Thursday, October 6, 2016

Syrian Army Warns Rebels And Families To Leave Eastern Aleppo

By Angus McDowall
Reuters
October 6, 2016

Syria's army has said that anybody who remains in the city of Aleppo after offering those who wish to leave an opportunity to do so would face their "inevitable fate."

A statement issued late on Wednesday said the army had cut off insurgents' supply lines into the northern city and that it had accurate information about the location of all their positions and arms stores. It urged all fighters there to lay down their arms and leave.

Earlier on Wednesday, the army said it was reducing its air strikes and shelling of rebel-held eastern Aleppo to alleviate the humanitarian situation and allow people to depart for safer areas if they wanted to do so.

The army, backed by Shi'ite militias from Iraq and Lebanon, as well as Russia's air force, began an offensive against eastern Aleppo on Sept. 19 after the collapse of a week-long truce. The offensive began with one of the war's most intense bombardments.

The scale of destruction in Aleppo since the offensive began has prompted mounting international concern and caused the United States to break talks with Russia on attempting to renew a ceasefire.

The army and its allies have made some territorial gains in the northern part of Aleppo since the offensive began and have also opened fronts in the city center and in the south.


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Thursday, October 6, Morning Global Market Roundup: Asia Stocks Up On Solid US Data, Gold Hit By Stimulus Taper Fears

By Hideyuki Sano 
Reuters
October 6, 2016

Asian shares firmed on Thursday thanks to stronger U.S. economic data, while growing prospects of a near-term U.S. rate hike and possible tapering of stimulus in Europe hit gold and lifted the dollar to one-month highs versus the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent while Japan's Nikkei .N225 gained 0.6 percent.

On Wednesday, U.S. S&P 500 Index .SPX gained 0.43 percent, led by banks and energy companies.

U.S. services sector activity recovered sharply in September from six-year low hit in August, following similarly upbeat news from U.S. factories on Monday.

"Both manufacturing and service indexes recovered from big falls in August. While it is not clear what the underlying U.S. economic trend is, given the recovery in Japanese and Chinese surveys the global economic cycle appears to be rebounding for now," said Chotaro Morita, chief bond strategist at SMBC Nikko Securities.

Growing optimism on the U.S. economy boosted bets that the U.S. Federal Reserve will raise interest rates in December.

The policy-sensitive two-year U.S. note yield hit a four-month high of 0.857 percent US2YT=RR on Wednesday.

Interest rate futures FFZ6 FFF7 are pricing in about a 60 percent chance the Fed will hike by its December meeting.

The 10-year U.S. Treasuries yield US10YT=RR also rose to 1.706 percent, compared to around 1.60 percent at the start of week.

A strong U.S. payrolls report on Friday could cement expectations of a rate hike. The median forecast of economists polled by Reuters is for non-farm payroll to rise 175,000.

The rise in bond yields partly stemmed from speculation the European Central Bank may eventually taper its bond buying after Bloomberg reported on Tuesday the bank would probably wind down the monthly 80-billion euro ($90 billion) scheme.

Euro zone bond yields have picked up since then, with Germany's 10-year Bund yield DE10YT=TWEB rising back to near zero percent from 2 1/2-month low of minus 0.16 percent hit last week.

The specter of tighter monetary policy in the U.S. and Europe hit precious metals hard.

Gold XAU= extended losses, hitting a 3 1/2-month low of $1,262.2 per ounce and last stood at $1,267.4

Silver XAG= also fell to $17.69 after having fallen to $17.565 per ounce, its lowest since late June.

In the currency market, the dollar rose to a one-month high of 103.67 yen JPY= and last stood at 103.37 yen.

The British pound GBP=D4 recovered slightly after hitting a three-decade low of $1.2686 on Wednesday on worries about Britain's EU exit. It last traded at $1.2747.

The euro EUR= was little changed at $1.1209, with pressure from concerns about the health of Deutsche Bank (DBKGn.DE) offset by speculation about the ECB's tapering.

Oil prices rose to their highest since June on a combination of the fifth unexpected weekly drawdown in U.S. crude inventories and hopes that major producers will agree to cut output next month.

The U.S. Energy Information Administration said crude stockpiles fell 3 million barrels last week, well below the build of 2.6 million barrels forecast by analysts in a Reuters poll.

