica-
tion is limited via his lawyers.”
Executives at Phoenixus as
well as lawyers working for the
firm didn’t respond to requests
for comment. This article in-
cludes information from inves-
tors, employees, business part-
ners and others who know Mr.
Shkreli, as well as investor
documents reviewed by the
Journal.
Long before newspaper
headlines christened him
“pharma bro,” “bad boy” and
“the most hated man in Amer-
ica,” Mr. Shkreli was one of
four children born to Montene-
grin immigrant custodial work-
* * * *
specialists. Companies gener-
ally charge about $35 for a “ba-
sic cleaning” and more for ad-
vanced services; Other Peoples
Kicks, a Moreno Valley, Calif.-
based cleaner, charges $150 for
sneakers “in critical condition.”
Coveted styles such as the
Nike Air Jordan 11 “Concord”
can retail for $220 and Balen-
ciaga’s blue and orange Balen-
ciaga’s Triple S sneakers sell
for $950. They can sell for hun-
dreds more on the resale mar-
ket. With those kind of prices,
cleaners bet some owners
won’t blink at their prices.
“I wouldn’t want to waste
my money on a new pair of
sneakers that I already had if I
could clean them up,” said
Prentice Burleson, who
launched Other Peoples Kicks in
January. The 41-year-old used
to clean and restore sneakers
from his own extensive collec-
tion, currently at around 400
pairs, as a hobby, learning from
YouTube.
Confident he had mastered
the skills after two years, the
retired Marine set up “a catchy
name,” business cards, a web-
site and UPS Drop Box. “I love
helping people,” he said.
How-to-clean videos abound
on YouTube with sometimes
Known for his provocative behavior, Martin Shkreli mugged for journalists during trips to the courthouse to face securities-fraud charges.
Martin Shkreli has made prison friends, including ‘Krispy’
and ‘D-Block,’ some of whom affectionately call him ‘Asshole’
ers in New York City’s Coney
Island neighborhood.
He dropped out of high
school and parlayed an interest
in chemistry and money into
Wall Street gigs, including one
at a hedge fund run by televi-
sion host Jim Cramer. At 23,
Mr. Shkreli launched his own
fund. Three years later, he and
a partner launched a second,
called MSMB Capital Manage-
ment, with $3 million in back-
ing.
A wrong-way bet in 2011 on
the shares of an obesity drug
company wiped out MSMB. To
cover up the loss, Mr. Shkreli
created phony documents with
exaggerated assets under man-
agement and raised a new
fund, federal prosecutors later
alleged. Mr. Shkreli pleaded
not guilty and denied wrong-
doing.
The new fund invested in a
pharmaceutical company Mr.
Shkreli created, Retrophin,
which sought drugs that
treated rare diseases. Later, he
gave his original hedge-fund
investors cash and stock from
Retrophin to cover up the ear-
lier losses, prosecutors later
alleged.
The Retrophin board fired
Mr. Shkreli as chief executive
in 2014 for what it described
as reckless decision-making,
including making stock bets
using Retrophin’s money.
Undeterred, Mr. Shkreli cre-
ated another drug company,
Turing, raising around $55 mil-
lion from banks and wealthy
investors impressed by what
they saw as an ability to iden-
tify undervalued drugs. Mr.
Shkreli put most of his net
worth into the new company.
In August 2015, Turing
made its first big move, ac-
quiring the U.S. marketing
rights to Daraprim, a treat-
ment for pneumonia in pa-
tients with a rare parasitic dis-
ease. Mr. Shkreli’s business
plan involved boosting the
sticker price more than fifty-
fold.
Overnight, he became a sen-
sation, fueled by colorful and
what even he later admitted
were inappropriate, public
comments.
“All of us were horrified,
but he was having the time of
FROM PAGE ONE
Tramaine Oxley with some of the shoes he has worked on.
elaborate step-by-step direc-
tions. Methods vary, but can in-
clude disinfectant wipes, non-
gel toothpaste, a leather
moisturizer and a suede and
leather protector spray.
Tramaine Oxley, whose
seven-month-old business goes
by the name Sneaker_staykrisp,
his life,” says Bertrand des Pal-
lieres, a French financier who
invested in Turing months be-
fore the Daraprim hullabaloo.
“He was on fire. He loved the
controversy.”
The public attention encour-
aged authorities to prioritize
an examination of Mr. Shkreli’s
broader business history, the
Journal earlier reported, and
led to Mr. Shkreli’s December
2015 arrest for securities fraud
and conspiracy. He resigned as
Turing chief executive a few
days after the arrest.
After his release on bail, Mr.
Shkreli appointed Ron Tilles, a
Wall Street wheeler-dealer
who had helped him raise
money in the past, to run Tu-
ring as CEO.
Mr. Tilles had the title, but
not the votes. Between his
roughly 40% personal stake in
the company and shares owned
by loyalist investors, Mr.
Shkreli wielded final decision-
making power. The two men
sometimes got into shouting
matches over the company.
“I’m ready to blow my
brains out,” Mr. Tilles told a
friend, about a year into his
tenure.
In April 2017, Mr. Shkreli ar-
gued that Mr. Tilles was
spending too much money and
persuaded the board to fire
him as chief executive, but
kept him on as a director. Mr.
Tilles’s successor, Turing’s for-
mer chief scientist Eliseo Sali-
nas, was fired after less than
two months. It was then that
Mr. Shkreli proposed a new
Life on the Inside:
Push-Ups, Tweets
From prison, Mr. Shkreli
phoned in advice to company
officials when he could. But he
hasn’t always been plugged in.
He spent a few weeks in soli-
tary confinement for unspeci-
fied violations and suffered a
painful infection after needing
dental fillings. Perennially slight
of build, he has gained weight
and plans to begin a weightlift-
ing program, says Christie
Smythe, an author writing a
book about Mr. Shkreli who
TRAMAINE OXLEY
works out of the kitchen of his
Brooklyn apartment, in the wee
hours before and after work.
The 37-year-old, who drives for
Uber by day, says he is self-
taught, having cleaned his and
his friends’ sneakers for years.
His tools include a microfiber
cloth, a soft brush, a hard-bris-
five-person board that in-
cluded three of his former em-
ployees and an acquaintance.
Mr. Shkreli, in a missive to
shareholders, wrote that he es-
timated the company was
worth $500 million. “Many of
you have profited from my
other ventures,” he wrote.
“This one will generate an
enormous return, as well, if
you let it.”
Mr. Shkreli’s slate of direc-
tors won.
“People just wanted more
governance of the board,” says
Mr. Mithani, 27 years old, who
first met Mr. Shkreli on Twit-
‘I’m ready to blow my
brains out,’ said an
ex-CEO who clashed
with Mr. Shkreli.
ter and earlier sold rare sneak-
ers online.
The new team took over in
June 2017. A few months later,
Kevin Mulleady, an ex-execu-
tive at Mr. Shkreli’s defunct
hedge fund, became CEO. Mr.
Mulleady was referred to as
“Co-conspirator 1” in the crim-
inal case where Mr. Shkreli
was sentenced last year, people
familiar with the matter say.
Mr. Mulleady, who wasn’t
charged with a crime, didn’t
respond to requests for com-
ment.
Mr. Shkreli’s team changed
has visited him several times
in prison. He can now do 15
push-ups in a row.
He has seen a prison thera-
pist and taken on the job of
caring for prison cats. He occa-
sionally argues with his cell-
mates about proper grammar.
“The guards still mispro-
nounce his name repeatedly,
which he thinks is on purpose,”
Ms. Smythe says. Based on
testimony at Mr. Shkreli’s con-
gressional hearing in 2016, the
“h” is nearly silent.
Banned by Twitter for lewd
missives, Mr. Shkreli frequently
tweeted in prison from his new
Friday, March 8, 2019 | A11
tle brush, hot water, a cleaning
solution, and an eraser.
It can be a dirty business.
Military training comes in
handy. He is a 45-year-old for-
mer Marine. “Properly cleaned
“I’ve had people whose sneak-
ers smell horrible,” Mr. Oxley
said. “Some people wear sneak-
and maintained footwear is a
part of our genetic makeup,” he
said. “I got a couple of buddies
ers without socks. Feet sweat.”
He uses a sneaker laundry de-
tergent plus a deodorizing
of mine, former military guys,
to help me. These are people
that know how to do this.”
spray in those cases. For Kenneth Collier, of Rich-
Some traditional shoe-repair mond, Va., who operates Sole
shops are adding sneaker Bandit Restorations, this isn’t
cleaning services. “We’ve been just a side job. “This is my ev-
seeing a younger demographic eryday hustle,” the 24-year-old
bringing in designer luxury said. “If I don’t touch shoes ev-
sneakers,” said David Mesquita, ery day, I don’t eat.” He is grate-
vice president of Leather Spa, a ful the sneaker boom hasn’t
New York-based service. shown signs of slowing down.
Customers are often ecstatic “People see them as like
when they get their dirty or maybe works of art,” said Reon
damaged sneakers back from a Codrington, who launched his
cleaner. “I said ‘Are you sure sneaker-cleaning service, Crep
you didn’t just buy a new Guardiola, in London last year.
pair?’,” said Sindu Carty, a 27- The 30-year-old travel agent
year-old college student from cleans and restores expensive
Brooklyn, after seeing what Mr. sneakers out of the garage of
Oxley had done on her scuff- his home. Now he counts Mr.
marked and dirty $500 Yeezys. Olafunmishe among his clients.
“I didn’t believe it.” A beat-up pair of Balenciaga
“A sneakerhead can’t walk sneakers from another cus-
around in dirty sneakers; that’s tomer took him about two
like a huge faux pas,” said Rich- hours to get in decent shape. “I
ard Dudley, a security consul- wasn’t able to get it ‘factory
tant who in 2015 founded Be- fresh’ but he was happy with
spoq, a Washington, D.C.-based them,” he said. “Luckily enough
service that specializes in shoe the person I was cleaning it for
shines and sneaker cleaning. was a friend of a friend.”
securities-fraud conviction.
That left Mr. Mulleady in
charge of day-to-day opera-
tions, right as the company’s
business degenerated. He
sometimes exchanged mes-
sages with Mr. Shkreli through
his criminal-defense attorney
Benjamin Brafman, who was
permitted to visit his client in
jail. Mr. Brafman said “our only
communications with Mulleady
after Martin’s conviction were
our efforts to satisfy Martin’s
court ordered restitution and
forfeiture issues.”
Last summer, Vyera changed
its name yet again to Phoe-
nixus, an amalgamation of the
Latin words for phoenix, the
bird that rises from the ashes,
and nixus, to struggle or prog-
ress.
LUCAS JACKSON/REUTERS
Despite being behind bars,
Mr. Shkreli has worked to con-
solidate control of the com-
pany. He advised on two offers
in 2018 to buy shares from ex-
isting shareholders at a steep
discount.
As of the end of September,
Phoenixus had $37.7 million of
cash, according to the com-
pany’s private third-quarter fi-
nancial statement. It reported
$48.3 million of sales for the
year to date, with a $10.3 mil-
lion net loss after operating
the company’s name to Vyera expenses including $9.4 million
AG from Turing to make it eas- spent on unspecified “research
ier to do deals with other and development,” the state-
pharmaceutical companies be- ment says.
cause potential partners were Mr. Shkreli recently oversaw
wary of being seen as doing a series of Phoenixus deals it
business with Mr. Shkreli. hopes will lead to new cash
Investment bankers who ex- cows like Daraprim, people fa-
amined the company’s books miliar with the matter say. In
had less rosy assessments than September, it signed a commit-
Mr. Shkreli’s $500 million valu- ment to provide $20 million to
ation. Mr. Shkreli blocked at Orphan Star Therapeutics LLC
least two offers to acquire the to work on drug candidates for
company, one for around $100 several rare diseases, accord-
million. ing to people familiar with the
After one person involved in deal. Orphan Star’s public an-
the nixed sale expressed mis- nouncement didn’t name Phoe-
givings to others, he received a nixus and the company didn’t
text message from an unlisted respond to a request for com-
number that couldn't be ment.
traced. “You like talking to In January, Phoenixus told
people about Turing? Bad. Bad. shareholders it licensed one of
Bad. Bad. Bad. Bad. Bad. Bad. its drugs to Seelos Therapeu-
Bad. Bad. Bad. Bad. Bad. Bad. tics, receiving $1.5 million and
Bad. Bad. Bad,” the message 250,000 shares in Seelos.
read. “We are watching and Investors were given little
listening.” information about the deals,
Mr. Shkreli repeatedly pre- they say. Seelos didn’t com-
dicted he would avoid incarcer- ment.
ation altogether. Before the
trial, he wrote out a spread-
sheet of comparable white-col- Wu-Tang forfeit
lar offenses that drew limited Mr. Shkreli isn’t getting out
sentences. A judge remanded of prison anytime soon, but he
him immediately in September may be running out of time to
2017 after Mr. Shkreli, then out control Phoenixus. He needs to
on bail after his conviction, of- repay at least $7.6 million to
fered $5,000 to any stranger the federal government as part
who would grab a strand of of his sentence, pending ap-
Hillary Clinton’s hair to disrupt peal. Court filings show he has
her book tour. The judge called only $5 million in cash, mean-
it a “solicitation to assault in ing he may need to sell shares
exchange for money.” The in Phoenixus to pay the bill,
same judge in March 2018 sen- paring his voting power. He
tenced him to seven years in was earlier ordered to forfeit
prison on the conspiracy and his one-of-a-kind Wu-Tang
Clan album and a Picasso
painting.
account at would-be foes such At Fort Dix, Mr. Shkreli re-
as Rep. Alexandria Ocasio-Cor- cently lost patience yet again
tez, a Democrat, and Twitter with his executives. At year-
Chief Executive Jack Dorsey. end, Mr. Mulleady put in for a
The account, which was de- seven-figure pay increase. Mr.
leted Tuesday, included the Shkreli, who has been gener-
profile description “scaffold ous with fellow prisoners and
hopper,” an apparent reference even paid their poker debts,
to a process for discovering was livid. He phoned the chief
new drugs in medicinal chemis- executive, who was on an Afri-
try. can vacation with his new fian-
“Here we go with the virtue cée, to fire him, a person famil-
signaling and white male iar with the matter said. Mr.
shaming. @jack walks right into Shkreli later agreed to make it
it, apologizing for making bil- a suspension.
lions of dollars,” he wrote on Mr. Mithani, the Phoenixus
Feb. 12, in response to a chain board member, declined to say
involving Mr. Dorsey. who was now acting as chief
executive of the firm.
A11A | Friday, March 8, 2019 NY * * THE WALL STREET JOURNAL.

GREATER NEW YORK

Lenox Hill Is Planning a Major Overhaul
The hospital is set to come a 41-story residential the north side of 77th Street Interior changes include an
building with about 200 units. could be demolished and expanded emergency unit,
spend more than $2 The terms and who would de- turned into one building of the where patients are currently
billion to revamp its velop the new building are same height, officials said. doubled-up in hospital bays with
open questions, said Michael City Council member Keith less than 2 feet between beds.

AGATON STROM FOR THE WALL STREET JOURNAL

Upper East Side campus
BY MELANIE GRAYCE WEST
Lenox Hill Hospital officials
are expected to announce Fri-
day a multibillion-dollar rebuild
of the institution’s Upper East
Side campus in Manhattan, an
overhaul that aims to improve
services and patient amenities.
Lenox Hill, part of North-
well Health, will need exten-
sive city and community ap-
proval for much of the project,
which is estimated to cost
more than $2 billion.
The hospital—whose cam-
pus occupies a city block
stretching from Park to Lex-
ington avenues, and from 76th
to 77th streets—would remain
fully operational during the
revamp, which is slated to oc-
cur in stages over 10 years.
Northwell is proposing to
the city that a corner parcel of
the site facing Park Avenue be-
Dowling, president and chief
executive of Northwell.
Lenox Hill faces increasing
competition in a growing
health-care market. The hospi-
tal’s facilities are aging, scat-
tered in a jumble of 10 build-
ings, some of which date to the
1800s. Patient rooms, operat-
ing rooms and the emergency
department are too small, Mr.
Dowling said. The facilities, he
added, aren’t consistent with
what you need to provide up-
to-date medical care.
“You have to have such a
facility in Manhattan to be
continuously relevant in New
York,” he said.
A hospital room tower, ris-
ing 516 feet on Lexington Ave-
nue, is planned for the first
phase.
Northwell is New York
state’s largest private em-
ployer with a $12 billion oper-
ating budget. It acquired Le-
nox Hill about 10 years ago
Lenox Hill would need city and community approval for its project.
and has invested roughly $200
million in the Upper East Side
campus since then, mostly in
infrastructure, officials said.
In addition to the proceeds
from the development of the
Park Avenue parcel, funding
for the project would come
from Northwell’s overall oper-
ations, borrowing and donors,
officials said.
The hospital also is devel-
oping a nearby block on Third
Avenue, where facilities would
Powers, whose district includes
the Lenox Hill campus, said
there is a need for the hospital
to grow, and an overhaul cre-
ates an opportunity to address
some of the quality-of-life is-
sues around the facility, includ-
ing parking and congestion.
“For me, it’s incredibly im-
portant that there is a lot of
public participation in the
plan and concerns for those
who live in or around the hos-
pital are addressed through
include ambulatory services. the land-use process,” he said.
Demolition on that site has be- The redevelopment would
gun, with the final building to include closed bays for deliv-
rise to between 12 and 14 sto- ery and garbage trucks on
ries. The exterior of North- 76th Street and a covered area
well’s Manhattan Eye, Ear, and for ambulances on 77th Street
Throat Hospital on East 64th so patients can easily enter
Street also will be updated. the emergency department.
The hospital has future Delivery trucks idle on the
plans to completely renovate a streets now. Ambulances drop
midblock building on the south patients at the curb and
side of 76th Street and turn it stretchers are wheeled across
into physician-practice offices. a city sidewalk to enter the
Moreover, three townhouses on emergency department.
The new emergency department
would expand to 53,000 square
feet from 14,300 square feet.
Lenox Hill also plans to es-
tablish a mother-and-baby hos-
pital by renovating the Woll-
man and Lachman buildings,
which sit at the northwest cor-
ner of the campus.
Nurses welcome upgraded
facilities, said Rebecka Haw-
kins Beatty, executive director
of the New York Professional
Nurses Union. But, she said,
there are concerns about
maintaining safe staffing lev-
els across all areas of the hos-
pital and not just meeting
those levels for VIP patients.
Ms. Hawkins-Beatty, who
lives in the neighborhood, pre-
dicted there will be local push-
back to the project. “There’s a
ton of construction. People are
buying up blocks to make high-
rise buildings,” she said. “I
think there’s going to be some
exhaustion in the area.”

Public The Armory Show Marks a Milestone in Manhattan

Insurance
Option Is
Proposed
BY JOSEPH DE AVILA

Democratic lawmakers in
Connecticut introduced legisla-
tion Thursday that would create
a public option for health-care
coverage, allowing individuals
and small businesses to buy in-
surance through the state.
Under the proposal, Con-
necticut would create multiple
plans that small businesses
and their employees could buy
starting in July, leveraging the
state’s existing purchasing
power to lower costs. And in
2021 Connecticut would begin
offering a new health-insur-
ance option that any state res-
ident would be able to join.
The public insurance would
offer more inexpensive cover-
age options for small busi-
nesses and for individuals who
don’t qualify for subsidies
through the Affordable Care
Act, officials said.
SPENCER PLATT/GETTY IMAGES

The legislation would “in-

crease competition, increase
choice and increase the num-
ber of families who have health
care they can actually afford,”
said state Sen. Matt Lesser, the
Democratic co-chairman of the
Legislature’s insurance and
real-estate committee, at a BROWSING: A visitor checked out artworks Thursday on the public opening day of the annual Armory Show. Founded in 1994 by four gallerists, New York City’s
news conference Thursday. premier art fair is celebrating its 25th year. The show, featuring 198 exhibitors from 33 countries, runs through Sunday at Piers 90, 92 and 94 on the Hudson River.
Representatives of Connecti-
cut’s health-insurance industry,
however, said the public option

Queens Night Market Begins New Chapter

would destabilize the state’s in-
surance market by paying hos-
pitals and other medical-service
providers below-market reim-
bursement rates, while other
insurance companies would be
forced to pay market rates.
“The proposal is anticom-
petitive,” Brendan Peppard, re-
gional director of state affairs
for industry group America’s
Health Insurance Plans, told
lawmakers Thursday. The pub-
lic options would have an ad-
vantage over traditional health
plans that they would be com-
peting with, he said.
The legislation calls for Con-
necticut to seek bids from pri-
vate insurers to administer the
public option for health insur-
ance that would be open to all
individuals. The state also would
negotiate rates on behalf of indi-
viduals with private insurers.
“We are not talking about
abolishing private health in-
BY CHARLES PASSY
Since its inception in 2015,
the Queens Night Market has
become one of the more
prominent events on the New
York City food scene, welcom-
ing 10,000-plus people nearly
every Saturday to its location
in Flushing Meadows Corona
Park.
Now, the outdoor market,
which opens for the season on
April 20, is looking beyond
food, and planning to grow its
brand through media.
The market has signed a
deal to release a cookbook
next year, featuring recipes
from some of the 100-plus
vendors who are part of the
annual event, according to
founder John Wang, a 37-
BETH J. HARPAZ/ASSOCIATED PRESS

surance,” said Democratic year-old entrepreneur.

state Senate President Pro
Tempore Martin Looney, who
supports the bill. Speaker of
the House Joe Aresimowicz, a
Democrat, also backs the pub-
lic-option legislation.
Gov. Ned Lamont, a Demo-
crat, hasn’t said whether he
supports the proposal.
State Sen. Kevin Kelly, the Re-
publican ranking member of the
insurance and real-estate com-
mittee, said Connecticut’s expe-
rience with Medicaid is a cau-
tionary tale. He noted that some
providers don’t accept Medicaid
and the quality of treatment var-
ies. “The Medicaid experience is
by no means the gold standard,”
he said. “For Democrats to want
to put everyone on a system like
this is problematic.”
The Experiment, a New
York-based press that is
known for cookbooks, said it
would be the publisher.
The Queens Night Market
also plans to create a series of
videos featuring its vendors,
which would be shared start-
ing this year via social media, The Queens Night Market, seen in 2017, now features cuisine from 100-plus vendors who hail from all corners of the world.
Mr. Wang said.
The moves reflect how the sors, said Mr. Wang, who for- vendors and how they estab- at the market,” Mr. Wang said. The Queens Night Market,
market, which emphasizes the merly practiced law. lished themselves in the U.S. Among the vendors hoping which this year ends for the
multitude of cuisines from Mr. Wang said he was in- and expanded their food busi- to see their story and food season on Oct. 26, is hardly
immigrant communities spired to create the food des- nesses. spotlighted is Wanda Chiu, the only food event to grow
throughout the city, has be- tination from his visits to the Vendors, who pay to set up who runs a stall at the mar- its brand as a media entity.
come a popular symbol of night markets in Taiwan. stalls in the market, hail from ket devoted to street foods The New York City Wine &
New York’s diverse culture. Prices don’t exceed $6 for any a numerous regions, ranging from her native Hong Kong. Food Festival has a partner-
Despite the event’s ability food item. from Asia to the Caribbean to Her specialties includes pan- ship with the Food Network
to draw crowds, it is still run He noted that his main West Africa. fried noodles and curry fish and Cooking Channel. The fes-
on a fairly bare-bones budget goal in establishing a more “Spin the globe and there’s balls. tival’s companion event in Mi-
of $300,000 a year and has prominent media presence is almost half a chance the place “I love to introduce peo- ami’s South Beach also has re-
failed to attract major spon- to share the stories of the you land will be represented ple” to the cuisine, she said. leased a cookbook.
THE WALL STREET JOURNAL. * * NY Friday, March 8, 2019 | A11B

GREATER NEW YORK

Queens D.A. to Step Down

BY CORINNE RAMEY
Longtime Queens District
Attorney Richard Brown said
Thursday that he would resign
in June due to health issues.
Mr. Brown, an 86-year-old
Democrat who has held office
since 1991, had announced ear-
lier this year that he wouldn’t
seek re-election, clearing the
way for what is expected to be
a competitive Democratic pri-
mary. On Thursday, he said he
had hoped to finish his term. and assumes the position in
“Given the current state of January 2020.
my health and my ongoing Mr. Brown, who was ap-
health issues, it has become pointed by Gov. Mario Cuomo
increasingly difficult to fully in 1991 and elected in subse-
perform the powers and duties quent years, has Parkinson’s
of my office in the manner in
which I have done since 1991,”
disease. In recent years he in-
frequently has appeared in
Every monogram is a work of art
Mr. Brown said in a statement. public.
He said that after he re- Candidates running to suc- Beautifully crafted in our Rhode Island
signed on June 1, his chief as- ceed him are Melinda Katz,
sistant, John Ryan, would the Queens borough president; studios, your customized three-letter
serve as acting district attor- Rory Lancman, a New York
monogram will be a wearable piece of art.
ney until a successor is elected City councilman from Queens;
Greg Lasak, a former judge; The sterling silver medallion of stylized initials
Mina Malik, former head of
the Civilian Complaint Review is sure to become your instant go-to favorite.
Board; Tiffany Cabán, a public
defender; Jose Nieves, a for-
mer prosecutor in the state at-
torney general’s office; and
AGATON STROM FOR THE WALL STREET JOURNAL

Betty Lugo, a defense attorney.

The candidates largely have
run on policies viewed as pro-
gressive, including declining
to prosecute some low-level
crimes and decreasing the use
of cash bail. Many have argued
that the criminal-justice sys-
tem is unfair to low-income
people and people of color.
A June primary will be fol-
lowed by a general election in
Richard Brown says he will resign June 1 for health reasons. November.

GREATER NEW YORK

NEW YORK STATE
GOP Lawmakers Ask N.J. Reaches Deal
Cuomo to Amend Ban With Two Unions
Several New York Republican
lawmakers on Thursday asked
Gov. Andrew Cuomo to amend an
executive order that bans nones-
sential travel to North Carolina so
12 SUNY students can stay at a
hotel there as they compete in the
NCAA Swimming championships.
Sen. Pat Gallivan, a Republi-
can, said the ban means the stu-
dents must stay at a hotel in
Virginia and commute more than
an hour to the competition.
Mr. Cuomo, a Democrat, signed
the order in 2016 after North Car-
olina approved a bill striking down
protections for transgender peo-
ple. It has been partially repealed,
but the governor’s aides said the
ban remains in effect.
—Jimmy Vielkind
LABOR TRANSPORTATION
MTA Says Debris Fell
From Subway Tracks
New Jersey’s state workers
would get 2% raises annually and
the state would save $70 million in
A piece of metal that fell
from an elevated subway line on
Wednesday and crashed onto a
$
95
Plus Free Shipping
health benefits under a four-year, car in Queens broke off from the
$120 million labor contract Gov. track’s structure, MTA Chief Sterling Silver Monogram Necklace
Phil Murphy unveiled Thursday. Safety Officer Patrick Warren
The first-term Democrat an- said Thursday. 16" length. 13⁄8" wide. Scripted type. Please allow an extra
nounced the deal with the “This was an extremely seri-
state’s Communications Workers ous incident that we are taking 3-5 business days for personalization.
of America and the AFL-CIO rep- aggressive action on,” he said.
Shown slightly larger for detail.
resenting 32,000 workers on the The metal hit a car in Wood-
heels of his second budget ad- side, smashing the windshield and Personalized items cannot be returned.
dress, which finances about $1 bouncing onto the vehicle’s roof. A
billion in new spending with probe revealed that the debris
roughly $1 billion in savings from was part of a metal plate used
worker health benefits. on the elevated 7 line, the MTA Ross-Simons Item #444001
The contract is subject to said, noting that the track’s struc-
worker ratification and would ture wasn’t compromised. The To receive this special offer, use offer code: JUSTME159
run from July 1 through June 30, MTA said it will inspect its tracks 1.800.556.7376 or visit ross-simons.com/justme
2023. with a focus on the metal plates.
—Associated Press —Paul Berger

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 A12 | Friday, March 8, 2019 THE WALL STREET JOURNAL.

LIFE&ARTS

Paula Beer and Franz Rogowski, left; Mr. Rogowski and Lilien Batman,
above; Mr. Rogowski (center left) with other members of the cast of
Christian Petzold’s ‘Transit,’ below
MUSIC BOX FILMS (3)

FILM REVIEW | By Joe Morgenstern

Exploring the State of Being Stateless

The hero of Christian Petzold’s film flees the forces of fascism, takes on another man’s identity, then falls in love with his wife

I
nstead of summoning up from work and watches. She to some distant, beckoning free- the dead man’s wife, an anguished bidden.
the haunting strangeness doesn’t listen, since she’s pro- dom. The film is also set in France, beauty played by Paula Beer.) The refugee’s plight, as “Tran-
of Christian Petzold’s foundly deaf, but soon, signing and Georg, the German hero, has This audacious blurring of time sit” sees it, is neither temporal nor
“Transit” by summarizing briskly, she tells her son to tell similarly escaped from Germany, and place surely sounds problem- transitory, but an infection of the
the action, which is spo- Georg that she’d like to watch him with hopes of ending up elsewhere, atic, and some have decried the soul that feeds on the isolation
radic, or specifying the sing the song again. Which he but that’s where the parallels end. erasure of historical fact—no men- that precipitated it. Surrounded by
time and place, which are ambigu- does, with redoubled feeling that’s Georg’s travails play out in lay- tion of the Nazis or the Jews they others in perpetual transit, Georg
ous, let me recount a sequence that reflected on her face. ered slices of time. He is visibly a persecuted. But the result is pro- loses hope. Having taken someone
begins with a little blob of some- It’s an exquisite moment in an citizen of the present; contempo- vocative, even startling, and more else’s identity, he loses his own. It’s
thing being heated in a teaspoon extraordinary film that uses the oc- rary cars fill the streets of Paris edifying than you might expect. remarkable that he’s so affecting—
over a candle. Is it heroin? No, it’s casion of Georg’s fraught journey and Marseilles. Yet his story throbs “Transit,” in French and German, the man is not a bubbly spirit—but
solder. The hero, Georg (Franz to depict his state of being, the with movie-mythic feelings of a doesn’t turn on facts, or period ac- Mr. Petzold’s film is full of sur-
Rogowski), a German refugee in anxious limbo in which he finds World War II past—the Paris mon- curacy. Mr. Petzold has already prises, including the identity of the
France, is trying to repair a loose himself trapped. The screenplay is tage in “Casablanca” comes to made two superb period films, seemingly omniscient narrator.
connection on a radio while a based on the 1944 Anna Seghers mind and heart—except that it’s an “Phoenix” and “Barbara.” His new Hans Fromm did the fine cinema-
young boy looks on, transfixed. novel of the same name, an exis- alternative past in which the Nazis one, which opens nationally this tography, and the Talking Heads
When the radio comes to life, it tential thriller set during World have been replaced by unnamed week, is closer to Camus, and the provide a coda that sounds oddly
plays a song that moves Georg War II. The novel’s unnamed narra- fascists enforcing a brutal rule, as timelessness of “The Stranger,” antic at first, then becomes, in the
deeply—his mother sang it to him tor is an anti-Nazi German who, fascists have done throughout his- than to some ripped-from-the- context, frightening, even crazed.
when he was a child. As Georg having escaped from a concentra- tory. (After assuming the identity headlines drama about Europe’s “We’re on a road to nowhere,” the
sings along, the boy’s mother, Me- tion camp, flees to Occupied France of a writer who has committed sui- refugee problem—although echoes lyrics go. It’s the perfect refugee
lissa (Maryam Zaree), comes home in the hope of escaping yet again cide, Georg falls in love with Marie, of the current situation come un- anthem.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
10s 1 2 3 4 5 6 7 8 9 10 11 12 Way
13 60 PUZZLE
CONTEST
Edmonton
d t <0
0s 14 15 16
Wine 61
grape
Vancouver
V Calgary
10s 62
Unspoiled area
Winnipeg
ip 10s 17 18 19
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 THE WALL STREET JOURNAL.
Caregiving Across Centuries
A twist on the improbable yet true story of a Jamaican nurse who worked with Florence Nightingale during the Crimean War
JULIETA CERVANTES
New York
IT SHOULDN’T BE all that
surprising, demographics be-
ing what they are, that the
subject of caregiving is be-
coming increasingly promi-
nent in American theater.
Since more and more of us
are either getting or giving
care, it stands to reason that
TELEVISION REVIEW | By Dorothy Rabinowitz
‘THE CASE AGAINST ADNAN
SYED’: JUSTICE FOR ALL?
IN 1999, 18-year-old Hae
Min Lee, a popular and at-
tractive Baltimore high-
school student, was found
strangled in a wooded park.
For which crime her former
boyfriend Adnan Syed was
charged and convicted. The
names of the victim, the ac-
cused and a few other prin-
cipals in “The Case Against
Adnan Syed” (begins Sun-
day, 9 p.m., HBO) will be fa-
miliar to the audience that
first learned of the story
nearly five years ago in the
popular podcast “Serial.”
The difference between it
and this four-part series is
a radical one. The HBO ver-
sion’s ambitious, complex
and deeply detailed narra-
tive delivers dimension to
this story of doomed ro-
mance, clashing cultural
values, and dubious justice
as only film can.
Here are cameras that lin-
ger on Adnan’s mother—on,
particularly, her face, alter-
nately stoic and sad, but al-
ways with a story to tell. It’s
HBO (2)
Adnan Syed, above, and Hae Min Lee and her friends, top right;
Adnan has spent nearly 20 years in prison for Hae Min’s murder
we should be interested in
seeing so central a part of
our lives played out onstage.
The latest example of this
heightened interest is
“Marys Seacole,” in which
Jackie Sibblies Drury, an up-
and-coming but no longer
young writer (she is 37)
whose work is nonetheless
a story of life half-lived, a
common condition of people
whose loved ones have sud-
denly been caught up in
criminal charges and taken
away from the family for no
reason they can accept—no
one has any doubt of Ad-
nan’s innocence. He has by
now been in prison for
A murder case gets
another look in this
HBO documentary
miniseries
nearly 20 years. His father
was so shamed by the accu-
sation and conviction of his
dutiful, academically gifted
son that he took early retire-
ment. The Syeds are Paki-
stani Muslims.
In only one regard was
Adnan not as dutiful as his
mother wished. He had a
girlfriend, a fact he had to
LIFE & ARTS
THEATER REVIEW | By Terry Teachout
new to me, tells the improb-
able yet true story of a
saintly, no-nonsense 19th-
century nurse who, born in
Jamaica in 1805, made her
circuitous way to what is
now Ukraine, where she
worked with Florence Night-
ingale in the Crimean War. In
Ms. Drury’s extensively fic-
keep secret from his fam-
ily—his mother in particular,
who strictly forbade her son
to be involved in any ro-
mance. Adnan’s father as-
sured his wife there was
nothing to worry about—a
boy who had such good
grades, he told her serenely,
could not be going around
with girls.
Adnan is at the center of
this drama, but so too is the
social world in which the
two teenagers lived and
studied, carried on about
their proms, and sneaked
around as Adnan and Hae
Min did to avoid parents
who were not amused by
anything having to do with
the wonders of young love.
Adnan appears to have trem-
bled at the prospect of his
mother learning that he had
a girlfriend.
Hae Min Lee, from a Ko-
rean family, had confided
her feelings for Adnan to a
diary—a frank record of the
ecstatic wonder she felt
thinking about him. The first
section of the film, focused
on Hae Min and Adnan, is as
stark and elemental a pic-
ture of adolescent passion
as can be imagined. But it’s
something more important
as well: the crucial introduc-
tion to Adnan, the reason
for the way everyone in his
world—his friends, his
teachers—held to their im-
passioned belief that Adnan
could simply never have
murdered Hae Min or any-
one else. Hae Min loved him,
but everyone else he knew
clearly had strong feelings
for him as well—for his in-
telligence, his friendship, his
spirit. It may often be the
case—it is often—that
friends find it impossible to
believe someone they knew
well committed a ghastly
crime. There is, nonetheless,
something striking about
the intensity of the disbelief
on the part of everyone in-
terviewed for this series.
All of which only under-
scores the reasons that
cases like this, of the justice
system gone awry for one
man—one among many, only
the many don’t get to be the
subject of HBO films—hap-
tionalized, magically realistic
play, Mary (played by Quincy
Tyler Bernstine) becomes a
symbol of the spirit of care-
giving who is reincarnated
time and again. The plural-
ized title is indicative of her
varied versions: We last see
her tenderly looking after
Merry (Marceline Hugot), a
pen. Impossible though it
was for his friends to believe
that the kind and loving and
never violent Adnan could
have strangled his former
girlfriend, it’s also true that
boyfriends recently dropped
by girlfriends who have then
gone off to find love else-
where—which is what hap-
pened in this case—tend to
be among the first to attract
the suspicions of police in-
vestigators when a murder
like this presents itself.
In time questions have
arisen about two men who
might well have been re-
sponsible for the murder
and about some of the testi-
mony that helped convict
Mr. Syed. In June 2016 the
Baltimore Circuit Court va-
cated Mr. Syed’s conviction
and granted a retrial, and in
March 2018 Maryland’s
Court of Special Appeals up-
held the decision. The prose-
cutor did not take this deci-
sion well and has appealed
to the highest court in
Maryland. This can have
come as no surprise.
Still, as Mr. Syed has
warned his mother, it will
all take a great deal of time
for the courts to decide his
fate. He has made one im-
portant decision on his
own. Offered the possibility
of a plea deal, he refused.
After 20 years, he has ex-
plained, he’s not now going
to confess to a crime he did
not commit.
The Case Against Adnan
Syed
Begins Sunday, 9 p.m., HBO
Friday, March 8, 2019 | A13
ana Blain-Cruz, another new-
ish face on the New York
Ismenia Mendes theater scene who made an
and Quincy Tyler appropriate splash with her
Bernstine recent Signature Theatre re-
(foreground) and vival of Lynn Nottage’s “Fab-
Karen Kandel ulation, or the Re-Education
(background) in of Undine.” “Marys Seacole”
‘Marys Seacole’ might have been a bit hard
to follow in less capable di-
rectorial hands, but Ms.
Blain-Cruz makes all the
rough places plain, and the
result is an exciting, involv-
ing show that catches you up
from the first scene onward.
I confess to having ini-
tially decided to review
“Marys Seacole” solely be-
cause of the cast. Not only is
Ms. Bernstine one of those
attention-seizing performers
who make everything they
do worth seeing, but the six-
woman ensemble also in-
cludes Ismenia Mendes, one
of New York’s most talented
young actors, who plays,
among other parts, Merry’s
sullenly disaffected millen-
nial granddaughter (“I know
I’m supposed to pretend that
it’s not totally sad and gross
here”) and a terrified battle-
field nurse-in-training. Ev-
eryone in the cast is very,
very good, but Ms. Bernstine
and Ms. Mendes can’t help
but stand out.
Marys Seacole
senile old woman, in what Lincoln Center Theater, Claire
appears to be a modern-day Tow Theater, 150 W. 65th St.
American nursing home. ($30), 212-239-6200, ex-
If all this sounds too ear- tended through April 7
nest for words, fear not: Ms.
Drury dramatizes the succes- Mr. Teachout, the Journal’s
sive phases of Mary Sea- drama critic, is the author,
cole’s life with pith and most recently, of “Billy and
vigor, aided by the equally Me.” Write to him at
resourceful staging of Lile- tteachout@wsj.com.
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A14 | Friday, March 8, 2019
The NFL Combine is over, and from now until the NFL Draft on April 25, when commissioner Roger Goodell starts dispensing awkward bear hugs, anonymous scouts are going to get a lot of attention.
I’m a Scout, and You’re All Garbage
As the NFL draft approaches, cue the petty criticism from unnamed executives
Your hands are too
small. Or wait: Is it
that your hands are
too big? You’re too
slow for our offense.
Or maybe…you’re too
fast?
Can a football player be too
fast? Who knows! I’m just worried
for no good reason, because wor-
rying for no good reason is my job.
Also: Your feet look funny. Your
toes, too. Your kneecaps bulge like
lightbulbs. Your lats are puny. Your
ears are thoroughly average. You
should probably get a haircut. Or
grow a mustache. You look uncom-
fortable in jeans. You’ve never
been to a zoo. Or to a Cheesecake
Factory.
It isn’t horrible. But it makes
me nervous.
You told the media you drink
sparkling water. Hmm. You like a
window seat on the bus. You pre-
fer waking up to sunlight. You’re
wary going over bridges. You dis-
like cats. Your favorite movie is
“Transformers 2.” You don’t ask
for a receipt at the supermarket.
You think Keith Richards’s solo al-
bums are overrated.
SOCCER’S HIGHEST-PAID ENIGMA
BY JOSHUA ROBINSON
ARSENAL HAS ALWAYS been
convinced that Mesut Özil is a soc-
cer genius. The club was sure
enough that it tripled its record
transfer fee to acquire him in 2013
and remained certain enough to
make him its highest paid player
with a contract extension last year.
But after investing over $100
million in him over the years, Arse-
nal is grappling with a much more
perplexing question than whether
or not Özil is supremely gifted. (For
the record, he is.) The more press-
ing question is whether the most
talented player in their squad is
even worth starting.
The answer isn’t as clear-cut as
it seems. Özil has become an endur-
ing enigma. At his best, there are
few passers like him. He is able to
trace paths through defenses that
will make you believe he sees the
universe’s hidden dimensions. His
touch is so deft that he can literally
spit out a piece of gum, juggle it
with his feet and knock it back into
his mouth.
But at his worst, Özil is practi-
cally invisible. He fades quietly into
the background, while the match
unfolds around him.
Former Arsenal manager Arsène
Wenger tortured himself for five
years wondering why Özil couldn’t
take over games. He never came up
with an answer. These days,
Wenger’s successor Unai Emery
These are what we call “red
flags.”
Your leadership style is ques-
tionable. I am not sure you are
captain material. Or even corporal
material. Your teammates, I talked
to them: They said weird things
about you. Not nasty, just weird.
They said you kept to yourself.
That you really liked peanut butter
with popcorn. And flannel paja-
mas. And windy days. And quinoa.
Who likes windy days? Peanut
butter with popcorn? Quinoa? Can
I really take a risk on you?
Who am I? You ask.
I am an anonymous football
scout, and I’m the person talking
mostly daffy nonsense about you
between now and the NFL Draft.
This is my time, buddy. The
combine is over, and from now un-
til April 25 in Nashville, when
commissioner Roger Goodell starts
dispensing awkward bear hugs,
people like me are going to get a
lot of attention.
Especially if we say mean things
about you. Trash you. Doubt you.
Disparage you. Anonymously.
Since we’re unnamed, our moti-
vations are murky. To say nothing
PREMIER LEAGUE
doesn’t even seem terribly inter-
ested in picking up the puzzle.
Özil has started barely a third of
Arsenal’s games in 2018-19 due to a
combination of nagging injuries and
Emery’s frustration with him. Even
when healthy, Özil can’t hold down
a place on a team that was once
built around him. Emery has listed
a fully-fit Özil among the substi-
tutes on at least 10 separate occa-
sions this season, including during
last weekend’s crucial game against
Tottenham.
“Sometimes he’s helping us, an-
other moment not helping us, be-
cause of his injury or maybe the
match isn’t for him,” said Emery.
“But he’s a good player.”
Özil is better than good. No one
in Premier League history racked
up 50 assists faster than he did. As
of last October, he was one of only
two players in a top European
league to have created at least
1,000 scoring chances since Opta
began tracking them in 2006. At a
time when soccer is more athletic
than ever before, Özil built a career
on mastering the most subtle tech-
nical details of his craft.
Except there is a fine line be-
tween doing things subtly and do-
ing nothing at all. Özil has only
three assists since August. His five
goals have come against mediocre
sides such as Newcastle, Bourne-
mouth and Vorskla Poltava. The less
tangible aspects—from his use of
space to his passing rhythm—no
longer seem critical. Özil has been
SPORTS
FOOTBALL | By Jason Gay
of our logic. We’re capable of talk-
ing ourselves into drafting you,
and then talking ourselves out of
drafting you in the space of a
week. Or vice versa.
Maybe we want to sink your
draft position, because we don’t
like you. Or we’re trying to sink
you so we can pick you ourselves.
Yes! How about that? Some of us
work both sides. It’s like a le Carré
thriller, but with anonymous
knuckleheads.
Occasionally, we’re right. Very
often, we’re wrong. It really
doesn’t matter, because nobody
knows our names.
Being anonymous means we can
say silly things without repercus-
sion.
This year, the panic is that
quarterback and Heisman Trophy
winner Kyler Murray is basically
Lilliputian, even though he’s barely
a VISIT PHOENIX brochure shorter
than Drew Brees, one of the great-
est QBs of all time.
Last year, a lot of us got fired
up that UCLA quarterback Josh
Rosen was too smart for football—
that Rosen’s brain was just so in-
quisitive, he couldn’t possibly fo-
on the field for just 38% of the Gun-
ners’ goals this season.
One issue is that Emery would
love for his team to follow the Pre-
mier League’s fashion and play a
high-pressing style, which doesn’t
suit Özil’s preference to act as more
of a quarterback.
Another is his persistent absence
from practice due to nagging back
ailments and illness, which frus-
trated Wenger and appears to irri-
tate Emery even more. Asked about
dropping him from the squad for a
recent defeat at West Ham after a
return from injury, Emery snapped
back, “The players who were here
are the players who deserved to be
in this match.”
Özil doesn’t do himself many fa-
vors by keeping so quiet. He was
unavailable for comment for this
article. His main form of communi-
cation is a purposefully inoffensive
social media presence.
He has, however, diverted from
that twice in the past year: once to
explain why he and another German
player of Turkish heritage, Ilkay
Gundogan, appeared in a photo op
with Turkish president Recep
Tayyip Erdogan in London last
spring; and again in the summer to
quit the German national team cit-
ing “racism and disrespect” from
the federation. Both incidents were
reminders of how little is really
known about him.
But even those who know Özil
don’t always understand him. His
desire to please and his respect for
cus in the way we need him to
focus.
When a quarterback drops back
in the pocket, you want him to fo-
cus on completions. You don’t
want him scanning the field, day-
dreaming over whether or not Ed-
ward de Vere actually wrote
Shakespeare’s plays.
Laugh all you want, people. But
now it’s possible Murray could re-
place Rosen in Arizona. This stuff
matters.
The stakes are huge.
Every rock must be overturned.
A bad draft can break a career.
Nothing is off-limits if you sit
down with me. I’ll ask you what
you will do on a third-and-10. I’ll
ask you what you’ll do if you en-
counter a shark in shallow water.
Or a narwhal. Or Wolf Blitzer. I’ll
ask you what you’ll do if your sis-
ter wants to show you her Yosem-
ite vacation photos one more time.
I want to provoke you. See if
you’re soft. See if you can handle
it.
Do you have what it takes on
game day? Do you have what it
takes to read an article in which
unnamed middle-aged scouts won-
Mesut Özil has started barely a third of Arsenal’s games in 2018-19.
Wenger, for instance, seemed to ex-
ceed anyone else’s in the squad. He
was one of the few players ever to
give the Arsenal manager a Christ-
mas gift, one of his jerseys from
Germany’s winning run at the 2014
World Cup.
Yet his attitude on the field
didn’t seem to line up with his ap-
parent commitment. Wenger re-
membered a match at Manchester
City when Özil did one of his disap-
pearing acts for the opening 45
minutes. Tramping into the dress-
THE WALL STREET JOURNAL.
JOE ROBBINS/GETTY IMAGES
der why you didn’t go fishing
more with your roommate your
sophomore year?
I want to know: Do you read
books? Do you have conversations
with lots of words? Have you ever
looked into the sky and wondered
what it’s all about?
Do you think you’re smarter
than me? Can you read a menu in
French? Do you know the capital
of Kansas? Do you?
“Topeka.” Whatever you say,
Rand McNally.
Maybe you’re not NFL material.
Maybe you should play football at
the Sorbonne.
In the meantime, I’m looking at
your thumbs. They don’t exactly
look right. One of your shoulders
is bigger than the other. Your eye-
balls seem off. And people say you
don’t love ketchup. You prefer the
stairs to the elevator. You pump
your own gas. You didn’t really get
all the hype over “A Star is Born.”
I’m not saying any of this is a
deal breaker. That imperfect peo-
ple don’t grow up to do important
things. You might actually be
good. I’m just concerned. This isn’t
life, after all. This is the NFL.
STUART MACFARLANE/ARSENAL FC/GETTY IMAGES
ing room at halftime, Özil was so
heated that he kicked a locker.
Where that passion had been on the
field, no one could say.
All of which could easily have led
Arsenal to see the 30-year-old both
as a genius and a busted flush. In-
stead, Arsenal extended his contract
until the summer of 2021. The plan,
ideally, is to figure out how best to
use him at some point before then.
“The key is in his hands,” Emery
said. “We can see the best Mesut
with us.”
THE WALL STREET JOURNAL. Friday, March 8, 2019 | A15