International benchmark Brent futures LCOc1 rose to as high as $52.09 per barrel on Wednesday, the highest since early June and last stood at $51.53, up 5 percent so far this week.

U.S. crude futures traded at $49.50 CLc1, down 0.6 percent on the day but up 2.6 percent on the week.

"Markets are hoping that they will not just agree on a cut next month but will also come up with a series of cuts in the future," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

"But unless we have more evidences of cooperation, it is hard to see oil prices rising much further."


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Oil Prices Dip After Reaching June Highs On U.S. Crude Stock Draw

By Henning Gloystein
Reuters
October 6, 2016

Oil prices eased on Thursday but remained near June highs reached the previous session when they were buoyed by a fall in U.S. crude inventories.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $49.54 per barrel, down 29 cents or 0.6 percent from their last settlement.

International Brent crude futures were down 30 cents, or 0.6 percent, at $51.56 per barrel.

Traders said the price dips early on Thursday were largely a result of profit-taking following strong price rises the day before.

Both contracts hit their highest levels since June on Wednesday after the U.S. Energy Information Administration (EIA) said crude stockpiles fell 3 million barrels last week to 499.74 million barrels, and as international oil markets prepared for a planned output cut by the Organization of the Petroleum Exporting Countries (OPEC).

"Another week another surprise drawdown in crude inventories by the EIA ... Although crude in storage remains at record highs, this is the third week of unexpected drawdowns in a row," said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore.

He added that WTI prices would likely be "eyeing the psychological $50" soon, although there was the downside risk of shale drillers putting rigs back into operation which were mothballed at lower prices.

Other analysts said that overall market conditions pointed to slightly higher prices, largely due to the planned OPEC cut, but also due to the risk of forced disruptions.

"All in all, oil prices seem headed for higher levels in the coming period," Global Risk Management said in its quarterly report published this week. It pointed to the risk of "several oil producing countries struggling to increase or even keep production at current levels due to unrest/oil facility wreckages and lack of industry investments".

Despite this, most analysts do not expect prices to shoot up much further as production will remain high even with an OPEC cut, and plenty of fuel remains in stock.

"Resilient production in the U.S. and Russia will postpone crude market rebalancing and keep the market in surplus into 2017," BMI Research said in a note to clients, even cutting its price forecast for next year.

"With an insufficient demand response to counteract strong supply, the result is a downward revision of our 2017 Brent forecast to $55 per barrel from $57 per barrel," BMI said.


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Dollar Treads Water As Markets Brace For Friday's Jobs Report

Reuters
October 6, 2016

The dollar stuck to narrow ranges against its major rivals in Asian trade on Thursday, ahead of this week's nonfarm payrolls report that could reinforce expectations that the U.S. Federal Reserve will hike interest rates by December.

Beleaguered sterling slumped 0.3 percent to $1.2715 GBP=D4 after falling as low as $1.2686 on Wednesday, its weakest in more than three decades on fears of the impact of Britain's impending exit from the European Union.

Underpinning the dollar, Chicago Fed President Charles Evans said he would be "fine" with raising U.S. interest rates by year-end if U.S. economic data remained firm.

On the economic data front on Wednesday, upbeat U.S. services sector activity offset a weaker-than-expected print on private-sector job growth ahead of Friday's jobs report.

The monthly employment figures are expected to show 175,000 jobs were added in September, according to the median estimate of 100 economists polled by Reuters.

Market participants will also look for any upward revision to August's weaker-than-expected gain of 151,000 jobs.

The dollar took a breather from its overnight run-up against its Japanese counterpart. It was buying 103.42 yen JPY=, down 0.1 percent but not far from a four-week high of 103.67 yen touched on Wednesday.

"It seems the market was short dollar/yen, which became a crowded consensus trade, so the risk of unwinding had been increasing," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

The latest data from the Commodity Futures Trading Commission showed that yen net long positions rose to a five-month peak of 68,892 contracts in the week ended Sept. 27, in the aftermath of the Bank of Japan's decision last month to target Japanese government bonds' long-term yields. [IMM/FX]

"The dollar/yen got above the Ichimoku cloud, which was a very good sign for Japanese investors," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

"But I think most did not expect that uptrend in dollar/yen, because there are no materials on which to sell the yen further and buy the dollar," he said. "Most people would like to check Friday's employment data."