OPINION
The Democratic Crackup BOOKSHELF | By James Kakalios

Americans
love a good
political
Instead, Mrs. Pelosi this
week accomplished the re-
markable feat of sidelining Mr.
dria Ocasio-Cortez’s threat last
week to put those Democrats
on a “list” for a primary chal-
longer matters; wants to abol-
ish Immigration and Customs
Enforcement; and believes
Going
brawl,

news
and
that’s terrible
for
S p e a k e r
Trump and owning most of
the unpleasant headlines her-
self. House Judiciary Chair-
man Jerry Nadler explained
lenge if they don’t get with her
program. And of course radi-
cal-left House members for
weeks have overshadowed the
markets are immoral. These
aren’t degrees of separation.
They’re completely separate
philosophies.
With the Flow
POTOMAC
Nancy Pelosi. that his sprawling Trump in- Pelosi agenda with their own That the party is going in
WATCH
Her Demo- vestigation was primarily de- proposals for a Green New opposite directions was beau-
Liquid Rules
By Kimberley
cratic Party signed to convince voters that Deal, Medicare for All, giant tifully illustrated this week by By Mark Miodownik
A. Strassel
has com- Democrats were “not just try- tax hikes and more. the heated public fight be- (Houghton Mifflin Harcourt, 232 pages, $26)

menced a full
throw-down—with itself.
Few things have benefited
Democrats more in the past
few years than the Donald
Trump show. The president
likes to be the center of atten-
tion, and the media likes noth-
ing more than to oblige him.
This dynamic helped make the
2018 election a referendum on
the man himself rather than
his policies, and that made
Mrs. Pelosi speaker of the
House.
Democrats envisioned the
same dynamic helping them
win the White House in 2020.
Mrs. Pelosi has been to that
rodeo before, after the 2006
election, when she was first
elected speaker. She mobilized
her committee chairmen to
launch focused investigations
to keep the spotlight on
George W. Bush’s Iraq war, en-
ergy policy, detainee treat-
ment, etc. She corralled a di-
verse caucus to pass a modest
agenda, “Six in ’06,” that
showed Democrats could get
things done but didn’t put
them in the limelight, much
less make them look crazy.
This paved the way to the elec-
tion of Barack Obama in 2008,
and Democrats figured Mr.
Trump would make a repeat
even easier.
ing to steal the last—to re-
verse the results of the last
election.” This required his
colleagues to deny furiously
that the party has already de-
cided on impeachment.
Pelosi and her chaotic
caucus manage to
overshadow Trump—a
dubious achievement.
Then there was the crackup
between House party elders
who wanted Democrats to con-
demn the anti-Semitism of
Rep. Ilhan Omar, and woke
freshmen who wanted to turn
smears against Jews into a
fuzzy discussion of hurt feel-
ings. Members battled for
days, only for Mrs. Pelosi on
Thursday to roll over to the
progressive left’s demand that
any resolution condemn “hate”
in general and not anti-Semi-
tism specifically. Even CNN de-
scribed all this as “chaos.”
These are not the only inci-
dents. They follow a high-pro-
file moment in which moder-
ate Democrats bucked their
party to vote with Republicans
on gun control, as well as furi-
ous backlash to Rep. Alexan-
It’s tempting to write these
moments off as growing pains
or the type of backbencher
grandstanding that debilitated
John Boehner’s speakership.
But that ignores how huge and
fundamental the fissures are
becoming in the Democratic
Party. This isn’t a tea-party
moment, which was fueled by
conservatives who felt their
Republican members weren’t
living up to principles that
most in the party share. The
Democratic Party is moving in
two different directions.
Ideologically, how do you
mesh a party whose members
variously embrace and reject
capitalism? Hillary Clinton, in
a remarkable moment last
year, said she believes her de-
cision in 2016 to call herself a
“capitalist” hurt her in places
like Iowa, where “41% of Dem-
ocrats are socialists or self-de-
scribed socialists.” In other
words, well over a third of
Iowa caucus-goers reject the
economic and political basis
upon which the Democratic
Party was founded.
The moderates who won
Mrs. Pelosi the gavel ran on
deficit reduction, border secu-
rity and market reforms. To-
day’s progressive movement
subscribes to “modern mone-
tary theory,” in which debt no
tween Wisconsin Democrats
who want the 2020 convention
in Milwaukee and Florida
Democrats who want it in Mi-
ami. The Wisconsin contingent
says the party needs to stop
snubbing labor unions and the
white working class Mr. Trump
won over in the 2016 election.
The Florida crowd says the
party needs to embrace more
passionately the multicultural,
minority, progressive micro-
cosms of coastal America.
What nobody is admitting is
that no Democratic politician
has yet to articulate a strategy
for catering to both. Because it
is impossible.
The reigning political wis-
dom is that none of this will
matter in the end. Democrats
will brawl, but their anti-
Trump fervor will ultimately
unite them around a standard-
bearer. Then again, these are
not usual political times. And
it seems equally possible that
the same anti-Trump con-
tempt will push them to over-
reach in their investigations
and indulge in policy prescrip-
tions that prove too extreme
for a center-right country.
It’s too soon to know. For
now, all we can do is sit back
and enjoy the Democratic
show.
Write to kim@wsj.com.
O
f the three phases of matter—gas, liquid and solid—
scientists pay the least amount of attention to liquids.
This is not because they are unimportant but because
they are the hardest to understand. Gases are in a state of
near constant motion, which enables one to determine their
average properties, such as temperature or pressure. The
atoms in solids, such as silicon or diamond, are relatively
stationary, but their crystalline order dramatically simplifies
the equations necessary to understand their properties.
Liquids, however, are the worst of both worlds—they lack
the order of crystals, while the methods that reveal the
properties of gases become hard to apply when the atoms
condense into a liquid.
Regardless of how diffi-
cult they are to understand,
liquids play a central role in
our lives. There are planets
that are solid rocks and
planets that are gas giants,
but the only one we know
with life has three-quarters of
its surface covered with water.
Which makes the dearth of
popular science books devoted
to this phase of matter
unfortunate.
Happily, this situation is
remedied by Mark Miodownik’s
“Liquid Rules: The Delightful and
Dangerous Substances That Flow
Through Our Lives.” Mr. Miodownik, a profes-
sor of materials and society at University College London,
wrote the 2014 best seller “Stuff Matters,” an engaging
popular account of the science underlying the materials we
take for granted. In that book, each chapter began with the
same photo of the author having a cup of tea at a small
table on his building’s roof, then examined one material
found in the photo, including steel, glass, paper and plastic.
In his second book, Mr. Miodownik turns his attention to
liquids, using the framing device of a trans-Atlantic flight.

The African Future of ‘America’s Church’
HOUSES OF The United membership, United Method- teaching and allows liberal re- can be cajoled through pro-
WORSHIP M e t h o d i s t ism is the only growing main- gions and churches to leave gressive protest.
By Mark Church voted
Tooley last week to
uphold its
rule that
clergy remain celibate if single
or monogamous if married. It
also reaffirmed its ban on
same-sex marriage. United
Methodism is nearly the only
major historically liberal main-
line Protestant denomination to
retain such stances on sex.
How did this happen? As
America’s third-largest reli-
gious denomination, United
Methodism has 6.8 million
members in the U.S.—but
nearly six million more over-
seas. Its foreign members par-
ticipate fully in the church’s
governing convention. Forty-
two percent of the 864 dele-
gates at the Feb. 23-26 general
conference in St. Louis came
from abroad. Africa, where
Methodism is strongly tradi-
tional, was the most-repre-
sented foreign region.
The U.S. church has lost
more than four million mem-
bers over 50 years, at a cur-
rent rate of nearly 100,000 an-
nually. Yet Methodism gains
more than 100,000 adherents a
year in Africa. The Democratic
Republic of Congo alone has
three million members. More
Methodists are in church there
on a typical Sunday than in
the U.S.
United Methodism’s in-
creasingly global composition
underlines the collapse of
once-dominant mainline Prot-
estantism in the U.S. In the
1960s 1 in 6 Americans be-
longed to a mainline church.
Today it’s 1 in 20, and still
falling. Thanks to its overseas
line church—and the face of
the church is changing
quickly.
The surge in African growth
has flummoxed America’s lib-
eral Methodist elites. Ascen-
dant for 100 years, they long
assumed their denomination
naturally would follow Episco-
palians, Presbyterians, Luther-
ans, Congregationalists and
others in liberalizing on sexu-
ality. But every quadrennial
conference since 1972 has af-
firmed sex as permissible only
between husband and wife.
Liberals sometimes defy
church law when making local
personnel decisions. In 2016
United Methodism’s U.S.
Western Jurisdiction elected
a lesbian bishop married to a
woman. The church’s top
court ruled her election ille-
gal but claimed to lack the
power to remove her. In re-
sponse to events like this,
bishops called last month’s
special conference to adjudi-
cate a final church settlement
on sexuality.
Most U.S. bishops touted
the “One Church Plan,” which
would have let local churches
choose their own policies on
same-sex marriage. This pro-
posal resembled other liberal-
izing denominations, which
have suffered schisms and ac-
celerated membership losses
after such moves. The Meth-
odist delegates defeated this
measure 55% to 45%.
In its place, by a vote of
53% to 47%, U.S. conservatives
joined international represen-
tatives to pass the “Tradi-
tional Plan.” It enhances en-
forcement of current church
with their property if unwill-
ing to abide. But it isn’t that
simple: The United Methodist
denomination owns its congre-
gations’ buildings. Parts of the
new plan, including the exit
provision, may have to be re-
fined next year at a conference
in Minneapolis.
Some conservative Method-
ists had threatened schism if
the liberalizing plan passed.
Now left-leaning Methodists
are pondering their exit op-
United Methodism
stands alone among
mainline Protestants
in defense of tradition.
tions, especially as the church
is leaving them behind. Africa
will gain about 20 delegates at
the next general conference
while the U.S. loses a similar
number.
More telling: Manila will
host the 2024 general confer-
ence, the first ever outside the
U.S. Four years later the
church will meet in Harare,
Zimbabwe—with African dele-
gates in the driver’s seat.
When the general conference
returns to the U.S. in 2032,
Americans will be a decided
minority in what was once
called “America’s church.”
Some unrealistic Methodist
liberals ignore these demo-
graphic and political obstacles
and pledge to fight indefi-
nitely. Many imagine that odist member, is president of
United Methodism is still a the Institute on Religion and
mainline Protestant body that Democracy.
Others are more realistic.
Adam Hamilton, pastor of the
denomination’s largest U.S.
church, says he might bail out.
He wrote in a March 1 blog
post that “I’ve never seriously
thought about leaving the
UMC, until now.” He added, “It
is hard for many of us to see
any future in a scenario in
which [conservatives] control
the church.” The pastor pre-
dicted protest, disobedience
and departures. He plans to
meet with “bishops and other
key leaders” at his church in
Kansas City, Mo., after Easter
to discuss the denomination’s
future.
No one knows how many
Methodists would join a new
liberal denomination. Only
about 800 of the church’s more
than 30,000 U.S. congregations
have affiliated with the
church’s unofficial LGBTQ cau-
cus. Self-identified “centrist”
clergy like Mr. Hamilton have
avoided joining the caucus.
They instead push for gradual
change, knowing their congre-
gations include diverse views.
A recent church poll found
44% of U.S. laity identify as
conservative. Twenty percent
say liberal, with most of the
rest somewhere in between.
Eighteenth-century British
Methodist founder John Wes-
ley boasted that the world was
his parish. Two centuries later,
his bombast is being fulfilled,
with unexpected consequences
for America and the world.
Mr. Tooley, a United Meth-
You may think that, aside from the drinks cart, there are
not too many types of liquids in the close confines of a jet
airplane, but Mr. Miodownik is able to keep this conceit up
in the air as long as his flight.
He begins with the safety instructions delivered by the
flight attendant, with Mr. Miodownik noting that no
mention is made of the vast quantities of jet fuel nestled in
the fuselage and wings of the aircraft. This fuel turns out to
be kerosene, and Mr. Miodownik provides a fascinating
history of the discovery and development of oils, first for
use in lamps and now for transportation. Here we
encounter, not for the last time, polymers—long chain
molecules composed of many (poly) repeating units (mers).
The properties of polymers vary greatly, depending on
the chemical composition of their molecular units. A carbon
atom, for example, prefers to form four chemical bonds,
and two of the ways it can do so are to bond with four
hydrogen atoms or four fluorine atoms. The first makes
methane, and the second carbon tetrafluoride. These
appear chemically very similar at the level of individual
molecules. Link these mers up, however, and the methane
On a trans-Atlantic flight, a professor holds
forth on the many liquids in the plane—from jet
fuel to the glues holding the aircraft together.
chain results in petroleum, and the carbon tetrafluoride
chain yields Teflon. Changing the molecular units at the
ends of the chain can produce polymers with one end that
is attracted to water and the rest of the chain attracted to
oil—the basis of the liquid soap that Mr. Miodownik
encounters in the airplane lavatory. Modifications along the
chain can cause interactions between neighboring units so
that, when subjected to an electric current, they line up
“the same way that fish align when they’re part of a shoal.”
This quasi-ordering of certain long-chain molecules is the
unique aspect of the liquid crystals that make up the screen
on which Mr. Miodownik watches an in-flight movie.
A brief bout of turbulence reminds Mr. Miodownik that
the plane he is riding in is held together not with rivets
but with glues, which leads to a fascinating chapter on
sticky liquids. “Glues start off as liquid,” he writes, “and
then, generally speaking, turn into a solid, creating a per-
manent bond.” Prehistoric cave paintings, Mr. Miodownik
notes, illustrate that our ancestors were adept at materials
processing, since “paints are essentially colored glues.” A
consideration of tree resins leads to discussions of veneers,
rubber (which got its name, he writes, from the fact that
“it was good for rubbing pencil marks off paper”), Post-it
Notes, cellophane tape and a plywood airplane, the World
War II Mosquito bomber. The chapter concludes with a
discussion of how the properties of cyanoacrylate glue
(commonly known as “super glue”) enable doctors to

The Unforced Error of Medicare for All quickly close a wound or incision without a single stitch.
The framing narrative of Mr. Miodownik’s plane journey
personalizes the story, but there were stretches where he
By Vin Gupta Meanwhile, there are imme- blindly; it is obvious that noth-Brown and Debbie Stabenow devotes too much space to it, particularly to personal

P
rominent Democrats fall-
ing over themselves to
support Medicare for All
are making a big mistake. For
a party seeking to rebrand it-
self—especially in places like
my native Ohio, where health
crises abound—this scenario is
a GOP dream. It’s easy to de-
mand universal health care,
but as efforts dating back to
FDR have shown, legislative
victories are a slow burn.
Megaphones on social media
won’t change that.
Recent polling from the Kai-
ser Family Foundation shows
that although voters like the
concept of Medicare for All, net
favorability falls by almost 50
points when they are presented
with hard truths such as the
higher taxes, less provider
choice, and increased wait
times that will inevitably result.
diate problems that need ad-
dressing. A recent study from
the Commonwealth Fund
found that nearly 45% of work-
ing-age adults were underin-
sured or without coverage dur-
ing at least part of 2018.
Department of Health and Hu-
man Services estimates that
premiums for an entry-level
silver plan on Healthcare.gov
will average $495 a month for
a 40-year-old.
Back home in Toledo over
the holidays, I heard countless
variations on these themes. One
couple in their early 60s told
me both had to return to work
part-time as teachers to afford
better health insurance. A for-
mer nurse at a federally funded
community health center had a
harsh assessment of Medicare
for All: “The politicians that fa-
vor this policy know it won’t
work and yet still pursue it
ing will change in time for us.” would do. anecdotes that are only tangentially related. Rather than
Which is why as 2020 ap- Fellow Democrats may ac- spend several pages on blind taste tests and his personal
proaches, Democrats should cuse me of seeking compro- preferences for different wines, for example, he might have
avoid ideological peer pressure mise when they are craving explained in greater detail exactly why, despite their near-
and embrace Sen. Sherrod revolution. I am a public health identical chemical composition, even a small dose of
Brown’s model of advocating physician and Air Force officer methanol is lethal while ethanol (the form of alcohol in
what’s possible: strengthening and, like many of my col- beverages) is not.
leagues, as welcoming to the This reservation aside, “Liquid Rules” is an entertaining
idea of Medicare for All as the discussion of the various ways our lives are enriched by
Democrats would be most progressive politicians. fluids. From the physics of ballpoint pens to the origin of
wise to seek reform, Unlike them, however, it is left jet-aircraft contrails, the book rewards the reader with
to us and our patients to con- fascinating facts and insights. Every day, millions of people
not revolution. tend with the consequences of travel on an airplane. Fortunately, Mark Miodownik was
inaction. Stop the empty rhet- recently one of them.
oric and pursue attainable
insurance exchanges through paths in the immediate inter- Mr. Kakalios is the Taylor Distinguished Professor in
cost-sharing federal subsidies est of our patients’ lives and Physics at the University of Minnesota and the author,
and reinsurance programs for their pocketbooks. most recently, of “The Physics of Everyday Things.”
high-risk enrollees, pushing for
nationwide adoption of Medic- Dr. Gupta is an assistant
aid expansion (and resisting professor of global health at Coming in BOOKS this weekend
GOP rollback efforts in states the Institute for Health Metrics Rome from Augustus to Constantine • Memoirs of loss
like Ohio that have done so), and Evaluation. He served as a and hope in China • The power and the glory of Louis XIV
and making people over 50 eli- health policy adviser to Rich- • On stage and on screen with Comden & Green • The
gible to buy in to Medicare, as ard Cordray, Ohio’s 2018 Dem- monumental life of Daniel Chester French • & much more
legislation sponsored by Sens. ocratic nominee for governor.
A16 | Friday, March 8, 2019 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK LETTERS TO THE EDITOR

Mario Draghi’s Last Try Oregon Will Learn Painful Housing Lessons

J
ust when Mario Draghi thinks he’s on the scorned the tax reform and deregulation that I hope the Journal doesn’t fall Road to Ruin” (Americas, June 11,
path to monetary normalization, the fail- lifted America’s growth. into the preposterous trap of “af- 2018) that I saved a paragraph:
fordable housing” (“Oregon, the “Rent control in Venezuela dates to
ures of European leaders drag him back Which brings us to Mr. Draghi’s TLTRO ex-
Rent Control State,” Review & Out- 1939, but was not enforced by Pérez
to center stage. The eurozone tension. The program, enter- look, March 4), acceding to the idea Jiménez. In August 1960 [Rómulo]
is flirting with recession, a Don’t blame the ing its third iteration, pro- that “brand new” housing, the most Betancourt revived it, passing a new
banking crisis always seems to
beckon in Italy, and with a few
ECB for the recession vides cheap funding to banks
with incentives to lend to
expensive consumer item in society, rent-control law and prohibitions on
should be affordable to low-income eviction. Since then, ‘not one apart-
notable exceptions elected menacing the eurozone. small businesses in particular. people. Half, if not 100%, of all ment building has been built,’ writes
leaders have ignored the Euro- At the peak, European banks housing is affordable depending on Vladimir Chelminski in his 2017
pean Central Bank president’s had gobbled up €740 billion how you spin it. (If it sold or rented book, “Venezuelan Society Check-
pleas for economic reform. So it’s Mario to the from two TLTRO rounds, and some €720 billion it’s affordable). The 1967 University mated.” The legendary slums that
rescue one more time. of that is still outstanding, due to be repaid of Michigan study “New Homes and climb Caracas’s hillsides are a testa-
On Thursday he tweaked the central bank’s starting in June 2020. Poor People” demonstrated when ment to this social stupidity. Oft-
1,000 new homes are built, 3,545 quoted Swedish economist Carl As-
“forward guidance” to push an interest-rate in- The problem is that those earlier TLTROs
moves take place in a chain of sar Lindbeck famously stated: “Next
crease into 2020 at the earliest, after previously risk amplifying rather than ameliorating Eu- moves. People move into the new to bombing, rent control seems in
suggesting one might come this year. He also rope’s reform failures. Italian banks were espe- 1,000 units at a rent of, say, $2,000 many cases to be the most efficient
unveiled more targeted long-term refinancing cially vulnerable to the looming end of TLTROs a month, vacating $1,500-a-month technique so far known for destroy-
operations—TLTROs—to provide cheap funding because they’d taken up an outsize chunk of the units which are then occupied by ing cities.”
to European banks until 2023. And lest there funding—some 33%, according to UBS. Italian people vacating $900-a-month As an apartment owner, I can
was any doubt, the ECB will roll over in full ma- institutions rely on that money to finance lend- dwellings, etc., until no vacant units state that I exercise a completely
turing bonds acquired under its €2.6 trillion ing, with TLTROs accounting for about 17% of were left behind in the chain. There organic system of rent control: I
quantitative-easing program. loans compared to the eurozone average of 7%. were an average of 3.5 moves for only charge what my tenants can
Mr. Draghi would have been hard-pressed to Naturally, this funding counted as “safe” under every new home. Of the 3,545 afford.
do nothing. ECB economists have cut their eco- various European regulatory measures. households that moved, 1,290 were N.J. SMEETS
categorized as low- and moderate- Westlake Village, Calif.
nomic growth forecast for 2019 to 1.1% from the With the first two TLTROs ending, fragile income at the time by the govern-
1.7% they had expected in December. Central bank Italian banks would have struggled to find other ment. The conclusion of the study I have mixed feelings about Ore-
staff now expect inflation of 1.2%, down from the funding sources. They still labor under substan- was that if poor people moved vol- gon’s new rent-control law. As a for-
1.6% they predicted three months ago and well tial bad debts, and the policies of the left-right untarily, they benefited from the mer Oregon landlord, I am relieved
short of the ECB’s near-2% mandate. insurgent coalition now in power in Rome are construction of 1,000 new homes to be out from under the state’s res-
Yet recent years also have demonstrated the driving up Italian borrowing costs. Mr. Draghi even though they didn’t occupy any idential landlord-tenant law, which
limits of Mr. Draghi’s extraordinary exertions. can’t admit Thursday’s action is designed partly of the new homes themselves. was tilted in favor of tenants to be-
Despite QE, a negative deposit rate, and multi- to forestall a new banking crisis in Italy, but FRED SCHNAUBELT gin with. As a retired legal counsel
ple subsidies for banks, the eurozone never that’s an obvious benefit. San Diego to Oregon landlords, I regret I will
managed to boom. Growth peaked at 2.4% in Mr. Draghi must be frustrated that he never Mr. Schnaubelt is a former San miss out on the bonanza in legal
Diego city councilman. fees that is certain to result from
2017, and unemployment rates as high as 15% weaned Europe off its overreliance on his mone-
tenant lawsuits under the new law.
(Spain) and 11% (Italy) linger. tary pyrotechnics, and he may have inadver- I was so taken with Mary Anasta- GREG BYRNE
Mr. Draghi understood the ECB’s limits and tently made parts of the eurozone economy more sia O’Grady’s “Venezuela’s Long Oracle, Ariz.
begged European leaders to reform labor laws vulnerable. As he heads to the end of his ECB
and business regulations under the political term in October, his last monetary try at least
cover of his monetary policy. Only France’s Em- puts the onus of recession on the politicians
manuel Macron has heeded the call, and now where it belongs. This won’t be enough to revive
his agenda is endangered by the popular back- Europe’s sagging fortunes—and, to Mr. Draghi’s
The History of the Jews in Poland Is Complex
lash to his green-tax overreach. Europeans credit, he never claimed otherwise. Regarding Elisabeth Zerofsky’s “Po- brighter, chapter on Polish-Jewish re-
land, Judaism and Historical Mem- lations, that dare not involve heavily
ory” (Houses of Worship, March 1): redacting older, much darker, ones.
Wisconsin’s School Monopolist That the past should not forever re-
main captive to the past doesn’t ex-
RICHARD D. WILKINS
Syracuse, N.Y.

W
isconsin has been a pioneer in school
choice. In Milwaukee about 28,000
students, all from modest means, re-
ceive state vouchers that let them attend private
schools. So do 10,000 kids throughout the rest
of the state, as well as another 700 special-needs
students. In a sign of the progressive political
times, Wisconsin’s new Governor wants to dis-
mantle this success.
Tony Evers has spent his career as a public-
school administrator, and last week he unveiled
his first state budget after defeating incumbent
Republican Scott Walker last year. The proposal
caps voucher enrollment in 2020, entirely
phases out the program for special-needs stu-
dents and blocks the creation of new indepen-
dent charter schools. Teachers unions have
hailed this as “a good first step.”
Not for poor kids trying to get a better educa-
tion. The Milwaukee program doesn’t have an
enrollment cap, so it’s limited only by the num-
ber of open seats in participating private
schools. To qualify, a family with married par-
ents and two kids must have an adjusted gross
income below $80,800. Statewide, that cutoff is
$62,220. The statewide vouchers currently have
enrollment caps, but they’re scheduled to disap-
pear in 2026.
Mr. Evers’s budget is his first stab at shutting
all this down. Last year he said that he’d work
to “phase out vouchers.” His budget also would
prevent any new independent charter schools
from being authorized through 2023, while pil-
ing on regulations.
Teachers at private schools, for example, do
not need a state license, although the voucher
House Democrats Say Shush
program requires them to have a college degree.
This provides important flexibility, especially
given that such schools may offer specialized
curricula, such as theology classes. If parents
think the teaching lacks rigor, they can always
send their kids elsewhere. Under Mr. Evers’s
budget, however, every private school that takes
vouchers would be required to hire only state-li-
censed teachers.
Mr. Evers has argued that Wisconsin can’t af-
ford to fund two parallel school systems, one
public and another private. But charter schools
are public, albeit free from union control. Vouch-
ers generally cost taxpayers less than they would
spend otherwise. Wisconsin’s statewide voucher
is $8,400 for a high-school student and $7,754
for kindergarten through eighth grade. The aver-
age per-pupil funding in public schools, includ-
ing state and local money, is $10,555.
A study last year from EdChoice examined 16
voucher programs, including in Wisconsin, and
concluded: “No fiscal analysis of any voucher
programs in the United States that accounts for
both costs and savings—including this one—has
found that students exercising choice through
voucher programs results in a net negative fiscal
impact on taxpayers.”
Republicans still have majorities in the Wis-
consin Legislature and they’ve declared Mr.
Evers’s budget dead on arrival. “Republicans in
the Legislature have spent years helping build
the voucher program,” Senate Majority Leader
Scott Fitzgerald told the AP. “We will not sup-
port a budget that includes this proposal.”
Nearly 40,000 students—and growing—will
have to hope this resolve outlasts Mr. Evers.
cuse deep distortion of the historical
record. Ms. Zerofsky rightly notes
that those were German, not “Polish
death camps.” The Nazis also wreaked
terrible suffering on the Poles.
Jews had been an integral, though
never accepted, part of Poland for
nearly a millennium. Wartime Polish-
Jewish interaction was marked both
by heroism and horror, predominantly
the latter. The period is neatly brack-
eted by the 1941 Jedwabne and 1946
Kielce massacres of Jews, perpetrated
by their Polish neighbors. Though a
reborn post-World War I Poland, un-
der duress, had guaranteed minority
rights, those for Jews were steadily
eroded during the interwar period by
harsh legislation and pervasive soci-
etal discrimination. Virulent anti-
Semitism remained endemic in post-
World War II Poland, culminating in
mass Jewish emigration.
Though it’s time to write a new,
California’s Water Woes Are Self-Inflicted
Regarding your editorial “Califor-
nia’s Weather Cycles” (March 4): Cali-
fornia’s weather has been cyclical
since recorded history began. Every-
one knows this. As California Con-
gressman Tom McClintock often said,
“Droughts are nature’s fault. Water
shortages are our fault.”
California had a water plan which
included the development of about 21
million acre feet of water storage
through the building of mostly Cen-
tral Valley reservoirs. The last major
reservoir, New Melones, was com-
pleted in 1979, with a capacity of
more than two million acre feet, when
Ms. Zerofsky’s assertion that Polish
attitudes toward Jews during World
War II aren’t easily simplified is com-
pletely beside the point. The fact that
thousands of Poles risked, and indeed,
lost their lives attempting to protect
Jews from their would-be German
murderers isn’t in dispute. Yad
Vashem has granted righteous gentile
status to more Poles than to citizens
of any other nation. At the same time,
however, denying the anti-Semitism
that wasn’t only ubiquitous in prewar
Poland, but was government-driven,
is tantamount to denying the exis-
tence of slavery in the antebellum
American South. Jews were expelled
from Polish medical schools, excluded
from Polish professional guilds and
even made to sit separately in univer-
sity lecture halls.
DAVID LEVINE
Teaneck, N.J.
and Atmospheric Administration pre-
diction was that California would
have a mild to moderate El Niño pat-
tern. Interesting that a prediction for
mere months ahead would be so inac-
curate, yet we are supposed to spend
trillions for the predictions five years,
10 years and more into the future.
The media stories about the predic-
tions which indicated that the mild
pattern wouldn’t be sufficient to end
the drought and the actual severe El
Niño California experienced were usu-
ally prefaced with: “Due to the effects
of climate change.” I’m guessing that
if there had been zero precipitation