A strong U.S. payrolls report on Friday could see the market price in a 70 percent chance of a December hike, according to Chris Weston, chief market strategist at IG in Melbourne. Bets were a bit over 60 percent as of Wednesday.

Traders were pricing in less than a 20 percent chance that the Fed would raise rates as early as November, according to CME Group's FedWatch program.

The euro was steady at $1.1201 EUR=, supported by higher European bond yields on concerns the European Central Bank might taper the pace of bond-buying before its asset purchase program ends.

A Bloomberg article on Tuesday cited sources as saying the ECB would likely gradually wind down its monthly 80-billion euro ($90 billion) program, spooking investors even though a central bank media officer later tweeted that tapering was not an ECB discussion topic.

The dollar index, which tracks the U.S. unit against a basket of six major currencies, was up 0.1 percent at 96.212 .DXY, but shy of last week's high of 96.442, which was its highest since Aug. 9.


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Twitter To Conclude Sale Deliberations This Month

By Liana B. Baker and Jessica Toonkel
Reuters
October 6, 2016

Twitter Inc has told potential acquirers it is seeking to conclude negotiations about selling itself by the time it reports third-quarter earnings on Oct. 27, according to people familiar with the matter.

The timeline is hugely ambitious in the context of most mergers and acquisitions, given that Twitter began mulling a sale only last month. It is the clearest sign yet that Chief Executive Jack Dorsey is pushing to provide clarity to shareholders and employees over the company's future as quickly as possible.

Binding acquisition offers are due in the next two weeks, and Twitter has already whittled down the field of potential acquirers, the people said this week. Salesforce.com Inc is in the running, while Google parent Alphabet Inc, and Walt Disney Co have also been contemplating bids, the people added.

Recode reported on Wednesday, citing sources it did not identify, that Google would not move forward with a bid to acquire Twitter.

It is not certain the process will result in a sale, the Reuters sources cautioned. The sources asked not to be identified because the matter is confidential.

Twitter and Salesforce declined to comment. Disney and Google did not return requests for comment.

With Salesforce.com, Twitter might turn its focus to customer service communications and mining its database of tweets for business intelligence. Google would likely be most interested in the social and news dimensions of Twitter. Disney, by contrast, might see it as a way to expand the reach of its sports and entertainment programming.

Twitter has struggled to generate revenue growth and profit, despite having some 313 million average monthly active users and a growing presence as a source of news.

The company missed Wall Street's sales expectations in both the first and second quarters of 2016, according to Thomson Reuters StarMine, and has yet to produce a net profit in 11 quarters as a public company.

It has also failed to keep pace with rivals, notably Facebook Inc's Instagram and Snapchat. Both now boast more users than Twitter by most measures, even though they are much newer, and advertisers have begun to migrate their ad dollars accordingly.

Dorsey, who returned to Twitter as chief executive more than a year ago, has been part of Disney's board since 2013.

Twitter went public in November 2013 at $26 a share. The shares peaked above $74 just over a month after its IPO, but have been on a steady downward trajectory since.


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Chicago Latest To Sanction Wells Fargo For Defrauding Customers

By Karen Pierog and Dave McKinney
Reuters
October 6, 2016

The Chicago City Council on Wednesday approved a one-year suspension for Wells Fargo & Co from city business because of its scandal over phony accounts, joining the states of Illinois and California in punishing the bank.

The ban includes bond underwriting, brokerage, trustee and other services the bank has provided to the city. Wells Fargo has earned $19.5 million in fees from Chicago since 2005.

Wells Fargo staff opened checking, savings and credit card accounts without customer approval for years to satisfy managers' demand for new business, according to a $190 million settlement with U.S. regulators and California prosecutors reached on Sept. 8.

The bank said it has fired 5,300 employees over the issue.

"I hope this action by the city of Chicago will echo around the nation and make it clear to other institutions this conduct is unacceptable," said Alderman Edward Burke, who heads the council's finance committee.

Illinois penalized the bank earlier this week while California announced a 12-month sanction against Wells Fargo, that state's oldest financial institution, on Sept. 28. California replaced Wells Fargo as a lead underwriter on two bond sales in the wake of its decision.

On Wednesday, Wells Fargo said it would continue to serve Chicago customers and support non-profit community agencies, educational institutions and foundations.