H
ouse Democrats are voting as early as the groups putting up such messages. our state’s population was around 23 or if we’d have had a 100-year flood
million. Now our population is about cycle, we’d hear the same.
Friday on H.R. 1, a campaign-finance The Institute for Free Speech offers an exam- 40 million and no new major reser- STEPHEN PEELER
reform bill that they allege is an at- ple of these ever-longer disclosures. Imagine, voir has been built in 40 years. Laguna Niguel, Calif.
tempt to rinse politics of “dark for instance, that an “environ- Without getting into the weeds
money.” But even their pals on H.R. 1 would chill the mental group sponsors a 30- about intelligent forest management, This editorial isn’t the first to
the left aren’t buying it. speech of groups second radio ad calling on it becomes obvious why there are wa- point out the cyclical nature of Cali-
One of the more searing in- President Trump to reduce air ter problems in California. When the fornia’s political class when it comes
dictments of the bill is a on the left and right. pollution.” Here’s how the re- Auburn Dam was proposed with three to water: “During the dry years, the
March 1 letter from the Ameri- quired disclaimer likely would million acre feet of storage, it got people forgot about the rich years,
can Civil Liberties Union, nor- unfold: blown up. Look at the fight to raise and when the wet years returned,
mally found these days supporting the left. In “Paid for by Americans for the Environment, the height (and capacity) of Shasta they lost all memory of the dry years.
Dam. The politics du jour hasn’t built It was always that way.” (John Stein-
a 13-page letter, the ACLU said that some of H.R. cleanenvironment.org. Not authorized by any
the water storage (and flood protec- beck, “East of Eden,” 1952.) Indeed,
1’s provisions “unconstitutionally impinge on candidate or candidate’s committee.” Then the tion) to keep up with our population Mr. Steinbeck, indeed.
the free speech rights of American citizens and head of the organization must say: “I am Jane growth. GAVIN ROBERTS
public interest organizations.” Such measures, Doe, the President of Americans for the Envi- LARRY WEITZMAN North Ogden, Utah
the group said, would silence “necessary voices ronment, and Americans for the Environment Placerville, Calif.
that would otherwise speak out about the pub- approves this message.”
lic issues of the day.” Indeed. And then the ad would have to list the first In October the National Oceanic Pepper ...
Provisions in the bill would require groups and last names of the group’s top two finan- And Salt
that, say, run ads to disclose the names of do- ciers, even if their donations weren’t given di-
nors above $10,000. That would force political rectly for the advertisement. The group would On Irresponsible Twitter Use THE WALL STREET JOURNAL

groups, the ACLU notes, “to make a choice: their need to list five donors if the ad appears on
Regarding Holman Jenkins’s “Crazy
speech or their donors. Whichever they choose, television.
Elon vs. the SEC, Round Two” (Busi-
the First Amendment loses.” The ACLU broadly supports regulating online ness World, March 2): An irresponsi-
The bill covers groups that run ads about, ads, but it notes that H.R. 1 is written to “regu- ble Twitter user whose mental state
say, climate change that refer to candidates but late online ads that appear outside of candi- is the most material factor of all for
don’t endorse them. What this means, the ACLU dates’ districts, to persons with no power to the share price of his company? Elon
says, is “advocacy groups speaking about the vote for or against the candidate.” The purpose, Musk for president! Someone post
issues that matter most to them, like abortion in other words, is to chill speech. this on their Twitter account. Please!
or gun rights, may see no alternative but to Congressional Democrats have been deter- ANDREW LARSON
steer far clear of the regulated zone to avoid mined for years to find means to silence their New Brighton, Minn.
penalties” or “mandatory disclosure of their political opponents on the right. But the ACLU
private associations.” is right that H.R. 1 would also smother the Letters intended for publication should
H.R. 1’s provisions on disclosure veer into the speech of groups such as Planned Parenthood be addressed to: The Editor, 1211 Avenue
of the Americas, New York, NY 10036,
absurd. It sounds as if the model for the bill’s or other progressive causes. or emailed to wsj.ltrs@wsj.com. Please
authors was the horrifying list of side effects House Democrats will gloat to the press that include your city and state. All letters “Care to sign up for our customer
that now accompany pharmaceutical advertis- they’re merely champions of good government. are subject to editing, and unpublished rewards card that gives you
ing. The bill’s premise appears to be that voters Just don’t make the mistake of trying to buy letters can be neither acknowledged nor the illusion that you’re getting
returned.
are too stupid to sort out the motives behind time to disagree with them. some kind of deal?”
THE WALL STREET JOURNAL.
Why the Bull Has Room to Run
By Jason DeSena Trennert
T
he bull market started
March 9, 2009, 10 years
ago Saturday. The S&P
500 had dropped to a
close of 676 in the midst
of the financial crisis, 2,072 points
or 75% lower than its current 2,748
level. Given that the Federal Reserve
has quintupled the size of its bal-
ance sheet in the intervening years,
and that the heavy regulatory hand
of the Obama administration gave
way to a more salubrious attitude
toward commerce under President
Trump, perhaps the duration and
the magnitude of the current bull
market shouldn’t surprise us.
What is surprising, for those of
Euphoria kills economic
expansions. The mood on
the street now is best
described as skepticism.
us who lived through the decades
before the financial crisis, is how
joyless the market’s current ascent
has been. Long gone are the march-
ing bands and giddiness that accom-
panied successive highs during the
dot-com era. Instead, what remains
is a cynicism, likely the result of
two 50% declines in the broader
market from 2000-02 and 2008-09.
Institutional and individual inves-
tors believe the bull market has
India and Pakistan Are Flirting With Nuclear Disaster
If you had to name
the man most likely
to spark a nuclear
war, who would you
pick? Kim Jong Un?
Here’s another can-
didate: Masood
EAST IS
Azhar, the founder
EAST
of the Pakistani jiha-
By Sadanand
dist group Jaish-e-
Dhume
Mohammed, or
Army of Mohammed.
After three weeks of dramatically
escalating tensions, India and Paki-
stan appear to have pulled back
from the brink of war—for now. But
the larger question remains: What
does the Pakistani army’s longstand-
ing policy of nurturing jihadist
groups mean for stability in South
Asia? As an increasingly nationalist
India grows more assertive, Paki-
stan’s jihadists could inadvertently
trigger a catastrophic war.
JeM stands at the center of the
continuing confrontation between
the two nuclear-armed nations. It
flared up with a Valentine’s Day sui-
cide car-bombing in Indian Kashmir
that killed more than 40 Indian sol-
diers. On Feb. 26, Indian warplanes
retaliated by bombing a JeM training
camp in Pakistan’s Khyber Pakh-
tunkhwa province, the first attack
across the international border since
Democrats Have Taken Over Education Reform
By Jay P. Greene
And Frederick M. Hess
T
he K-12 education-reform
movement was once led pri-
marily by conservatives and
libertarians with centrist Democrats
as junior partners. But over the past
decade, education reform has taken a
hard left turn. Republicans are now
almost entirely invisible within the
ranks of its activists. This progressive
capture of education reform—like the
capture of much of the media and ac-
ademia—will undermine the quality
and effectiveness of the movement’s
work.
We’ve seen this trend firsthand
over two decades of work in educa-
tion reform, so we decided to quan-
tify it. In a new study, the first of its
kind, we examined the political pref-
erences of people working in educa-
tion-reform groups. To identify these
groups we focused on those receiving
support from the Bill and Melinda
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been little more than an elaborate
magic trick that will be revealed, in
the end, to be ephemeral.
The good news for the contrarian
investor is that this level of skepti-
cism might mean that the bull mar-
ket will last longer than anyone
thinks possible. As legendary inves-
tor John Templeton said, “Bull mar-
kets are born on pessimism, grow
on skepticism, mature on optimism,
and die on euphoria.”
Aside from a few brief flirtations
with cryptocurrencies and cannabis
stocks, it would be very difficult to
describe today’s investing public as
especially open to risk-taking. Re-
markably, fund-flow data suggest
that individual investors have actu-
ally been net sellers of the market
over the last decade. Since 2009,
the roughly $1 trillion in inflows to
domestic equity exchange-traded
funds has been more than offset by
the $1.3 trillion in outflows from
higher-cost domestic equity mutual
funds.
A few years ago we at Strategas
started calling the current bull
move the “Jake from State Farm”
market. It was an oblique reference
to an amusing commercial that de-
picts a wife confronting a husband
who’s on the phone at 3 a.m. She
thinks he’s talking to a paramour
when in fact he’s speaking with
Jake, a State Farm insurance agent.
Even after she speaks with Jake, the
suspicious wife can’t accept that
he’s simply an insurance salesman
in khaki pants: “She sounds hid-
eous!” To which her husband re-
the 1971 war that turned East Paki-
stan into independent Bangladesh.
On Feb. 27, the Pakistani air force
bombed Indian targets in Kashmir
but did not cause material damage—
exercising deliberate restraint, in
Pakistan’s telling. In the scramble
that followed, Pakistan downed an
Indian MiG-21 and captured its pilot.
His return two days later cooled
temperatures somewhat, but the
countries continue to exchange artil-
lery fire along the line of control,
the de facto border that divides dis-
puted Kashmir.
More than a week after India’s
airstrikes, the facts remain fuzzy.
Citing commercial satellite images,
international experts have cast
doubts on Indian claims that its air-
strikes hit a terrorist camp and
eliminated “a very large number of
JeM terrorists.” Pakistan’s govern-
ment says India’s bombs hit a clump
of trees. The Pakistani media glee-
fully reported that India martyred
an unfortunate crow.
So far, India has also failed to
provide credible evidence that one
of its Soviet-era MiG-21s shot down
a Pakistani F-16. Virtually nobody
outside India believes the more lurid
stories, tom-tommed by ruling
Bharatiya Janata Party politicians,
of hundreds of hapless jihadists va-
Gates Foundation and the Walton
Family Foundation. These are the two
leading backers of school reform. Al-
most all major education-reform
groups receive funding from one or
both foundations (as have we). We
then searched OpenSecrets.org for all
political campaign contributions
made by the staff of these groups to
gauge their political leanings.
We tracked staff contributions to
political campaigns in a sample of 73
education-reform organizations
funded by the Gates Foundation, in-
cluding Achieve, Teach For America,
the New Schools Venture Fund, Alli-
ance for Excellent Education, Jobs for
the Future, Turnaround for Children,
and Bellwether Education Partners.
In total, we found 2,625 political
campaign contributions from the
staff of Gates grantees. Of those con-
tributions, more than 99% supported
Democratic candidates or the Demo-
cratic Party. Only eight (that’s eight,
not 8%) of the 2,625 campaign contri-
Robert Thomson
William Lewis
Chief Executive Officer and Publisher
DOW JONES MANAGEMENT:
Ramin Beheshti, Chief Technology Officer;
Mark Musgrave, Chief People Officer;
Edward Roussel, Chief Innovation Officer;
Christina Van Tassell, Chief Financial Officer
OPERATING EXECUTIVES:
Kenneth Breen, Commercial;
Jason P. Conti, General Counsel;
Tracy Corrigan, Chief Strategy Officer;
Frank Filippo, Print Products & Services;
Kristin Heitmann, Chief Commercial Officer;
Nancy McNeill, Corporate Sales;
Thomas San Filippo, Customer Service;
Josh Stinchcomb, Advertising Sales;
Suzi Watford, Chief Marketing Officer;
Jonathan Wright, International
Barron’s Group: Almar Latour, Publisher
Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
OPINION
plies, “Well, she’s a guy, so . . .” In-
vestors are expressing similar levels
of skepticism today with regard to
the current bull market and eco-
nomic expansion. Despite enormous
evidence to the contrary, no one
quite believes that it’s real or that it
can last.
There is no shortage of things to
worry about. But the biggest threats
to the American economy are start-
ing to fade, little by little. The cur-
rent policy mix appears broadly
supportive of further economic
prosperity and market gains. The
most important development has
porized by India’s high-tech, Israeli-
made bombs. Nor has Pakistan
backed up its boast of downing an
Indian Sukhoi-30 fighter.
The details matter. Prime Minis-
ter Narendra Modi’s re-election
prospects in a few months hinge
partly on his image as a strongman,
unafraid to take India’s fight against
‘Neither side wants to
escalate. But both . . .
have become prisoners
of their own propaganda.’
terrorism to Pakistan. A tale of
eliminating 250 bloodthirsty jihad-
ists obviously plays better than one
of accidentally felling a pocket of
forest.
Nonetheless, the debate over ca-
sualties obscures the larger implica-
tions of India’s action. Simply put,
New Delhi’s military retaliation
against Pakistan for an attack by a
terrorist group it hosts sets a prece-
dent. Pakistan’s old calculation, that
nuclear weapons shield it from re-
taliation, no longer holds. Another
major attack against Indian targets
traced to Pakistan could evoke an
butions went to Republicans.
The political imbalance among
Walton grantees was somewhat less
pronounced. Our sample of 194 or-
ganizations receiving support from
the Walton Foundation included
Teach For America, KIPP, Education
Reform Now, 50CAN, the 74 Media,
Chalkbeat, and the Education Trust.
In total, we found 3,887 political cam-
paign contributions from employees
of these organizations, of which
3,377, or 87%, went to Democrats.
The deep-blue hue of education
reformers rivals that of famously
Democratic precincts like Hollywood
and public-employee unions. The
Center for Responsive Politics re-
ports that 78% of campaign dollars
from the “TV, movies, and music in-
dustry” have gone to Democrats
since 2000. Even the National Edu-
cation Association, the nation’s larg-
est teacher union, gives a larger
slice of its campaign money to Re-
publicans (7%) than do the employ-
Notable & Quotable: Warming
From a June 29, 1989, Associated
Press dispatch:
UNITED NATIONS (AP)—A senior
U.N. environmental official says en-
tire nations could be wiped off the
face of the Earth by rising sea levels
if the global warming trend is not re-
versed by the year 2000.
Coastal flooding and crop failures
would create an exodus of “eco-refu-
gees,” threatening political chaos,
said Noel Brown, director of the New
York office of the U.N. Environment
Program, or UNEP.
He said governments have a 10-
year window of opportunity to solve
the greenhouse effect before it goes
beyond human control.
As the warming melts polar ice-
caps, ocean levels will rise by up to
GETTY IMAGES
been the Fed’s reassurances this
year that monetary policy won’t be
left on “autopilot” as the central
bank exits quantitative easing and
excessively low interest rates. With
the real federal-funds rate at a mere
0.5%, it is difficult to describe mon-
etary policy as especially tight. (Of
the eight recessions since 1960,
none has started with a real fed-
funds rate of less than roughly 2%.)
Regulatory policy, especially to-
ward finance and energy, has eased
dramatically during the Trump ad-
ministration. The 2017 Tax Cuts and
Jobs Act created real incentives for
even tougher response from its
much larger neighbor. The cost of
hosting JeM, as well as the equally
deadly Lashkar-e-Taiba, just rose
dramatically.
Has Pakistan gotten the message?
On Tuesday it banned two organiza-
tions linked to LeT and detained at
least 44 people, including the son
and brother of the JeM’s founder,
Mr. Azhar.
This is for the good, except that
we’ve seen it all before, including
after a 2001 attack on India’s Parlia-
ment by JeM and LeT and after the
2008 Mumbai attacks by LeT that
killed 166 people, including six
Americans. If the pattern holds, Pak-
istan will quietly ease pressure on
the jihadists once Indian tempers
cool and the international commu-
nity’s attention passes.
Georgetown political scientist C.
Christine Fair, an expert on terror-
ism, says Islamabad will find it diffi-
cult truly to abandon jihadist prox-
ies. “Pakistan wants to change the
map of South Asia, but it has an
army that can’t win a war it starts
and it has nuclear weapons that it
can’t use,” she says. “The only way
it can challenge India is by using ji-
hadi assets against it.”
Pakistan’s jihadists can continue
to draw on a network of hard-line
ees of Gates education grantees (less
than 1%).
Does the education-reform sector
lean so far left simply because every-
one in education is progressive? No.
An Education Week poll shows that
41% of educators identify as Demo-
crats while 27% identify as Republi-
cans and 30% as independents.
A once-heterodox
movement is now
monochromatically blue.
That’s bad for the cause.
The virtual nonrepresentation of
conservatives has made school re-
formers more open about their politi-
cal convictions, even on unrelated is-
sues. Many school-reform groups,
including KIPP, Teach for America
and Education Trust, have energeti-
three feet, enough to cover the Mal-
dives and other flat island nations,
Brown told The Associated Press in
an interview on Wednesday.
Coastal regions will be inundated;
one-sixth of Bangladesh could be
flooded, displacing a fourth of its 90
million people. A fifth of Egypt’s ara-
ble land in the Nile Delta would be
flooded, cutting off its food supply,
according to a joint UNEP and U.S.
Environmental Protection Agency
study. . . .
Shifting climate patterns would
bring back 1930s Dust Bowl condi-
tions to Canadian and U.S. wheat-
lands, while the Soviet Union could
reap bumper crops if it adapts its ag-
riculture in time, according to a study
by UNEP and the International Insti-
tute for Applied Systems Analysis.
Friday, March 8, 2019 | A17
companies to curtail financial engi-
neering in favor of capital expendi-
tures, the mother’s milk of produc-
tivity and wealth creation. Perhaps
the biggest potential policy hurdle
has been the uncertainty surround-
ing trade. But here, too, it seems the
worst has been avoided.
The Trump administration
seemed willing to fight simultane-
ous trade wars with every nation on
Earth last summer. But it has since
negotiated deals with Mexico, Can-
ada and South Korea. An agreement
with China seems imminent, though
what it will contain is anyone’s
guess. It seems clear that at the
very least, both sides want a deal
that calms the fears of businessmen
on both sides of the Pacific.
With the S&P 500 off to its best
start since 1991, it is reasonable to
expect a pause in the upward trajec-
tory of stocks. But with the market
trading at 16.5 times 2019 earnings
expectations and 10-year Treasury
notes yielding 2.6%, the actual risk-
reward profile of the market is fa-
vorable.
The biggest risk to the long-term
health of the economy and the mar-
ket today is the desire of policy
makers from both parties to allocate
capital. This process is always best
left to the collective wisdom of mar-
kets. Mercifully, such excessive med-
dling seems unlikely until at least
2020, or perhaps 2024.
Mr. Trennert is chairman of
Strategas, an investment-strategy,
economic and policy research firm.
madrassas, or Islamic schools, that
have long supplied fighters to Af-
ghanistan and Indian Kashmir. Plus,
in Pakistan the perception is that it
won the most recent skirmish; the
only proven damage so far was to
the Indian fighter jet. By promptly
returning the captured Indian pilot,
Prime Minister Imran Khan managed
to project himself as a reasonable
man who seeks peace on the Sub-
continent. The episode also has
turned a spotlight on India’s spotty
human-rights record in Kashmir. On
the surface, Pakistan may see little
reason to change.
But no matter how satisfying
Pakistan’s generals may find sticking
it to their old enemy, their tactical
win disguises a strategic failure. In-
dia showed a willingness to up the
ante, and most of the world, includ-
ing the U.S., stood by New Delhi.
The Hudson Institute’s Husain
Haqqani, a former Pakistani ambas-
sador to Washington, says the odds
of escalation on the border remain
high. “Neither side wants to esca-
late,” he says. “But both countries
have become prisoners of their own
propaganda.”
Someone has to break this dan-
gerous cycle. Ensuring that Paki-
stan’s latest crackdown on jihadists
is for real is the best place to start.
cally embraced the anti-Trump “re-
sistance,” adopting outspoken pro-
gressive stances on hot-button issues
like immigration, tax policy and gun
control. The education-reform sector
risks appearing as one more progres-
sive lobby. This appearance under-
mines its authority when it pushes
for crucial changes like school choice,
transparency and experimental new
learning methods.
K-12 education, more than most
policy issues, is shaped at the state
and local level. Given that two-thirds
or more of U.S. states are red or pur-
ple—including such reform bellweth-
ers as Colorado, Louisiana, Indiana
and Tennessee—reformers hurt their
cause when they fail to anticipate Re-
publican concerns or speak credibly
to Republican audiences. And be-
cause of the left’s attachment to
teachers unions and discomfort with
market-based education reform, a
Democrat-only strategy has difficulty
assembling a majority even in blue
states.
Political homogeneity helps ex-
plain many of the setbacks the re-
form movement has suffered in re-
cent years, including the collapse of
Common Core, the abandonment of
new teacher evaluation methods, and
a national stall in the expansion of
charter schools. It is losing its ability
to forge new coalitions and find new
converts. Those who care about the
effectiveness of K-12 education
should think about ways to inject
some red—or at least purple—into a
movement that has become mono-
chromatically blue.
Mr. Greene is Distinguished Profes-
sor of Education Policy at the Univer-
sity of Arkansas. Mr. Hess is Director
of Education Policy Studies at the
American Enterprise Institute. Their
report examining the political prefer-
ences of people working in education
reform organizations will be released
Monday in Education Next.
A18 | Friday, March 8, 2019 THE WALL STREET JOURNAL.

BUSINESS & FINANCE
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S&P 2748.93 g 0.81% S&P FIN g 1.06%
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Entities tied to Sacklers,
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maker, told to redeem
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facing mounting legal and fi-
nancial pressure, has been
tossed out of a large hedge
fund for its alleged role in fu-
eling the opioid crisis.
Investment entities of the
Water-Damage Claims Flood Home Insurers
BY LESLIE SCISM
More American homes are
flooding from the inside.
Old pipes and valves, worn-
out hoses on second-story
washing machines and faulty
connections for a proliferation
of water-using appliances are
causing a surge in increasingly
expensive damage reported to
insurers. The increase has oc-
curred even as many other
types of claims—including
fire—have declined in fre-
quency, industry figures show.
One in 50 homeowners filed
a water-damage claim each
year between 2013 and 2017,
the latest data analyzed by
Verisk Analytics’ ISO insur-
ance-analytics unit. It
crunches industry data on a
five-year rolling basis. The
2.05% frequency rate is up
from 1.44% annually between
2005 and 2009.
The bottom line is a $13 bil-
lion water-damage bill for
companies that insure homes
in 2017. Claims average about
$10,000, ISO says.
“Wildfires, hurricanes and
tornadoes catch headlines, but
the reality is that the No. 1
kind of risk that the everyday
consumer has is a water
claim,” said Jon-Michael Kow-
all, an executive in the prop-
erty-insurance business of
USAA, one of the nation’s big-
gest home insurers.
“It is lurking in the house,”
he said.
To tackle the problem,
Texas-based USAA has 6,000
policyholders testing water-
detecting sensors in a multi-
year pilot project. This type of
experimentation, where de-
vices are installed to spot po-
tential water damage, has
morphed into one of the hot-
test corners of InsureTech, in-
novation focused on the insur-
ance sector.
Chubb Ltd., one of the big-
Kroger Stumbles in Grocery Battles
BY HEATHER HADDON
Kroger Co. is struggling to
keep up in a more competitive
grocery market.
Shares in the largest U.S.
supermarket chain fell 10%
Thursday after it reported
lower revenue and profit for
its latest quarter. Kroger has
invested hundreds of millions
of dollars in online operations
that are weighing on profit-
ability as the grocer faces
pressure to keep prices low.
“We understand we have
our work cut out for us,” Chief
Executive Rodney McMullen
said in an interview.
LUKE SHARRETT/BLOOMBERG NEWS
Shares in the supermarket chain fell 10% Thursday after it posted lower quarterly profit.
TECHNOLOGY: HUAWEI STEPS UP CAMPAIGN TO DEFEND GLOBAL BUSINESS B6
S&P IT g 0.92%
Sackler family were told late
last year by Hildene Capital
Management that it was no
longer comfortable managing
By Juliet Chung,
Sara Randazzo
and Gregory Zuckerman
their money. Hildene said last
week that someone known by
members of the firm had suf-
fered an opioid tragedy.
The Sacklers have tried to
avoid scrutiny for their role at
privately held Purdue as state
gest insurers of high-end Here are some things experts recommend
homes, said the number of an-
nual water claims costing to prevent damage from plumbing.
more than $500,000 has dou-
bled since 2015, and those
over $1 million have tripled.
Industry executives said filing a water-damage claim,
there are myriad factors driv- five-year rolling average
ing the costs higher.
The rise in overall claims is
due partly to aging homes. A
postwar building boom in the 2005–09:
1950s gave way to other 1.44%
booms, meaning much of
America lives in houses that
are decades old and become
likelier candidates for plumb-
ing failures. Even homes built
during the real-estate bubble
of the early 2000s can gener-
ate claims as they often have
far more appliances with wa-
ter connections.
In addition, more home-
owners today want their laun-
dry room on an upstairs floor.
“In the old days, if the
washing machine had a leak,
you’d get a mop” and scrub a
concrete floor and be done
with it, said Chubb Executive
Vice President Paul Krump.
The damage can be par-
ticularly stunning in ex-
pensive homes.
Developer George Fer-
manian had always been
more concerned about the
ocean potentially damaging
his two-decade-old ocean-
front property in Southern
California. The property even
has a 12-foot sea wall.
But last year, a second-
story toilet tank cracked
and spilled water in the
house for an unknown,
extended period when
he was away. Oak
floors, walls, artwork,
electronics gear and
seats in a home the-
ater were damaged.
“Walls are gypsum,
wood absorbs water, in-
sulation absorbs water,
Please turn to page B2
Kroger and other food sell-
ers are racing to keep up with
tough competition from Ama-
zon.com Inc. and Walmart
Inc., as well as the expansion
of deep-discount chains such
as Aldi.
Some have made strong
gains. Target Corp. said Tues-
day that digital sales rose 31%
in its fourth quarter, while
business in stores grew by 3%.
Kroger’s digital sales rose
58% during its most recent fis-
cal year, and the company said
it is offering delivery or online
pickup at 91% of its stores. Mr.
McMullen said he would be
speaking to investors in com-
* * * * THE WALL STREET JOURNAL.
DJ TRANS g 0.96% WSJ $ IDX À 0.47%
and federal lawsuits mounted
and public-health officials crit-
icized the company’s efforts to
increase sales of painkiller
OxyContin.
Now the family’s sophisti-
cated, multibillion-dollar in-
vestment operations and char-
itable efforts are facing closer
examination. Purdue, which
has been an important source
of the family’s wealth and in-
come, is considering filing for
bankruptcy, The Wall Street
Journal has reported, citing
people familiar with the mat-
Percentage of homeowners
2013–17:
2.05%
Bathroom
Inspect to
determine that
caulking is
watertight in tubs
and shower stalls.
Watch for dripping
under sinks.
Kitchen/
laundry room
Inspect water supply
hoses for appliances like
dishwashers,
refrigerators, icemakers,
garbage disposals and
washing machines.
Basement
Know where the shutoff
valve is for the main water
supply. Consider shutting off
your water if away from
home. Inspect visible
plumbing lines and your
water heater for leaks or
damage. Use elevated racks
for storage.
Sources: Chubb (prevention); ISO Data, Verisk Analytics (claims)
ing days about the strengths
of the company’s strategy.
“We will be working hard
for them to understand that
the cash flow of the business
continues to grow,” he said.
Investors retreated from
supermarket stocks last week
after The Wall Street Journal
reported that Amazon plans to
launch urban grocery stores
that could offer a wider range
of consumer products than its
Whole Foods stores. The first
store could open as soon as
the end of this year. Kroger’s
shares suffered some of the
steepest declines.
Some analysts expect Ama-
LIBOR 3M 2.601
ter. A number of nonprofits
have said they were reviewing
their philanthropic relation-
ships with the family.
Lawsuits by 36 states and
more than 1,600 cities and
counties against Purdue, other
drugmakers and distributors
of prescription painkillers are
starting to focus on Sackler
family members. Four Sacklers
have been called to testify this
month as part of cases against
Purdue in Ohio and Oklahoma,
lawyers involved said.
Purdue has denied allega-
zon’s grocery stores to be
more of a threat to other su-
permarket chains than to
Kroger because it has fewer
stores in the cities that Ama-
zon is targeting. “Walmart and
Target’s heavy investments
into new technology are big-
ger immediate threats to
Kroger’s core business than
Amazon’s grocery stores,” said
Jake Dollarhide, CEO of Long-
bow Asset Management, which
owns Kroger shares.
Mr. McMullen said Kroger’s
product quality, improved dig-
ital offerings and extensive
network of stores are helping
it compete with Amazon and
other retailers. Kroger oper-
ates nearly 2,800 stores in 35
states and Washington, D.C.
Kroger’s margins also took
a hit during the most recent
quarter as the company sacri-
ficed profit to keep prices low.
Like other retailers, Kroger is
paying suppliers more for
some food products. Third-
party surveys show Walmart
prices for a basket of similar
goods are now cheaper than
those at Cincinnati-based
Kroger on average.
Mr. McMullen said the sur-
veys don’t capture the promo-
tions and other deals Kroger
offers customers to remain
competitive.
Please turn to page B2
 Heard on the Street: Grocer
is marked down...................... B12
NIKKEI (Midday) 21142.75 g 1.46%
tions that it is to blame for
the opioid epidemic.
Citing the Sacklers’ ties to
opioids, fund manager Brett
Jefferson late last year forced
the Sackler entities invested in
the firm to start redeeming
their investments in Hildene,
his $10 billion asset manager.
“An opioid-related tragedy
affected someone with a per-
sonal relationship to me and
other members of Hildene,”
Mr. Jefferson said in a state-
ment last week about the inci-
Please turn to page B2
Roof and attic
Check to see if
missing, worn
or broken roofing
material has allowed
water in. Attic
should be properly
ventilated.
Peter Santilli/THE WALL STREET JOURNAL
INSIDE
YOUR CLOTHING
IS A
POLLUTANT
APPAREL, B3
WeChat Sets Powerful
Example for Facebook
BY SHAN LI
BEIJING—Facebook Inc.’s
latest shift toward private mes-
saging, payments and e-com-
merce echoes the footsteps of
WeChat, the social-networking
app that many Chinese find in-
dispensable.
After Facebook Chief Execu-
tive Mark Zuckerberg said the
social-media powerhouse that
encourages public sharing sees
its future in encrypted messag-
ing, payments and other ser-
vices, the similarities were
Friday, March 8, 2019 | B1
See more at WSJMarkets.com
Expiring
Patents
Add to
Bayer Ills
BY RUTH BENDER
BERLIN—Bayer AG, em-
broiled in a legal battle over
whether its weedkillers cause
cancer, faces another poten-
tially big problem: expiring
patents on its top-selling
drugs, with no emerging win-
ners in its pipeline.
The company that invented
aspirin is approaching a patent
cliff, the point at which a drug’s
patent protection runs out and
manufacturers of generic drugs
can start marketing the com-
pound. That invariably results in
a steep drop in sales for the pat-
ent owner.
Patents on best-selling
drugs expire all the time. But
Bayer’s looming cliff looks es-
pecially dizzying, with two big
drug patents running out soon
and nothing obvious to suc-
ceed them. Profits and growth
at Bayer’s pharmaceuticals
unit rely heavily on two block-
busters: blood thinner Xarelto
and eye treatment Eylea.
Together, Xarelto and Eylea
contributed 35% of the unit’s
sales in 2018. Sales of top seller
Xarelto are expected to peak at
more than €5 billion ($5.7 bil-
lion) a year shortly before the
loss of exclusivity in most mar-
kets in 2023. No. 2 Eylea is ex-
pected to suffer from competi-
tion before its patent expires in
many countries in 2025.
“As it stands today, Bayer
has a relatively large problem
on its hands,” said Bernstein
Research analyst Wimal Kapa-
dia. “They have several inter-
esting assets but none of them
appear to be game-changing.”
Bayer’s management has its
hands full, executing a drastic
restructuring plan to boost
profits across its divisions, in-
tegrating Monsanto Co., and
fighting the thousands of law-
suits that came with its acqui-
sition of the U.S. seeds and
pesticides maker. Bayer rejects
the cancer allegations.
“The pipeline could be
stronger, there’s no question,”
Chief Executive Werner Bau-
mann said at a news confer-
ence in February. But he and
other executives argue the
company still has ample time
to replenish its drug pipeline
and already counts some
promising treatments among
the 50 products currently in
clinical development.
Please turn to page B6
OIL-PRICE
FORECASTS
STEADY FOR ’19
COMMODITIES, B11
striking to many Chinese.
“Isn’t this just WeChat?”
one user noted on Weibo,
China’s answer to Twitter.
The path to a super-app
wouldn’t be as smooth for
Facebook. WeChat, which
counts over one billion users,
was sheltered from competi-
tion in a market hungry for its
services and doesn’t provide
the level of privacy that many
users of a Facebook app would
likely demand.
But for wired Chinese—and
Please turn to page B4
B2 | Friday, March 8, 2019
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
Airbnb..........................B2
Aldi ................. B1,B2,B12
Alight Solutions ......... B5
Allscripts Healthcare
Solutions.................B10
Alphabet..............A3,B10
Amazon.com
........... A3,B1,B2,B10,B12
American International
Group.........................B2
B Lidl.............................B12
Bayer...........................B1
Berkshire Hathaway.B10
BlackRock..................B10
C Midea Group ............. B10
Chubb.....................B1,B2
Citadel.........................B5
Costco Wholesale.......B3
E N
Eli Lilly ........................B6
Endo International......B2
F Ocado Group........B2,B12
Facebook...........A3,B1,B4
Fannie Mae ................. B5
Freddie Mac ................ B5
G-H
General Catalyst
Partners..................B10
Goldman Sachs Group
........................... B10,B11
INDEX TO PEOPLE
A
Amador, Art..............B10
Austin, Rob.................B5
B J
Baumann, Werner.......B1
Bickert, Monika..........A3
Brooks, James L.........B4
C Schimel, Richard.........B5
Claure, Marcelo...........B5
Cohen, Michael...........A4
Crinieri, Michael ....... B10
D W
Dollarhide, Jake..........B1
Draghi, Mario............B12
F Oelrich, Stefan............B6
Felder, Eric..................B5
G Perez, Nancy.............B12
Goldman, Ken............B12
Griffin, Ken ................. B5
Water
Claims Tie
Up Insurers
Continued from the prior page
your cabinets absorb water,”
said Mr. Fermanian. Repairs
on his property took eight
months and cost Chubb just
over $1 million.
Chubb also paid for instal-
lation of a water-shutoff sys-
tem that detects unusual flows
of water through the plumbing
and can be set to shut off
within a minute of such activ-
ity, Mr. Fermanian said.
In luxury homes, wet bars,
water-filtration systems, hot-
and cold-water taps, extra
bathrooms and other features
typically create 40 points of
connection into the plumbing
system, said Stephen Poux, a
senior executive at American
International Group Inc.
“That’s a lot of opportunity
for a valve or a connection…to
spring a leak,” he said.
Mr. Poux regularly meets
InsureTech entrepreneurs and
tests problem-detecting prod-
ucts. “I’ve personally piloted
Kroger’s
Profit and
Stock Fall
Continued from the prior page
Kroger’s investments in its
online operations include tak-
ing a stake in U.K. robotics
grocer Ocado Group PLC. Oc-
ado is building its first U.S.
network of automated ware-
houses for Kroger. The U.S. su-
permarket chain said Thurs-
day it had invested $589
million in Ocado and Home
Chef, a meal-kit company, in
its most recent fiscal year.
Kroger has pledged to gen-
erate $400 million in operat-
ing profit by next fiscal year,
in part by diversifying its
sources of revenue. The grocer
is pushing into financial ser-
vices, selling its consumer
data to suppliers and selling
more ads to target shoppers.
Some of Kroger’s competi-
tors are trying to diversify
revenue by similar means.
Kroger said Thursday it was
on track to meet the operat-
ing-profit goal. Same-store
sales rose during the quarter.
Executives said early disburse-
ment of food stamps during
Han's Laser Technology
Industry Group ....... B10
Hildene Capital
Management.......B1,B2
Snap...........................B10
SoftBank Group..........B5
SoftBank Innovation
Fund .......................... B5
Huawei Technologies..B6 SPDR S&P Oil & Gas
J-K Exploration &
Production...............B11
JPMorgan ChaseB10,B11
SQN Investors .......... B12
Kimmeridge Energy
Management...........B11 Stripe.........................B10
Kroger.............B1,B2,B12 T compensation, one year after
L Target.....................B1,B2
Tencent Holdings...B1,B4
Livongo Health..........B10 Teva Pharmaceutical
Industries..................B2
Lyft............................B10
Thomson Reuters.....B10
M year increased 81%
Tradeweb Markets....B10
Morgan Stanley.B10,B11
21st Century Fox........B2
Motif Investing.........B10 U
MSCI..........................B10 Uber Technologies .... B10
V 52% of votes opposed.
News Corp...................B2 Vail Resorts ................ B2
O Vanguard Group........B10
Village Vanguard ........ B5
Volkswagen...............B12
P the company raised the bench-
W marks required for him to re-
PDC Energy...............B11
Peugeot.....................B12 Walmart.................B1,B2
Pinterest.....................A3 Walt Disney................B2
Purdue Pharma......B1,B2 Wellington Management
R-S ...................................B10
Refinitiv .................... B10 Y
Silk Therapeutics........B2 Yelp............................B12
Groening, Matt...........B4
I
S
Sackler, Arthur ........... B2
Iger, Robert.................B2 Sackler, Jonathan.......B2
Sackler, Kathe.............B2
Sackler, Mortimer D.A.
Jean, Al.......................B4 .....................................B2
Jefferson, Brett..........B1 Sackler, Raymond.......B2
K Sackler, Richard..........B2
Kapadia, Wimal .......... B1
Slott, Ed......................B5
Kowall, Jon-Michael
..........................A2,B1,B6 T
Tavares, Carlos ......... B12
M relationship with the Sackler
McMullen, Rodney......B1
O
Wanzhou Meng...........B6
Weahkee, Michael......A6
Weber, Stanley...........A6
P Y
Young, Jean.................B5
R Z
Rosenbluth, Todd......B10 Zuckerberg, Mark ....... B4
several devices,” he said.
“They don’t always work.”
AIG and some other insur-
ers offer premium credits for
policyholders’ use of technol-
ogy deemed effective.
Though insurers’ payments
are growing, it doesn’t mean
they pay every water
claim. Since the 1960s, stan-
dard homeowners policies
have excluded storm surge and
river flooding. And in general,
homeowners’ policies cover
“sudden and accidental” dam-
age, not routine maintenance.
So homeowners who ne-
glect an obvious slow leak for
months before serious damage
occurs could end up in a cov-
erage dispute, insurance exec-
utives and lawyers said.
Among participants in
USAA’s pilot project is Mark
Fredriksen, who placed sen-
sors near the water heater and
washing machine and under
kitchen and bathroom sinks, in
his Smithtown, N.Y., home.
So far, they have averted
two potentially costly claims,
he said. One sensor detected
dripping from an old bath-
room valve. On another occa-
sion, as he was putting his
children to bed upstairs, the
kitchen sensor chirped. Water
was spitting out from a dish-
washer hose.
Crunch
Kroger's move to keep prices
down has hit margins.
Gross profit margin, change
from the previous year
0.6 pct. pts.
0.4
0.2
’17
FY2014 ’15 ’16
–0.3
–0.4
Note: FY2018 ended Feb. 2, 2019.
Source: S&P Capital IQ
the federal-government shut-
down boosted sales.
The company reported net
income of $259 million for its
latest quarter, or 32 cents a
share, down from $854 mil-
lion, or 96 cents a share, a
year earlier. Adjusted profit
totaled 48 cents a share.
Sales for the quarter ended
Feb. 2 fell 10% to $28.1 billion.
Kroger forecast net earn-
ings, after adjustments, of
$2.15 to $2.25 a share for its
current fiscal year, compared
with $2.11 a share during the
most recent fiscal year.
—Micah Maidenberg
contributed to this article.
Disney Holders Support Pay Vote
BY ERICH SCHWARTZEL
Walt Disney Co. sharehold-
ers narrowly approved a say-
on-pay referendum concerning
Chief Executive Robert Iger’s
voting against his pay package
and prompting the company to
make changes to it in recent
months.
At the company’s annual
meeting Thursday, the non-
binding resolution on Mr.
Iger’s compensation passed
with about 57% of shareholder
votes. Last year’s say-on-pay
resolution was rejected, with
Following that pushback,
Disney has reduced Mr. Iger’s
pay package twice in the past
three months. In December,
ceive a $100 million equity
grant in 2021. Then, earlier
Fund
Tosses
Family
Continued from the prior page
dent, which he said occurred
several years ago. The Stam-
ford, Conn., hedge fund do-
nated at that time to an or-
ganization fighting the opioid
crisis and since then has re-
peatedly considered ending its
family, he wrote.
“Last year the weight on
my conscience led me to ter-
minate the relationship and
initiate the redemption proce-
dure,” Mr. Jefferson wrote.
Hildene joins a list of uni-
versities, museums and non-
profits, including most re-
cently the New York Academy
of Sciences and Columbia Uni-
versity, that are reviewing
their relationships with the
family as a result of its ties to
opioids. Columbia said last
month it wasn’t currently ac-
cepting donations from Sack-
ler-related entities.
Marketing and prescribing
of opioid painkillers starting
in the late 1990s led to an ad-
diction crisis. Other companies
targeted by opioid-related
suits include Johnson & John-
son, Teva Pharmaceutical In-
dustries Ltd., Allergan PLC
and Endo International PLC.
They have denied wrongdoing.
The Sacklers until recently
have best been known as
benefactors of museums and
universities around the world.
Some members of the Sack-
ler family who have been ac-
tive in Purdue are now named
as defendants in at least two
dozen opioid lawsuits. They
have become more of a focus
in the last several weeks after
the unsealing of a lengthy
amended complaint from the
Massachusetts attorney gen-
eral that cited internal emails
and memos from Sackler fam-
ily members. A spokesman for
members of the Sackler family
has said that lawsuits have
made inaccurate claims about
the family, which is committed
to addressing the opioid crisis.
Richard, Kathe, Mortimer
D.A. and Jonathan Sackler, all
members of Purdue’s control-
ling family and former board
members of the company, are
scheduled to sit for deposi-
tions beginning this week. The
interviews are likely to further
probe family members’ roles
in the company and marketing
of its drugs. Mortimer D.A.
and Jonathan are testifying in
a case brought by Oklahoma’s
attorney general.
’18 The depositions are be-
lieved to be the first for family
members since Richard Sack-
ler was questioned in 2015 as
part of a Kentucky lawsuit. His
testimony, which became pub-
lic last month, showed the
company’s efforts to boost the
use of OxyContin for wide-
spread pain-management use.
Three Sackler brothers—
Raymond, Arthur and Morti-
mer—bought Purdue’s prede-
cessor in 1952. They took a
small pharmaceutical firm
making laxatives and antisep-
tics and built the enterprise
that became Purdue.
Not all Sackler family mem-
bers have been involved in the
company. Some of Arthur’s
family members have said his
estate sold out after his death
in 1987, before Purdue
launched OxyContin in 1996.
Purdue paid out more than
$4 billion to the Sackler family
owners between 2008 and
BUSINESS & FINANCE
this week, Disney said it was
removing $13.5 million from a
windfall expected when Disney
closes its $71.3 billion acquisi-
tion of major assets of 21st
Century Fox.
Even after those changes,
shareholder advisory firms
recommended shareholders
vote against the resolution, as
did California Public Employ-
ees’ Retirement System, a
shareholder that has been out-
spoken on corporate-gover-
nance matters.
Mr. Iger remains one of the
highest-paid executives in en-
tertainment. His compensation
package jumped 81% to $65.6
million in the year ended in
September, driven by $35.4
million in stock grants, some
of which were tied to an ex-
tension of his employment
contract through December
2021.
“I am proud to be leading
Raymond Sackler, left, and Mortimer Sackler each served as co-chief executives of Purdue Pharma.
Family Holdings
Some members of the sprawling Sackler family control opioid maker Purdue
Pharma. The company doesn't identify which family members have ownership
stakes in the firm, and not all family members have been involved in the
company. Family members have a wide range of investments in hedge funds
and other businesses.
Raymond Sackler (died 2017)
Purdue co-CEO
Richard Sackler*
This branch of the family has
investments in Vail Resorts, Peak
Resorts and Silk Therapeutics.
David Sackler*
Former hedge-fund manager who
now runs Summer Road, the
family office managing the wealth
of Richard Sackler's branch of the
family.
Rebecca Sackler
Veterinarian
Marianna Sackler
Jonathan Sackler*
His family office Kokino invests in
hedge funds. He also has indirect
investments in Airbnb, the Honest
Company and Lyft.
Madeleine Sackler
Filmmaker
Miles Sackler
Clare Sackler
Filmmaker
*Former Purdue board member †Date of death unknown.
Note: Not all family members are listed.
Source: Staff reports
2016, the Massachusetts attor-
ney general’s lawsuit says.
Branches of the Sackler family
own independent companies
associated with Purdue that
sell OxyContin internationally.
The scrutiny of the Sacklers
is highlighting their family in-
vestment operations, which
are some of the most sophisti-
cated in the U.S. Branches of it
are longtime investors in
hedge funds, including early
stakes in Perry Capital and
Lone Pine Capital.
Some family members also
have financial interests, di-
rectly or indirectly, in: Airbnb
Inc.; the Honest Co.; ski resort
operators Vail Resorts Inc. and
Peak Resorts; the Smith res-
taurant chain in New York; the
luxury Amanyara resort in
Turks and Caicos; and apart-
ment complexes and hotel de-
velopments throughout the
U.S. They have invested in bio-
materials company Silk Thera-
peutics, Inc. and backed with
$100 million Boston invest-
ment firm Balter Capital Man-
agement, according to people
familiar with the matter. The
hedge funds that count the
Sacklers among their clients
either declined to comment or
didn’t respond to requests for
comment.
The family office for Ray-
mond Sackler’s son Richard is
* *** THE WALL STREET JOURNAL.
the Walt Disney Co. through porting stronger data protec-
this important time and be- tion—failed with 39% and 26%
lieve the changes I, with the of the vote, respectively.
board, have made are in the At the meeting, Mr. Iger
best interest of the company,” also outlined the company’s
Mr. Iger said. ambitious expansion plans at
Mr. Iger met with share- its theme parks, which have
been its fastest-growing divi-
sion in recent years.
Two “Star Wars”-themed
Robert Iger’s pay lands—one at each U.S. park—
package last fiscal will open about a month ear-
lier than anticipated. Phase
one of the Disneyland location
to $65.6 million. will open May 31, and the Walt
Disney World location will fol-
low on Aug. 29, Mr. Iger said.
Both attractions are the
holders in St. Louis following largest expansions in each
a busy year. The Fox deal is in park’s history, and overwhelm-
the “final stages” of closing, ing interest already has the
said Mr. Iger, with final regu- company bracing for capacity
latory approval expected soon. crowds.
Two shareholder resolu- 21st Century Fox and News
tions—one encouraging more Corp, parent company of The
transparency on Disney’s lob- Wall Street Journal, share
bying efforts and another sup- common ownership.
TACO VAN DER EB/HOLLANDSE HOOGTE/REDUX
ALAN DAVIDSON/REX/SHUTTERSTOCK
Mortimer Sackler (died 2010)
Purdue co-CEO
Ilene Sackler Lefcourt*
Director of the Sackler Lefcourt
Center for Child Development
Jeffrey Lefcourt
Founder and CEO of Corner Table
FIRST WIFE
Restaurants, which owns and
runs the Smith restaurant chain
in New York.
Karen Lefcourt-Taylor
Psychotherapist
Kathe Sackler*
Foundation founder
Robert Mortimer Sackler (deceased)†
Mortimer D.A. Sackler*
His family office, Stillwater, has
investments in Amanyara luxury resort
SECOND WIFE
in Turks and Caicos and Change.Org.
He was also invested in Shake Shack
through private-equity firm Alliance
Consumer Growth.
Samantha Sackler Hunt*
Married entrepreneur John Hunt,
THIRD WIFE
whose firm Archimedia is invested in
yacht company Wally as well as several
wineries and restaurants.
Michael Sackler
Venture capitalist
Marissa Sackler
Founded nonprofit incubator
Sophie Sackler
named Summer Road LLC for
a street near the Alta ski re-
at hedge fund Perry while in
college. David Sackler later
sort in Utah, near where a
branch of the family owns a
home that is the site of family
started his own hedge fund,
Moab Capital Partners, with a
former Perry colleague.
gatherings. Summer Road, run
by Richard’s son David Sackler,
a former hedge-fund manager
An entity called Kokino LLC
invests the wealth of Jonathan
Sackler and Kokino’s employ-
himself, has recruited nearly a ees. Kokino operates out of the
dozen traders in recent years. same building in Stamford
Raymond’s descendants are that houses Purdue’s head-
worth roughly $3.5 billion, ac- quarters, along with other in-
cording to a person familiar vestment firms with connec-
with the matter. Richard is a tions to the Sacklers.
past president of Purdue and —Elisa Cho
Richard’s son David, a former and Jim Oberman
Purdue board member, worked contributed to this article.
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THE WALL STREET JOURNAL.
Costco
Raises
Minimum
Wage
BY SARAH NASSAUER
AND MICAH MAIDENBERG
Costco Wholesale Corp.
said it has raised starting
wages for store workers to $15
an hour, as a tight U.S. labor
market continues to drive
fierce competition for hourly
staffers.
Executives at the Issaquah,
Wash.,-based retailer, which
has around 245,000 workers,
said Thursday the company
raised its minimum hourly
wage for U.S. and Canadian
staff from $14 this week. It is
the second such increase in
less than a year at the com-
pany, which raised its hourly
minimum from $13 last June.
Costco will also increase
pay for supervisors and has
started offering paid parental
leave for hourly employees,
said chief financial officer
Richard Galanti on a confer-
ence call to discuss quarterly
earnings Thursday.
Several large employers
have been raising pay to lure
or keep hourly and part-time
workers in a hot job market
where unemployment recently
touched its lowest level in de-
cades.
Costco reported total reve-
nue of $35.39 billion in the
quarter that ended Feb. 17,
compared with $32.99 billion
the year earlier.
Same-store sales, or those
generated at Costco ware-
houses and e-commerce sites
operating for more than a
year, rose 5.4%. Online sales
rose 20.2%, he said.
The company reported a
profit of $889 million, or $2.01
a share, compared with $701
million, or $1.59 a share, the
year prior. Analysts had fore-
cast $1.69 a share, according
to FactSet.
Costco shares rose 5% in af-
ter-hours trading. The stock is
up 6.4% so far this year.
© 2019 Dow Jones & Co., Inc. All rights reserved. 6DJ7090
Friday, March 8, 2019 | B3
BUSINESS NEWS
Synthetic Clothes Shed Into Oceans
Apparel makers deal In Vogue
with potential danger
of microfibers released
Production of synthetic textiles has risen
amid growing demand from the clothing industry.
during washings Global fiber production
150 million metric tons PROJECTIONS
BY SAABIRA CHAUDHURI Wool
125
Cotton
Makers of sportswear and
fleece jackets are trying to ad- Cellulosic
100
dress concerns about tiny plas- Polypropylene
tic particles from synthetic 75
Acrylic
clothing finding their way into Polyamide
WILFREDO LEE/ASSOCIATED PRESS
seafood and drinking water. Polyester
While the plastics backlash 50
has focused on single-use
products like straws, bottles 25
and coffee cups, synthetic
clothing is gaining attention 0
because such garments shed 1980 ’90 2000 ’10 ’20 ’30
plastic every time they are
Note: Figures for cotton and wool fiber represent total annual mill consumption;
washed. for all other fibers the figures equal total annual production.
Each year, more than a half- A possible plastic microfiber in ocean water under the microscope. Source: Wood Mackenzie
million metric tons of microfi-
bers—the equivalent of 50 bil- Brännsten said.
lion plastic water bottles— First Small Step Is made from more than 50% syn- sociation, a trade body, said the Researchers also have ze-
enter the ocean from the thetic material to tell consumers legislation is getting ahead of roed in on how clothes are
washing of synthetic textiles, Educating the Public that the clothing sheds plastic science and that more research washed. Outdoor-apparel
according to the International microfibers when washed. is needed before slapping labels brand Patagonia found fabrics
Union for Conservation of Na- “It probably won’t change on garments. Mr. Herman was shed lots of microfibers on the
ture and Natural Resources, a The U.S. and the U.K. are too many adults’ minds, but it part of a working group set up first wash, but few in subse-
Switzerland-based group that among countries that have out- can bring awareness where by Connecticut last year to ex- quent washes. That suggests
counts governments, nonprof- lawed personal-care products, maybe 10-20 years from now amine how the public could be pretreating garments before
its and charities among its such as facial scrubs and soaps, that generation will be more educated about microfibers. they are sold could potentially
members. that contain tiny plastic beads, conscious about microfibers,” “We don’t know if synthetic capture and recycle what oth-
While all clothing sheds fi- raising fears among apparel said Felix Ortiz, assistant apparel is a primary contributor erwise goes down household
bers when washed, synthetic makers of a crackdown on tex- speaker of New York’s state as- to the microfiber issue,” said Mr. drains.
particles—unlike wool and cot- tiles. sembly, who introduced the bill Herman. “There is very little The brand also found that
ton—don’t biodegrade. Most Pending bills in New York in New York. way to accurately measure the the type of washing machine
conventional washing-machine and California, if successful, Nate Herman of the Ameri- impact of one type of thing ver- matters. Jackets washed in
filters aren’t designed to trap would require labels on clothes can Apparel and Footwear As- sus another.” top-load models shed seven
such tiny particles, and while times as many microfibers as
wastewater-treatment plants front-loaders.
capture a big portion, they starting to look for ways to type of microplastic. The parti- tential health impact after a Companies have started
don’t trap everything. The curb microfiber shedding. cles, less than 5 millimeters study found plastic in 259 bot- selling washing bags and balls
problem is worse in countries Adidas AG, Hennes & Mau- long, also come from a range tles of water from 11 different intended to catch fibers in
whose population uses lots of ritz AB and Patagonia Inc. are of other things like tires, brands bought in nine coun- washing machines.
synthetic clothing and that among companies funding re- toothpaste and marine coat- tries. Adidas said it has developed
have fewer wastewater-treat- search into how microfibers ings. Research shows that ingest- a method to analyze the shed-
ment plants. are created, shed and end up Textiles are a much bigger ing microplastics can hurt the ding properties of different
The number of microfibers in the ocean. They have found problem than personal-care ability of planktonic organisms materials and is sharing the
entering the ocean is forecast that it matters how fibers are products, contributing 35% of to feed and the ability of fish technique with others to de-
to accelerate as demand for woven and clothes are washed. primary microplastics released and marine worms to gain en- fine a common, accepted stan-
clothes rises. More than 22 “We are very concerned into the ocean, compared with ergy from food. dard. It also is drawing up spe-
million metric tons of microfi- about microfiber leakage from 2% from personal care, accord- H&M said it is exploring cific measures to share with
bers are projected to enter the synthetic fibers,” Cecilia Brän- ing to IUCN. whether clothes can be de- suppliers on how to mitigate
ocean between 2015 and 2050, nsten, H&M’s sustainability Microplastics have turned signed to minimize shedding. shedding and handle waste.
according to the Ellen Mac- head, said. “We use synthetic up in seafood, drinking water, The brand is monitoring the Fleeces have been in the
Arthur Foundation, a non- fibers of course, and so it’s our beer, honey and sugar, accord- development of alternative spotlight for shedding microfi-
profit. responsibility that they don’t ing to studies, but the impact biodegradable fibers, although bers. One study found polyes-
That is prompting new end up where they shouldn’t on human health is unclear. it said there are limitations. ter fleeces shed 85 times more
scrutiny and early attempts at be.” The World Health Organization “You wouldn’t want to swim fibers than polyester fabric
regulation. Companies are Microfibers are just one is reviewing microplastics’ po- in a cotton bathing suit,” Ms. does.
Hear from senior Wall Street Journal editors and inluential executive leaders as they
examine and address the challenges and successes that women in business face today.
Join us at our next event:
Women In Finance | March 20, 2019 in New York City
Learn more at WomenIn@wsj.com
WomenIn@wsj.com | WomenIn.wsj.com | #WomenIn
 B4 | Friday, March 8, 2019
KATHERINE BINDLEY/THE WALL STREET JOURNAL
Follow these app settings to make your Facebook account less accessible to strangers with your phone number.
PERSONAL TECHNOLOGY | By Katherine Bindley
Settings Make Facebook Less Creepy
Facebook
still feels
pretty intru-
sive at times.
You’ll be talk-
ing about
something and an ad for that
thing will pop up in your news
feed or on Instagram. After
telling a friend how dusty my
apartment was a few weeks
ago, I got an ad for an air pu-
rifier. What’s the most likely
explanation? I noticed the ad
because I was complaining
about dust? Or Facebook has
bugged my apartment?
Still, when I wrote about
being hypertargeted by Face-
book after limiting ad track-
ing, many people shared their
own eerie coincidences. Oth-
ers said they’d tried every-
thing—going so far as to con-
tact the company—and still
saw ads that were reminders
of painful life experiences.
Even when you try to keep
up with all the settings, the
settings keep changing. Just
this weekend, we learned
from a Facebook user that our
phone numbers were still
used as a way to look us up,
even though Facebook turned
off a way to do that last April.
Frustratingly, the default pri-
vacy setting for our numbers
is “everyone.” That is, “Who
can look you up using the
phone number you provided?”
“Anyone on or off Facebook.”
Facebook continues to
surprise us with how it is us-
ing our information. Chief
Executive Mark Zuckerberg
announced sweeping changes
to the social network
Wednesday, with a focus on
messaging and encryption.
While we wait for the over-
haul, there are settings to
mitigate the spying.
Pull out your phone, launch
Facebook and follow along.
First, find Ad Preferences:
Tap the three horizontal lines
at the bottom of the app, then
Settings & Privacy, then Set-
tings. Scroll down to the Ads
section, which has one option,
Ad Preferences.
For ads related to ads
you’ve clicked in the past, go
to Your interests. If there’s
anything in there you’d
ADVERTISEMENT
The Marketplace
To advertise: 800-366-3975 or WSJ.com/classifieds
CLASS ACTION
   