"Wells Fargo is disappointed that the Chicago City Council has chosen to suspend a relationship with one of the nation’s safest and strongest financial institutions at a time when the city needs access to dependable financial partners," the bank said in a statement.

Following the vote, Chicago Mayor Rahm Emanuel told reporters: "The city's disappointed in Wells Fargo."

Illinois Governor Bruce Rauner's office, which included Wells Fargo in a pool of senior underwriters for bond sales, said on Sunday the state would not be using the bank for debt deals "until further notice."

Illinois Treasurer Michael Frerichs on Monday suspended $30 billion in state investment activity with the bank. Those activities include investments in Wells Fargo debt and bank broker/dealer services.

Also on Wednesday, Connecticut's state treasurer Denise Nappier told Reuters in a statement that Morgan Stanley was added as a co-bookrunner for an October bond sale because of troubles at Wells Fargo.

"The addition of Morgan Stanley ... was made in an abundance of caution to help ensure the success of the sale," the statement said. "Wells Fargo had been assigned as the sole bookrunner prior to the recent revelations of regulatory actions against the bank."

In addition to outright sanctions, the states of Massachusetts and Oregon, as well as the city of New York, have said they would press for reforms at the bank, await results of investigations while also reviewing their business relationship with the firm.


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Venture Capitalists Invest $56 Billion In Startups So Far In 2016

By Heather Somerville
Reuters
October 6, 2016

Venture capitalists poured $15 billion into startups in the third quarter, putting this year on pace to be the third largest ever for investment activity, according to a report released on Thursday.

So far this year, venture-backed companies have raised $56 billion across nearly 6,000 funding deals, according to a report from venture capital database PitchBook Data Inc and the National Venture Capital Association. At that pace, venture investment is projected to hit $74 billion by year's end, falling short only of the investment levels in 2000 and 2014.

The data shows that despite long-held fears of a contraction in venture capital that would force startups out of business, investors continue to enthusiastically back promising technology companies.

"The rounds keep getting bigger," said Adley Bowden, vice president of analysis for PitchBook. "As valuations go up and (venture) firms are trying to get a certain ownership percentage, the check size goes up as well."

Late-stage venture rounds have spiked most significantly, with the median round size at about $10 million, up from a little more than $6 million in 2013.

"The Airbnbs and the established unicorns ... are not having trouble raising capital and very large rounds," Bowden said.

Mutual funds, hedge funds and sovereign wealth funds - contrary to widely held expectations that they would flee venture capital amid the slowing IPO market - continue to invest heavily in "unicorns," the term for venture-backed companies valued at $1 billion or more. Uber Technologies Inc, for instance, raised $3.5 billion from Saudi Arabia's sovereign wealth fund in June.

Unicorns appear to be gobbling up most of the venture capital, with angel and seed financing falling about 18 percent to $1.7 billion in the third quarter compared with a year ago, the result of more accelerators such as Y Combinator replacing seed investors as startups' first stop for cash, the report shows.

Venture capitalists appear to be spending money as fast as they are raising it. Firms have raised $32 billion so far this year, compared with $36 billion for all of last year.

Although money continues to flow into technology companies, little is flowing back to venture capital firms. The report takes a dour view on the IPO market, saying the "slump is unlikely to reverse." The third quarter saw 162 exits - IPOs and M&A deals - compared with 237 a year ago.

"A lot of unrealized gains are in the venture funds right now," Bowden said.


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Lenovo In Talks To Take Over Fujitsu's PC Business

By Chang-Ran Kim, Tim Kelly and Makiko Yamazaki
Reuters
October 6, 2016

China's Lenovo Group Ltd is in talks to bring Fujitsu Ltd's personal computer business under its control, allowing the Japanese company to focus on IT services and other businesses, a source with direct knowledge of the talks said.

The two companies aim to reach a deal this month, with some 2,000 Fujitsu workers likely move to Lenovo, the Nikkei business daily said on Thursday, without saying where it got the information.

The deal, if realized, will make Fujitsu the second Japanese PC assembler after NEC Corp to seek the help of the world's largest PC maker to stay competitive in the thin margin market. Lenovo and NEC set up a PC joint venture in 2011.

Fujitsu's shares gained 7 percent in early trade to hit their highest level since January, compared with a 0.6 percent gain for the broader market. Lenovo shares were up 2 percent.

Fujitsu may transfer its design, development and manufacturing operations to a joint venture led by Lenovo or Lenovo may opt to buy a majority stake in the Japanese company's PC unit, the Nikkei said. It did not mention potential financial terms.

Fujitsu said in a statement it was considering various options for the PC unit but had not yet made a decision on its future. Lenovo declined to comment.

Fujitsu had initially negotiated with Toshiba Corp and unlisted Vaio Corp, which was spun off from Sony Corp, for a three-way merger of their PC businesses. But the talks fell through earlier this year as the companies were unable to agree on the details.

Global demand for PCs has been squeezed by sales of smartphones and tablet computers. Smaller makers less able to benefit from large scale production face an uncertain future.

In the second quarter of this year, worldwide shipments of PCs were stronger than expected, but nonetheless shrank 4.5 percent from a year earlier to 62.4 million units, according to technology research company IDC.

Lenovo accounted for 21.2 percent of those shipments, followed by HP Inc with 20.8 percent, and Dell Inc [DI.UL] with 16 percent. Asustek computers Inc had a 7.2 percent share while Apple Inc held 7.1 percent.

Fujitsu shipped 4 million units in the year ended in March, mostly for the Japanese market, the company said. It did not appear in IDC's top five rankings.


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Robin Hood Economics Falls Flat In Debates

By Michael Barone
The Washington Examine
October 6, 2016

Robin Hood is dead. Or at least seriously ailing. The politics of taking from the rich and giving to the poor — the politics which philosophers from Aristotle to James Madison dreaded — just doesn't seem to be working as it used to.

That's not to say that the United States is about to give up on progressive taxation. With its graduated income tax, the American tax system is by some measures the most progressive in any advanced country. For a generation, the jousting between Republicans and Democrats has been waged within a pretty narrow range. The former want a top rate of 33 percent, the latter 42 percent. However, Hillary Clinton, evidently trying to win over wary Bernie Sanders fans, now says she wants to raise it to 65 percent.

What's evident from the first presidential and the vice-presidential debates is that the arguments for this Robin Hoodism aren't persuasive. The two gimmicky catchphrases enunciated by the two Democratic nominees seemed to land with a thud.

"Trickle-down economics all over again," Hillary Clinton characterized Donald Trump's tax plan. "I call it trumped-up trickle-down because that's exactly what it would be." A clever phrase, but not one she repeated as the debate went on.

Tim Kaine came prepared with a novel formulation. You'll get a "'You're hired' president in Hillary Clinton or a 'you're fired' president in Donald Trump." Mike Pence congratulated him on the gimmick. Viewers didn't hear the phrase again.

Kaine's hired/fired at least had a somewhat contemporary reference point in Trump's trademark line in his reality TV show. Clinton's "trickle down" political shorthand with an ancient lineage, a phrase once triggered a more elaborate argument familiar and persuasive to many working class Democratic voters.

It would have been readily understood, for example, by the 125,000 people — mostly men, mostly white, mostly union members — who gathered in downtown Detroit's Cadillac Square to hear Democratic presidential nominee John F. Kennedy speak on Labor Day 1960. You don't see rallies like that in the now renamed Kennedy Square anymore.

They believed that the high tax rates imposed by Franklin Roosevelt in the 1930s (top rate 63 percent) and then by bipartisan consensus during World War II (top rate 91 percent) and left in place thereafter were a way of taking the outsized gains of a few corporate bosses and movie stars and distributing the proceeds to ordinary workingmen and their families.

As it happens, Kennedy didn't make that argument at all. Recognizing that high tax rates encouraged tax avoidance and discouraged growth, he proposed what became the 1964 tax cuts, which were a model for former actor Ronald Reagan in the 1980s.

The problem with trickle-down and hire/fire is that they are addressed to a segment of the electorate that no longer exists — or at least is no longer a plausible target for Democratic candidates. One recent poll showed non-college-graduate white men voting only 17 percent for Hillary Clinton. Donald Trump does better than that with Hispanics.

The era of boss versus worker politics, in which the key issue has been economic redistribution, has long been over. For at least a generation, maybe two, we have been in an era of identity politics, in which cultural issues divide voters.