TECHNOLOGY
rather not see, tap on the
three vertical dots to remove
the interest.
For ads based on your pro-
file—such as relationship sta-
tus or job title—tap Your in-
formation. Beneath those
fields, you can manage addi-
tional categories that Face-
book puts you in—“Wi-Fi us-
ers,” for instance.
For ads based on data from
Facebook’s partners—compa-
nies that use its tracking soft-
ware—tap Ad settings. Once
you select “Not allowed,” you
will still see ads that relate to
your activity on Facebook and
Instagram, and also ads from
companies that have your
contact info.
For ads relating to a par-
ticular subject matter (par-
enting, for example), go to
Hide ad topics.
Finally, check up on Ad-
vertisers, which is where you
see the list of “advertisers
who uploaded a contact list
with your info.” It might be
crazy long, so set aside time
to go through and X out any
advertisers you don’t want to
hear from. You’ll have to
check back and play Whac-A-
Mole, since advertisers will
continue to upload customer
lists with your name on it.
It is true that you can no
longer type a phone number
into the Facebook search box
and see whose name pops up.
But your phone number can
still be used to find you.
“Today, the ‘Who can look
me up?’ settings control how
your phone number or email
address can be used to look
you up in other ways, such as
when someone uploads your
contact info to Facebook from
their mobile phone,” a Face-
book spokeswoman said. The
spokeswoman didn’t provide a
complete list of scenarios.
To tighten this up, visit
Settings > Privacy Settings >
“Who can look you up using
the phone number you pro-
vided?” The most private op-
tion is “Friends.”
Of course, you can take all
the steps and turn off every-
thing and sometimes you’ll
still feel like Facebook is
eavesdropping.
PUBLIC NOTICES
* *** THE WALL STREET JOURNAL.
‘Simpsons’ Removes
Michael Jackson Show
BY JOE FLINT
A classic episode of “The
Simpsons” featuring Michael
Jackson’s voice will be removed
from circulation, the show’s
longtime executive producer,
James L. Brooks, said.
“It feels clearly the only
choice to make,” Mr. Brooks
said of the 1991 episode in
which Mr. Jackson voiced the
character of a patient in a men-
tal hospital who believes he is
the pop star.
Mr. Brooks said he, along
with Matt Groening and Al
Jean, the other two master-
minds of the long-running Fox
cartoon, came to the conclusion
after watching the HBO docu-
mentary “Leaving Neverland.”
In the documentary, which pre-
miered earlier this week, two
men allege in graphic and com-
pelling detail that Mr. Jackson
molested them over several
years when they were children.
“The guys I work with—
where we spend our lives argu-
ing over jokes—were of one
mind on this,” Mr. Brooks said
in an interview, speaking on be-
half of the production team be-
hind “The Simpsons.”
A spokesman for Twentieth
Century Fox Television, which
handles distribution of the
WeChat
Sets Strong
Example
Continued from page B1
tech-sector analysts—the rea-
son for Facebook’s shift is easy
to understand. Developed by
Tencent Holdings Ltd., WeChat
has evolved from a simple mes-
saging service into an app
where users can shop, pay, or-
der food, buy movie tickets and
make restaurant reservations
and doctor’s appointments.
Tencent doesn’t break out
financial figures specifically for
WeChat and gaming remains
its biggest source of revenues.
In its last financial quarter, the
company recorded year-over-
year revenue growth of more
than 60% in social advertising,
payment services and other
businesses related to WeChat.
It has helped turn the Shen-
zhen-based company into one
of China’s biggest, most influ-
ential companies, with invest-
ments in industries including
WSJ.com/Tech
show, referred to Mr. Brooks
for comment. Twentieth Cen-
tury Fox parent 21st Century
Fox and Wall Street Journal
parent News Corp share com-
mon ownership.
Mr. Jackson, who died in
2009, steadfastly denied he had
molested or harmed any chil-
dren. The Michael Jackson Es-
tate last month attempted to
block HBO from airing the doc-
umentary by suing the network
in Los Angeles Superior Court
charging among other things
that it “falsely claims Michael
Jackson was abusing children.”
Mr. Brooks said he found
“Leaving Neverland” convincing
and heartbreaking.
“The documentary gave evi-
dence of monstrous behavior,
he said, adding that he went
into it wanting to “believe the
thing that we believe,” which
was that Mr. Jackson was
falsely accused.
In “The Simpsons” episode
titled “Stark Raving Dad,”
Homer Simpson briefly ends
up in a mental institution,
where he meets a man who
claims to be Michael Jackson.
The character, Leon Kompow-
sky, was voiced by Mr. Jack-
son. Mr. Brooks said the epi-
sode had been one of his all-
time favorites.
David Marcus, Facebook’s for-
mer head of Messenger, has
called out apps developed in
Asia, including WeChat, as
trailblazers in offering services
on messaging platforms.
Tencent didn’t respond to a
request for comment about
Facebook’s strategy shift.
By pushing into services,
Facebook is trying to find other
ways of making money beyond
advertising, which accounts for
about 98% of its revenue.
A huge draw of WeChat is
its mobile-payment system,
WeChat Pay, which enables us-
ers to pay both virtually and in
physical stores without cash or
credit cards by simply scanning
a QR code. People can also
transfer money to each other
through the app.
Its popularity has drawn a
huge variety of businesses,
many of which rely on WeChat
for the bulk of their customers,
according to analysts. Chinese
startups such as Pinduoduo
Inc., an e-commerce company
that offers group discounts on
consumer goods, have piggy-
backed to achieve so-called
unicorn status.
Tencent “has moved into
markets like retail and educa-
 
 retail and education. tion and health care—and pay-

 
  
    
  Facebook is “very aware of ments is their foot in the door
  

    
 
  
 
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(800) 366-3975
deserves a decent
 3  #   & :::$#+4$# $
    "
For more information visit:
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place to live.
BUSINESS OPPORTUNITIES BUSINESS OPPORTUNITIES BOATING

 
  

  
 







   
  
 
   
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THE WALL STREET JOURNAL. Friday, March 8, 2019 | B5

PERSONAL FINANCE

Freddie-
Fannie
Retirees Pushed to Keep 401(k)s
More employers offer ity to withdraw any portion of Generational Shift balance at any time, up from

Joint Bond features to entice

investors to stay
their balance at any time.
Many are adding services that
provide financial advice, like
Baby boomers control more than half the assets in 401(k)-type
plans, money they may roll over to IRAs.
41% in 2007. Vanguard Group
found that participants who
retired in 2010 with flexible

Supported in company plans

BY ANDREW ACKERMAN
AND BEN EISEN
The world’s second-largest
bond market moved a step
closer to its much-anticipated
overhaul on Thursday when
Wall Street firms voted to sup-
port a single mortgage-backed
bond for Fannie Mae and
Freddie Mac.
The vote by Wall Street’s
largest trade group, the Secu-
rities Industry and Financial
Markets Association, is the fi-
nal hurdle for the proposed
new security—which is ex-
pected to launch in June as
part of a revamp to the $5 tril-
lion market in bonds guaran-
teed by the mortgage-finance
firms. Together, the two back
roughly half the U.S. mortgage
market.
The trade group sets the
standards for what mortgages
can be packaged and sold to
investors. The group approved
guideline changes to enable
trading of the new securities
“by a significant majority,” it
said in a statement.
The new single security will
bring together two products
that currently are issued sepa-
rately by Fannie and Freddie.
Analysts say the change is sig-
nificant because it could set
the stage for an eventual over-
haul of the housing-finance
system, featuring new compet-
itors to Fannie and Freddie
that also could issue bonds on
the single-security platform.
Supporters also say the
change will deliver long-
needed improvements to the
infrastructure that underpins
the housing-finance market
and potentially decrease rates
for homeowners.
“Moving to a single security
will be a critical step in GSE
reform, easing the path to a
system that is less dependent
on any one player for a func-
tioning secondary mortgage
market,” said Jim Parrott, a
former Obama administration
housing adviser who is now an
industry consultant, referring
to Fannie’s and Freddie’s des-
ignation as government-spon-
sored enterprises, or GSEs.
Congress, which is consid-
ering legislation to overhaul
the mortgage companies,
would need to pass new legis-
lation to encourage new en-
BY ANNE TERGESEN
As baby boomers leave the
workforce, more employers
are trying to persuade them to
stick with their 401(k) plans
during retirement.
In the past,
RETIREMENT most 401(k)
plans had poli-
cies that encouraged retirees
to transfer, or roll over, their
savings to an individual retire-
ment account.
But now, company-spon-
sored retirement plans are in-
troducing features to entice
employees to leave their sav-
ings where they are. That is
because when plans lose as-
sets, employers have less bar-
gaining power to sharply drive
down 401(k) fees in negotia-
tions with fund provid-
ers, harming employees who
remain in the plan.
More employers are amend-
ing their 401(k) rules to en-
courage retirees to keep their
money in the plans—for exam-
ple, by giving them the abil-
Factors to Weigh
About Your Plan
Before deciding whether to
transfer money from a 401(k)
to an IRA, it is important to
weigh the cost and quality of
the advice available under each
option, as well as the following
factors.
Fees: Many 401(k) plans of-
fer low-cost investments, in-
cluding institutional share
classes of mutual funds that
are off-limits to individual in-
vestors, said Jean Young, senior
research analyst at Vanguard.
While IRA investors pay an
average of 0.61% for stock
funds, 401(k) participants pay
0.45%, according to the Invest-
Citadel Hedge Fund
Closes Aptigon Unit
BY RACHAEL LEVY
Chicago hedge-fund giant
Citadel is closing one of its
help turning a nest egg into a
stream of lifelong
come. Others are launching
in-
campaigns designed to con-
vince retirees of the benefits
of remaining in a 401(k), in-
cluding access to lower-cost
investments and additional
creditor protections.
“Don’t move!” reads a bro-
chure aimed at retirees from
the nation’s largest 401(k)-
type plan, the federal govern-
ment’s Thrift Savings Plan.
“TSP’s administrative costs
are lower than those of similar
plans.”
In the past, employers were
fine letting employees retire
and take their balances with
them. There is a cost to mail-
ing former employees account
statements and tracking down
those who move, said Rob
Austin, director of research at
401(k) record-keeper Alight
Solutions LLC.
But he said retention
is a growing priority. Among
employers surveyed by invest-
ment-consulting firm Callan
LLC, 38% say they want to
keep retirees in their 401(k)s,
up from up from 29% in 2016.
ment Company Institute, a
trade group for the mutual-fund
industry.
An investor who pays 1 per-
centage point more in fees will
amass 20% less in savings over
a 40-year career, according to
the Center for Retirement Re-
search at Boston College.
Before making a rollover de-
cision, ask your employer for
the quarterly fee-disclosure
statement that lists participant
fees, including investment-man-
agement and administrative
charges.
Compare that to the cost of
an IRA, including commissions
and account-maintenance and
investment-management
fees. It is possible to find a very
low-cost IRA, so be sure to
compare prices.
Citadel’s billionaire founder.
Citadel and Mr. Felder “mu-
tually agreed” on his depar-
Gen X
29%
Percentage of
assets in 401(k)
plans held by each
Millennials
4%
Pre-boomer
7%
Note: Millennials were born between 1981 and 2004, Gen X between 1965 and 1980, baby boomers
between 1946 and 1964.
Source: Federal Reserve via Investment Company Institute
In 2014, overall 401(k) plan
distributions exceeded contri-
butions for the first time, ac-
cording to consulting firm Ce-
rulli Associates. The net
outflows have largely per-
sisted since. Between 2012 and
2017, withdrawals increased by
8.4% a year, on average, while
contributions rose by a 6.4%
annual rate, Cerulli says.
To stem the tide of retiree
switchovers, 401(k) plans are
adding flexible distribution
Investment Options: IRAs
offer thousands of investment
options. But this can create
headaches for those who don’t
know how to evaluate them.
Employers are fiduciaries who
are legally obligated to monitor
the funds they offer, says Rob
Austin, director of research at
401(k) record-keeper Alight So-
lutions LLC.
“You don’t have the same
protections with an IRA,” Mr.
Austin said.
Simplicity: An IRA offers a
way to consolidate multiple re-
tirement accounts in one place
and see all of your holdings on
one statement.
If you like your 401(k), your
employer likely will allow you to
do the same thing within the
plan.
Baby boomers
60%
generation
options, similar to those of-
fered by many IRAs. In the
past, many plans forced retir-
ees wanting to take any money
out to remove their entire
balance. Now, according to a
recent survey of 333 employ-
ers by Alight, 66% offer retir-
ees the option of taking regu-
lar monthly, quarterly or
annual payments. That is up
from 52% in 2007.
Nearly 70% allow retirees to
withdraw any portion of their
Early access to your
money: Those who leave an
employer at age 55 or older can
generally tap their 401(k) ac-
counts without paying a 10%
early-withdrawal penalty, says
Ed Slott, an IRA specialist in
Rockville Centre, N.Y. In con-
trast, with an IRA, the 10% pen-
alty applies before age 59½. (In
both cases, investors owe ordi-
nary income tax on their with-
drawals.)
Unlike an IRA, most 401(k)
plans offer the option to take a
loan.
Creditor Protections: Fed-
eral law protects the assets in
401(k)-style accounts from
creditors and legal judgments.
But because IRAs are governed
by state law, protections vary,
says Mr. Slott.
distribution options
had nearly 50% more in their
former employers’ 401(k)
plans in 2015 than those with-
out access to such features.
On Sept. 15, the federal gov-
ernment’s $560 billion Thrift
Savings Plan will begin allow-
ing retirees to take as many as
one unscheduled withdrawal a
month. Current rules permit
only one such distribution
over a participant’s entire
time in the plan.
Federal retirees will also be
able to receive monthly, quar-
terly or annual checks and
change the amount any time.
Under current rules, only
monthly installments are per-
mitted, and the amount can
only be changed between Oct.
1 and Dec. 15.
To make clear the benefits
of staying with TSP, the
plan distributes a worksheet
to departing employees that
asks them to compare the
TSP’s fees and investor protec-
tions with alternatives.
To further help retain peo-
ple’s retirement funds, em-
ployers are also adding some
advisory services. Often, retir-
ees decide to hire a financial
adviser and roll money over to
an IRA, with the adviser re-
ceiving a fee—generally 1% of
the account’s balance—to
manage the money. So that
401(k) participants will also
have access to advice, more
employers are adding so-called
managed accounts. These pair
portfolios devised by algo-
rithms with human helpers at
call centers and charge about
0.4%, on average.
Currently, 47% of plans of-
fer a managed account service
that helps people figure out
how to make their money last
in retirement, according to
Alight.
In addition to encouraging
people to stay with its retire-
ment plan, TSP allows both
participants and retirees
to transfer money into the
plan from their IRAs.

trants to the space.
Some firms, including Pa-
cific Investment Management
Co., or Pimco, have resisted
the change, people familiar
with the matter said.
Pimco has said the switch is
unnecessary and could in-
crease mortgage rates. “The
mortgage market is one of the
most liquid, well-functioning
markets worldwide, so the
proposal [for a single security]
is solving for a market prob-
lem that, in our view, does not
exist,” the asset manager
wrote in a 2017 “viewpoint”
note titled “Higher Mortgage
Rates Are Likely With Pro-
posal of ‘Single Security.’
A Pimco spokeswoman de-
clined to comment on the vote
on a single bond.
Craig Phillips, a counselor
to Treasury Secretary Steven
Mnuchin, urged top industry
officials to get behind the
project in recent months, amid
vocal opposition from Pimco
and others that threatened to
derail the project, according to
people familiar with the con-
versations. A Treasury spokes-
man declined to comment.
stock-focused units, Aptigon
Capital, according to people
familiar with the matter.
In addition, Eric Felder,
who ran the unit, is leaving
after less than two years at
the firm.
In a client letter sent
Thursday, Citadel said Mr.
Felder’s stock-focused portfo-
lio managers and teams with
The unit’s
credit portfolio
managers and
teams will
report to Ken
Griffin, Citadel’s
founder.
the strongest performance and
highest potential will transfer
to Citadel’s other stock units.
Mr. Felder also ran Citadel’s
credit business.
In the letter, Citadel said
Mr. Felder’s credit portfolio
managers and teams will re-
port to Ken Griffin on a tem-
porary basis until the firm fills
Mr. Felder’s role. Mr. Griffin is
GET A CLEAR
ture, the letter said. It isn’t
known how many staffers are
affected by the change. Mr.
Felder joined Citadel in April
2017 as a senior managing di-
rector from Magnetar Capital.
Citadel is one of the world’s
largest hedge funds with more
than $29 billion in assets. The
PLAN FOR YOUR
firm has gained a reputation
for rapid change at its busi-
ness units and within its exec-
utive levels.
RETIREMENT.
Before Mr. Felder took over
Aptigon in early 2018, hedge-
fund veteran Richard Schimel
ran it for about two years be-
fore he was let go.
For many in the industry,
joining a large firm like Cita-
del has benefits. Last month,
one of the industry’s few fe-
male founders announced she
would close shop to take on a
portfolio management position
in one of Citadel’s three re-
maining stock-picking busi-
nesses.
Citadel’s flagship multi-
strategy fund is up 4.55% after
fees this year through Febru-
ary, following a 9.1% gain last
year, a person familiar with
the numbers said.
Fidelity gives you clarity about where you stand
and can help answer retirement questions like:

SoftBank Turns to Latin America
BY MAYUMI NEGISHI
TOKYO—SoftBank Group
Corp. is launching a $5 billion
fund to invest in tech startups
in Latin America, dwarfing
rivals in a region experiencing a
surge in venture-capital inflows.
The Tokyo-based conglomer-
ate said Thursday it has com-
mitted $2 billion to the new
SoftBank Innovation Fund to
focus on mid-to-late-stage ven-
tures in the region. The com-
pany didn’t name other inves-
tors in the fund, but said it
would work with the Saudi-
backed $99 billion SoftBank Vi-
sion Fund to make bigger in-
vestments.
The fund’s size is equivalent
to venture investment in Latin
America in 2017 and 2018 com-
bined, according to Venture-
source, making it stand out in a
market that has grown to dou-
ble what it was five years ago
but remains tiny in global
terms.
Latin America offers fewer
competitors and lower valua-
tions, SoftBank officials said.
“It’s a blue ocean,” Marcelo
Claure, the conglomerate’s chief
operating officer, said in an in-
terview.
SoftBank has already in-
vested hundreds of millions of
dollars in Latin America, in-
cluding $100 million in each of
two Brazilian companies: deliv-
ery startup Loggi and ride-shar-
ing company 99. It later sold its
99 stake to China’s Didi Chux-
ing Technology Co.
The launch of the new fund,
which Mr. Claure will lead,
comes as SoftBank is revamp-
• How much might I need to cover essential
and discretionary expenses?
ing its organization to better • Am I on the right track to meet my goals?
manage an increasingly dispa-
rate portfolio. The operator of • What can I do to strengthen my plan?
the world’s largest pool of tech-
focused capital oversees an in-
vestment empire encompassing
well over a thousand compa-
nies, from established market
leaders to early-stage startups.
Over the years, the disparate
investment approaches have
caused tensions, partly from a
800.FIDELITY
lack of clarity about who re- Fidelity.com
ports to whom and which unit
should invest where, according
to people familiar with Soft- IMPORTANT: The projections or other information generated by the Planning & Guidance Center’s Retirement Analysis regarding
Bank’s operations. the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not
Mr. Claure was tasked with guarantees of future results. Your results may vary with each use and over time.
creating a team to find ways Investing involves risk, including risk of loss.
the myriad portfolio companies The trademarks and/or service marks appearing above are the property of FMR LLC and may be registered.
can collaborate. That group, Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2019 FMR LLC. All rights reserved. 874551.1.0
consisting of executives with
entrepreneurial experience, will
now be split in two.
B6 | Friday, March 8, 2019
MASSAGE
REDEFINED®
Every detail and every massage
movement has been thoughtfully
Huawei Lashes Back at the U.S.
BY DAN STRUMPF
considered to make contentment,
pleasure, and relaxation part of SHENZHEN, China—For
years, Huawei Technologies
your everyday. Open a door to Co. bided its time as the U.S.
a better you. gradually escalated its cam-
paign to rein in the Chinese
telecom giant. Now, Huawei
Find your DreamWave. has shifted to a war footing,
suing the U.S. government as
the company looks to defend
its global business.
The strategy represents a
bold move for Huawei, which
while failing to convince the
U.S. it isn’t a security threat is
striving everywhere else to
play a significant role in the
rollout of next-generation 5G
networks.
Among the risks is further
antagonizing the Trump ad-
ministration, which is con-
cerned about China’s techno-
logical rise and is engaged in a
broader trade fight with Bei-
jing.
Huawei’s lawsuit, filed late
Wednesday in a Texas federal
court, names the U.S. govern-
ment and seven administra-
tion officials. It alleges that
Congress violated the U.S.
CURRENTLY ACCEPTING Constitution by denying it due
PRE-ORDERS process in passing a law last
year that bans federal agen-
cies from buying Huawei gear
www.DreamWave.com and from doing business with
888.727.2150 contractors that buy from the
Chinese company.
The suit directly challenges
the multifaceted campaign by
the U.S. to limit Huawei’s rise
and cast it as a national-secu-
rity threat. It argues that
American officials are damag-
ing its reputation around the
world without evidence and
without giving the company a
chance to defend itself.
Huawei generated more
than $100 billion in global rev-
enue last year and its execu-
tives have played down the
importance of the U.S. market;
still, it wants to maintain its
role as the world’s dominant
telecom equipment maker.
From a stage inside the pri-
24" Hitch Mounted
vately held company’s sprawl-
Bumper Protection
ing headquarters in this
southern Chinese city, a team
FloorLiner™ BumpStep®XL of top Huawei executives on
Thursday laid out their own
list of charges against the U.S.
New! They accused American politi-
Non-Toxic
Feeding
System PetComfort.com
Bayer
Patents
To Expire
Continued from page B1
To speed things up, Bayer is
cutting its in-house R&D
teams while pursuing drug-de-
velopment partnerships and li-
800.441.6287 censing deals with biotech
International #001.630.769.1500 firms and research institu-
tions.
The shift, part of the wider
©2018 by MacNeil IP LLC restructuring announced late
last year, came after Bayer
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TECHNOLOGY
A Huawei plant in Dongguan, China. The company is suing the U.S. government over a sales ban.
cians of unfairly bashing Hua-
wei and said other countries
were “rightly resisting” the
U.S. campaign to block it from
markets. They also cast U.S.
officials as hypocrites, accus-
ing them of stealing Huawei
source code, hacking its serv-
ers and snooping on its
emails—an apparent reference
to 2014 allegations from for-
Washington has cast
the maker of telecom
equipment as a
national-security risk.
mer NSA contractor Edward
Snowden that the U.S. had
spied on Huawei.
Huawei’s newly confronta-
tional posture is endorsed by
the company’s founder, former
Chinese army engineer Ren
Zhengfei. In a speech in Wu-
han last month, Mr. Ren said
the company he founded in
1987 had “entered a state of
war.”
The stakes for both sides
have risen as the telecommu-
nications industry prepares
for a once-a-decade upgrade
of the world’s cellular net-
met setbacks in projects it had
pitched as future sales drivers.
In December, the company
halted trials for its uterine fi-
broids treatment vilaprisan,
which it had hoped would gen-
erate annual peak sales of over
€1 billion, due to the risk of side
effects. Anetumab ravtansine, a
drug for cancer linked to asbes-
tos and projected to hit peak
sales of €2 billion, recently also
failed a crucial clinical trial.
Bayer said it is seeking to
replicate a partnership it struck
in 2017 with U.S. biotech Loxo
Oncology Inc. in the fast-grow-
ing cancer treatments market.
Bayer last month gained full li-
censing rights for a Loxo-devel-
oped drug shown to be effec-
tive in shrinking some tumor
types. The U.S. Food and Drug
Administration in November
2018 approved the drug under
the brand name Vitrakvi, and
Bayer predicts it will have peak
sales of €750 million. Loxo is
now part of Eli Lilly & Co.
One problem with this plan,
analysts say, is that drugs take
a long time to develop, while
Bayer’s cliffs are approaching
fast. For a treatment to start
selling around 2024, Bayer
needs to buy the rights to
compounds that are already at
an advanced stage of clinical
trials.
But drugs in such advanced
testing stages are often expen-
sive to acquire, and Bayer’s fi-
nances leave little room for
maneuver.
After its $63 billion pur-
chase of Monsanto, Bayer has
made debt reduction a priority
to improve its credit rating.
Stefan Oelrich, who took
over as head of pharmaceuti-
cals in November, said last
week he preferred to buy
treatments in early stages of
development to avoid “making
shortcuts that cost a lot of
money,” but added that Bayer
could also buy into more ad-
vanced drugs.
Some analysts say Bayer’s
reputation as a good partner
in the industry will help it win
16.87
the deals it needs to boost its
pipeline.
Others, though, worry that
partnerships and smaller
drug-licensing deals won’t be
enough to make up for the
loss of its blockbusters.
Bayer had forecast its six
most promising experimental
treatments would hit at least
€6 billion in annual sales in
* ***
works. A yearslong effort by
Huawei to build a lead in 5G
technology and win over
some of Washington’s closest
allies such as the U.K. and
New Zealand is under threat
as U.S. officials lobby them to
exclude Huawei from their 5G
rollouts.
“The U.S. government is go-
ing after their most important
global customers,” said Dun-
can Clark, chairman of the in-
vestment advisory firm BDA
China and a longtime observer
of Chinese business. “The
gloves are off. Those were
hard-won over the past two
decades.”
U.S. officials have for years
maintained that Huawei pres-
ents a national-security threat
and that its equipment could
be used by Beijing to spy on
Americans and their allies.
In the past year, they began
taking that case to capitals
around the world, arguing that
they don’t need a smoking
gun.
Instead, the officials have
argued that in China no com-
pany is free from the long arm
of the Communist Party, and
that a privately held company
with a former military engi-
neer as its founder shouldn’t
be trusted to build sensitive
5G networks.
CEO Werner Baumann says there’s ample time to replenish pipeline.
Cliff Ahead
Patents for Bayer's two best-selling drugs will expire soon.
Bayer’s top pharmaceuticals, annual sales 2018
U.S. Rest of the world
Drug
Xarelto
Eylea 0 Macular degeneration
Mirena
Kogenate*
Nexavar
YAZ†
Glucobay 0.002
Adalat 0 Hypertension
Aspirin Cardio 0
Betaferon‡
€0 billion 1 2
*Including Kovaltry/Jivi †Including Yasmin/Yasminelle ‡including Betaseron Note: €1 = $1.13
Source: the company
coming years. But in Decem-
ber, Bayer projected only €3.75
billion in peak sales for its five
most promising experimental
drugs, with vilaprisan and
anetumab ravtansine no lon-
ger appearing on the list.
Corporate deals can offer
another way for pharmaceuti-
cals companies to dodge on-
coming cliffs. Pfizer Inc.
bought Wyeth Corp. in 2009
for $68 billion ahead of losing
patent protection of its block-
buster Lipitor drug. Earlier this
year, Bristol-Myers Squibb Co.
agreed to pay $74 billion to
buy rival Celgene Corp., which
soon faces a patent cliff.
After the Monsanto acquisi-
THE WALL STREET JOURNAL.
QILAI SHEN/BLOOMBERG NEWS
The U.S. campaign had
some initial success last year:
Australia blocked Huawei from
its 5G rollout, and New Zea-
land rejected a proposal to in-
clude Huawei gear in one op-
erator’s build-out plan.
Several countries in Europe
said they were taking a fresh
look at new limits on Huawei
in their networks.
But the U.S.-led effort is
showing cracks, with Germany
and the U.K. indicating that
they will allow a measure of
Huawei participation in their
rollouts. The United Arab
Emirates, South Korea and
other American allies are sign-
ing deals to buy 5G equipment
from Huawei.
The Chinese government,
meanwhile, has retaliated
forcefully against Canada for
its arrest of Huawei finance
chief Meng Wanzhou in De-
cember at the behest of U.S.
authorities, who allege she
and Huawei violated U.S. sanc-
tions on Iran.
Beijing has detained two
Canadians whom it has ac-
cused of stealing state secrets
and more recently banned
canola imports from the coun-
try’s largest grain processor.
—Rob Taylor in Canberra
and Xiao Xiao in Beijing
contributed to this article.
WOLFGANG RATTAY/REUTERS
Example of usage
Blood clots
Birth control
Hemophilia
Cancer
Birth control
Diabetes
Cardiovascular disease
Multiple sclerosis
3 4
tion, Bayer can no longer
make deals of that size. But a
midsize deal in the range of €5
billion could be an option once
it has sold off assets and low-
ered debt, people close to the
company said.
Mr. Oelrich said he
wouldn’t rule out moving into
such a price range but that
buying a company outright
wasn’t the best option.
Markus Manns, portfolio
manager at Union Investment,
which holds roughly 1% of
Bayer’s shares, said, “I don’t
think it would be wise to jump
on another big acquisition right
now…I want them first to focus
on integrating Monsanto.”
B10 | Friday, March 8, 2019
STREETWISE | By James Mackintosh
It’s Hard to Buy at the Bottom and Hang On
True con-
trarians only
buy stocks
when it makes
them feel
physically
sick. This week is exactly 10
years since the vomit-induc-
ing moment when the S&P
500 hit an intraday low of
666 (rounding down), Citi-
group became a penny stock
and General Motors was con-
sidering bankruptcy.
U.S. stocks stood where
they had been 13 years ear-
lier, the financial system was
collapsing and investors
thought a repeat of the
Great Depression was on the
way.
It was, of course, a great
time to buy. Including divi-
dends, investors who bought
the S&P have made an annu-
alized return of almost 18%
since then. Those who
bought Citi made 21% a year.
Score 10 out of 10 for the
contrarian.
It is easy to vow that next
time—and there will be a
next time—you’ll be a buyer,
not a seller. You will recog-
nize the capitulation by in-
vestors, understand that
governments won’t allow the
financial system to collapse
and go all-in.
Except, how would you
know? The market had been
diving for months, and con-
trarians who bought in lost
money too. The stock col-
lapse in October 2008 after
Lehman Brothers was scary
enough to bring up break-
fast, but far from the end.
After Congress rejected
the TARP bailout the fall was
even bigger, and govern-
ments and central banks
agreed to unprecedented
Digital-Health Startup Mulls 2019 IPO Robots Drive 5 ETFs
BY MAUREEN FARRELL
Livongo Health Inc. is pre-
paring for an initial public of-
fering as soon as the third
quarter of 2019, joining a
horde of technology compa-
nies racing to tap the public
markets.
The digital-health startup
has hired Morgan Stanley,
Goldman Sachs Group Inc.
and JPMorgan Chase & Co. as
underwriters for an IPO that is
expected to value the company
in excess of $1 billion, accord-
ing to people familiar with the
matter. Livongo has raised
roughly $240 million privately,
most recently at an $800 mil-
lion valuation.
While Livongo’s IPO will be
smaller than those of high-
profile tech companies like
Uber Technologies Inc. and
Lyft Inc., Silicon Valley ven-
ture-capital firms, bankers and
public investors will be watch-
ing closely. Livongo is set to
be one of the first Silicon Val-
ley companies to debut that
deploys technology in an ef-
fort to change how patients
receive care and to lower
health-care costs.
Dozens of smaller private,
venture-backed companies are
jockeying to provide similar
services, but none has
achieved the revenue or user
base of Livongo, which is on
track to take in more than
$100 million this year from
more than 120,000 patients.
Livongo expects to more than
double its revenue in 2020,
people familiar with its finan-
cials said. Like most fast-
growing technology startups,
the company is still losing
REFINITIV
Tradeweb to File
For Initial Offering
Refinitiv is taking trading-
platform operator Tradeweb
Markets Inc. public.
Tradeweb said in its Securi-
ties and Exchange Commission
filing that it expects to raise
$100 million in proceeds from
the offering, but that figure is
often used as a placeholder to
calculate filing fees.
It didn’t give a range for its
initial public offering or say how
many shares it expected to sell.
The company is expected to be
valued at more than $5.5 billion
at the time of the offering, ac-
cording to people familiar with
A Bullish Decade
There were plenty of reasons to panic during
what turned out to be a great 10 years for stocks.
3000
S&P 500
2500
2000
Intraday low of 666.79
1500
1000
500
0
2008 ’09 ’10 ’11
Selected S&P 500 drops*
–5
–58
*Drops are from intraday peak to trough.
Source: Refinitiv
joint action to save the
world economy. Contrarians
who thought they timed it
perfectly and bought at the
Oct. 27 low in 2008 went on
to lose 20% by the time the
S&P hit 666.
Even if you successfully
picked the bottom, would
you have held for 10 years?
It’s easy to say that of
course you would be a buy-
and-hold investor. But even
with perfect hindsight there
were plenty of great reasons
to sell along the way.
In 2010, the Greek crisis
came and with it the realiza-
tion that the financial crisis
would have long-lasting ef-
fects. In the U.S. fear of re-
cession grew, the Federal Re-
serve reintroduced
emergency bond-buying and
Livongo offers cloud-based glucose-monitoring to diabetes patients,
money as it pushes to grow its
user base.
Unlike, for example, the taxi
or hotel industry, which have
experienced major overhauls
as a result of technology dis-
ruption, health care so far has
proved more resistant to
change.
The highly regulated indus-
try’s complex web of con-
tracts, data systems, drug-ben-
efit managers and others make
it hard for new entrants to
make inroads. Alphabet Inc.’s
Google ended its attempt to
create an electronic health-re-
cords database in 2011, just
three years after it began.
But venture-capital firms as
well as major companies, in-
cluding Alphabet, continue to
try. For example, Amazon.com
Inc., Berkshire Hathaway Inc.
and JPMorgan have struck a
partnership to look at how to
redesign health insurance for
the matter, though IPO pricing
can change at the last minute.
Refinitiv will still own the
majority of Tradeweb’s voting
power. Refinitiv is the new name
for Thomson Reuters Corp.’s fi-
nancial and risk business.
—Allison Prang
VANGUARD
Socially Responsible
Fund to Be Launched
Vanguard Group is launching
its first actively managed envi-
ronmental, social and gover-
nance-focused equity fund, as
the asset manager looks to
complement its ESG portfolio of
low-cost, index-based offerings.
The Vanguard Global ESG Se-
BANKING & FINANCE
’12 ’13 ’14 ’15 ’16 ’17 ’18
–2% Oct. 19, 1987
2-2
27-9
–7 21
–22 211
–5 21-216
–2 Feb. 218
–2 Oct.-Dec. 218
the dollar slumped. When
the S&P was down 17%,
would you be calm, or selling
to lock in what was left of
your profit?
In 2011, the U.S. came
close to defaulting on Trea-
surys and lost its triple-A
credit rating. The eurozone
crisis turned critical, and in-
vestors realized that China’s
stimulus would have painful
aftereffects. The bull market
came to an end, at least on
an intraday basis, as the S&P
sank 22% between May and
October and emerging stocks
fell almost a third. It looked
like a global recession might
be on the way. Again, would
you be able to ignore the
temptation to lock in profit?
It was even worse in 2012
as the eurozone appeared to
their more than one million
collective employees.
Livongo offers cloud-based
glucose-monitoring to patients
with diabetes, selling its ser-
vices directly to more than
600 employer-sponsored
health plans and insurers at
between $60 and $70 a month
per employee. The company
has also moved into treatment
of cardiovascular diseases,
weight loss and mental-health
issues.
Dr. Robert Wachter, a pro-
fessor and chairman of the De-
partment of Medicine at the
University of California, San
Francisco, said that while doc-
tors are often wary of using
new technology, they have
been looking for a long time
for a better way to keep tabs
on a patient’s health between
office visits.
“Even physicians who are
traditionalists think it would
FINANCE WATCH
lect Stock Fund will be available
for investment by mid-2019, the
firm said in a securities filing.
The fund will be managed by
Wellington Management Co.
The fund will have expense
ratios between 0.45% and 0.55%,
which Vanguard said is lower
than the average ratio from sim-
ilar funds, citing Morningstar
data.
—Kimberly Chin
MSCI
Ownership Limits
Affect China Indexes
Global index compiler MSCI
Inc. removed a Shenzhen-listed
company from its China indexes
and cut the weighting of a large
’19
Investors who sold before the slumps in February or October timed one of history’s best market runs.
be on the brink of breakup.
U.S. stocks didn’t react so
badly, but the news was un-
relentingly bad. It was
tempting to get out.
In 2013 came the Taper
Tantrum, as markets worried
that the Fed might be about
to kill the recovery by rais-
ing rates, pushing emerging
markets into a panic. Still, if
you focused only on the U.S.
you found it easier to hold
on, with the S&P falling less
than 10% at its worst point.
In 2014, there was an Eb-
ola epidemic, U.S. bombing
of Syria and more Fed con-
cerns, and the VIX index of
implied volatility jumped
above 30 as stocks fell just
under 10% in 18 trading
days. If you phoned a friend
for advice, it would most
be great to have a way to mea-
sure and monitor patients out
of the office to see if anything
is going off the rails,” said Dr.
Wachter, who served as an ad-
viser to Google’s aborted
health initiative and more re-
cently has worked with one of
Livongo’s key backers, venture
firm General Catalyst, as an
adviser.
Robert Huckman, a profes-
sor at Harvard Business
School who runs its health-
care initiative, said that for
Livongo and other health-care
startups to succeed they must
LIVONGO HEALTH
become indispensable for em-
ployers and insurance plans
seeking to help patients man-
age their health.
“What they most want is a
single solution for an array of
conditions their employees
face,” he said.
Livongo’s underwriters are
expected to tout the size of
the diabetes market—with
more than 32 million Ameri-
cans already diagnosed with
the disease—and the com-
pany’s similarities with fast-
growing software providers
with predictable revenue and
little customer turnover.
Livongo was founded when
General Catalyst’s Hemant
Taneja, who was one of the
earliest investors in financial-
technology firm Stripe Inc.
and social-media company
Snap Inc., teamed up with ex-
Allscripts Healthcare Solu-
tions Inc. Chief Executive Glen
Tullman. The two drew up the
business plan for what would
be Livongo inside the venture-
capital firm’s offices in 2013.
Livongo began operating in
2014.
home-appliance maker, as inter-
national holdings of both got
close to breaching national for-
eign-ownership limits.
The New York-based index
company said it would oust
Han’s Laser Technology Indus-
try Group Co. from its China in-
dexes after Friday’s close. On
Tuesday, China barred foreigners
from buying more shares in
Han’s Laser, as their holdings
neared its 30% ceiling.
MSCI said it would also halve
the importance of Midea Group
Co. to its indexes, citing con-
cerns about “potential investabil-
ity.” Midea makes refrigerators,
air conditioners, rice cookers and
other appliances. Foreign owner-
ship has neared 28%.
—Joanne Chiu
* * THE WALL STREET JOURNAL.
likely be “Sell!”
If you were still holding
on to your stocks in 2015, it
was probably because you
had lost your trading ac-
count password. A Chinese
stock bubble inflated and
then burst, Beijing devalued
its currency and an oil-price
collapse brought fear of a
new U.S. recession. From the
optimism of the summer of
2015 the S&P had lost 15% by
February 2016, as oil com-
pany failures threatened a
wave of bond defaults.
If you somehow made it
through, you were fine until
last year’s ructions. Did you
sell in February, before the
volatility shock knocked 12%
off stocks? Or in October, be-
fore the bear market
knocked stocks down more
Launched by Goldman
BY ASJYLYN LODER
Goldman Sachs Group Inc.
launched five new exchange-
traded funds that rely on in-
dexes built with machine learn-
ing and artificial intelligence.
The New York investment
bank is working with Motif In-
vesting Inc. to identify compa-
nies that fit with broad themes
that Goldman’s money manag-
ers think will drive growth, like
“finance reimagined” and
“data-driven world.”
Goldman’s foray into com-
puter-driven ETFs is the latest
sign of Wall Street’s increased
reliance on sophisticated auto-
mation. Computers can read far
faster than a legion of analysts,
sifting company reports, news
stories and regulatory filings for
clues to a company’s future.
Two years ago, BlackRock Inc.,
the world’s largest money man-
ager by assets, announced that
it would overhaul its actively
managed equities business to
rely more on robots than hu-
mans.
“With machine learning, you
can get the benefits of hun-
dreds of stock pickers in a low-
cost quantitative way,” said
Todd Rosenbluth, senior direc-
tor of ETF and mutual fund re-
search at CFRA. “You can cre-
ate indexes that evolve based
on shifts in data.”
Recent years have seen the
proliferation of a new breed of
indexes that veer even further
from plain-vanilla benchmarks.
ETF issuers have designed
funds that try to pick compa-
nies that are less volatile,
higher quality or more socially
MSCI cut appliance maker Midea Group’s weighting in its China
indexes as foreign ownership neared 28%. Beijing’s limit is 30%.
BRENDAN MCDERMID/REUTERS
than 20% to December’s in-
traday low? If you did, con-
gratulations! You timed one
of history’s best-ever market
runs, almost as good as the
10-year stretch from the
1990 recession to the dot-
com bubble.
Those who sold at last Oc-
tober’s all-time high for U.S.
stocks might be proved right
if the market rebound ends
up being temporary and a
recession drags down earn-
ings and valuations. Or in-
vestors might once more
shrug off fears, the economy
lumbers on and stocks
mount yet another surpris-
ing gain. But it’s worth keep-
ing that brokerage-account
password handy, because the
end of this cycle might not
be too far off.
responsible.
Further blurring the line
between active and passive in-
vesting, many of the smart in-
dex funds are really just at-
tempts to codify trading
strategies that active money
managers have employed for
decades. Indexes aren’t all
that different from robots.
They follow their methodol-
ogy—essentially their pro-
gramming—to pick stocks and
rebalance their portfolios at
scheduled intervals.
The goal was to define
themes that have mass appeal
and staying power and avoid
the downfall of being so nar-
rowly defined that investors
lose interest, said Michael
Crinieri, global head of ETF
strategy at Goldman.
Data mining and language
processing help companies like
index provider MSCI Inc. quan-
tify how companies perform on
environmental, social and gov-
ernance criteria. Motif uses
web crawlers to scan patent
databases and academic jour-
nals as well as company finan-
cial filings.
“What AI allows you to do is
to be more dynamic and data
driven, and remove the human
bias,” said Art Amador, chief
operations officer and co-
founder of EquBot Inc., in San
Francisco. “We think it will
help you perform more consis-
tently through different mar-
kets.”
EquBot has two AI-driven
stock ETFs with more than
$150 million in assets and runs
separately managed accounts
for investors.
XINHUA/ZUMA PRESS
THE WALL STREET JOURNAL.
Bonds
Rise After
Reversal
By ECB
BY SAM GOLDFARB
Government bonds on both
sides of the Atlantic strength-
ened Thursday after the Euro-
pean Central Bank said it
would hold interest rates at
current levels at least through
the end of this year.
The yield on
CREDIT the benchmark
MARKETS 10-year U.S.
Treasury note
settled at 2.637%, compared
with 2.692% Wednesday. The
yield on the 10-year German
bund closed at 0.069%—its
lowest settle since October
2016—compared with 0.128%
on Wednesday, according to
Tradeweb. Yields fall when
bond prices rise.
Along with its message on
rates, the ECB slashed its fore-
cast for gross-domestic-prod-
uct growth this year to 1.1%
from 1.7% in December. It also
lowered its inflation forecast
and announced plans for a
fresh batch of cheap long-term
loans for banks as a way of
stimulating the faltering euro-
zone economy.
Overall, the ECB’s actions
were more aggressive than in-
vestors expected. Not long
ago, many investors and ana-
lysts had thought the ECB
could start raising interest
rates in 2019, but such a shift
to tighter monetary policy has
looked increasingly distant in
recent months.
The ECB’s rate policy mat-
ters for U.S. Treasurys because
low yields on European gov-
ernment bonds make Trea-
surys more attractive by com-
parison, ultimately supporting
demand in both markets.
“You’re seeing a bit of a ca-
pitulation now, where [Ger-
man] bunds have rallied below
some key support levels,” said
Michael Lorizio, senior trader
at Manulife Asset Manage-
ment.
The ECB is the first major
developed-country central
bank to provide new stimulus
at a time when data shows the
global economy softening.
Treasury Auctions
The Treasury Department will
auction $165 billion in securities
next week, comprising $38 bil-
lion in new debt and $127 billion
in previously sold debt. Details
(all with minimum denomina-
tions of $100):
 Monday: $48 billion in 13-
week bills, a reopening of an is-
sue first sold on Dec. 13, 2018,
maturing June 13, 2019. Cusip
number: 912796RU5.
Also, $39 billion in 26-week
bills, a reopening of an issue
first sold on Sept. 13, 2018, ma-
turing Sept. 12, 2019. Cusip
number: 912796RA9.
Also, $38 billion in three-year
notes, dated March 15, 2019,
maturing March 15, 2022. Cusip
number: 9128286H8.
Noncompetitive tenders for
both bill issues must be received
by 11 a.m. EDT Monday and
competitive tenders, by 11:30
a.m. For the notes, the deadlines
are noon and 1 p.m., respectively.
 Tuesday: $24 billion in
nine-year, 11-month 2.625%
notes, a reopening of an issue
first sold on Feb. 15, 2019, ma-
turing Feb. 15, 2029. Cusip num-
ber: 9128286B1.
Noncompetitive tenders must
be received by noon Tuesday;
competitive tenders, by 1 p.m.
 Wednesday: $16 billion in
29-year, 11-month 3% bonds, a
reopening of an issue first sold
on Feb. 15, 2019, maturing Feb.
15, 2049. Cusip: 912810SF6.
Noncompetitive tenders must
be received by noon Wednesday;
competitive tenders, by 1 p.m.
AUCTION RESULTS
Here are the results of Thursday's Treasury auctions.
All bids are awarded at a single price at the market-
clearing yield. Rates are determined by the difference
between that price and the face value.
FOUR-WEEK BILLS
Applications
Accepted bids
" noncompetitively
" foreign noncompetitively
Auction price (rate)
Coupon equivalent
Bids at clearing yield accepted
Cusip number
The bills, dated March 12, 2019, mature on April 9,
2019.
EIGHT-WEEK BILLS
Applications $124,037,381,400
Accepted bids
" noncompetitively
" foreign noncompetitively
Auction price (rate)
Coupon equivalent
Bids at clearing yield accepted
Cusip number
The bills, dated March 12, 2019, mature on May 7,
2019.
* * * *
New Growth Worries Sink Stocks
BY AKANE OTANI
AND DAVID HODARI
U.S. stocks slid after the Eu-
ropean Central Bank unveiled
plans to deploy additional
stimulus, raising fresh worries
about the health of the global
economy.
Lingering
THURSDAY’S q u e s t i o n s
MARKETS about trade re-
lations and the
world economy have weighed
on the stock market’s 2019 re-
bound. The ECB’s messaging
brought those worries to the
forefront, showing investors
that central bankers have be-
come increasingly concerned
about the slowdown across the
eurozone.
West Texas Intermediate crude is expected to average nearly $60 a barrel this year, a poll of 11 investment banks showed. Oil pump jacks in Texas are seen in January.
Oil-Price Forecasts for This Year Hold Steady
BY CHRISTOPHER ALESSI
LONDON—Banks in Febru-
ary left their overall forecasts
for oil prices in 2019 un-
changed from January, even as
they widely expected prices to
rise through
COMMODITIES the first half of
the year on the
back of OPEC-led production
curbs and geopolitical risks to
global supply.
Brent crude, the global oil
benchmark, is expected to
continue to average over $67 a
barrel in 2019, according to a
poll of 11 investment banks
conducted by The Wall Street
Journal. West Texas Interme-
diate, the U.S. oil standard, is
expected to average nearly
$60 a barrel this year, the poll
showed. Both estimates are in
line with the previous month’s
bank forecasts.
“Oil prices will gradually
rise through Q3 on the back of
producer supply cuts engaged
by OPEC and its non-OPEC al-
lies, alongside involuntary out-
put reductions in countries
that face supply risks like Ven-
ezuela, Libya or Nigeria,” said
Harry Tchilinguirian, head of
commodity research at BNP
Paribas. “The move up in oil
prices is, however, predicated
on macroeconomic risk tied to
U.S.-China trade tensions re-
maining at bay,” he added.
Investor Challenges Executive Pay at PDC Energy
BY RYAN DEZEMBER
A shareholder activist will
challenge PDC Energy Inc. in
an effort to change the way the
oil producer pays its executives,
part of a broader push by in-
vestors to force U.S. energy
producers to focus more on
profitability than growth.
Kimmeridge Energy Man-
agement Co., which last month
disclosed a 5.1% stake in PDC,
said it is putting forth a slate of
directors to challenge the three
$172,945,128,900 board members whose terms
$60,000,218,900
$1,387,696,700
expire this year. Denver-based
$0 PDC’s chief executive, Barton
99.812944
(2.405%)
Brookman, is among those up
2.450% for re-election.
40.52%
Kimmeridge said it wants
912796UW7
the company to align executive
compensation more with share-
holder returns than production
growth. The firm also advo-
$35,000,942,400
$285,664,400 cates a dividend, exploration of
$0 potential deals with rivals and
99.626667
(2.400%) a reduction of administrative
2.449% costs at PDC, which has a mar-
65.39%
912796VA4 ket value of about $2.5 billion.
“A lot of the problems in the
exploration-and-production
MARKETS
The central bank said that it
would leave interest rates un-
changed at least through the
end of the year, months longer
than investors had previously
expected. It also added that it
would launch a fresh batch of
ultracheap long-term bank
loans.
While those moves showed
the ECB was willing to take ag-
gressive steps to try to stimu-
late growth, it also highlighted
the extent to which the global
economic outlook has dimmed
over the past year, some ana-
lysts said.
“The big question is
whether these policy adjust-
ments are enough to avert a
synchronized global down-
turn,” said Jon Hill, managing
Rebound
U.S. crude-oil futures price,
quarterly average
$70 a barrel
65
FORECAST
60
55
50
2018 2019
Sources: SIX (historical); the banks (forecast)
Brent advanced 0.5% to
$66.30 a barrel on Thursday,
while WTI was up 0.8% to
$56.66 a barrel.
The Organization of the Pe-
troleum Exporting Countries
and 10 partner producers out-
side the oil cartel, led by Rus-
sia, agreed late last year to
collectively hold back crude
output by 1.2 million barrels a
day for the first half of this
year, compared with October
levels. OPEC agreed to handle
800,000 barrels a day of those
cuts, while the Russia-led co-
alition agreed to shoulder the
space could be fixed with
proper compensation struc-
tures aligning management
with shareholders,” Kim-
meridge managing partner Ben
Dell, who is one of the firm’s
three nominees, said in an in-
terview.
PDC, which drills in Colo-
rado as well as in west Texas
fields that it bought from Kim-
meridge in 2016 for about $1.6
billion, said Thursday that its
current directors “bring finan-
cial and operational experience
and relevant expertise, includ-
ing in the areas of oil and gas,
leadership, corporate manage-
ment, accounting and finance,
and mergers and acquisitions.”
Kimmeridge’s urgings are an
example of a wider push by in-
vestors to wean shale drillers
from the growth-at-all-costs
mentality that has swamped
commodity markets and pro-
duced piddly returns for share-
holders over the past several
years.
The SPDR S&P Oil & Gas
Exploration & Production ex-
change-traded fund, which
director and rates strategist at
BMO Capital Markets. “If the
accommodation isn’t suffi-
cient, then we’re maybe seeing
the start of the endgame.”
The Dow Jones Industrial
Average shed 200.23 points, or
0.8%, to 25473.23, posting its
fourth straight daily decline.
The S&P 500 fell 22.52 points,
or 0.8%, to 2748.93 and the
Nasdaq Composite lost 84.46
points, or 1.1%, to 7421.46.
Declines were broad, drag-
ging 10 of the S&P 500’s 11
sectors lower and putting the
broad index on track for its
worst weekly slide since De-
cember.
Bank stocks were particu-
larly hard hit by the selling.
Morgan Stanley declined 45
Focus on OPEC
Pushes Up Crude
Oil prices closed at a one-
week high on Thursday, as in-
vestors focused on OPEC-led
production cuts that have helped
rebalance the market since the
start of the year.
Light, sweet crude for April
delivery settled up 44 cents, or
0.8%, at $56.66 a barrel on the
New York Mercantile Exchange,
the highest since Feb. 28. Brent,
the global benchmark, gained 31
cents, or 0.5%, to $66.30, the
highest close since Feb. 27.
Crude prices have been
buoyed in 2019 by the produc-
remainder.
The decision has helped to
bolster crude prices by more
than 20% since the start of the
year. Prices had plummeted by
around 40% in the fourth
quarter of last year, from four-
year highs breached at the
start of October.
Production also came down
in Iran and Venezuela, two key
cartel members that were ex-
empted from the latest pro-
duction-cut deal as a result of
U.S. sanctions on those coun-
tries’ oil industries. Libya,
which also was exempt from
Oil Slump
Energy producer shares have lost value
while the broader stock market has soared.
60%
40
20
0
–20
–40
–60
–80
2015 ’16 ’17
Source: SIX
tracks the performance of more
than 60 U.S. producers includ-
ing PDC, has lost 60% over the
past five years. In the same pe-
riod, the S&P 500 stock index
has gained 47%. PDC shares,
meanwhile, have fallen 39%.
Investors blame compensa-
cents, or 1.1%, to $41.17, Gold-
man Sachs fell $1.97, or 1%, to
$192.77 and JPMorgan Chase
shed 75 cents, or 0.7%, to
$102.97.
Meanwhile, European stocks
suffered their biggest one-day
slide in a month, with the
Stoxx Europe 600 ending down
0.4% and erasing its gains for
the week.
In other signs of pessimism,
the euro fell 1.1% against the
dollar, and yields on Italian
and German government debt
declined.
Bond yields, which fall as
prices rise, typically retreat
when investors are skeptical
about prospects for growth
and inflation.
Over recent months, central
tion curbs from the Organization
of the Petroleum Exporting
Countries and its allies outside
the oil cartel. Prices are “continu-
ing to profit from the OPEC+
production cuts and the involun-
tary supply outages in Venezu-
ela and Iran,” analysts at Com-
merzbank said.
The oil industries of Venezu-
ela and Iran—both OPEC mem-
bers exempt from the most re-
cent production-cut agreement—
have been pressured by strict
U.S. sanctions.
OPEC, de facto led by Saudi
Arabia, and a group of 10 part-
ner producers, led by Russia,
agreed late in 2018 to hold back
crude production by a collective
1.2 million barrels a day for the
the December deal, and Nige-
ria, which is participating in
the coordinated cuts, could
both face supply outages in
the future as a result of civil
unrest, analysts say.
OPEC’s output declined by
550,000 barrels a day in Febru-
ary, bringing the total fall in
production since October to 2.2
million barrels a day, according
to consultant JBC Energy.
“The fundamental backdrop
sets the stage for a tight sec-
ond quarter,” according to a
Goldman Sachs analysis. But
the analysis warned that a
S&P 500
PDC Energy
SPDR
S&P Oil & Gas
Exploration &
Production ETF
’18 ’19
tion structures that reward ex-
ecutives for boosting output
and adding reserves with little
regard for commodity prices.
Such pay plans encourage exec-
utives to drill wells even if do-
ing so is uneconomic. The prac-
tice stems from the shale
Friday, March 8, 2019 | B11
banks around the world have
flagged a weakening global
economy as reason to hold off
of normalizing monetary pol-
icy.
The downbeat trading ses-
sion in the U.S. and Europe fol-
lowed a mixed session in Asia.
Japan’s Nikkei Stock Aver-
age lost 0.7%, weighed down
by declines in technology
shares. At midday Friday in
Tokyo, the Nikkei was down a
further 1.5%. The Shanghai
Composite rose 0.1%, among
the few major indexes in Asia
to end Thursday higher. Early
Friday, the Shanghai bench-
mark was down 1.6%, Hong
Kong’s Hang Seng Index was
down 1.2% and South Korea’s
Kospi was down 0.8%.
SERGIO FLORES/BLOOMBERG NEWS
first half of 2019. Compliance
with the cuts—shouldered
largely by Saudi Arabia, the
world’s largest exporter of
crude—have exceeded market
expectations.
Saudi Arabia and Russia are
the world’s two biggest oil pro-
ducers behind the U.S.
“The fact that OPEC is still
looking to put a floor on prices
is helping to support” the mar-
ket, said Michael Hewson, chief
market analyst at brokerage
CMC Markets. But, he added,
Brent has largely been “stuck in
a range” between $64 and $67 a
barrel since mid-February, in part
because of concerns over slow-
ing global economic growth.
—Christopher Alessi
long-term bullish outlook for
the year should be tempered
in the second half by the re-
surgence in U.S. shale oil.
“Permian basin pipeline ex-
pansions with adequate export
capacity will de-bottleneck
U.S. shale supplies into the
global export markets,” Gold-
man Sachs said.
In 2020, banks expect Brent
and WTI crude-oil prices to av-
erage $68 a barrel and nearly
$63 a barrel, respectively, the
Journal poll showed. That is on
par with the previous month’s
forecasts for next year.
boom’s early days, when com-
panies raced to exploit newly
viable drilling fields.
By late 2014, most of the
shale fields had been spoken
for and oil prices began their
five-year slump, dropping to
levels that made many new
wells unprofitable. Still, pro-
ducers have largely continued
to pay executives to produce
more oil and gas than they did
the year before.
PDC’s average daily produc-
tion, for example, has more
than quadrupled since the end
of 2014, though that ramp-up
has failed to lift its shares.
PDC has based an unspeci-
fied portion of Mr. Brook-
man’s past bonuses on whether
the company tops year-over-
year production-growth tar-
gets, according to securities fil-
ings. PDC last week proposed
adding two new metrics to its
pay formula that it said would
help measure how efficiently it
operates. In 2017, Mr. Brook-
man received compensation
valued at $5.8 million, accord-
ing to a securities filing.
B12 | Friday, March 8, 2019 * * THE WALL STREET JOURNAL.