Democrats could squeeze a few last votes as the tribune of workers versus bosses in Midwest target states in 2012 against Mitt Romney, the son of an auto executive. That hasn't been working against Trump.

Downscale whites don't see Trump as a boss who will fire rather than hire them. They see him as a champion who might somehow fire the cultural elitists who look down on them as waste material in a "basket of deplorables," vermin infected with "implicit racism."

Trump does arouse fears among many voters — fears of impulsive foreign initiatives, trade wars, attacks on political enemies. Multiple provocative comments have provided the basis for those fears. But they don't fear the specter that Clinton and Kaine sketched out, that his tax cuts would produce financial collapse. No serious economist, liberal or conservative, believes their preposterous theory, raised in the debate, that the 2001 and 2003 Bush tax cuts led inexorably to the 2008 financial collapse.

Clinton and Kaine seek to rally a coalition of blacks, Hispanics, young people and college-educated single women large enough to total 50 percent. Robin Hood economics, as they seemed to recognize as they dropped trickle-down and hire/fire, doesn't get them there.


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Theranos To Close Wellness Centers, Labs, To Focus On MiniLab Technology

By CNBC Staff
CNBC
October 6, 2016

Embattled blood-testing start-up Theranos will close all its clinical labs and Wellness Centers, chief executive Elizabeth Holmes revealed in a public letter to "stakeholders."

The move came after months spent "assessing our strengths and addressing our weaknesses," she said in the letter that outlined a new focus for the former Silicon Valley darling.

The closures would impact about 340 workers in Arizona, California and Pennsylvania, "many of whom have devoted years to Theranos and our mission," Holmes said. Reuters reported that this was a 44 percent staffing cut, with the company employing about 790 full-time workers.

Theranos would now focus its "undivided attention" on its miniLab platform, Holmes said, adding, "Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care."

Theranos' miniLab is a self-contained laboratory that allows a robot to run a number of tests on samples. The miniLab contains different modules that allow it to conduct a series of tasks that traditionally would require multiple, separate machines.

Holmes said in August that the miniLab was "invented consistent with our core design philosophy of minimizing the number of steps, especially pre-analytical steps, that have to be performed manually."

The move appears to be a dramatic downsizing of Holmes' ambitions to offer hassle-free blood-testing direct to the public - an ambition driven in some part by Holmes' own childhood fear of blood tests.

It comes a year after an investigation by Wall Street Journal reporter John Carreyrou first raised doubts about the start-up's technology, which is based on a machine called Edison. Holmes had promised that Edison could conduct blood tests on just a drop of blood, compared to the technology of competitors that required tubes of blood to do so.

The company was at one point valued at more than $9 billion, making Holmes the world's youngest female billionaire, as tech investors flocked to the Stanford University drop-out, who founded Theranos at the age of 19. Theranos ran a network of blood-testing Wellness Centers, some in partnership with drugstore chain Walgreens, that sent the tests to its labs in California and Arizona.

But the WSJ probe alleged that Theranos was in fact conducting most of the testing at its centers on standard blood-testing equipment because Edison's results weren't reliable.

Although Theranos disputed the WSJ's claims, U.S. federal regulators called the company's laboratory practices into question and in January, the Centers for Medicare & Medicaid Services (CMS) identified serious deficiencies at Theranos' lab in Newark, California.

Theranos said it was taking "corrective action" and had already addressed many of CMS' concerns. It also operated a lab in Arizona, where it said it did the majority of its tests. But in March, CMS said Theranos had failed to sufficiently fix the problems in California, and threatened sanctions including a two-year ban from operating clinical labs for Holmes.

Two months later, Theranos voided two years' worth of test results, in what the WSJ reported was an effort to avoid the sanctions.

In June, Walgreens ended its partnership with Theranos, shuttering 40 testing sites. The drugstore giant cited CMS' concerns over deficiencies, as well as the test results voided by Theranos. In the same month, Forbes cut its estimate of Holmes' net worth from $4.5 billion to zero and removed her from all of its "rich lists."

Another blow came in July, when CMS said it was imposing sanctions on Theranos, including the two-year ban for Holmes. The founder, who has a majority stake in the company, is currently appealing this ban.

In August, the company withdrew a request to the U.S. Food and Drug Administration for emergency clearance of a Zika virus blood test.

A September expose in Vanity Fair, headlined "How Elizabeth Holmes' House of Cards came Tumbling Down," claimed to reveal Theranos' culture of extreme secrecy, in which internal concerns about problems with the company's testing were shut down.

According to Dow Jones, Theranos still faces federal criminal and civil investigations over whether the unlisted company misled investors. The company has denied any wrongdoing.

Theranos had nothing to add to the open letter.


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Goldman Sachs Employees To Pull $300 Million From Omega Advisors

Follows insider trading charges against Omega’s Leon Cooperman; Bank retirement plan also liquidated fund managed by Och-Ziff


By Dakin CampbellKatherine Burton and Saijel Kishan
Bloomberg
October 6, 2016

Goldman Sachs Group Inc.’s retirement plan is pulling about $300 million from Leon Cooperman’s Omega Advisors Inc., marking the second time this year it’s cutting ties with a famous alum who ran afoul of U.S. authorities.

The bank informed employees of the decision in a memo Wednesday, according to a person with knowledge of the situation. Most of the funds, which are held in a separately managed account, will be liquidated by Oct. 31, said the person, who asked not be identified because the information is private.

Goldman Sachs employees are exiting the investments managed by Cooperman, who spent more than two decades at the bank, after the U.S. Securities and Exchange Commission accused the hedge fund manager of insider trading.

“Bottom line is that we have done nothing wrong and this will be proven in a court of law,” Cooperman, 73, said by phone Wednesday. “We are disappointed that they couldn’t make an independent decision. They are rewarding the government for bad behavior.”

Omega’s Performance

Cooperman said that since Goldman Sachs invested with him in May 1993, he’s outperformed the S&P 500 Index by about 2 percentage points a year for the bank. He’s also beaten the Russell 2000 by about 3 percentage points annually and the MSCI World Index by about 6. He’s matched the performance of the HFRI Fund Weighted Composite Index during that time.

The Omega Credit Opportunities Fund is up more than 13 percent, the Omega Equities fund has gained more than 5 percent and the firm’s main fund is up over 3 percent this year through Sept. 20, Cooperman said on a call last month.

In August, the Goldman Sachs retirement plan said it would pull about $350 million from Daniel Och’s Och-Ziff Capital Management Group LLC as the U.S. investigated whether a unit paid bribes in Africa. After exiting Omega and Och-Ziff, 401(k) participants who want to invest with an external hedge fund manager will be left with only one option: investments managed by Lee Ainslie’s Maverick Capital, said the person.

Andrew Williams, a spokesman for Goldman Sachs, declined to comment.

On Sept. 21, the SEC accused Cooperman of using his status as one of Atlas Pipeline Partners’ largest shareholders to gain access to confidential information. Cooperman defended his trading in Atlas and told clients he’s fighting the charges and refused an opportunity to settle the case. He promised investors on a call last month that the firm would voluntarily return client money if the SEC case became a distraction.

Goldman Ties

Cooperman founded Omega in 1991 after 25 years at Goldman Sachs, where he headed the asset-management unit and rose to general partner, according to the hedge fund firm’s website. Omega, with $5.4 billion in assets under management as of Aug. 31, is among the oldest in the industry and one that Cooperman has built with a reputation as a stock picker who scrutinizes undervalued companies and asks management tough questions.

A plumber’s son who worked his way up from the South Bronx to Wall Street, Cooperman has gained attention beyond financial circles for his political views and criticism of President Barack Obama, and more recently, Hillary Clinton.

Like Cooperman, Och has kept ties with the bank after starting his own company. Och rose to become co-head of U.S. equities trading over a decade at Goldman Sachs and his multistrategy fund at Och-Ziff was among the firm’s retirement offerings. Goldman Sachs planned to liquidate most of the assets in the fund by Sept. 1, according to an investor letter obtained by Bloomberg.

On Sept. 29, Och-Ziff reached a settlement with U.S. authorities, paying more than $400 million and admitting that a unit conspired to bribe officials in the Congo to win business. Och-Ziff’s assets have slid by almost a fifth since the end of 2015 to $36.9 billion as of Oct. 1, the firm said this week.

Goldman Sachs’s 401(k) plan held more than $6.6 billion in assets at the end of 2014 for more than 30,000 employees, former employees or survivors, according to the latest government filing available.


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