Tiny Stock Moves Fuel Momentum Jitters
BY AMRITH RAMKUMAR
Daily stock moves have
fallen sharply following last
quarter’s volatility, stoking
worries that the market is los-
ing momentum after a shift by
the Federal Reserve fueled the
recent rally.
The S&P 500’s average daily
move in February was 0.4%.
That is after the benchmark
equity gauge logged average
daily swings of 0.9% or more
in the prior four months, ac-
cording to Dow Jones Market
Data. In December, at the
height of last quarter’s market
turmoil, the index’s average
move was 1.4%.
Comments from the Fed
this year that it is pausing in-
terest-rate increases for now
and a fourth-quarter earnings
season that was better than
some investors feared have
quieted trading and boosted
stocks. The S&P 500 is up 9.7%
so far this year.
However, the index fell for
the fourth consecutive session
Thursday and has moved at
least 0.6% in three of the first
five trading days in March.
The four-session losing streak
is the longest for stocks since
Dec. 24, the day indexes hit
their lowest point during the
fourth-quarter rout.
Some investors wonder
whether the Fed’s dovish pivot
has already largely been
priced into the market. The
S&P 500 has battled to climb
above the 2800 level, closing
at 2748.93 on Thursday, in an
example of the market strug-
gling to get traction around
widely watched technical and
psychological levels.
The pattern of quiet trading
is also causing anxiety because
stock moves were also unusu-
ally small before the market’s
swoons last year in February
and December—rocky
stretches still fresh in the
minds of many investors.
Meanwhile, concerns about
global growth and the U.S.-
China trade talks linger, pre-
MARKETS
pact. The average gap from
Major indexes recovered from last year’s declines... Average of daily gap between
S&P 500 intraday high and the S&P 500’s intraday high to
S&P 500 daily performance low, monthly low fell to 19 points last
month, the lowest such spread
since September, when it was
5% 60 points
16 points. The index swung at
Dec. 26: 4.96% least 30 points on average
Best day since from October through January,
4 March 2009 40 including a 64-point average
spread in December.
Volatility has also been
3 20 zapped from bond, currency
and commodities markets in
recent sessions. Market watch-
0 ers warn that such close-knit
2 movements could lead to as-
2018 2019
sets falling together if volatil-
ity spikes again.
1 Number of times S&P 500 has Analysts cite a few develop-
moved at least 1%, monthly ments that could jolt markets
out of their lull.
15 sessions Some say a more definitive
0
trend of strong economic-data
points could force the Fed to
10
rethink its pause in interest
–1 rates, reigniting fears of
Thursday tighter financial conditions.
–0.8% Investors will get the latest
–2 5 look at U.S. growth in Friday’s
jobs report.
Investors are also grappling
–3
with worries about slowing
0 00 0 0
economic activity overseas.
2018 2019 The S&P 500’s 0.8% slide
Thursday—its largest one-day
drop in a month—came after
...still, the S&P 500 has recently struggled to sustain a rally above 2800. Proportion of investors the European Central Bank
anticipating at least one eased policy in response to the
2800
rate increase in 2019 global slowdown.
50% Although the U.S. and China
2700 have made progress on reach-
40 ing a trade agreement, some
2600
analysts fear that more signs
of global economic weakness
30
could send markets tumbling
2500 again.
20 The Citigroup Economic
Surprise Index for developed
2400 10
markets, a measure of whether
economic reports are meeting
2300 0 projections, fell to its lowest
November December January February March Jan. 2019 Feb. March level since 2012 earlier this
month. The gauge is firmly in
Note: March data as of Thursday
Sources: Dow Jones Market Data (S&P 500 daily performance, average gap, 1% moves); FactSet (S&P 500); CME Group (interest rates)
negative territory, indicating
economic data are broadly
venting many assets from themselves out,” said Nancy progress going forward.” It has moved less than 1% starting to come in below ex-
climbing back to last year’s Perez, senior portfolio man- The S&P 500 moved more for 13 consecutive sessions, pectations.
peaks. ager at Boston Private Wealth. than 1% just twice last month the longest such streak since “We may be going through
“The uncertainties that we “The question is where the after posting at least six such early October. these swings of relief and
were looking at in December— data comes in and will it point outsize moves in the four pre- Even movements during the angst through the year,” Ms.
a lot of them have worked to more slowing or steady vious months. day have grown more com- Perez said.

Email: heard@wsj.com
HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

Grocer Kroger Gets Marked Down OVERHEARD Activist Gives

Grocery giant Kroger is
doing everything it can to re-
spond to pressures on its in-
dustry. That hasn’t been
enough to satisfy investors.
U.S. grocery stores are fac-
ing a perfect storm. American
food tastes are changing rap-
idly, forcing stores to adapt
quickly. European deep dis-
counters such as Aldi and
Lidl and expanding in the
U.S., putting pressure on
prices. Consumers are having
more groceries and other
household staples delivered
to their door. Amazon.com is
charging into the space, first
with its acquisition of Whole
Foods and now with plans to
open a lower-end chain of
stores. On top of all that,
trucking and logistics costs
have soared.
What is a grocery chain to
do?
At Kroger the answer has
been quite a bit, all at once. It
is spending billions to make
its stores more appealing and
to build out e-commerce and
delivery capabilities. Digital
sales rose 58% in fiscal 2018,
Yelp Reprieve
Kroger same-store-sales growth, excluding fuel for the quarter, compared Europe’s car industry just
5%
with analyst expectations of
54 cents, according to Fact-
Set. Shares fell 12% in early-
isn’t getting its message
across. The boss of its main
lobbying body has a novel so-
But No Out
4 morning trading. lution: quit lobbying. Yelp dodged a bullet
Particularly alarming to in- Car makers have had a Thursday, but the activist’s
vestors was the company’s rough time with European pol- gun remains at the ready.
3 gross margin, which declined iticians ever since Volks- SQN Investors LP sent an-
by nearly a percentage point wagen’s diesel crisis turned other letter to the online re-
from a year earlier excluding the media spotlight on emis- view company saying it won’t
2
fuel. Kroger said this was due sions. Last October, European challenge Yelp’s board of di-
to startup costs for new parliamentarians voted to cut rectors at the coming annual
1 warehouses and price reduc- the regulatory cap on vehicle meeting. During its fourth-
tions to remain competitive. carbon emissions in 2030 by quarter results call, Yelp out-
JPMorgan Chase analyst 40% relative to the 2021 tar- lined several significant busi-
0 Ken Goldman wrote that the get. ness changes made at SQN’s
FY 2014 ’15 ’16 ’17 ’18 ’19 margin decline was the steep- Carlos Tavares, chief exec- apparent behest, including
Note: 2019 figure is midpoint of company guidance. est since 2009 and “suggests utive of Peugeot and presi- the addition of three new in-
Source: the company deteriorating core supermar- dent of the European Auto- dependent directors to its
ket fundamentals.” With the mobile Manufacturers’ board. In a January letter,
which ended Feb. 2. The com- growing decently. Same-store likes of Amazon coming after Association, which represents SQN threatened a proxy fight
pany also is investing in its sales excluding fuel rose 1.9% it, Kroger has no choice but car makers’ interests in Brus- if its mandates were ignored.
own private-label brands, in the fourth quarter from a to keep prices competitive, sels, doesn’t want a fresh SQN’s latest pledge is a
which now account for 30% year earlier, slightly better even when costs are rising. public-relations push. “Lobby- cease-fire, not a peace treaty.
of its unit sales. Kroger has than analysts’ estimates of Sometimes a company can ing in Europe is dead. First we Achieving its target of mid-
invested in British online gro- 1.8%. For fiscal 2019, the com- do almost everything right need trust. Lobbying is associ- teens compound annual reve-
cer Ocado and is working pany expects same-store sales but still fail to overcome ated with manipulation,” he nue growth and margins of
with it to build robotic ware- growth of 2% to 2.25%, also powerful fundamental trends. said at the Geneva Motor more than 30% before inter-
houses in the U.S. And last ahead of consensus expecta- Kroger is a well-run business, Show this week. est, taxes, depreciation and
year it acquired meal kit- tions. but it is simply worth less Unfortunately for auto in- amortization will be a tall or-
maker Home Chef. But Kroger’s spending than it used to be and inves- vestors, rebuilding trust seems der. First-quarter guidance is
Through its efforts, Kroger weighed on earnings, which tors know it. like a very long-term project. for anemic sales growth of 4%
has managed to keep sales came in at 32 cents a share —Aaron Back to 6%, improving to 8% to
10% for the full year.
Yelp at least appears to be

ECB’s New Stimulus Will Help Banks More Than Economy
After months of pretend-
ing to ignore the subject, the
European Central Bank has
finally confirmed another
bout of long-term lending.
This won’t revive the slow-
ing eurozone economy, but it
will help cushion the blow
for banks.
On Thursday, the ECB an-
nounced a third round of its
Targeted Longer-Term Refi-
nancing Operations—or TL-
TRO—program, which will
offer cheap two-year loans
to eurozone banks, linked to
lending to businesses and
households. This makes the
Frankfurt-based central bank
the first in the developed
world to ease policy again,
following clear signs of a
global economic slowdown.
However, investors
Money borrowed by banks
under the European Central
Bank's Targeted Longer-Term
Refinancing Operations
€200 billion
100
0 borrowers are, not the avail-
’15 ’16
€1 = $1.12
Note: Excluding the take-up on June 2016
designed to roll over previous TLTRO
borrowing under more advantageous terms
Source: European Central Bank
shouldn’t expect a fresh
wave of credit to help the
eurozone economy.
When it comes to liquid-
ity, central banks can bring
the horse to water but can’t
make it drink. After the
2008 financial crisis, the
ECB pumped about €3 tril-
lion ($3.393 trillion) into
banks’ books, but lending
didn’t jump—nor did it in
other countries whose cen-
tral banks did the same.
Banks’ lending decisions
are mostly made on the ba-
sis of how creditworthy their
’17 ability of funds.
Banks have the ability to
create deposits when they
lend, and they can always
tap the interbank short-term
funding market, which the
central bank is ultimately
backing with a range of
other operations.
This is why TLTRO opera-
tions were never in huge de-
mand. The most successful
round was the latest one—
because banks thought there
would be no more—and it
amounted to just €234 bil-
lion.
The program’s main bene-
fit is that it allows banks to
circumvent banking regula-
tions that authorities them-
selves impose. The loans are
less long-term than they ap-
pear, because banks are
forced to repay them if their
collateral turns bad, but they
do count as long-term for
the purposes of rules
that penalize short-term
borrowing.
The round therefore
amounts to a small but wel-
come subsidy for European
banks, which have had a
dreadful run on the stock
market.
“If there were no subsi-
dies nobody would take up
the TLTROs,” ECB President
Mario Draghi said Thursday.
The TLTRO may end up
being yet another case of a
central bank giving with one
hand what it takes with the
other: Officials also signaled
that interest rates will re-
main at record lows for lon-
ger than previously thought,
which is bad for lenders. Eu-
rozone bank stocks dropped
about 4% Thursday.
However, this could be an
overreaction. Investors al-
ready knew that rates
wouldn’t go up this year be-
cause the eurozone economy
is slowing. Thursday’s an-
nouncement is still good for
banks: No matter what hap-
pens, the ECB just threw
them a bone.
—Jon Sindreu
focusing on the right things.
The company is shifting its
efforts from a spotty local
sales model to one focused on
larger national accounts. Yelp
also is solidifying partner-
ships with key industry lead-
ers. The company said it has
doubled the number of res-
taurants delivering on Yelp
since its 2017 partnership
with online food-delivery gi-
ant Grubhub. Earlier this
week, Yelp announced it
would add a “verified li-
censes” feature whereby it
will charge service providers
for vetted status, taking a
page from Angie’s List.
Skepticism lingers, though,
and Yelp doesn’t have a for-
mal settlement agreement
with SQN, according to a
source close to the matter. It
remains to be seen just how
patient SQN is prepared to be.
—Laura Forman